Angel investors, fund managers, investment groups, and early stage VCs are finding golden opportunities in these economic times. Entrepreneurial America has never been more vibrant, creative, productive or innovative than when the markets are down. The collapse of public stock values for even “Blue Chip” companies is driving investors to seek alternate ways to recover their portfolio losses. With the cost of key business inputs (labor, rents, technology) lower than ever, the time is right for entrepreneurs to seek private capital to expand their businesses and lead the economic recovery.When all the fundamentals of a successful business are present (growing target market, product that satisfies an unmet need in the market, and a management team with the knowledge and experience to execute) all firms need to succeed is simply good old-fashioned growth capital. Savvy investors aren’t throwing money at early stage companies, but they are looking to investigate, identify and selectively invest in those companies with the greatest potential for high returns. And to attract this capital, these companies — in such dynamic growth arenas as healthcare & biotechnology, alternative & green energy, digital media, and software—need to get the word out and present their case. They need to reach out and pitch investors at venture conferences and angel groups. Entrepreneurs seeking to get their companies in position to lead the economic recovery need be where the investors will be to tell their stories and inspire belief in their products.
According to the National Venture Capital Association 3,808 ventures raised VC funding totaling $28.3 billion. And, according to the Center for Venture Research 70,000 ventures were funded by angel investors last year totaling $37.2 billion. Remarkably, this was after the “recession” had officially begun. The money hasn’t disappeared, it is just being judiciously apportioned by the venture and angel markets. Capital is still out there and with the right plan entrepreneurs can get their share of it. Angel Investor organizations are increasing in numbers and more investors
than ever are joining these groups. They join the Angel Investor Clubs because they have time to attend dinners and commit to participating on screening and due diligence committees. For the most part Angel Investor Clubs and VCs are still oriented toward high growth technology companies.
How can investors and entrepreneurs find each other in these economic times?
According to Karen Rands, President of Launch Funding Network and the managing director for the National Network of Angel Investors;
“One of the best ways for entrepreneurs to link up with investors is through regional conferences such as the Atlanta SE Venture Conference, the Florida
Venture Forum or even the Association for Corporate Growth Capital Connection conferences.”
According to Ms. Rands, conferences like these offer opportunities for investors and entrepreneurs to meet and learn about each other in an informal atmosphere that is conducive to discussion and sharing information. Typically there is a screening process to ensure a good fit between the companies and the investors attending the conference. Added Ms. Rands, “When we last held the Southeast Private Equity Conference (SPEC), we brought together nearly 300 attendees including investors representing over $560 Million in capital. Deals were done, resulting in millions of dollars being invested in companies looking to respond to their market opportunities.” She expects that the other regional conferences have a similar ratio of investors to entrepreneurs and outcomes. However, it is imperative to be prepared. It is very easy to spend money going to a conference and get 0 results. If a company isn’t polished, and very clear in their value proposition to the investor and the marketplace, they will be blur in the investors mind as just another company at the event. If they can be sure their messaging is clear and compelling, doors will open up for them throughout the conference as investors seek them out to talk with them. Furthermore, they will be remembered after the conference and there will be a buzz about their company as investors leave, but continue to talk about their opportunity to other investors. Then the real challenge for entrepreneurs will be making sure they follow up with each and every investor they met and expressed an interest. And not just once….Karen warns “the biggest failing I see repeated with entrepreneurs raising capital through events is that they simply do not follow through. They will spend thousands of dollars preparing for and participating in events and then not call all the investors or just call them once and leave a message. An entrepreneur that approached sales leads the same way wouldn’t expect to be in business very long, why would they expect selling equity in their company would be any different?”
Atlanta is rapidly becoming the hotbed of innovation and capital formation in the Southeast. Silicon Valley and Boston have long led the way with angel investors that had high tolerance for risk and would approach providing seed and growth capital as a numbers game. Investors in the Southeast and Midwest have long been more conservative, desiring companies to have actual plans on how they would go to market and create revenue. The playing field is leveling now, as the new trend toward “Lean Startup Methodology” is gaining momentum. This concept is when a company is expected to engage their target customer segment to gain validation that their product has the features and price point that will lead to sales and adoption in the marketplace –
before they go to market. The entrepreneurs learn to improvise, adapt, and change in order to launch and build a company that has a greater likelihood to succeed because they know that there are customers willing to buy the product or service. Therefore the investors are providing capital to go toward creating revenues rather than experimenting with the entrepreneurs perception of what the market wants.
More capital is expected to come into the marketplace over the next couple of years as more investors enter it due to the changes in securities regulations. With the advent of the Jobs Act, new rules were put in place for how entrepreneurs can solicit investors. Although the future of pure crowd funding – selling equity to non-accredited, inexperienced investors, in very small amounts
– is uncertain, the potential for raising capital through the offerings eligible for General Solicitation is very exciting. Accredited investors that are executives in companies and qualify by their income alone, have previously been limited to investing in real estate and the stock market. Now they have the ability to identify private investment opportunities that have been fully vetted in secure due diligence deal rooms, much as they might look at public investment opportunities on eTrade or other trading platform. These offerings have been passed by the SEC as qualified investment opportunities under the REG D 506c or REG A offerings.
Within the supply chain of capital, traditional angel investors have traditionally invested in start ups in the technology space. Venture Capital follows that investment by choosing companies that are high growth potential within a short period of time. Those companies that have raised a little bit of money to start, and grown organically typically fall into an abyss of lack of capital because they are too far along for traditional angels, to organic in their growth pattern for VCs, and too small for private equity. The new programs for raising capital with accredited investors open up a whole new pool of funds that will only help the market place for entrepreneurs and access to capital.
To learn more about the Due Diligence Gateway & Investor Relations Services offered by Kugarand Capital Holdings, LLC— visit http://Kugarand.com