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03.15.05
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Provides Guidelines For Investors and Entrepreneurs to Succeed In Secretive $50
Billion Marketplace
NEW
YORK
– Angel investing is
burgeoning. Following several painfully slow years –the legacy of the
dot.com meltdown – this investment sector is resurgent, opening new avenues for
entrepreneurs to secure funding and profitable opportunities for investors
seeking to get in on the ground floor, according to Worth magazine’s April cover
story.
Angel investing – where wealthy individuals
invest both seed capital and industry expertise in start-up companies – is the
hidden engine of the economy’s growth. Angels invested nearly $50 billion in
2004—almost 10 times the amount committed by venture capitalists. Canny private
financiers are poised to increase their support of the best and brightest
emerging companies, explains senior correspondent Eileen Gunn.
“Angel investors who succeed today learned
painful lessons in the aftermath of the dot-com bubble,” Ms. Gunn writes. “These individuals now scrutinize
entrepreneurs’ business plans carefully, and protect their investments by
setting performance bogeys and by structuring their commitments to ensure that
venture capital firms do not push them aside in subsequent rounds of
financing.”
Having learned the lessons of the
freewheeling (and money losing) land-grab of the glory days of the internet
explosion, angels now abide by a more stringent set of guidelines when deciding
which better mousetrap to back.
These include:
1.
Taking a cumulative stake of 20 to 30
percent in a start-up. While most investments go as high as $2
million, most happen in the $100,000 to $1 million range.
2.
Pacing commitments with an eye to the
company’s future capital needs. This is critical when additional capital is
needed to survive future liquidity events.
3.
Sensibly pacing the disbursement of
capital. This provides a welcome measure of control
over the company while limiting exposure if something goes
wrong.
4.
Not skimping on due
diligence. Investors now use network contacts to check
on entrepreneurs’ reputations and ability, while asking tougher questions about
their plans.
Successful investors “do a better job of
separating business proposals that are genuinely promising from those that are
merely cool,” the cover story explains.
“They understand the need to scrutinize balance sheets and to coddle and
coach their entrepreneurs. They
know they need to strike deals with founders that get the most mileage out of
their seed money and that protect their interests when things do go wrong, and
they are better able to get additional rounds of funding from the big venture
capital firms without finding themselves relegated to the
sidelines.”
While risk cannot be eliminated, abiding by
these guidelines will help investors to better understand and manage the
process, according to Worth.
Worth magazine
With
its acclaimed re-launch in December 2003, Worth set itself apart as the magazine
that looks after all the best interests of readers with substantial personal
wealth. Combining the financial acumen of Worth with the luxury lifestyle
expertise of 29-year-old Robb Report, Worth covers the philanthropic, personal
finance, business and lifestyle issues faced by individuals whose focus has
shifted from obtaining wealth to the challenges of managing it. Worth also addresses the sociological
and psychological issues that are unique to truly wealthy families, emphasizing
the impact that these critical decisions have on future generations.
MEDIA CONTACT
Jeff Perlman
Vice President,
Corporate Communications
(310) 589-7780
jeffp@curtco.com
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