Startup founders want just-in-time financing (survey)

Venture capitalists and angel investors who are working on buffing their brand image and building relationships with entrepreneurs may be wasting their time, according to a newly released survey of 363 startup executives who recently raised funds or plan to do so within the next year.

The survey, commissioned by the Palo Alto office of Dorsey & Whitney, an international law firm, challenges many preconceived notions of what entrepreneurs find attractive.

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Angel investors — wealthy individuals chiefly investing their own money — came out on top as the most popular source of funds. And the most important criteria were speed of investment and an understanding of the business’s financing needs — both ranked as important by more than 90 percent of survey respondents.

In other words, today’s entrepreneurs want just enough money, delivered right when the business needs it.

Another critical issue: An investor who knows the startup’s industry well was rated as somewhat important or very important by 85 percent of respondents.

Nearly half of respondents, on the other hand, said a prior relationship with the investor was not important. And three in four ranked having a top-tier investor with an established brand name as either not important or only somewhat important.

Ted Hollifield, a partner at Dorsey & Whitney, called the funding environment for tech startups “hypercompetitive.” He’s not kidding: The tension between old-school angel investors, newcomers to the scene, and traditional venture capitalists broke out into the open recently, with the likes of Google investor Ron Conway and PayPal alum Dave McClure (pictured above) engaging in name-calling in emails, tweets, and blog posts.

A memo to McClure and Conway: The Dorsey & Whitney survey shows that entrepreneurs don’t care about your Techmeme mentions. They just want their money. And fast.