It's been a while since I have posted. Changes have happened and I decided to fore go the so-called free mall. Instead, I have been thinking about a real business, with real profitability. The idea is a fairly common venture with an uncommon twist. Thinking of creating this business has led me down the pathway of locating resources to launch, grow, and manage the venture.
I read as much about entrepreneurship and funding as I can, and frequent Entrepreneur.com often, as well as StartupNation.com, and Venture Capital blogs. I found the following article on one such blog. This is an article about financing as well as The Funding Universe, a new (two years) resources site for businesses.
Of course you can simply go to the Wall Street Journal to read the article, and I could have provided the link, but wanted you, the reader here, to have something at your fingertips to use. Hope it helps you in your business or business plans for future reference.
Enjoy, m_99
Web Sites Help Bring Together Entrepreneurs and Investors
By Daniel Hausmann of Venturewire
Nate Alder believed clothing insulation could be warmer and more efficient, so he and a few partners set out earlier this year to reinvent winter-jacket lining. Unfortunately, prospective angel and venture-capital investors didn't warm up to the idea on first look in the spring. The second time around in the fall Mr. Alder and his team walked away with $375,000 in angel investor backing. The difference, according to Mr. Alder: his start-up, Argon Technologies Inc. (www.argongear.com), went through Funding Universe, a Web site (www.fundinguniverse.com) designed to connect entrepreneurs with investors. The site can help companies tweak business plans and hosts in-person "speed pitching" -- a take on speed dating where investors are paired with entrepreneurs. "Angels said at the speed-pitching that our pitch was so much better than before," Mr. Alder said, adding he walked away from the October event with 10 to 12 offers. "Face-to-face made the difference; it raises your chances significantly."
As the venture world has recovered from the tech bubble bust at the turn of the century, a number of sites have popped up offering advice and the ability to connect entrepreneurs with investors. These businesses take things beyond sites that simply offer message boards or rating services like the much publicized The Funded, which lets anonymous people rate VCs.
Funding Universe and others like it boast services that range from e-mailed distribution of pitches to networking conferences that mirror speed dating events. The programs, while not targeted at experienced venture capitalists, are specifically useful for business owners and angel investors lacking a robust rolodex.
"The angel world is very inefficient," said Brock Blake, chief executive of Funding Universe. "Angels don't walk around with a sign on their back that says 'Angel Investor.' "
Mr. Blake launched Funding Universe, his first start-up, two years ago after graduating from Brigham Young University. On his own, he raised a few hundred thousand dollars in angel backing in the months after the site debuted to help it grow.
On Funding Universe, entrepreneurs can post their business plans for free. The company then helps businesses fix pitches and rates business plans, posts video pitches, and introduces companies to investors with comparable portfolios. The services after the free posting come with a charge; a subscription can range from $20 to $50 per month depending on services. In its network, the company has 718 investors and over 21,000 entrepreneurs, according to Mr. Blake.
One of the strong components of the site, according to investors and start-ups, is the face time provided by the speed-pitching events. Mr. Blake lines up 30 to 50 investors in a room, and about 10 start-ups go table-to-table delivering seven-minute pitches. The company has six Utah-based events lined up for 2008 and is looking to book more across the country.
Other sites offer varying levels of help similar to Funding Universe. Plan Heaven allows companies to post pitch videos that are then distributed to a network of investors. The service is free but the site does not track the results of its users. Another site, Go4Funding, lets entrepreneurs and investors post their needs and contact information, ala Craig List. The site charges consultants, lawyers, accountants and others $100-per-month to advertise on the site.
Another site, Go BIG Media LLC's GoBIGNetwork.com, essentially works as an online classified service for the start-up community. Users can post ads to invest, get invested and find employees, and also find advice through blogs and forums. Ad posters pay $59 per month, per ad; people looking to contact posters pay $39 per month, and vendors, such as loan providers, pay Go BIG $10 per lead to find companies in need.
Of the 100,000 start-ups in the system, 10,000 are actively fund-raising, Go BIG Founder Wil Schroter said. Of that number, 82% will get contacted, and some will get as many as three responses. However, Mr. Schroter said his company doesn't proactively track how many of those responses results in a check being cut. Often those responses are from intermediaries of investors, such as capital brokers, Mr. Schroter said.
Rich Sloan and his brother Jeff, both veteran entrepreneurs, offer tips through podcasts, a nationally syndicated radio show and their blogs on StartupNation.com. The site also has subscription services for business plan tracking, patent and corporate paperwork. Mr. Sloan said he has about 130,000 users.
While many of these Web sites have popped up post-bubble, the services hark back to the late 1990s when business plans were plentiful. At the time, Joe Rubin, director of FundingPost.com, was an entrepreneur and Web site designer who calls himself not "one of the lucky people to cash out in the dot-com boom." Mr. Rubin saw a need for this in the marketplace back then for a site to assist entrepreneurs. Unfortunately for Mr. Rubin, he launched his site in 2000 just as things were going haywire for dot-coms. He stuck it out, seeing a lot of investors with money on the sidelines.
"We wanted to make something that was easy and low pressure for them," Mr. Rubin said.
Funding Post offers similar services as Funding Universe, including pitching events and introductions to investors. His company charges $75 for admittance to the events and $100 for site subscriptions; some packages can run up to $2,000 depending on services needed. About 100 business summaries have been submitted to Funding Post in the past 30 days, though he declined to discuss the company's income.
Gideon Naim, chief financial officer with RFID-tracker company CenTrak Inc., went through several Web sites, including Funding Post, when his company was founded in 2003. He attended one of Funding Post’s pitch events near the company's home base in Newtown, Pa. "We were successful in closing angel rounds not many months after," Mr. Naim said. His company has raised under $2 million to date without going to venture capitalists. The company plans to go that route in the third quarter of 2008.
Venture capitalists say, however, if entrepreneurs want to get in the door with their firms, they'd better bring a trusted friend. John Taylor, the vice president of research for the National Venture Capital Association, said he hasn't encountered a success story in the venture capital industry from this method. David Aronoff, general partner with IDG Ventures Boston, said over 95% of his firm's deals come from insiders. Of the 4,500 to 5,000 deal pitches his firm sees annually, they'll write checks for 8 to 10.
"Venture capitalists are not generally going to be cruising Web sites looking for the next thing," Mr. Taylor said.
Okapi Venture Capital Managing Director Marc Averitt said most of his deals come from trusted sources such as lawyers, accountants, and colleagues in the industry. Occasionally he'll do a deal off the street but said he is less inclined to do deals that come through brokers who charge entrepreneurs a fee.
"There are better deals that don't have that baggage," Mr. Averitt said.
But for individual and angel investors, the screening process some of these sites offer is time saved. Brigham Tomco of angel investor Meyer Ventures, a family office based in New York, served as a consultant for Funding Universe for a time. He's also attended their speed-pitching events and has not invested in a lead from there yet. He said the companies did not fit for one reason or another. Despite that he said he'd continue to look at leads because of their quality and because of Mr. Blake's screening process.
"The quality of their presentations is as good or better than what we usually see," Mr. Tomco said.
- Click the title link to visit the Funding Universe
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