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August 28th, 2014 at 8:01 am

Pre-VC rounds are shaking up early-stage funding

sensa

The Sense sleep tracking device has been backed by angel investors and crowdfunding campaigns.

Wall Street Journal’s Evelyn Rusli reports that startups are tapping new sources of early-stage funding, including ad hoc networks of wealthy tech executives doing some investing on the side, and that should give some big venture capital firms pause. Twenty-three year old entrepreneur James Proud is the latest example. He has raised $10.5 million from a circle of well-connected angel investors and an additional $2.4 million in a Kickstarter campaign for his sleep-tracker device Hello.

 

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The advantage for entrepreneurs in these kinds of non-VC rounds is clear–the deal terms are more favorable and they get to retain significant control of their companies. And while early angel rounds have traditionally been a precursor to institutional VC funding, things could be shifting. Startups can now raise much higher amounts in these pre-venture rounds, thanks to the rise of online crowdfunding campaigns and a more well-financed network of tech execs with the ability to write million-dollar checks.

For most startups, VCs will still be needed for growth capital and “value-added” services like strategy guidance and industry connections. But a few good exits by tech startups that bypassed VC rounds entirely could offer a potential new model.

Proud had early experience with well-connected tech entrepreneurs-turned-investors: In 2011, at age 20, he was a member of the Thiel Fellows, a group of teenagers paid byPayPal founder and billionaire investor Peter Thiel to skip college and pursue entrepreneurship or other projects. The WSJ’s Lora Kolodny earlier interviewed Thiel about the controversial initiative and other matters.

DraftKings has raised $41 million in new venture funding to grow its daily fantasy sports business in the U.S. The Raine Group led the Series C investment, joined by earlier backers Redpoint Ventures, GGV Capital and Atlas Venture.

Aldea Pharmaceuticals, which has just raised $24 million in Series B financing, is developing a drug that speeds alcohol metabolism and would allow people to sober up more quickly. New investor RusnanoMedInvest led the round, which included WuXi PharmaTech Corporate Ventures, Canaan Partners and Correlation Ventures.

Dynamic Signal has raised $12 million in a Series C round led by Rembrandt Venture Partners that VentureWire learned valued the company around $125 million. The company enables businesses to enlist their employees as social marketers.

Alsop Louie Partners has secured $54.4 million toward its third fund for security and IT investments, according to a regulatory filing. The San Francisco-based firm began raising the new fund a year ago with the goal of gathering $100 million.

Reverse Medical, which is commercializing vascular embolization plugs, has been acquired by Irish medical technology giant Covidien.

Guavus has raised $20 million in funding for its big-data analytics for telecommunications networks. Investors in the round include Artiman Ventures,Goldman Sachs Group, Intel Capital, Investor Growth Capital, QuestMark Partners,SingTelInnov8 and Sofinnova Ventures.

Via Wall Street Journal

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