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Prepare a killer presentation. Learn about the venture capital fund raising process. Search for capital in several databases by type of funds / location / industry / size of investments in angel groups, incubators and venture capital.

Funding Workbook / Angels / Incubators / VC Process / VC DB

Presentation is everything. Even an outstanding business idea won't win any funding if it isn't presented right. Most businesses fail to locate capital without the best plan and presentation skills. This workbook is a step-by-step guide to creating your business plan and funding request.


Angel Groups

Angels are your best bet to secure the funding you need after the Friends & Family round and before the VC round. Angels in the NY city area are difficult to find and generally do not invest in groups. There are several so called 'angel' groups. Believe me, I have not found an angel among them! I have been very lucky. I found my angels at a law firm and through my doctor. I raised $500,000 through a private placement.Keep in mind that angels as well as VCs invest within a 100 mile radius. Don't waist your time even if they say they will invest anywhere - they don't!
ACE-Net  Access to Capital Electronic Network - The largest angel group in the country. $450 for database access.
Freeprivatecapital.com

Helps companies and investors establish an early and cost-effective means to safely exchange vital information and establish credibility over the Web. The Company's mission is to build a worldwide online private capital finance portal to attract and service the small business and accredited investor marketplace with "best of breed" products and services.

Angeltips.com
New York, NY

A couple of guys in NY that had an idea and couldn't find anyone to fund it so they started angeltips.com . They were recently bought out by Earlybirdcapital.com. They have received lots of publicity but I have yet to meet anyone that has closed on funding from their angel group.

NYNMA.com
New York, NY

NYNMA is a not-for-profit industry association founded in 1994 to support and promote the new media industry in New York with over 7000 individuals representing nearly 2500 companies. They are also associated with Starvest Partners, L.P., a VC in NYC. I met with them and was not impressed with their lack of professionalism!

Angelstreet.com
IL, CA

angelstreet.com connects accredited investors, venture groups and private equity funds. High-net-worth individuals and institutions now can invest side-by-side with professional lead investors. One problem, the minimum amount to be involved is $3,000,000.

Internetangels.com
New York, NY

An angel group in NYC. Not much information is available.

Independencefunds.com

A NYC provider of private equity, venture capital, and alternative investment products for high net worth investors and institutions. Not much information is available about them.

Universityangels.com

UniversityAngels.com is an on-line angel marketplace and entrepreneurship resource devoted exclusively to students and graduates of the world's leading universities.
SherbrookeAngels.com Same as UniversityAngels.com.
Stockexposure.com Located in CA, they have a large accredited community where they e-mail new opportunities.
The Band of Angels
Hans Severiens
Suite 200-7003
3130 Alpine Road
Portola Valley, CA 94028

Based in Silicon Valley, The Band of Angels is one of the most well-known Angel groups. It consists of approximately 140 members and generally focuses on Internet and High Tech investments.

The Gathering of Angels
Tarby Bryant
Phone: (505) 982-3050
tbryant@nm.net

The Gathering of Angels encompasses a large forum, allowing any interested Angel investor to be included on its approximately 1,500-person mailing list. Based in Santa Fe, New Mexico, The Gathering of Angels presents selected entrepreneurs to potential investors at its regular meetings and provides industry experts to assist Angels in the due diligence process.

The Capital Network

The Capital Network is a selective Angel matching service that provides forums aimed both at assisting entrepreneurs in business development and assisting Angels in their search for viable investment candidates.

Tech Coast Angels

Tech Coast Angels is a technology-focused Angel group that invests in and assists companies located in Southern California. The group generally funds seed-stage businesses with capital requirements of less than $1 million. Southern California only!

The Angel Breakfast Club
668 High Street
Palo Alto, CA 94301

The Angel Breakfast Club is an organization designed to increase the exposure of entrepreneurs to early stage capital, skills, and resources. The group meets monthly to review potential investments.

Sandles Capital Resources The official verbiage is that they focus on early-stage companies located in the Northeast to Mid-Atlantic region. They are acting like a VC with strict requirements before they get involved such as a minimum $3M and revenues. This is basically a one women show. Ellen is simply acting as match maker with a low back end fee but lots of up front "miscellaneous" fees.

The Angel's Forum LLC
P.O. Box 1605
Los Altos, CA 94023
Phone: (650) 857-0773
inquiries@AngelsForum.com

The Angel's Forum LLC is a group of private equity Angel investors interested in investing both time and money in very early stage companies (typical investments range from $50,000 to $500,000). Works with companies in the San Francisco Bay Area only!

Investor Keys

Dealing with private investors or "angel investors" in a Direct Public Offering or "DPO" is a complicated process.  While the process can be started on your own, you will need professional help along the way. Here we will give you an overview and lead you to agencies and resources that can help you.

The U-7 Offering Form
This is your starting point. The U-7 form can be used as a basis for full prospectus, or it can be the entire offering document. The U-7 Form is only part of the process and valuable information about the process is available from the following sources:
State Securities Regulators
North American Securities Administrators Association
This should be thoroughly sources should be thoroughly studied prior to beginning your offering process.

Completing Offering Document
The North American Securities Administrators Association provides the U-7 and it's instruction manual. Download the U-7 and instructional manual and it is highly recommended that you read through the online Issuer Manual
.

Keep in mind that the manual and the U-7 are designed only to expedite the completion of an investment offering document, they are not designed to replace the expertise of a good securities attorney.  You can complete the U-7 on your own, but for the review and the document filing you will require a Securities Attorney.

Audited Financials
Strong consideration should be given to having audited financial statements. The stock exchanges require them, and it adds credibility to your offering with potential investors. Choose accountants that are experienced in working with smaller companies and familiar with the requirements of public offerings. In most cases it is best to first select your securities attorney who can then recommend accountants that they are familiar with.

Offerings Must Be "Approved"
You will work with State Securities Regulators to obtain a permit from at least one state. We have provided a state-by-state listingof those offices. If you wish to register in multiple states you should consider having a regional state review.  This can be done by contacting:

Western Regional Review
New England Regional Review

The Direct Stock Market
Once through the process you will need the ability to reach the private investment market place. An excellent way of doing that is through The Direct Stock Market . The Direct Stock Market exists to bring registered companies seeking equity capital and private investors together.  Be sure to check them out.


Incubators

LabMorgan.com LabMorgan is the e-finance unit of J.P. Morgan. It offers the capabilities of an incubator, venture capitalist, and catalytic agent. Must be past seed stage.
Fastwired.com Not sure where they are based. Web site is very premature.
Business Incubation Group  (BIG) A NY city incubator.

Garage.com
420 Florence Avenue
Palo Alto, CA 94301 USA
Phone: 650-470-0950
Fax: 650-470-0940

Garage.com is the Internet's premier matching service for technology-focused entrepreneurs seeking seed capital and high net worth investors seeking high-quality startup investment opportunities. Carefully screened member businesses are presented to the technology industry's top investors and provided with resources to support the company's development. These resources, including forums on accounting and consulting, commercial banking, insurance, law, and venture capital, allow entrepreneurs to focus more time on building the product or service side of their business.

I-Group An incubator for Internet entrepreneurs in New England.
Net Market Partners A CA based accelerator for B2B e-commerce companies.
intendchange A CA based incubator.
Campsix A CA based incubator.
I-Hatch A NY city incubator.
IPO Engineers A NJ incubator.
Iron Street Labs A NY city incubator.
LaunchCenter 39 A NY city incubator.
Net Value Holdings Inc. A CA virtual incubator.


VC Process

Venture Capital is the process by which investors fund early stage businesses. A venture capital funding arrangement will typically entail relinquishing some level of ownership and control of the business. The promise of a high return on investment offsets the high risk the investor takes.

The investment is usually in the form of stock or an instrument which can be converted into stock at some future date. As the business matures, an initial public offering may take place, or the business may be merged or sold. Venture capitalists typically expect a minimum of 30-35% annual return on their investment at the time they are bought out with an overall target of 10 to 30 times their total investment. Venture capitalists typically invest in high growth companies within specific industries of interest. Typical investments range from $1m - $20m. Management experience is a major consideration in evaluating financing prospects.

Seed Funding
A relatively small amount of capital provided to an investor or entrepreneur, usually to prove a concept. It may involve product development, but rarely involves initial marketing.

Early Stage Funding
Financing provided to companies that have expended their initial capital and require funds, often to initiate commercial manufacturing and sales.

Later Stage Funding
A subsequent investment made by an investor who has made a previous investment in the company -- generally a later stage investment in comparison to the initial investment.

Bridge Loan
Short-term financing which is expected to be paid back relatively quickly, such as by a subsequent longer-term loan or IPO. Also called swing loan or bridge financing.

Mezzanine Financing
Late-stage venture capital, usually the final round of financing prior to an Initial Public Offering (IPO).
 

Debt Offering
A debt instrument offered for purchase by private investors. Normally with warrants for future stock purchases at fixed prices.

Equity Participation
Offer of an equity ownership position or a note which has an option to convert from debt to equity.

Initial Public Offering (IPO)
A company's first offering of stock to the public.

Joint Venture Partner
An agreement between firms to work together on a project for mutual benefit.

Merger
Two or more companies combined to achieve greater efficiencies of scale and productivity. This is accomplished through the elimination of duplicated plant, equipment, and staff, and the reallocation of capital assets to increase sales and profits in the enlarged company.

Acquisition
The act of one corporation acquiring a controlling interest in another corporation. In an "unfriendly" takeover", the buying corporation may offer incentives to stockholders such as offering a price well above the current market value.

Mezzanine Funding
A company's progress makes positioning for an Initial Public Offering viable. Venture funds are used to support the IPO.

Preferred Stock (preferred stock offering)
A preferred stock is a type of capital stock that pays dividends at a set rate (at the time of issuance). Dividend payments to preferred holders must be made before common stock dividends can be paid. Preferred stocks usually do not have voting rights.

Private Placement
The sale of securities to a small group of investors (generally 35 or fewer), which is exempt from SEC registration requirements. The investors execute an investment letter stating that the securities are being purchased for investment without a view towards distribution.

Underwriting
An investment banking firm sells securities from the issuing corporation to the public. A group of firms may from a syndicate to pool the risk and assure successful distribution of the issue. There are two types of underwriting arrangements: best efforts and firm commitment. With best efforts, the underwriters have the option to buy and authority to sell securities, or if unsuccessful, may cancel the issue and forgo any fees. This arrangement is more common with speculative securities and with new companies. With a firm commitment, the underwriters purchase outright the securities being offered by the issuer.

Determine Whether Venture Capital Is Appropriate
Consider Alternative Sources Of Capital:

  • Bootstrapping By Providing Services For Hire
  • Relatives
  • Friends
  • Angel Investors (Former Successful Entrepreneurs In The Industry)
  • Corporate Partners
  • Equipment Leasing Firms
  • Banks

Find The Right Firm - Ask the right questions

  • Stage Focus - e.g. Does the firm invest in companies that have no revenue?
  • Geographic Focus - e.g. Does the firm invest in companies in the Southeast?
  • Industry Focus - e.g. Does the firm invest in Internet companies?
  • Size Of Investment Criteria - e.g. Does the firm invest as little as $500,000?
  • Return On Investment Criteria - e.g. Is the market large enough to create a 30% annual rate of return for investors?
  • Investment Style - e.g. Does the firm like to take a roll-up-the-sleeves, "hands-on" approach or a passive advisory approach?

 Prepare A Business Plan

  • Hook them or lose them in the first 2 pages - lead with a tight executive summary
  • Explain your company's "unfair" advantage - show why you will succeed in a sea of competition
  • Outline a well-defined product or service and target market
  • Provide good market data and analysis and a cogent plan of attack
  • Demonstrate that management has the necessary skills to execute its plan
  • Show uses of funds and concrete financial goals and milestones
Secure An Introduction
  • Get professionals who provide services to venture capital firms and portfolio companies excited to work with you
  • Network your way to your target venture capital firms - elicit professionals' support and have them provide an introduction as a trusted intermediary
  • Target lawyers and accountants who provide services to the venture community

Grab Firms' Attention

  • Focus, Focus, Focus - play to venture capitalists' short attention spans
  • Find strong, seasoned managers willing to work on the team
  • Demonstrate a very large future market opportunity
  • Prove the management team's ability to adapt rapidly and successfully to a changing environment
  • Show escalating barriers to entry in your market

Make A Powerful Presentation

  • Get to the point - Brevity is the soul of wit
  • Focus on the market opportunity - Technology is a necessary but not a sufficient condition
  • Guide the presentation toward the management, the market and the money

Follow Up With Additional Information

  • Bring up any adverse news or information first and control its dissemination
  • Avoid negative surprises
  • Provide complete information when requested
  • Make it as easy as possible to get to "yes"

Understand The Valuation Process

  • Identify the major risks in your business
  • Reduce the perceived risks to increase the value of your company
  • Understand investors' return on investment criteria - e.g. discount rates for earlier stage companies are significantly higher than for later stage ones
  • Identify a clearly definable exit strategy
Years/X 2X 4X 6X 8X 10X
2 41% 100% 145% 183% 216%
3 26% 59% 82% 100% 115%
4 19% 41% 57% 68% 78%
5 15% 32% 43% 52% 58%
6 12% 26% 35% 41% 47%


Internal Rate of Return (IRR) on a multiple of original capital investment (Horizontal Scale) realized over an assumed period of years (Vertical Scale).

Survive Due Diligence

  • Back up sales, revenue and expense claims with documentation
  • Provide solid references
  • Organize records of all contracts
  • Secure all intellectual property rights
  • Audit historical financials
  • Examine legal documents with attorneys

Close The Deal

  • Remember that the deal is not done until the money is in the bank


VC Database     

Who's getting the cash?  Who's giving it? Discover new venture capital firms, potential partners, new customers, important executives, vital contact information and more.

Search the entire database of venture capital news articles and releases by using pull down menus or by using all or part of a word in the keyword search.

You can search VC investments by Geography, Industry and Key Word  

Search by location and industry

www.vcwatch.com

Search by name, state, min & max deal amount, and the companies they have funded

Venture-capitalists.com

Search by deal amount or location

Data Merge Financial News Get the latest VC news and 'How to' information here.
Hoovers Online Get complete profiles of companies here. You can search by Industry -- Location -- Annual sales -- Company type and more with a subscription.
MoneyHunter A great site packed with features like a business plan template, and a Golden Rolodex to find investors based on your criteria, and much more.
Venture Capital Insights Contacts and "how to" advice for getting business financing - venture capital, loans, mortgages, IPO. Plus--New: Free Venture Capital Database File Download
VentureOne
One of Euclid's General Partners, Graham Anderson, is a member of VentureOne's Editorial Advisory Board. The nation's leading venture capitalists look to VentureOne's information products for serious venture investment opportunities. VentureOne tracks information on thousands of venture-backed companies that are seeking additional rounds of financing.
VentureTrack 2000

Now, with VentureTrack 2000TM, you can tap into the accumulated knowledge of 100's of insiders on over 500 venture capital firms.

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