Part I of  V

Although this company finds most of our clients in corporate America, we have a very healthy startup support business, and my Accelerator is central to the entrepreneurial community.

As it turns out the broader investment community that includes Angels and Venture Capital (“VC”), is thawing it’s collective view when it comes to putting their money to work. So, to facilitate the vital synergy between entrepreneurs, their startup companies, and early investors, we will be outlining where the money can be found, and how these relationships work.

The lines are not always clear, but after “friends and family” rounds of investment, the next round investor, be it Venture Capital or the itinerant executive that are generally referred to as “Angels”, but can simply be called “Venture Capital”. This is not meant to be confusing, but it is for people novice to finding money for their startup or emerging culture companies. Mind you… The lines are typically drawn at the amount of capital being invested, and it’s purpose.

I try to teach entrepreneurs to differentiate by the use of capital. For example, the earliest money should be used for mission-specific uses that might include proof-of-concept development and Intellectual Property efforts that establish the companies products and services, and make them more “capital friendly”. In these cases, we have a program called Execs-with-Checks that align proven investors with critical skills sets and experience by discipline (operations, finance and accounting, technology, etc) with the specific needs of an emerging company. That is an ideal Angel.

Although early-stage investors seem like they are from heaven, the entrepreneur needs to be prepared for trial and tribulation, criticism and scrutiny – and, should also be prepared to give up a widely varied percentage of your company for funding.

NOTE: When approached by people that want to start a new business (or Ministry for that matter) I always ask them four questions…

1.  Do they have a plan?

2.  Can they and will they invest their own money (sweat equity does not count)?

3.  Can they live without income for eighteen months?

4.  Is their spouse dialed-in?

Generally speaking, an opportunity to work with angel investors means acquiring venture capital from individual investors. These individuals look for companies that exhibit high-growth prospects.

Another terrific early stage investor is the “Smart Money Investor”. This can be a company or other business owner that  has a form of synergy with your business or compete in an industry in which they have succeeded.

Angels (and friends and family rounds) are best suited for arly-stage companies with no revenues. Things begin to change with sales and earnings. Companies seeking equity capital from angel investors must welcome the outside ownership and perhaps be willing to relinquish some control. To successfully accommodate angel investors, a company must also be able to provide an “exit” to these investors in the form of an eventual public offering or buyout from a larger firm.

Look for Part II of  V in the next week or so.

Let’s be part of the Solution.

brian patrick cork