Raising Private Capital–Powerpoint from Invest Nebraska

When entrepreneurs post business summaries on FundingUtah.com, I want them to be able to list what stage they are at in their companies development. So I needed to find out how the industry categorizes companies that are seeking financing.

I found a great powerpoint from InvestNebraska.com that outlines the types of private equity that are available for entrepreneurs.

I was disappointed to be reminded about how little venture capital flows into seed stage companies. The data shows that in 2003, venture capital went into companies as follows:

  • Startup/Seed Stage, 2%
  • Early Stage, 18%
  • Expansion Stage, 55%
  • Later Stage, 25%

Of course, seed stage companies need relatively little capital while later stage companies need very large rounds.

The funny thing, as I blogged recently, is that seed stage investors have a higher average return than later stage investors. But most investors seem to shy away from doing this.

A more encouraging data point for new entrepreneurs was that 52% of angel investments are in seed and early stage companies, but it was 66% in 2002.

The categories we are going to use are:

  • Idea Stage (pre-team)
  • Startup/Seed Stage (team is being formed, pre-revenue)
  • Early Stage (revenue, but negative cash-flow)
  • Expansion Stage (need more capital to cross the chasm)
  • Later Stage (pre-IPO)

FundingUtah.com is showing a lot of promise. What I really need now is feedback from the 54 angel investors who have signed up for FundingUtah.com. I want to know what we can do to help them make more money by betting on the right entrepreneurs and teams. We\’re trying to get all FundingUtah entrepreneurs to join LinkedIn.com (and we link to their profile) so investors can quickly see who is credible. We\’re also thinking of making it possible for entrepreneurs to do online video pitches, so that investors can get a feel for them before meeting them for the first time.

If you have any other suggestions on how an online matching service can help angel investors more, please let me know. We may be rolling out other state sites soon and a parent site, FundingUniverse.com. That will put us in competition with FundingPost.com and vFinance.com, among others.

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