If you’re looking to go it on your own, embrace your entrepreneurial spirit and start your own business you may need a little help in the funding department to get you off the ground. If you have solid ideas and a great business plan, this may not be a problem, but if you’ve never gone about looking for investors the process can seem a bit daunting, especially since times are tough all over. Here are some helpful tips to make finding funding a little less stressful.
Do some research. Ask around, look on the net, and see who some likely candidates to support your business are and who will be able to provide you with the requisite capital to get going.
Use the web. There are numerous sites out there that are dedicated to hooking up investors with entrepreneurs. Take advantage of them.
Attend forums and conferences. One way to find investors is to go where they are, including conferences for venture capital and investment. It might cost you a bit, but you’ll get the chance to pitch your business to a wide range of people.
Use your existing connections. You may already know people who can put you in touch with investors looking for a viable business venture. Don’t be afraid to ask friends, family and former coworkers.
Find those with similar interests. If your business is designed around creating new tools for doctors then why not look to wealthy practices or doctors as sources of funding? Many may be interested not only in your business but the potential benefit to their own work as well.
Inquire with business retirees. Just because someone has left the 9-5 grind doesn’t mean they’re ready to call it quits on business altogether. You may find former entrepreneurs and execs who will be excited by the prospect of investing in a new idea.
Find a partner. Unless you’re dead-set on going it alone, finding a partner can be a godsend for a fledgling business. You may bring one asset to the table while you partner can bring another. Together you may find you have enough to get things going.
Invest your own money. If you’ve got the cash to spare and the confidence in your success why not invest in your own company? Whether it pans out or fizzles you’ll only be accountable to yourself.
Get a great team. With an efficient and intelligent management team, your business will have a better chance of succeeding and attracting the kind of investment you’re looking fot.
Get competitive. Try submitting your business plan to websites to get feedback and compete for investor attention. It might be hard work, but it could pay off big time in the end.
New Zealand startups have typically followed a high-growth strategy, but Tom McKaskill argues that in many cases a strategy to building for a strategic trade sale is more appropriate.
Tom suggests:
“If we plan the exit from the outset, the manner in which the business is developed continually keeps the exit in mind and this ensures that we don’t veer off track in terms of meeting our major objective. Some Angels and VC investors do this but they are in the minority.
Now lets get even more radical. Why don’t we change our investment criteria to only focus on investments where we have a high probability of a premium exit. In order to do this, we have to have a very good idea of what creates premium exit conditions, that is, what do we have to do to set up the conditions where a premium exit is highly likely, whether this be an IPO or a trade sale? What would we have to do to make this happen?
INVEST to EXIT is a highly pragmatic strategy for Angel and Venture Capital investors which focuses the investment, business development and harvest activities on strategic value. Investment decisions are targeted towards those ventures which can create a strategic buyer exit. The period of investment is often shorter, operational execution risks are lower and return on investment is higher.
What people are saying about the book:
“Tom McKaskill’s insights into the ‘art of the exit’ provide a great roadmap for all Angel and Venture Capital investors. In a misguided investment world that relies too heavily on IPOs, mega-exits and too much quantitative analysis, McKaskill has taken an enlightened and straightforward approach to a topic that should be foremost on startup investors’ minds.”
Joe Platnick, Pasadena Angels, USA
“For the professional Angel and Venture Capital investor, Invest to Exit is the first book to succinctly capture the importance of aligning the combined interests of inves- tor, management and shareholder when making the investment to produce an optimum result on exit regardless of underlying economic conditions. Commencing exit plan- ning much earlier in a company’s development, combined with planning and then flawless execution will always produce an outcome better than starting later and hop- ing a buyer “will be just around the corner”.
Dr. McKaskill has captured the essence of the issue, providing examples which clearly highlight the challenges and issues faced along the way.
This is compelling reading for investor and companies alike as they work collabora- tively to achieve a superior result when they sell.”
Greg Sitters, Sparkbox Investments Limited, New Zealand
Table of Contents
Preface
Acknowledgements
1 Begin with the end in mind
2 High growth - high risk
3 Spot the IPO
4 Financial vs strategic exits
5 Threats and opportunities
6 Identifying strategic value
7 Finding strategic buyers
8 Enabling the opportunity
9 Reducing risks to the buyer
10 Setting up the exit deal
11 Evaluating potential investments
12 Executing the exit strategy
13 Structuring the trade sale deal
14 Selecting professional advisors
15 Conclusion - impatient capital
Download it now - it may be the most valuable thing you’ve read in a long time.
The Halo fund is open now through 31 August 2009 … with a minumum investment of NZD 25,000, it offers qualified investors passive exposure to a broad range of angel investments. Think of it as the “New Zealand Angel Investment Index Fund”.
The Halo Fund No 1 provides a passive ‘fund’ approach to Angel investing.
It gives investors a unique opportunity to gain qualified access in a cost effective manner to a portfolio of over 30 New Zealand early-stage, high growth investments.
It does so by partnering with New Zealand’s most experienced Angel investors to invest in new technology, high growth companies in high-value sectors like software, bio-technology, niche manufacturing and medical diagnostics.
The Fund will be a passive investor which invests on a one-to-two basis in deals vetted and approved by the co-investing partners and the New Zealand Venture Investment Fund Limited’s (NZVIF) Seed Co-Investment Fund (SCIF).
You can download the pitch book, or view the Powerpoint slideshare show below.
Please also be sure to read our legal disclaimer, and note in particular that nothing you read on this site constitutes an offer of securities.
Business Week published an interesting article on “Super Angels” - small firms unfettered by the corporate machinery of the bigger VC firms, and focussing on larger-percentage stakes in smaller seed-stage investments, launching startups for “only” $1M.
From time to time I refer to New Zealand as “honey I shrunk the country”, and so even though the scales at play in the US are different from here by orders of magnitude, we still have the “super angel” phenomenon, although we’ve approached it from the other direction.
With the flight of VC cash from the NZ market, players like Movac and Sparkbox have moved up the food chain from where they started. And it makes good sense, as the single-digit-millions (NZD) funding rounds, otherwise known as the “valley of death”, have been harder and harder to achieve from VC’s in the last couple of years.
The other key difference between NZ’s super angels and the microcap type funds covered in Business Week is that the NZ firms are true angels - they’re playing with their own money, unlike traditional VC’s who are typically playing with institutional cash.
I like to think that our model is better than their model for purely parochial reasons, and that the choices made by people with 100% of their own skin in the game will be more sensible. But we still have the basic problem in New Zealand that we find it tremendously difficult to scale our companies into international enterprises. And the main issue with that comes back to scale - “honey I shrunk the country”. It isn’t cheap to go offshore, and that’s where we need the supersize resources available in larger economies to make it happen.
But we can have a blended model (seed capital from NZ and expansion capital from offshore), and that’s what most entrepreneurs strive for.
We caught up with her last week in Wellington to talk about how the Association is going after nine months in action, and her plans for the future.
Key points:
The Association’s education programmes are going well
The angel clubs are in good health
2008 was slow with more follow-on deals than new investment
2009 is looking better, with more deals coming through
Syndication is a growing trend. In2006 36% of deals syndicated; this grew to 58% in 2008. Syndication is more likely to occur if investors have relationships with members of other clubs, and the Association is encouraging that.
To improve the angel scene, we need to increase the number of angel investors by encouraging others to get involved in angel investing, and encourage angels to improve skills through education.
The Association will be running 3-4 events per month, the highlight of which will be the Summit in Queenstown in November.
Angel investing is a portfolio game - spread your risk across a number of companies, and don’t put all your eggs into one basket.
Albert Einstein once said, “the only source of knowledge is experience; information is not knowledge.” There is blend between the two though - it is possible to gain knowledge from others’ experiences. I’d always prefer to be an armchair failure than a real failure and save my real effort for success, but that’s not always possible.
At WebFund, one of our key criteria in evaluating entrepreneurs in new ventures is their experience in failure and what they’ve learned from it.
The Angel Association in conjunction with Angel HQ and Simpson Grierson ran a workshop at PwC in Wellington yesterday on Term Sheets. The instructional part of the course was well delivered by Simon Vannini (Simpson Grierson), but the most interesting part of the afternoon was the panel discussion led by David Beard (Movac), Brent Ogilvie (Pacific Channel), Andrew Turnbull (ICE Angels) and Gavin Milnes (No 8). The attendees liberally related war stories and shared past foibles in a frank yet lighthearted way, which was worth the price of admission.
NZVIF have a Guide to Term Sheets (including sample documents) which covers most of the material we talked about, and is a great place for entrepreneurs and angels to start.
WaikatoLink has been named as one of the first members of the International Incubation Initiative, Icube, launched by Exploit Technologies at the New Zealand Business Forum in Singapore yesterday. Icube was set up to encourage innovation, new opportunities, collaboration and international business linkages through greater access to incubators internationally.
WaikatoLink Chief Executive Mark Stuart says, “Good networks and support services are vital for growing New Zealand businesses wanting to achieve success in overseas markets. Singapore provides a great leveraging platform for our technologies and ventures, particularly due to their interest in innovation and collaboration. There is also an abundance of private sector capital to tap into.”
Icube will help start-ups from WaikatoLink, the commercial arm of the University of Waikato, and other participating incubators find business partners, customers and investors in the South East Asia market.
New Zealand Foreign Affairs Minister, the Hon Murray McCully, was a Guest of Honour at the Forum to witness the signing of the Memorandum of Understanding between Exploit Technologies and the new partners. The agreement outlined collaborative activities and services designed to help start-ups increase their global presence, including: provision of a virtual international office, use of office space, extended international incubation for business engagement or research and development, mentoring and advisory services, and access to angel networks.
Mr Boon Swan Foo, Executive Chairman of Exploit Technologies said, “In recent years, the number of global start-ups is growing; and the collective potential of global start-ups as a powerful economic engine begins to emerge. Having a robust network of partners who can provide support services to homegrown start‐ups overseas will eliminate some of the risk for these new entrants.”
WaikatoLink currently has nine high potential subsidiary companies under incubation. WaikatoLink’s successful incubator, VentureLink, has operated for a number of years for ventures based on University of Waikato science and technology. WaikatoLink’s incubation expertise was opened up to entrepreneurs and other organisations last year as part of the university’s commitment to innovation and regional economic development.
WaikatoLink’s Icube membership builds on other global linkages the company has established recently. Last year WaikatoLink partnered with Tsinghua University in Beijing to open up a commercialisation pathway into China; secured a relationship with the Market Access Centre in the US; and joined Singapore’s Technology Transfer Network (TTN), an international alliance formed in 2008 to accelerate the commercialisation of technology to industry.
WaikatoLink’s Mark Stuart was also invited to present at the New Zealand Business Forum on New Zealand’s world‐leading research capability in biotechnology and the fit with Singapore’s science commercialisation expertise and resources. The presentation and panel discussion outlined thriving partnerships already in existence and considers possibilities for future cooperation.
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