" Looking For Funding In All the Right Places"

Despite an uncertain economy, entrepreneurs can still raise money in these difficult times - the trick is knowing where the gold is buried. 

Angel Investors (Private Individuals)

Angels remain a prime source for funding, customarily investing $50,000 to $500,000 per transaction. Angels invest more money than Venture Capital (VC) funds and complete twenty times the number of total deals, according to funding experts.

Dan Mitchell, executive director of ACE-Net, a non-profit online linking service for investors and entrepreneurs, sees angels continuing to do deals in the wake of the dot.com collapse and the 9/11 terrorist attack.  “If you have a good company, there’s money out there,” Mitchell says. “The criteria might be a bit tougher, but serious investors are still looking for opportunities.”

A poll taken by Angel Investor News, an e-publication for angels and entrepreneurs, shows that angels are still hunting for solid deals. Of 43 angels across the country who voted, 79 percent said they plan to invest more during the next six months than in the past six months. This percentage is down only slightly from a high of 86 percent in the same poll taken before 9/11.

David Cromwell, the Lester Crown Adjunct Professor of Entrepreneurship at the Yale School of Management, thinks angels are easier to find than VCs. Many VC funds are putting money into existing portfolio companies.

To draw investors, entrepreneurs need to have their business act together. A definite must is a bulletproof business plan that is a company blueprint. Cromwell, who mentors Yale’s Sachem Ventures – the only student-run VC firm in the country - says investors have gone back to basics in assessing a company, primarily looking for a strong, savvy management team with a proven CEO. His advice is to worry more about your management team than the idea.

But not all business ideas are created equal. Investors are drawn to investments that reach cash flow break-even level quickly (about a year). Among some of the hot industries attracting funding from investors are bio-techonolgy, high tech equipment and communications, software, security devices and systems, online education and healthcare.

Venture Capitalists

Venture Capitalists are another funding source typically investing upwards of $1 million in 'later-stage' companies with a track record. Michelle Bowman of Andersen and president of the Connecticut Venture Group sees VCs being very selective where they put their money. Entrepreneurs need to do their homework.   “You need to know who invests in your type of company or industry,” Bowman says. “VCs have an investing profile with the types of deals they like and their expectations.”

The Public Markets

Frank Morse, Vice Chairman of CVG and a boutique investment banker (Carter Morse in Southport), believes funding to go public is another story. Initial Public Offerings are down and many businesses face depressed valuation.  “I would never say not to do something,” Morse says. “But you can’t deny IPO money is harder to find. It will come back, but the heady days of the ‘90s have passed.”
 

Summing up the current climate, Bowman concludes:  “With a good business model, there’s still money out there. Investors don’t fade away.”

Resources For Equity Funding  

Connecticut Innovations            www.ctinnovations.com            860 563-5851

Connecticut Venture Group       www.ct-venture.org                  203 256-5955

ACE-Net                                 www.ace-net.org                      203 392-5881

Business Plan Competition      www.angel-investor-news.com/Contest.htm

ACE-Net's “You Belong in Connecticut” Business Plan Competition.