Pennies from Heaven
Two-and-half years ago, Joe Kessinger, 48, and Will Nelson, 52, decided to launch a business to sell what seemed to be a potential gold mine: a product with which parents could diagnose ear infections at home. But, it also meant buying the technology from the company that owned it—a hefty sum of money.
What did they do? To fund the company, Lenexa, Mo-based Innovia Medical, they turned to five angel clubs, organizations of wealthy individuals interested in investing in new businesses. Ultimately, they raised $6 million, largely from these groups.
“It's a lot of work,” says Kessinger. “But it's worth the effort.”
If you're trying to rustle up money for a startup, you might consider following Kessinger's lead and target an angel. These private, high net-worth individuals invested about $25.6 billion last year, an increase of 10.8% over 2005, according to the Center for Venture Research at the University of New Hampshire.
But, more important, while angels once were a diffuse, highly secretive bunch, they've increasingly been forming themselves into organized groups, and they're a lot easier to contact than ever before. About 265 of them now exist, many of them members of a new association, the Angel Capital Association.
How to make sure to attract their money once you've contacted them?
TIP #1: Understand their structure. Not all angel groups are alike. Most meet monthly to hear presentations from entrepreneurs and have a screening process for selecting which companies will be invited. But, in some, like Mid-America Angels in Lenaxa, one of the groups Kessinger raised money from, angels make investments on their own. In others, there's a common fund; investors vote on a number of companies to invest in as a group. Still others have a hybrid approach.
TIP #2: Cultivate contacts before you appear. If you're invited to make a presentation before a club, it's best to develop a champion ahead of time. Talk to attorneys, investors and other small businesses in the area, to see if you can get an introduction to one of the members beforehand. At the very least, try to make an appointment with the screening committee, to get a better feel for just what the group is looking for.
TIP #3: Go local. Most angel groups invest in nearby companies, ones that, potentially, are a car ride away. So, focus on clubs in the area.
TIP #4: Make the presentation brief. It's all about introducing the group to the company, not providing an in-depth look. Try for 5 to 15 minutes in length. At the same time, you'll have to work hard to pull it off. “The first impression is the one that carries the day,” says Joel Wiggins, managing director of Mid-America Angels. “Give it everything you've got.”
About the Author: Anne Field is an award-winning small-business writer based in Pelham, NY
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