Rumor has it that Israeli video startup 5Min, which has user-uploaded “how to” videos, has raised another $5 million in cash, from Spark Capital.
We covered the startup recently – think YouTube with special features like slow motion to make the videos more useful. Our original profile is here, and our coverage of competitors is here.
Ouch! How Not To Do An Angel Round
The company previously raised $300,000 in angel funding. For those entrepreneurs who are curious about the economics of angel rounds, the details around 5min are interesting. In their case, it was ugly. An Israeli (print) magazine called Globes recently got their hands on the capitalization table of 5min and published the details. The angels ended up with nearly half the company for that $300k, leaving the three founders (the first three on the list) and all other employees to split the rest.
It’s rare that this kind of information about a company is published publicly, but it shows how angels can squeeze a company if they have the negotiating leverage.
And the founder’s lack of ownership will lead to failure because they will be unmotivated. Must this in the deadpool right now Mike, cause you know thats where it’ll be.
not at all. If their equity gets too law, it would be common to issue additional stock options to the founders to keep them motivated. But if one or more of those angels makes a big stink about it, it could tear the company apart. That’s why it’s important to get angels who understand the whole life cycle of a startup, and are flexible when they need to be.
Plus, the company is on a roll.
Hey Mike you might want to update CrunchBase with the new funding!
There’s some good people working at http://www.5min.com.
Good and talented people. I am sure they will do fine with the money in the bank.
5min presented on Tuesday at the NY Video Meetup – I don’t think a good comparison is to YouTube – though I can see YT “stealing” some of 5min’s features like the one you mention – slow mo. Their belief is that everyone is an expert at something and will want to share that knowledge. And that sharing this knowledge can drive new business to the creator – using the example of a yoga instructor giving away a few bits of proper form to interest potential training customers.
Their upcoming “sponsored knowledge” model could be very successful from what they shared.
They released some stats including:
one million unique visitors for October with 700-1000 uploaded videos per month.
And they showed the Israeli VC video which had everyone on the floor laughing
http://www.cent...blip-vaynerchuk
While it’s not a great trade for $300k, they still have a sizable portion of the company. I can think of many founders who had less equity after 2-3 rounds of financing, yet they still stayed motivated…
It’ll probably make it harder for them to recruit developers and get more funding later, but I’m sure motivation is the last thing on their mind.
Here is what I think they’re referring to. He’s an angel!
http://www.5min...y-from-VCs-4661
Joseph – I could be wrong but they specifically said he wasn’t an angel on tuesday in nyc – but he is an angel of Kaltura!
These are Human-Angels. So they will have strong bite for every profit company will make. Better not to look for angels. I don’t understand why when so many people are working in a team need angels. They can use their intelligence, spirit and motivations to develop and enjoy the success their own. The company is less spirited from the beginning – this is what I feel.
I can think of a good Kenny Rogers song that the founders should have taken to heart before entering an Angel round of financing for such a SMALL amount! It doesn’t make much sense… 300K is a drop in the bucket for 50% of a company with this type of potential… the angel flew over their radars on this one.
Jon
I think this is a bad side of Techcrunch – to publish things that are so intimate for founders.
Here ia a company that I really like, great guys (I also heard one of them in NY on Tuesday) – that are also going to make it (it appears) and you Michael, for the sake of exposure, take all their private decisions and publish them
Blogs can be real great and real dirty!
oded katash?
Interesting article!
I didn’t understand it, but it was well written, concise and no mispellings.
http://fakestev...er.blogspot.com
Giving them great exposure! Im on the verge of launching a massive new web 2.0 site and would kill for exposure on TechCrunch!
Plus, info that is in the public domain is fair game
how come google opensocial don’t work?
They should be happy they got this amount of money. Come on, what makes it different then YouTube, Metacafe, or any other video sites? Slow motion? WOOOOOOOO
Mike – I find this fascinating, and I’d love to read more posts like this on TC.
How much of the company do you think the founders should have given for the $300k?
Too bad they did not call it 6min. they might have gotten 6 millions
Here’s what I think of 5Min
http://techwast...-something.html
Yep, but this would be a common case in the case of first-time (or rare) investors. They tend to think that they give out the money and hence the founders are their employees.
@John (#19):
You can’t even properly pick apart a company. It’s ironic that you’d shout down 5min for “inventing words” and “ruining the language” while your writing is poor and riddled with grammar mistakes.
Seriously… let Uncov handle the bashing. They’re much better at exposing real fails than you are.
@Arrington:
Can you clarify what sort of “roll” they’re on? Traffic #’s up or what? I can’t say I’d use 5min all that much, but their video player is nice
Trust me, painful angel better than no angel.
The angels are good business people ….
Sometimes you have to dine with the devil even though we see them as angels too .
I thought that is common. I thought founders will get about 10-20% of the company and the rest is all including angel.
Definitely want to learn more on this . Anybody, any links on the typical structure of this in tech startups?
A painful angel is not necessarily better than no anger.
If you can’t find an angel investor, changes are that:
a. your idea or team is bad
b. you don’t have the connections
In any case, you still have options open to you. Bootstrapping may sound painful, but a bad investor can cause untold amounts of pain too, it’s just that you’ll just notice it later.
My question is… angel investors received about ~50% of the company for $300,000. What do the VC’s get for dumping $5 million???
“Owership” in the graph?
@Don your website freaks me out….
Oded Kattash, former Israeli basketball player and a present day basketball coach of Maccabi Tel Aviv, is known for his killer instinct. He has proven it over and over and in this case once more time. $3.6K for 1.2%, not bad at all.
This is a sad joke on the investors because the only traffic 5min.com is from videos the keep spamming to the top on Digg.