New York SBDC Research Network

From Bplans : An early question among potential co-founders during discussions about commitment was always “have you raised money yet?” as if it’s a requirement of doing a tech startup. It seems like a common trend with first-time tech entrepreneurs—and even some more experienced entrepreneurs—to think of fundraising as a required step in the process of starting a technology company. They read articles on TechCrunch about how startups are raising huge, early rounds of funding from VCs, then begin putting together pitch decks and attempt to seek out funding for their own startup. However, if you look at the history of today’s biggest tech companies, nearly all of them started without raising outside funds. Facebook, Apple, and Microsoft all started in garages or dorms, and didn’t raise money until later on when they were ready to scale up operations. In fact, many companies are successful without ever raising outside money, including PlentyofFish, Balsamiq Mockups, and Shutterstoc...

The Office of Advocacy released a small business fact sheet, "Putting Recent Venture Capital Gains in Perspective," by Economist Jonathan Porat. According to the fact sheet, the first quarter of fiscal year 2015 had the highest level of venture capital investment in a first quarter since the year 2000. This upward trend is part of a sizeable post-recessionary rebound in venture capital. The fact sheet also examines the data on venture capital investment deals since 1995 and looks at the five biggest venture capital deals in Q1 2015, all of which are technology startups from California. The fact sheet can be found here .

Venture capitalists (VCs) make you work hard for their money by inundating you with question after question about your fundraising process, your company goals, your founding team, among other things. Many of these questions will seem reasonable. Some will seem ridiculous. But no matter the question, you must have an answer. And your answers better be good. Behind all of this interrogation, there is one key underlying question: what makes you different? Regardless of the variation on the theme, your potential VC is really asking why your business — as compared to others vying for their money — is worth their investment. If you’re ready to join the ranks of funded entrepreneurs, you need to be prepared to answer this key question. How? Read HOW from the ASBDC .

WASHINGTON – Venture capital firms that invest in women-led businesses see positive returns, says a new report issued by the U.S. Small Business Administration (SBA) Office of Advocacy. The report, called Venture Capital, Social Capital, and the Funding of Women-led Businesses , focuses on women entrepreneurs’ access to equity funding and how social networks influence venture capital firms’ decisions to invest. In the report, the authors, Joy Godesiabois and Lawrence Plummer, find that social capital (“who you know and how you know them”) affects funding of women-led firms in different, sometimes conflicting ways. Venture capital firms tend to invest with familiar social networks that may not include women entrepreneurs. Yet this study shows that when venture capital firms do invest in women-led businesses, they generally improve their bottom line. And venture capital firms that regularly invest as a group in the same businesses tend to invest more often in businesses led by women ...

DealBook: A Lesson in Control By STEVEN M. DAVIDOFF November 10, 2010 New York Times The Deal Professor examines the use of venture capital for a start-up, saying many entrepreneurs receive needed money, but lose control of their business "A venture fund will negotiate a set of agreements with the founders at the time of its investment... Not only will the fund negotiate to ensure that an exit occurs, but the V.C. will insist that it be paid back before the founder. "The key for entrepreneurs in deal negotiations is to make sure that when they do raise V.C. money, they have options. If they can get multiple term sheet offers from more than one venture capital firm, then they can negotiate to sell the smallest part of their company on the most lenient terms. If you only have one term sheet, you are not going to fare well. "When the company is not performing to expectations, these legal rights negotiated at the beginning of the founder-V.C. relationship come into play....

An article titled " Perform Due Diligence on Potential Investors " appeared recently on Business Week's website. Its author (Tom Taulli) reminds those pursuing venture capital and/or angel financing that, despite current lending conditions, there's still an obligation to review the qualifications and histories of potential investors. Just because traditional lending sources have tightened is no reason to act desperate, and give away too much during negotiations. Several suggestions are then offered as to what "due diligence" should be done. In addition to these, I recommend these two sites (both of which I've recommended in previous blog posts): 1) TheFunded (written about here on 5/21/07) 2) Punctuative - the Venture Capital Database (written about here on 8/6/08) Both sites are useful in that they enable those seeking investment to comment, critique, and/or condemn the performance of some funds out there. A little background, then, can only help.

Here's an interesting article from a researcher who also founded two different tech firms. He argues that, in certain industries, getting venture capital funding for startup firms isn't all that it's cracked up to be. Even if the funding helps a business achieve its self-identified funding goal, there's pressure inherent in receiving the money - pressure to hire an A-list (and expensive) staff, and pressure to produce *right now* (in lieu of pursuing long-term growth). He argues that there's virtue in being undercapitalized, in that it forces a company's management team to be that much more creative (and honest) in what it needs to kick-start growth. I cite this article because, as I've written recently, we've seen a bump in the number of requests seeking venture capital firms for our clients. There are certainly merits in seeking out this type of financing. However, obvious as it might sound, have your clients be careful what they wish for.

This week, I handled three separate requests for SBDC clients to locate venture capital firms who might be interested in their business concepts. This might be just a coincidence, or a reflection on difficulties each had in pursuing "conventional" lending avenues. Regardless of why it happened, it was a disconcerting coincidence to also read this week a press release from the National Venture Capital Association (whose website provides links to data cited in the release). It's a five-page document, but the gist of the message is grimly summed up in its title: "Venture Capital Investment Plummets in Q1 2009 to 12 Year Low" The decline was consistent across all the industries measured in the report, as well as across every business development stage. The comments of Mark Heesen, president of the NVCA, are meant to provide reassurance: "While this drop in investment is significant, we are not forecasting levels to continue to fall further. We would expect a ...

We have several resources related to venture capital at our disposal at the Research Network. Here's a new one I saw on the ResourceShelf blog. It's the Venture Capital Database . As described on by Alain Sherter on TheDeal .com : "The database, which lists information on 492 VC firms and nearly 6,800 venture investors worldwide, is based on information from the National Venture Capital Association, supplemented by Winn's own entries. It provides links to firms' Web sites, email addresses, locations and investment parameters, including assets under management and minimum and maximum investment. In a nice touch, VCDB displays firms in Google Maps, which gives entrepreneurs an idea of their proximity to investors. Even more useful, it provides biographical info on individual VCs , along with links to their blogs, if they have one. The database is searchable by firm and VC , location, investment size and alma mater." Worth checking out? Let us know what ...

I like Entrepreneur magazine and I especially like Guy Kawasaki's column which I have mentioned here before. If you are a dabbler like myself, you will appreciate his succinct and friendly style. I am so behind in my reading that I was reading an older column and then a more recent one came to my attention, so they are both listed here: Garnering Angels "Sure, you may have ventured for VC, but raising angel capital takes a different kind of skill." By Guy Kawasaki Entrepreneur Magazine - January 2008 Explains about angel investors - what motivates them and how seeking an angel is different from looking for venture capital. Another angel investor article on Entrepreneur's site, focuses in particular on an angel network that helps women-owned businesses. Send me an Angel Can you get angel funding to expand your company? By Aliza Sherman Entrepreneur Magazine - October 2007

It's been almost two years since I first wrote about this resource in our collection. I guess our blog has reached the age where we can dip into the archives once in a while to review some older posts. I won't repeat it verbatim (no need to plagiarize myself). However, I have done a few searches for venture capitalists this week, and, in both occasions, lacked information to create a more focused list. Most advisors, when requesting such a search, will let us know the industry in question. Also, as a general rule, we limit our results to those firms with an office somewhere in New York. However, there are two other factors worth knowing: 1) The amount of funding being sought (many firms have a minimum and/or maximum amount that they're willing to invest); and 2) The development stage of the business Galante's defines some of these development stages: Seed - Concept or idea stage. Money needed to research market and concept feasibility. Startup - Pre-operational f...

I learned of a new website from a recent e-newsletter from ASBDC. It's called TheFunded.com , and it has a feature that comes at the need for venture capital from a different angle. Since we frequently have clients who seek this kind of financing, the site is useful in that they can search for VC firms in their part of the country. They can also narrow their search by the size of funding being sought. The results of their search, however, aren't simply contact information for the fund. In most cases, each firm will have written commentary by business owners who've had experience with them (usually a paragraph or so). Each firm gets rated (on a scale from 1 to 4, I believe), and the firm's rating appears prominently when the search results come in. The site doesn't appear to have a function where you can search for firms that deal with a specific industry (we have a tool like that in the library). However, getting the feedback directly from those with past exper...