Capital West Advisors’ Comparative Analysis of Venture Capital and Angel Network Financing:
Capital West Advisors maintains a very comprehensive database of investment contacts which currently consists of approximately 1000 Venture Capital firms and 100 Angel Networks. For each client, Capital West Advisors will hand select every Venture Capital firm and Angel network in the United States that is appropriate for its client in need of financing. The decision on whether to present a particular client to Venture Capital firms or Angel networks can often be solely determined according to the amount of capital the client is seeking. Whether a client is looking for Venture Capital or Angel Network financing, Capital West Advisors will identify every appropriate Venture capital firm and Angel Network for the particular company, submit the business plan, executive summary, and financial statements, and follow up as extensively as possible with each venture capital firm. Capital West Advisors follows up for up to 3 months with each and every venture capital firm and Angel Network to ensure that it has been For both Venture Capital and Angel Network introduction campaign, the single most important component is following up which represents approximately 90% of Capital West Advisors’ labor in its venture capital introduction services and approximately 70% of Capital West Advisors’ labor in its Angel Network introduction services (due to the significant labor needed to fill out the applications).
Angel Networks will typically invest within the range of $200K to $2 million. Venture Capital firms will typically invest in the range of $1 million to $50 million per investment. If a client is seeking under $1 million, Capital West Advisors will typically submit the business plan only to Angel networks. If the company is looking for over $2 million, Capital West Advisors will typically submit the business plan to only venture capital firms. When the company is seeking between $1 million and 2 million, Capital West Advisors will often submit the business plan to both Angel Network & Venture Capital firms.
On average, if a company is looking for $1 million, Capital West Advisors will be able to identify 10-20 Angel Networks that are appropriate to submit the business plan to (highly contingent upon the nature of the industry and geographic location). If a company is looking for $1 to 2million, again Capital West Advisors will be able to submit the business plan to 10-20 Angel Networks, but will also be able to submit the business plan to a handful of Venture Capital firms, which we will often selectively only choose these smaller venture capital firms that are somewhat within the geographic location of the client at hand. When a company is seeking over $1 million, Capital West Advisors will typically be able to identify approximately 75-150 Venture capital firms that are appropriate primarily affected by the popularity of the industry and the geographic location.
The process of submitting to Angel Networks is slightly different than the process of submitting to Venture Capital firms. Submitting to Angel Networks is a highly more extensive submission process which often requires the filling out of comprehensive 1-4 page applications in a high quality format. Venture Capital submission is typically done through email or website submission. The vast majority of Angel networks will invest in only a specific geographic region, which could represent a city, state, or tri-state region. There are approximately 8 out of 100 Angel Networks though that will invest anywhere throughout the United States. The majority of Venture Capital firms also have some type of geographic focus; however, it is typically a wider geographic focus and approximately 35% will invest in companies located anywhere in the United States; however, the majority of these ‘open-minded’ venture capital firms will still lean towards companies with a few hundred miles of where they are located.
When following up with Venture Capital firms, Capital West Advisors will typically make a very strong effort to get a particular Associate or Managing Director to review the business plan. At times, this could represent a number of individuals, but the majority of the time, there will be 1 or 2 particular Managing Directors that are appropriate to target based upon the particular business model and Capital West Advisors has relationships with and the specific contact information of many Managing Directors that is has developed over time. Capital West Advisors venture capital database represents a wide range of venture capital firms that invest in various stages of growth and industries. Capital West Advisors’ database contains the address, specific contacts at each Venture capital firm, email, website information, and every investment criteria factor, which include stage of company, investment amount seeking, industry, and geographical focus. The most popular industries that venture capital firms invest in currently are information technology, internet, software, healthcare, biotechnology, energy, media, and business services.
The process of following up with Angel networks is different than the process of following up with Venture Capital firms. The core focus when following up with Angel networks is to have them refer the business plan to appropriate investors, which can be inside or outside the network, getting the Angel Network to review the business plan, getting the Angel Network to invite you to meetings. For Angel networks there is typically 1 to a handful of important ‘gatekeepers’ of which Capital West Advisors maintains relationships with a strong proportion of these Angel Networks. Angel Networks typically represent a large conglomeration of accredited high net-worth investors who make individual investment decisions; it is often that 2 to several investors will collectively make a co-investment. It is also possible that 2 different Angel networks can make a co-investment.
Important Company Features (Start-up and Early Stage Companies)
The following are a few elements, which are particularly important for start-up and early stage companies seeking financing:
Management Team: The Management team is one of the most important elements of a business model from an investor’s perspective. We will often recommend to clients to place an Advisor (s), additional key executives or even an interim Chief Executive Officer. An interim executive placement is accomplished by typically first engaging interest by sharing your business plan with a prospective Executive and offering an executive agreement which becomes activated upon the successful placement of funding. Capital West Advisors has several Managing Directors and Project Managers that are available to serve in an advisory capacity. Capital West Advisors’ advisory services which can be very helpful from the perspective of business development and strengthen its position to raise capital; it can also bolster the strength and appearance of the Management team. Typically, the more capital that a company is seeking, the more stringent the Venture Capital firm or Angel Network’s requirements will be regarding the strength of the Management team. The elements that they look for in the Chief Executive Officer, are years of experience within the particular industry, a strong history of success within that particular industry. Other factors that will increase the importance of a strong management team, is a company’s business development cycle and the sophistication of the business model.
Existing relationship with Suppliers, Manufacturers, and Affiliate Partners: For a start-up company, it is typically important to the investor that the growth of the company will be turn-key upon funding. In other words, the company seeking financing should have key relationships in place that will allow for various operational elements such as manufacturing or product development, distributors that can help get the product, affiliate partners that can refer business, and any other suppliers that can be pivotal to that business.
Existing interest from potential customers or test survey’s for consumer goods & services
Important Company Features (Growth Stage & Mid-Stage companies)
A growth stage or Mid-stage company also needs to maintain all of the key core components as featured in the above Start-up and Early-stage section, but also must typically maintain one or more of the following:
· A certain level of historical revenues (which can vary substantially) and sometimes they will require certain level of net income performance.
· Economies of scope or economies of scale that can be realized through capital investment and a higher scale of operations.
· New key relationships or management that will better position the company to obtain sustainable growth.
· New contracts or interest from prospective customers, distributors, or new suppliers.
· New Intellectual Property that can yield strong partnership or licensing opportunities.
· New forms of marketing that can create new marketing channels or improve marketing performance.
Capital West Advisors represents over 75 Years of collective business planning, consulting, and capital introduction experience. Please visit our website at www.capitalwestadvisors.com for more information.
Capital West Advisors
9701 Wilshire Blvd. 10th Flr
Beverly Hills, CA 90210