Jun. 11–There was a day when life for the entrepreneur seemed too good to be true, when it seemed like any idea scrawled on a cocktail napkin could find funding in 30 days.
Today, gun-shy venture capitalists are more closely scrutinizing potential investments, so it may take three to six months to close a funding deal, said Chris Wand, principal at Superior-based Mobius Venture Capital.
But venture capital funds nationwide are sitting on some $80 billion that they must put to work or return to investors, said Stephanie Smeltzer, vice president of Denver-based Meritage Private Equity Funds.
The flow of funds to startups has slowed. Smeltzer said venture capitalists invested $365.7 million in 79 companies in the first quarter, compared with $1.3 billion in 256 companies in the first quarter of 2002.
On Thursday, entrepreneurs will attempt to reopen the investment spigot. They’ll be pitching their ideas to venture and angel investors at The Rockies Venture Club’s 15th annual Colorado Capital Conference.
“Now is a great time to be an entrepreneur. You just have to have a better company than you had to have five years ago,” said Maita Lester, executive director of the Rockies Venture Club.
Eight companies also will have the chance to present their business plans, although many others will network with investors during the event.
“We’ve gotten the companies in front of the investors. Now it’s up to the companies to create a compelling story,” said conference chairman Blaine Versaw.
Companies also must decide whether to present to angel investors — typically individuals who make smaller investments in higher-risk, earlier stage companies — or to venture capitalists — who invest larger sums in exchange for a piece of the company.
Accera Inc., an Aurora biotech firm, will approach angel investors to raise funds to expand research into treatments for different types of memory impairment, president and chief executive Steve Orndorff said.
“In today’s climate the process has been difficult all around, but angels seem to have a better appetite for these types of investments,” said Orndorff, who has also approached venture capitalists.
In his presentation, Orndorff will include an emotional aspect along with the business opportunity. He said angel investors and venture capitalists look for similar qualities, but angels are also looking for a connection on a more personal level.
John Pope, chairman of Laramie-based WellDog Inc. who will present to venture capitalists, said appealing to a venture capitalist is less of a match-making process. “Venture capitalists are listed on websites and in phone books. They’ll even give you qualifiers as to what they are looking for.”
When WellDog started, Pope offered practically anyone the opportunity to invest in the gas-exploration technology company until he developed relationships with people who would recommend the company to investors.
“It takes tenacity and making sure you have all your ducks in a row,” he said.
Wand said, “Sometimes you have to play the six-degrees-of-separation game. If you don’t know anyone, maybe your lawyer knows someone who knows someone.”
Mobius Venture Capital looks at companies as a total investment package. “It really can’t be boiled down to a simple formula,” Wand said.
Although Meritage considers five criteria, the firm leans heavily on the market as a deciding factor, Smeltzer said. “Management is definitely important, but you can enhance management,” she said.
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