Venture Capital in Mid-America
Venture Capitalists tend to cluster in Boston and the Bay area of California. Many of them also like to be close to the companies they invest in. Consequently, many startups and growing small businesses located in the mid-America regions find it difficult to interest VCs.
No longer. There is a source of VC funding for small businesses in areas the U.S. Census Bureau defines as rural. These VCs are called Community Development Venture Capitalists (CDVC) and most of them are looking for a “double bottom line”–financial and social returns. Many of the CDVCs also provide money for operations assistance and to guarantee debt.
Although the concept of investing in “rural” companies began in the late 90′s, it has only become popular more recently. There are now about 80 CDVCs actively investing. There is a large untapped pool of talented entrepreneurs in small-town America, and even the traditional VCs are starting to realize that becoming successful does not require a big-city address. Ideas hatched in a small town diner are just as viable as those hatched in fancy high-rise buildings.
At the same time, don’t forget that these are still Venture Capitalists, and they don’t just hand out money without expecting a high rate of return. You still have to do your homework, and present a “knock their socks off” business plan–that is believable. There are thousands of people constantly seeking VC money across the country, and very few of them get funded. You must have a great concept, great team, and a great presentation, or your idea will never even get looked at. Do your homework…get help if you need it.
If you are starting a business in “rural” America, or trying to expand your existing business, you may be interested in what CDVCs have to offer. For more specific information on CDVCs, check them out at the Association of CDVCS.
Open Source Funding
I know there are many newly started, or about-to-start businesses out there just waiting for an investor to jump in and help them. Well, now’s your chance. Hi-tech entrepreneur, Mark Cuban, has developed his own private stimulus plan for small business, and is willing to consider funding existing, or start up businesses. If you are looking for “jump start” money, this program may be for you.
Here is what Mark said initially on his blog:
Rather than trying to be a Venture Capitalist, I was looking for an idea that hopefully could inspire people to create businesses that could quickly become self funding. Businesses that just needed a jump start to get the ball rolling and create jobs. Im a big believer that entrepreneurs will lead us out of this mess. I just needed a way to help.
So here it is. Some people will love it, some will hate it. It is what it is.
Some of Marks rules for funding may be outside the box, but he moves fast, and if your business qualifies, you may be funded very quickly.
This is certainly not the only way to fund your business, but it is an interesting concept, and well worth taking a look at.
For more information and all the details on applying for funding, go to Marks blog.
Good luck!
Venture Capital Available
If you are a tech-based company and are looking for venture capital as seed money or expansion capital, it is now available…that is, if you are developing new applications or services for Apple’s iPhone, or iPod Touch.
The Venture Capital firm of Kleiner Perkins Caulfield and Byers (KPCB) is seeking companies with “market changing” ideas. KPCB’s current iFund focuses on location-based services, social networking, mobile commerce, communications, and entertainment. They will make investments ranging from $100,000 of seed capital, to $15 million of expansion capital.
If your business fits any of KPCB’s current focus areas, and you need capital to start up, or expand, this may be your opportunity. You may get more information from KPCB here.
Venture Capital – I
Venture capitalists rely primarily on an Initial Public Offering (IPO) for their big payday, but now, because of the recession, that window has been slammed shut. Does that mean venture capitalists are temporarily out of business?
Absolutely not, according to a recent report by PricewaterhouseCoopers. Venture capitalists have simply modified their strategy to accommodate the current economic conditions. As a result, U.S. venture capital investing has remained within historical norms through the third quarter of 2008. In fact, venture capitalists entered into more deals in the first three quarters of 2008, than in the same three quarters of all years since 2001. The trend for venture capital investments is up…and so should be the spirits of any company looking for venture investments.
In addition, the major changes the venture firms are making are likely to work better for most new companies, such as:
- The life cycle of the average investment is now longer (due to lack of IPO exits). Earlier venture investments were planned to end in four or five years—now they are looking at eight or nine years. This means that venture firms may invest additional capital, over a longer period, to assure continued growth of your company until “payday.”
- On the front end of the life cycle, the venture firms are typically investing sooner in the seed and early stage start-up phase. This means they may initially invest smaller amounts than they might have in prior years. This is good news for many ready-to-start companies.
Of course, the requirements for acquiring venture capital is about the same as they always have been—that is, a great idea, and an outstanding management team. Oh yes, you also must have a willingness to work harder than you ever thought you possibly could. Venture capital is not for everyone, and it is very difficult to obtain, but for those companies that need a sound investor to help grow their business, venture capital is necessary—and available.
The time has never been better for new company start-ups, and in future posts I will be giving some guidelines on how to prepare to seek venture capital.
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