From Dig South, Angel investors share tips for entrepreneurs

By Liz Segrist
lsegrist@scbiznews.com
Published April 14, 2014

For entrepreneurs hoping to launch a new company, funding can be their biggest obstacle, particularly in the Southeast.

“In this marketplace, venture capital is exceedingly scarce,” said Matt Dunbar, the managing director of Greenville-based Upstate Carolina Angel Network, during the Dig South festival in downtown Charleston.

In the fourth quarter of 2013, the Southeast received $383 million in venture capital funding for 124 deals, roughly 5% of the nationwide share, while Silicon Valley received $3.22 billion for 306 deals, roughly 39% of the share, according to PricewaterhouseCooper’s MoneyTree report.

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PeopleMatter, a Charleston-based company that creates software for human resources, has successfully garnered tens of millions of dollars from venture capital firms such as Morgenthaler and Scale Venture Partners. It is one of the few locally, however.

To bring more venture capital funding into the region, Johns Island-based Gold Ridge Asset Management committed $1 million to launch Silicon Harbor Ventures late last year. Charleston Angel Partners, SCRA Technology Ventures' SC Launch and Capital A Partners also provide local funding options.

Angel investors can offer entrepreneurs a potential funding pool for their startups in a region where venture capital is hard to come by, said Dunbar, one of six angel investors that spoke about the process at Dig South on Thursday.

Entrepreneurs need to extensively prepare for their pitches with business plans, market research, financial models and product verification, according to the expert panel.

They need to be able to explain their financial plan in detail, including how many units they need to sell to stay afloat and how they will use the financing — if awarded.

“Get to a point where you have a product, or just before, or get to a point where you have some revenue, or just before, and that’s when you start looking at angel investors,” said Bill Harley, an advisory board member for the Faber Entrepreneurship Center at the USC Moore School of Business.

Entrepreneurs need a solid plan that shows investors how their money will be used and to get them excited about the business idea, said Steve Swanson, the retired co-head of global electronic trading products and services at CitiGroup.

For the Upstate Carolina Angel Network, a group of angel investors, an idea has to grab their interest initially, and then the business plan has to be strong enough to secure an interview with the group, which then votes whether to provide funding.

Before any meeting takes place, companies should research the angel groups thoroughly and have a working financial model and a business plan packaged and prepared to send on the cloud, Dunbar said.

Companies often forget to engage customers at every step of the development process, said Juliana Larossi, an angel investor and professor of entrepreneurship at the University of South Carolina. Angel investors want to know if there is a market for the product or service being offered, and they want to see customer validation.

“When considering investing, I always look to see if a company is doing this,” Larossi said.

If the idea is solid and the entrepreneur has done their homework, angel investors will consider most any industry, said Rachael Qualls, the CEO of Venture360, which helps entrepreneurs prepare for angel investor groups and connects them to more than 200 investors from around the country.

Swanson said entrepreneurs that research potential investors and take the time to seek them out can often get their foot in the door faster. As for the pitches, Swanson said any factually incorrect or misleading information is a deal breaker.

“Every single thing you put in that presentation is something you need to be able to defend and feel comfortable with,” Swanson said.

Reach Liz Segrist at 843-849-3119 or @lizsegrist on Twitter.

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