Unchained Entrepreneur - Business Advice

Guide to Angel Investor Organizations and Groups

Seth Elliott — Thu, 30 Dec 2010 15:45:00 +0000

This Guide to Angel Investing Organizations is a detailed listing of more than 225 angel investor groups throughout the United States and Canada – as well as several international organizations. Although this guide is substantial, it does not purport to be fully comprehensive. Some of the information herein may be incorrect, and there may be Angel Organizations not listed in this guide. I have not included SuperAngels or the various accelerator/incubator programs in this list by intent.

The organizations are categorized by state (with every state but West Virginia represented), as well as National, Canada and Other International sections. The listings note the name of the organization, location, and website (which will allow you to obtain contact information in most cases). In many cases, notes about investment criteria are provided, to speed your evaluation of appropriate angel networks.

Be sure to review angel organizations with a regional perspective in mind. Many angel networks are listed in one state, but invest across a spectrum that bridges state lines.

If you know of an Angel Organization not listed here, please don’t hesitate to contact me or provide such information in the comments.

Good Luck!

State	Name of Organization	Location	Notes	Website

Alabama	Birmingham Angel Network	Birmingham, AL	Companies in Alabama; Prefer companies in Birmingham; Entrepreneur must invest 10% of capital sought	http://www.birminghamangels.com
Alabama	Huntsville Angel Network	Huntsville, AL	Companies in Northern Alabama or Southern Tennessee	http://www.huntsville.angelgroups.net
Alaska	Alaska InvestNet	Anchorage, AK	Companies in Alaska	http://www.alaskainvestnet.org
Arizona	Arizona Angels Investor Network	Phoenix, AZ	Prefer companies in Arizona	http://www.arizonaangels.com
Arizona	Arizona Technology Investor Forum	Tempe, AZ	Technology companies in Arizona	http://www.atif-az.org
Arizona	Desert Angels	Tucson, AZ	Prefer Tucson area companies; $250 presentation fee	http://www.desertangels.org
Arizona	Northern Arizona Angels	Flagstaff, AZ	Companies in Northern Arizona	http://www.nacet.org
Arkansas	Fund for Arkansas’ Future	Little Rock, AR	Companies in Arkansas	http://www.arkansasfund.com
California	12 Angels	Los Angeles, CA	Companies must address addiction recovery in some fashion; require $5,000,000 annual revenues	http://www.12angels.org
California	Acorn Angels	Cupertino, CA	Early stage high technology investments	http://www.acornangels.com
California	Angels Corner	Silicon Valley, CA	None	http://www.angelscorner.com
California	The Angel’s Forum	Palo Alto, CA	Companies in Northern California	http://www.angelsforum.com
California	Band of Angels	Menlo Park, CA	High technology companies	http://www.bandofangels.com
California	CalCEF Clean Energy Angel Fund	San Francisco, CA	Clean energy and technology companies	http://www.calcefangelfund.com
California	Coachella Valley Angel Network	Palm Desert, CA	Technology driven companies	http://www.cvangelnetwork.com
California	European American Angel Club	San Francisco, CA	None	http://www.euroamericanangels.com
California	Foothills Angels	Sacramento, CA	None	http://www.foothillsangels.com
California	Harvard Angels (Bay Area)	San Francisco, CA	Prefer San Francisco area investments	http://www.hbsanc.org/article.html?aid=328
California	Icon Angels	Los Angeles, CA	Fee based angel organization	http://www.iconangels.com
California	Imporium Angels	San Diego, CA	None	http://www.imporiumangels.com
California	Life Science Angels	Menlo Park, CA	Biotechnology and medical device companies	http://www.lifescienceangels.com
California	MIT Angels (Northern California)	San Francisco, CA	Preference for companies started by MIT alumni	http://http://www.mitcnc.org/site/c.muIZLaMMJrE/b.4490271/k.2676/MIT_Angels.htm
California	North Bay Angels	Healdsburg, CA	Preference for companies in Northern/Central California and Nevada; functioning prototype stage or beyond	http://www.northbayangels.com
California	Pasadena Angels	Pasadena, CA	Companies in Southern California	http://www.pasadenaangels.com
California	Plug and Play	Sunnyvale, CA	Diversified group offering incubator/accelerator style services as well as angel investing	http://www.plugandplaytechcenter.com
California	Private Capital Network	Huntington Beach, CA	Also has chapter in Stockholm, Sweden – more chapters in the works	http://www.privatecapitalnetwork.net
California	Sacramento Angels	Sacramento, CA	Companies in Northern California with a technology emphasis	http://www.sacangels.com
California	San Joaquin Angels	Stockton, CA	Prefer regional companies	http://www.sanjoaquinangels.com
California	Sand Hill Angels	Redwood City, CA	Technology, internet, clean technology and life sciences companies; Bay area companies preferred	http://www.sandhillangels.com
California	Silicom Ventures	Los Altos, CA	$1,000 presentation fee	http://www.silicomventures.com
California	Tech Coast Angels	Los Angeles, Orange County, San Diego, Santa Barbara	Companies in Southern CA	http://www.techcoastangels.com
California	US Angel Investors	Palo Alto, CA	Associated with Bay Area Startup Network (http://www.basn.org)	http://www.usangelinvestors.com
Colorado	Ansel Capital Partners	Boulder, CO	$25 application fee; Companies in the medical device, health care services or health care IT industries	http://www.anselcapitalpartners.com
Colorado	NoCo Angels	Fort Collins, CO	Companies in Northern Colorado	http://www.nocoangels.com
Connecticut	Angel Investor Forum	East Hartford, CT	Companies in Connecticut; medical device, financial services, software or consumer products companies	http://www.angelinvestorforum.com
Connecticut	Connecticut Venture Group	Fairfield, CT	Companies in Connecticut	http://www.cvg.org
Connecticut	Landmark Angels	Greenwich, CT	Companies located on the East Coast of the United States	http://www.landmarkangels.com
Delaware	First State Innovation	Wilmington, DE	None	http://www.firststateinnovation.org
District of Columbia	Angel Investors of Greater Washington	Washington, DC	Companies District of Columbia, Maryland and Virginia; Primarily interested in serial entrepreneurs	http://www.aiogw.org
Florida	Angel Investment Forum of Florida	Summerfield, FL	None	http://www.aiffl.org
Florida	Emergent Growth Fund	Gainesville, FL	Prefer companies in the Gainesville, FL area	http://www.emergentgrowth.com
Florida	Gulf Coast Venture Forum	Naples, FL	Companies in Florida	http://www.angelsoft.net/angel-groups/gulf-coast-venture-forum
Florida	Miami Innovation Fund	Miami, FL	Early stage companies in Miami area	http://www.miamiinnovationfund.com
Florida	New World Angels	Boca Raton, FL	Revenue producing companies in Florida	http://www.newworldangels.com
Florida	Springboard Capital	Jacksonville, FL	None	http://www.springboardcapllc.com
Georgia	Ariel Savannah Angel Partners	Savannah, GA	Application Fee	http://www.savannahangelpartners.com
Georgia	Atlanta Technology Angels	Atlanta, GA	Early-stage technology companies in Georgia	http://www.angelatlanta.com
Georgia	Network of Business Angels and Investors	Atlanta, GA	Prefer companies in the Atlanta area	http://www.nbai.net
Georgia	Seraph Group	Atlanta, GA	None	http://www.seraphgroup.net
Idaho	Hawaii Angels	Honolulu, HI	None	http://www.hawaiiangels.com
Idaho	Boise Angel Alliance	Boise, ID	Companies in Southwestern Idaho	http://www.boiseangelalliance.com
Idaho	Northwest Angel Network	Boise, ID	None	http://www.theangelpeople.com
Illinois	Cornerstone Angels	Northbrook, IL	Companies in the Midwest	http://www.cornerstoneangels.com
Illinois	Heartland Angels	Skokie, IL	Technology companies located within 300 miles of Chicago	http://www.heartlandangels.com
Illinois	Highland Park Angel Group	Highland Park, IL	None	http://www.hp-funding.com
Illinois	Hyde Park Angels	Chicago, IL	Prefer Midwest based companies (Chicago, specifically) or with alumni from Univ. of Chicago on executive team	http://www.hydeparkangels.com
Indiana	Clark Angel Network	Fort Wayne, IN	Companies in Northeast Indiana or Indianapolis	http://www.clarkangelnetwork.com
Indiana	Irish Angels	Notre Dame, IN	Companies associated with Notre Dame	http://www.business.nd.edu/ia/about_ia.cfm
Iowa	Rock River Capital	Rock Rapids, IA	None	http://www.rockrivercapital.angelgroups.net/
Kansas	Mid America Angels	Lenexa, KS	Companies located within 150 miles of Kansas City	http://www.midamericaangels.com
Kansas	Midwest Venture Alliance	Wichita, KS	Prefer companies in Kansas, will invest in companies in Oklahoma, Missouri, Colorado or Texas	http://www.midwestventure.com
Kansas	Women’s Capital Connection	Lenexa, KS	Companies in Kansas-Missouri region	http://http://www.kansaswbc.com/WomensCapitalConnection/tabid/1221/Default.aspx
Kentucky	Bluegrass Angels	Lexington, KY	Kentucky companies	http://www.bluegrassangels.com
Kentucky	Louisville Angel Network	Louisville, KY	Prefer companies within a 2-hour drive from Louisville	http://www.louisvilleangelnetwork.angelgroups.net
Kentucky	Louisville’s Enterprise Angels	Louisville, KY	None	http://www.angelsoft.net/angel-group/louisvilles-enterprise-angels
Louisiana	South Coast Angel Fund	New Orleans, LA	Technology companies within a 3 hour drive of New Orleans	http://www.southcoastangelfund.com
Maine	Maine Angels	Portland, ME	Prefer companies based in Maine	http://www.maineangels.org
Maryland	Capital Access Network	College Park, MD	Companies in Maryland, District of Columbia, Virginia or Delaware; $165 application fee	http://www.rhsmith.umd.edu/Dingman/programs/CAN/
Maryland	Chesapeake Emerging Opportunities Club	Columbia, MD	Currently fully invested	http://www.ceoopportunities.com
Massachusetts	Angel Healthcare Investors	Boston, MA	Companies in healthcare or life sciences field; companies located in the Northeast United States	http://www.hcangels.com
Massachusetts	Bay Angels Investment Group	Mashpee, MA	Companies in Cape Cod, The Islands, SE Massachusetts and Rhode Island; technology driven companies	http://www.bayangels.net
Massachusetts	Beacon Angels	Boston, MA	Companies in New England; maximum $5 million pre-money valuation	http://www.beaconangels.com
Massachusetts	Boston Harbor Angels	Boston, MA	Companies in Boston area; maximum $3 million pre-money valuation; $400 presentation fee	http://www.bostonharborangels.com
Massachusetts	Boynton Angels	Westborough, MA	Companies within 2 hour radius of Worcester; Prefer life sciences, energy, transportation, communications or software industries	http://www.boyntonangels.com
Massachusetts	Clean Energy Venture Group	Boston, MA	Early stage clean energy companies located in the Northeast United States	http://www.cleanenergyvg.com
Massachusetts	Common Angels	Boston, MA	Innovative information technology companies; Boston area companies	http://www.commonangels.com
Massachusetts	Golden Seeds	Boston, MA	Women led companies; maximum $5 million pre-money valuation; companies located in New England or Mid-Atlantic regions; also has locations in New York, Philadelphia and San Francisco	http://www.goldenseeds.com
Massachusetts	Hub Angels Investment Group	Brookline, MA	Not accepting unsolicited plans; companies located in New England, particularly Boston area	http://www.hubangels.com
Massachusetts	Launchpad Venture Group	Boston, MA	Companies in Boston area; technology driven companies	http://www.launchpadventuregroup.com
Massachusetts	Mass Medical Angels	Boston, MA	Life science companies in New England	http://www.massmedangels.com
Massachusetts	River Valley Investors	Springfield, MA	Companies within 2 hour drive from Springfield, MA; will not invest in biotechnology, consumer products, industrial manufacturing, energy, or medical device industries	http://www.rivervalleyinvestors.com
Massachusetts	Walnut Venture Associates	Wellesley, MA	Companies in New England	http://www.walnutventures.com
Michigan	Ann Arbor Angels	Ann Arbor, MI	Companies in Ann Arbor Michigan area; technology companies	http://www.annarborangels.org
Michigan	Aurora Angels	Houghton, MI	Companies in Michigan (preferably Upper Peninsula); technology companies	http://www.auroraangels.com
Michigan	Blue Water Angels	Midland, MI	Companies in Michigan; technology companies	http://midmichiganinnovationcenter.org/web/component/content/120?task=view
Michigan	Capital Community Angels	Lansing, MI	Prefer companies in Greater Lansing area	http://www.capitalcommunityangels.org
Michigan	First Angels	Kalamazoo, MI	Companies in West Michigan	http://www.southwestmichiganfirst.com/First_angels.cfm
Michigan	Grand Angels	Grand Rapids, MI	Companies in Michigan, preferably in Kent, Ottawa or Muskegon counties	http://www.grandangels.org
Michigan	Great Lakes Angels	Detroit, MI	Companies in Michigan, Ohio, Indiana or Ontario	http://www.glangels.org
Minnesota	3c Capital Partners	Northfield, MN	None	http://3ccapital.angelgroups.net/
Minnesota	South Metro Investors	Burnsville, MN	None	http://southmetroinvestors.angelgroups.net/
Minnesota	Two Rivers Angel Investment Network	Mankato, MN	None	http://www.tworivers.angelgroups.net
Minnesota	Wellspring Investor Alliance	Mankato, MN	None	http://http://www.greatermankato.com/business-wsinvestoralliance.php
Mississippi	Mississippi Angel Network	Ridgeland, MS	Companies in Mississippi; will not invest in companies in: retail services, oil & gas exploration or production franchisees, real estate development, management or investment.	http://www.technologyalliance.ms
Missouri	Billiken Angels Network	St. Louis, MO	Associated with St. Louis University; Companies with an association with St. Louis University	http://www.billikenangels.com
Missouri	Centennial Investors Angel Network	Columbia, MO	Prefer companies in Mid-Missouri; prefer technology start-ups and early stage companies; $100 fee	http://www.centennialinvestors.com
Missouri	Show Me Angels	Kansas City, MO	Prefer companies in Kansas City region	http://www.showmeangels.com
Missouri	Springfield Angel Network	Springfield, MO	Prefer companies in SW Missouri region	http://http://www.drury.edu/multinl/story_ejc.cfm?nlid=312&id=22582
Missouri	St. Louis Archangel	St. Louis, MO	Companies in St. Louis region	http://www.stlouisarchangels.com
Montana	TechRanch	Bozeman, MT	Companies in Montana	http://www.techranch.org
Montana	Frontier Angel Fund	Kalispell, MT	Companies in Montana and the inland Pacific Northwest	http://www.frontierangels.com
Nebraska	Nebraska Angels	Lincoln, NE	Companies with a Nebraska presence	http://www.nebraskaangels.org
Nevada	Reno Angels	Reno, NV	Companies in Reno-Tahoe area; $100 application fee	http://www.renoangels.org
Nevada	Sierra Angles	Incline Village, NV	Companies in Northern Nevada or 1-80 corridor in Northern California; Prefer the following industries: clean energy, green technology, computing, communications, health sciences, mobile applications, Web 2.0 or software.	http://www.sierraangels.com
Nevada	Vegas Valley Angels	Las Vegas, NV	Companies in Southern Nevada; maximum pre-money valuation of $4 million	http://www.vegasvalleyangels.angelgroups.net
New Hampshire	East Coast Angel Network	Portsmouth, NH	Companies in New Hampshire region; companies in advanced technologies, e-commerce, healthcare or industrial products & services industries	http://www.ecoastangels.com
New Hampshire	First Run Angel Group	Conway, NH	Companies in the White Mountains region	http://www.firstrunangelgroup.com
New Hampshire	Granite State Angels	Hanover, NH	Companies in New England	http://www.granitestateangels.com
New Hampshire	Monadnock Angel Investors	Monadnock, NH	Companies in Monadnock New Hampshire region	http://www.monadnockangelinvestors.com
New Hampshire	Northeast Angels	Nashua, NH	Prefer companies within driving distance of Nashua, NH; will consider companies in other areas of New England	http://www.nea.angelgroups.net
New Jersey	Jumpstart	Mt. Laurel, NJ	Companies in Mid-Atlantic region	http://www.jumpstartnj.com
New Mexico	New Mexico Angels	Albuquerque, NM	Companies in New Mexico	http://www.nmangels.com
New Mexico	Gathering of Angels	Santa Fe, NM	$2,500 presentation fee	http://www.gatheringofangels.com
New York	Dutchess County Angel Network	Poughkeepsie, NY	Companies in Dutchess County	http://www.thinkdutchess.com/business-resources/dcan.html
New York	Golden Seeds	New York, NY	Women led companies; maximum $5 million pre-money valuation; companies located in New England or Mid-Atlantic regions; also has locations in Boston, Philadelphia and San Francisco	http://www.goldenseeds.com
New York	Long Island Angel Network	Melville, NY	Companies in Long Island	http://www.liangels.angelgroups.net
New York	New York Angels	New York, NY	Companies in the Northeast United States	http://www.newyorkangels.com
New York	Orange County Angel Network	Goshen, NY	Companies in Orange County	http://www.orangecountycapital.com
New York	Rochester Angel Network	Rochester, NY	Companies in the greater Rochester area	http://www.rochesterangels.com
New York	Seed Capital Fund of Central New York	Syracuse, NY	Early stage technology companies in Syracuse or Central/Upstate New York	http://www.scfny.com
New York	STOC Angel Investment Network	Binghamton, NY	Companies in Southern Tier of NY; associated with Binghamton University School of Management	http://www.stock-ny.com/angel-network.asp
New York	Tech Valley Angel Network	Albany, NY	Prefer companies within 150 miles of Albany; technology oriented ventures; $300 administrative fee to present	http://www.techvalleyangels.com
New York	Tri-State Angel Investment Network	New York, NY	None	http://www.angelinvestorfunding.com
New York	Tri-State Ventures	New York, NY	Prefer companies in New York area; companies in technology, life sciences, service and consumer product industries	http://www.tristateventures.com
North Carolina	Blue Ridge Angel Investment Network	Fletcher, NC	Companies in Western North Carolina	http://www.brainnc.com
North Carolina	Eastern North Carolina Investor Network	Greenville, NC	Associated with Eastern Carolina University’s Entrepreneurial Initiative	http://www.ecu.edu/cs-acad/rds/ei/investor.cfm
North Carolina	Inception Micro Angel Fund – Coastal	NC	Companies in Coastal Region of North Carolina; still in formation stage	http://www.imafcoastal.com
North Carolina	Inception Micro Angel Fund – East	Winston-Salem, NC	Companies in Eastern Region of North Carolina	http://www.imafeast.com
North Carolina	Inception Micro Angel Fund – NC	Charlotte, NC	Companies in greater Charlotte area	http://www.imafcharlotte.com
North Carolina	Inception Micro Angel Fund – RTP	Raleigh, NC	Companies in Research Triangle Park Area; still in formation stage	http://www.inceptionmicroangelfund.com
North Carolina	Inception Micro Angel Fund – Triad	Winston-Salem, NC	Companies in Piedmont, NC area	http://www.imaftriad.com
North Carolina	Inception Micro Angel Fund – West	Fletcher, NC	Companies in Western Region of North Carolina	http://www.imafwestern.com
North Carolina	Piedmont Angel Network	Summerfield, NC	Companies in North Carolina, particularly Piedmont area	http://www.piedmontangelnetwork.com
North Carolina	Triangle Accredited Capital Forum	Wake Forest, NC	None	http://www.capital-forum.com
North Carolina	Wilmington Investor Network	Wilmington, NC	Companies in South Carolina and Eastern North Carolina	http://www.wilmingtoninvestor.com
North Dakota	Fargo Moorehead Angel Investment Fund	Fargo, ND	None	http://www.fmangelfund.angelgroups.net
North Dakota	Northern Plains Fund	Bismarck, ND	None	http://www.northernplains.angelgroups.net/home/
North Dakota	Valley Angel Investment Fund	Grand Forks, ND	None	http://www.valleyangelinvestmentfund.angelgroups.net/
Ohio	Akron Archangels	Akron, OH	Provides sponsored advisory services to assist chosen entrepreneurs in NE Ohio area	http://www.akronarchangels.com
Ohio	Core Network	Toledo, OH	Primarily companies in NW Ohio and SE Michigan	http://www.core-network.org
Oklahoma	i2E	Oklahoma City and Tulsa, OK	Early stage technology companies in Oklahoma	http://www.i2e.org
Oregon	Jefferson Grapevine Entrepreneurial & Angel Network	Medford, OR	None	http://www.jeffersongrapevine.org
Oregon	Oregon Angel Fund	Portland, OR	Companies in Oregon or SW Washington; associated with Portland Angel Network	http://www.oregonangelfund.com
Oregon	Oregon Sustainability Angels	OR	Companies focused on sustainable products and services; companies in Oregon or SW Washington	http://www.osa.angelgroups.net
Oregon	Portland Angel Network	Portland, OR	Companies in Oregon or SW Washington; associated with Oregon Angel Fund	http://www.oen.org/programs_pan.aspx
Oregon	Portland Venture Group	Lake Oswego, OR	Companies in greater Portland or Vancouver, WA area	http://www.angelsoft.net/angel-group/portland-venture-group
Oregon	Southern Oregon Angel Network	OR	None	http://www.angelsoft.net/angel-group/southern-oregon-angel-network
Oregon	Southern Willamette Angel Network	Eugene, OR	None	http://www.eugenechamber.com/cwt/external/wcpages/business/swan.aspx
Oregon	Women’s Investment Network	Portland, OR	Companies in Oregon or SW Washington; associated with Oregon Angel Fund and Portland Angel Network	http://www.oen.org/programs_win.aspx
Pennsylvania	Blue Tree Allied Angels	Wexford, PA	Companies in Pennsylvania, Ohio or West Virginia	http://www.bluetreealliedangels.com
Pennsylvania	Delaware Crossing Investor Group	Doylestown, PA	Companies in Bucks, Montgomery, Northampton and Lehigh counties in Pennsylvania or Hunterdon, Mercer and Burlington counties in New Jersey; $250,000 + investment needs	http://www.rhsmith.umd.edu/Dingman/programs/CAN/
Pennsylvania	Golden Seeds	Philadelphia, MA	Women led companies; maximum $5 million pre-money valuation; companies in New England or Mid-Atlantic regions; also has locations in New York, Boston and San Francisco	http://www.goldenseeds.com
Pennsylvania	Investors Circle of York	York, PA	None	http://www.yorkkiz.org/icy
Pennsylvania	LORE Associates	Philadelphia, PA	Companies in Greater Philadelphia area	http://www.loreassociates.com
Pennsylvania	Mid-Atlantic Angel Group	Philadelphia, PA	Companies in Pennsylvania, New Jersey, Delaware, New York, and Maryland	http://www.magfund.com
Pennsylvania	Minority Angel Investor Network	Philadelphia, PA	Companies within 5 hours of Philadelphia; prefer IT, life sciences and physical sciences companies.	http://www.minorityangelinvestornetwork.com
Pennsylvania	New Dominion Angels	Warrenton, PA	None	http://www.newdominionangels.com
Pennsylvania	Pennsylvania Angel Network	Erie, PA	Companies in Pennsylvania	http://www.paangelnetwork.com
Pennsylvania	Pittsburgh Equity Partners	Pittsburgh, PA	Prefer companies in SW Pennsylvania; Prefer seed and early stage IT and Life Science companies	http://www.pghpep.com
Pennsylvania	Pocono Mountain Angel Network	East Stroudsburg, PA	Associated with East Stroudsburg University	http://www.esu.edu/aboutesu/cred/angel.cfm
Pennsylvania	Private Investors Forum	Harrisburg, PA	None	http://www.privateinvestorsforum.com
Pennsylvania	Robin Hood Ventures	Wayne, PA	Companies within 1 hour drive of Philadelphia; $750k – $1.5mm investment	http://www.robinhoodventures.com
Pennsylvania	Susquehanna Investment Network	Susquehanna, PA	Companies in Central Pennsylvania	N/A
Pennsylvania	Winners Investors Network	Altoona, PA	Companies in Pennsylvania	http://www.paangelnetwork.com/index.php?option=com_content&task=view&id=75&Itemid=1
Rhode Island	Cherrystone Angel Group	Providence, RI	Companies located within a 2-hour drive of Providence	http://www.cherrystoneangelgroup.com
South Carolina	Charleston Angel Partners	Charleston, SC	Companies in the Southeast United States	http://www.chapsc.com
South Carolina	Upstate Carolina Angel Network	Greenville, SC	Companies in the Southeast United States	http://www.upstateangels.org
South Dakota	Enterprise Angels	Brookings, SD	Associated with Enterprise Institute	http://www.angelsoft.net/angel-group/enterprise-angels
South Dakota	Great Opportunities LLC	Sioux Falls, SD	Companies in South Dakota or bordering states	http://www.gosdfund.com
South Dakota	Prairie Winds Capital	Sioux Falls, SD	Prefer companies in greater Sioux Falls region	http://www.midwestventure.com
South Dakota	SDSU/Brookings Angel Fund	Brookings, SD	Prefer companies in South Dakota or neighboring states	http://www.brookingsangelfund.com
Tennessee	Angel Capital Group	Nashville, TN; Knoxville, TN; Tri-Cities, TN; Chattanooga, TN	Companies in Tennessee; will not invest in ad-based internet, real estate, restaurants, pharmaceuticals or ethanol companies	http://www.acgcommunity.com
Tennessee	Nashville Capital Network	Nashville, TN	Companies in Central Tennessee	http://www.nashvillecapital.com
Texas	Baylor Angel Network	Waco, TX	Associated with Baylor University business school	http://www.baylor.edu/business/angelnetwork
Texas	Camino Real Angels	El Paso, TX	Companies in the Paso del Norte region	http://www.caminorealangels.com
Texas	Central Texas Angel Network	Austin, TX	Companies in Central Texas	http://www.centexangels.com
Texas	Concho Valley Angel Network	San Angelo, TX	Companies in Texas	http://www.cvangel.org
Texas	Eyes of Texas Partners	The Woodlands, TX	None	http://www.eyesoftexaspartners.com
Texas	Houston Angel Network	Houston, TX	Companies in Texas; will not invest in the following industries: entertainment, oil/gas exploration, real estate development, bars/restaurants/spas	http://www.houstonangelnetwork.org
Texas	Lone Star Angels	TX	Companies in North Texas	http://www.lonestarangels.angelgroups.net/
Texas	North Dallas Investment Group	Dallas, TX	None	http://www.nd-ig.com
Texas	North Texas Angel Network	Ft. Worth, TX	May not be currently investing	http://www.northtexasangels.org
Texas	South Texas Angel Network	San Antonio, TX	None	http://www.satai.us/investment/investment_stan.html
Texas	Texas Women Ventures Fund	Irving, TX	Women led companies in Texas or Southwest United States; revenues of $7 million or greater; positive cash flow	http://www.texaswomenventures.com
Texas	Waco Angel Network	Waco, TX	Companies in Texas; $250 submission fee	http://www.wacochamber.com/angelnetwork.php
Utah	Southern Utah Dixie Angels	St. George, UT	Companies in Utah or Nevada	http://www.dixieangels.com
Utah	Olympus Angel Investors	Salt Lake City, UT	Companies in Utah	http://www.olympusangelinvestors.com
Utah	Park City Angels	Park City, UT	Companies in Utah or Nevada	http://www.parkcityangels.angelgroups.net
Utah	Salt Lake Life Science Angels	Salt Lake City, UT	Life science companies in Utah or Mountain West states	http://www.sllsa.com
Utah	Utah Angels	Provo, UT	Companies in Utah, particularly in the Wasatch Front	http://www.utahangels.com
Vermont	North Country Angels	Montpelier, VT	Companies in the Northeast United States	http://www.northcountryangels.com
Virginia	Active Angel Investors	Vienna, VA	Companies in Maryland, Washington DC and Northern Virginia	http://www.newvantagegroup.com
Virginia	Hampton Roads Angel Network	Hampton, VA	Companies in Technology, internet, clean technology and life sciences investments	http://www.hrtc.org
Virginia	Jefferson Corners Group	Charlottesville, VA	University of Virginia spinoff-companies and technology firms in Charlottesville, VA area	http://www.jeffersoncornergroup.com
Virginia	Virginia Active Angel Network	Charlottesville, VA	Companies in Virginia, Maryland, District of Columbia, North Carolina, Kentucky and West Virginia	http://www.virginiaactiveangelnetwork.com
Washington	Alliance of Angels	Seattle, WA	Companies in Washington, Oregon, Alaska, Montana, Idaho or lower British Columbia; high-growth technology companies; $95 submission fee	http://www.allianceofangels.com
Washington	Bellingham Angel Group	Bellingham, WA	Companies in the Pacific Northwest	http://www.bellinghamangels.com
Washington	Columbia Investor Group	Spokane, WA	Prefer companies in Eastern Washington	http://www.watechcenter.org
Washington	Delta Angel Group	Spokane, WA	Early stage, technology companies in the Pacific Northwest	http://www.deltaangelgroup.org
Washington	Northwest Energy Angels	Seattle, WA	Clean technology companies in the Pacific Northwest	http://www.nwenergyangels.com
Washington	Puget Sound Venture Club	Bellevue, WA	$150 presentation fee	http://www.pugetsoundvc.com
Washington	Seraph Capital Forum	Seattle, WA	Companies in Western United States. or Southern British Columbia	http://www.seraphcapital.com
Washington	Tacoma Angel Network	Tacoma, WA	Companies in the Pacific Northwest	http://www.tacomaangelnetwork.com
Washington	Zino Society	Seattle, WA	$150 application fee	http://www.zinosociety.com
Wisconsin	Golden Angels Network	Milwaukee, WI	Companies in the Midwest	http://www.goldenangelsnetwork.org
Wisconsin	Lake Superior Angel Network	Superior, WI	Lake Superior region based companies (contiguous counties from St. Louis county, MN to Western UP of MI)	http://www.lakesuperiorangels.com
Wisconsin	Origin Investment Group	La Crosse, WI	Associated with University of Wisconsin La Crosse Small Business Development Center	http://www.uwlax.edu/sbdc/Origin-Investment-Group.htm
Wisconsin	Pennies From Heaven	Kenosha, WI	Prefer companies in Wisconsin	http://www.angelmoney.org
Wisconsin	Phenomenelle Angel Fund	Madison, WI	Companies with substantial woman or minority ownership and at least $1mm revenue run rate	http://www.phenomenelleangels.com
Wisconsin	Wisconsin Angel Network	Madison, WI	None	http://www.wisconsinangelnetwork.com
Wisconsin	Wisconsin Investment Partners	Madison, WI	None	http://www.wisinvpartners.com
Wyoming	Wyoming Angel Network	Laramie, WY	None	http://www.wyomingangels.angelgroups.net/

National	ECS Angels	Bar Harbor, ME	None	http://www.ecs-angels.com
National	InvestIN Private Investor Network	Dallas, TX	Also offices in Boston, Chicago, Los Angeles, Mumbai, New Delhi, New York, Palo Alto, Reno, Seattle, San Francisco and Shanghai	http://www.theinvestinforum.com
National	Investors Circle	San Francisco, CA	Companies in following industries preferred: energy, environmental solutions, organics, natural products, education, media, health & wellness, community & international development; $150 refundable application fee, $995 presentation fee	http://www.investorscircle.net
National	Keiretsu Forum	Multiple Locations	Chapters in California, Pacific NW, Colorado, New York, Beijing, Barcelona, Paris and London	http://www.kereitsuforum.com
National	Space Angels Network	Leesburg, VA	Aerospace related companies	http://www.spaceangelsnetwork.com
National	Tribe of Angels		Jewish angel network; no longer accepting unsolicited applications	http://www.tribeofangels.com
National	Wedgwood Circle Angel Investor Network	Burke, VA	Companies that can have substantial cultural impact	http://www.wedgwoodcircle.com
National	Women Angels	Miami, FL	Companies with majority female ownership	http://www.womenangelsllc.com

Canada	Alberta Deal Generator	Edmonton and Calgary	Technology companies in Alberta	http://www.dealgenerator.com
Canada	British Columbia Angel Forum	Vancouver, British Columbia	None	http://www.angelforum.org
Canada	Anges Quebec	Montreal, Quebec	Prefer companies in Quebec	http://www.angesquebec.com
Canada	Cleantech Angel Network	North York, Ontario	Companies in clean technology and clean industrial/energy	http://www.cleanangelnetwork.com
Canada	First Angel Network	Halifax, Nova Scotia	Prefer companies in Atlantic Canada; $3,000 presentation fee	http://www.firstangelnetwork.ca
Canada	Fundamental Technologies II	Coquitlam, British Columbia	Companies in British Columbia or Washington State; technology focused companies; no life science, energy or cleantech companies; maximum pre-money valuation of $3 million	http://www.fundamentaltechnologiesii.com
Canada	Golden Horseshoe Angel Network	Oakville, Ontario	Companies in Ontario’s “Golden Horseshoe” region	http://www.ghangels.com
Canada	Infusion Angels	Waterloo, Ontario	Incubator model associated with University of Waterloo and Technology Park Accelerator	http://www.infusionangels.com
Canada	Maple Leaf Angels	Toronto, Ontario	None	http://www.mapleleafangels.com
Canada	Okanagan Angel Network	Kelowna, British Columbia	Prefer companies in the Okanagan Valley	http://www.okangels.org
Canada	Ottawa Angel Alliance	Ottawa, Ontario	Companies in the National Capital Region (Ottawa and Gatineau)	http://www.ottawaangels.ca
Canada	Peterborough Region Angel Network	Peterborough, Ontario	Companies in the Greater Peterborough area	http://www.peterboroughangels.ca
Canada	Ryerson Angel Network	Toronto, Ontario	Companies founded by current student or alumni of Ryerson University or from the Greater Toronto area; Companies founded by entrepreneurs under 30	http://www.ryerson.angelgroups.net
Canada	Saskatchewan Angel Investor Network	Regina, Saskatchewan	Companies in Saskatchewan; $200 application fee	http://www.saint.sk.ca/index.php
Canada	Southwestern Ontario Angel Network	London, Ontario	Companies in Southwestern Ontario region	http://www.swoangel.com
Canada	Vancouver Angel Technology Network	Vancouver, British Columbia	Life science, advanced technology or green technology companies in British Columbia	http://www.vantec.ca
Canada	Venture Alberta	Edmonton, Alberta and Calgary, Alberta	Companies in Edmonton or Calgary	http://www.venturaealberta.com
Canada	Winnipeg Venture Organization	Winnipeg, Manitoba	Companies in Winnipeg area	http://www.wao.ca
Canada	York Angel Investors	York, Ontario	Companies in York area	http://www.yorkangels.com

International	Angel Ventures Mexico	Mexico City, Mexico	None	http://www.angelventuresmexico.com
International	InvestIN Private Investor Network	Dallas, TX	Also offices in Boston, Chicago, Los Angeles, Mumbai, New Delhi, New York, Palo Alto, Reno, Seattle, San Francisco and Shanghai	http://www.theinvestinforum.com
International	Innovateur Capital	Mexico City, Mexico	None	http://www.innovateurcapital.com
International	Keiretsu Forum	Multiple Locations	Chapters in California, Pacific NW, Colorado, New York, Beijing, Barcelona, Paris and London	http://www.kereitsuforum.com
International	Private Capital Network	Stockholm, Sweden	Also has chapter in Huntington Beach, CA – more chapters in the works	http://www.privatecapitalnetwork.net

Nice Assets!

Seth Elliott — Tue, 14 Dec 2010 13:08:56 +0000

Continuing with our series on financial statements, today we are going to examine the Balance Sheet in more detail. Let’s evaluate the “left-hand” side of the Balance Sheet – Assets. Today, we’ll review the specific categories of Assets and examine some of these classifications in more detail.

Cash is clearly the most liquid of assets. Cash includes unrestricted balances in checking accounts, cash on hand and savings accounts (even though the bank often has the right to hold the funds for a period of time).

Marketable Securities, sometimes called short-term investments, are instruments that can readily be converted into cash. These usually refer to stocks, bonds or other securities that have a determinable market price and a liquid market in which to sell them. Management must have the intent to convert these securities into cash during the current period (i.e., within 1 year) in order to categorize these as marketable securities.

Accounts Receivable are simply monies due to the company from customers as a result of sales or services the company has rendered. Bear in mind that accounts receivable are generally shown net of an allowance for uncollectability (including discounts or returns).

Inventory is simply the balance of any goods on hand. These are generally categorized as follows:

Raw Materials are components purchased for direct use in manufacturing a product.
Work in Process are products that have been started but are not yet ready to be sold.
Finished Goods, by contrast, are items that have been completed and are ready for sale.
Supplies are components that are used indirectly in producing goods (or services), for example tape for cash registers (as a retailer) or needles (for a garment manufacturer).

Note that not all firms have these Inventory categories. Manufacturers generally have all five, while retailers and wholesalers often do not have any Raw Materials or Work in Process inventory. Service firms often have no inventory at all.

Prepaids are expenditures made in advance of the time that the company will make use of the goods or services. Typical prepaid expenses include taxes, rent, insurance, advertising and similar expenditures.

Other Current Assets are often categorized on the balance sheet. These may include other types of receivables (tax refunds, installment sales, etc.), unbilled costs, deposits or advances, etc. Remember, an asset may be classified by management as current if it is anticipated to be converted into cash within one year.

Recall that all other assets are deemed to be Long-term or Noncurrent in nature. Generally, these are categorized as tangible assets, long-term investments and intangible assets,

Tangible assets are actual physical facilities and equipment that are used in operating the business. These usually include Land, Buildings and Improvements, Machinery/Equipment and In Progress Construction. These items are all subject to Depreciation – which is the process of allocating the costs of these items over some defined period of time during which the asset will erode in value. Depreciation is accumulated from period to period and is subtracted from the tangible asset value to arrive at a net asset value.

Investments are not characterized as tangible assets. Long-term investments are generally equity (stocks) or debt (bonds) of other companies held for the purposes of exercising control or maintaining a specific business relationship.

Intangible Assets are, as the name suggests, non-physical in nature. Generally, these assets are intellectual property, such as patents, copyrights or trademarks. These are usually recorded at historical cost (or appraised value) and amortized over their useful (or legal) lives.

Of course, this brief overview does not include any and all assets that may appear on the Balance Sheet. Firms may have assets that do not fit into one of these classifications. These may include noncurrent receivables, noncurrent prepaid expenses, etc.

Before we conclude the examination of Assets and move on to Liabilities, we need to examine a few key ratios. In my next post, we’ll take a look at two key Asset ratios: Accounts Receivable Days and Inventory Days. We’ll discuss how these ratios are used and how to easily calculate them. Additionally, we’ll evaluate how to use them for comparison purposes and provide instruction on utilizing them to project elements of the future balance sheet.

For Want of a Nail . . .

Seth Elliott — Mon, 06 Dec 2010 14:15:05 +0000

This article was first published as “For Want of a Nail . . .” on Technorati

For want of a nail the shoe was lost. For want of a shoe the horse was lost. For want of a horse the rider was lost. For want of a rider the battle was lost. For want of a battle the kingdom was lost. And all for the want of a horseshoe nail.

Allowing small undesirable situations to spiral and grow inexorably worse is particularly dangerous in Startup World. Take care of first things first, no matter how minor the details. One of those seemingly minor details is deciding where to form your business.

In the past, many entrepreneurs chose to incorporate in Delaware (or more recently Nevada) due to more favorable terms. However, many of these favorable terms are no longer relevant – or applicable to startups. For 99% of startups, registering in your home state is the best choice, allowing you to take advantage of low cost and regulatory ease.

Let’s take a closer look at some of the advantages of home state registering:

Low Cost. Fees to register a business vary depending upon your state of residence They can be as low as $41 (Kentucky) and as high as $300 (Texas). In 34 states it’s $100 or less to incorporate – and in 8 of those it’s only $50 (or less).

Ease. It’s never been easier to incorporate. In many states, you can actually perform the entire process online. Even when you need to submit paperwork, it’s relatively simple to do if you are a resident of the state. Additionally, by registering in your home state, you don’t need another physical address and/or a registered agent. Of course, you also avoid the need to obtain a foreign corporation business license in your state of operations. These facilitate the process – plus save even further on costs.

Home Field Advantage. Any future needs in regards to complex structures may require the assistance of an attorney. Home state registration enables you to use a local practitioner, which can prove less expensive and more manageable.

Intrastate Securities Law Exemption. If you raise angel financing, you may find an intrastate offering example useful. To qualify, a company must be incorporated in the same state where it is offering the securities and carry out a very significant amount of its business in that state. If you incorporate and do business in your home state, this could prove extremely valuable to you – saving significant resources in terms of management time, paperwork, and attorney fees.

Registering your business is simply an administrative detail. As trite as it seems, failure to address this formation requirement early may be costly later on.

With minimal thought, effort and expenditure, your new venture can be up and running in a matter of days – and in the future your kingdom won’t be lost for lack of a horseshoe nail.

Working Smart vs. Hard

Seth Elliott — Tue, 19 Oct 2010 13:03:45 +0000

This article was first published as “Smart vs. Hard” on Technorati

Woody Allen famously said, “Ninety percent of success is just showing up.” The fact is, in a startup environment, you have to show up A LOT. Grinding out 12-plus-hour days is certainly a hallmark (if not a badge of honor) for many successful startups.

However, there’s certainly more to it than simply putting in the time. A big part of entrepreneurial success is working smart – not just hard.

Unfortunately, many aspiring founders seem to be stuck on the bottom end of this scale – all perspiration and no inspiration. (There are founders boxed in at the other end also, but we’ll save that examination for another time.) There comes a time, relatively early in your company’s life cycle, when you need to pull your nose up from the grindstone and take stock if you’re actually advancing your corporate goals.

Fill a need. Be certain that your product actually plugs a hole in the marketplace. Satisfying customers is inspiring – particularly because that results in sales (revenues!). If your product doesn’t move off the shelf in a reasonable time frame, you should be evaluating your circumstances.

Seek Competitive Advantage. I see a lot of “me too” business plans lately. In and of itself, there’s nothing wrong with replicating a competitor’s success (particularly with key modifications or improvements). Nonetheless, creating breakthrough innovations, new intellectual property, proprietary developments and new business processes are particularly satisfying and a source of foundational strength in building a startup.

Hoard IP. In a related fashion, create intellectual property wherever you can. Register domain names. File for trademarks and service marks. Copyright when appropriate. Register the same (and related names) on social media sites. File patents whenever possible. Building a storehouse of intellectual property should serve you well in the future.

Foster Development. Serve as a mentor and leader to your team. Build a strategy and make specific efforts to encourage the development of new skills throughout your organization. Education and learning can serve as the foundation for many in-company developments that shortcut time to market or create new forms of competitive advantage.

Model. Remember a great product with a competitive advantage does not a business make. Figure out how to outprice your competitors, deliver better service, a higher quality product and still produce a fantastic gross margin. OK – once that fantasy is disposed of, realize that focusing on a core business model designed to deliver success is a key component of working smart. Control what you can – particularly your own knowledge base – and find a business model that can serve as a foundation for successful growth.

At the end of the day, your startup is about achieving revenues and profits. Whatever reasonable steps you take to get there are the right ones. Nonetheless, try focusing on working “smart” in addition to working “hard” and see if you can’t get there faster – while having more fun.

Bear Traps: Attitudes to Kill Your Startup

Seth Elliott — Tue, 12 Oct 2010 14:30:10 +0000

Lack of self-confidence, or belief in your product/solution, can kill your startups chances. However, this risk characteristic is one that I rarely encounter amongst startups. Most entrepreneurs have a healthy dose of confidence – perhaps bordering on arrogance.

In fact, this other extreme can be just as dangerous to startup success. Over-confidence in your abilities, product or solution can destroy your prospects. Here are several attitudes to guard against as you grow your business:

“Business plans are old school.” Many entrepreneurs believe the change in the market environment means business plans are obsolete. The fact is that a properly constituted business plan is more important than ever. Naturally, you’ll need some form of overview to show investors if you’re seeking financing. More importantly, you need a business plan for yourself. The strategic planning process requires you to think through all the relevant components of your business. By writing it down, you can measure and manage relevant elements. Of course, what has changed is the form that business plans should take. Format and fluff take a backseat to substance and strategy.

”I’m the Prospective Customer.” Passion for your product/solution is a key ingredient for any success. Nonetheless, just because you love it doesn’t mean the market will. It’s critical that you rapidly acquire users, test their reactions and iterate your product. Successful entrepreneurs identify a market problem and tailor a solution to fit. Don’t produce a “solution” and then go looking for a “problem.” Don’t get so wedded to your design and aesthetic that you are unable to receive customer feedback and improve accordingly.

’Nobody Does It.” I can’t tell you how often I hear an early-stage entrepreneur tell me that there are no competitors to his solution. As we’ve discussed in the past, telling prospective investors that you have no competition is rarely a good idea. In general, you signal that you haven’t devoted the proper resources to researching your market, you’re dishonest or there simply isn’t a market for your solution. None of those scenarios are promising for you as an entrepreneur.

”We Are Agile and Nimble.” This comment is often made by technology entrepreneurs when discussing some of the “giants” in the field (IBM, Microsoft and increasingly Google are typical examples – but I’ve heard it applied to many other large companies). This is a perilous delusion to labor under. It may be true that a large company may not compete with you, but that’s likely because they find the market too small. If a large, “lumbering” firm decides to compete in your space, rest assured they will find a solution (it is true, however, that it may be appropriate to discuss the “buy vs. build” decision for large companies).

”Our Solution Will Go Viral.” I’ve recently discussed this “strategy” for achieving hyper growth by startups. Assuming that your solution is so fabulous that it will spread like wildfire via word-of-mouth and social networks is, at best, naïve. If you have a specific strategy that involves viral elements, be prepared to show specifics and back it up with the capital needed to achieve traction.

”We Have First Mover Advantage.” This belief essentially combines “no competition” and “agile and nimble” into a success perspective. It’s often trotted out by entrepreneurs that have no proprietary intellectual property or established brand name. While “First Mover Advantage” was popularized in a 1988 Stanford Business School paper, but its application in “startup world” is questionable. Steve Blank recently reviewed the facts, noting that first move advantage can actually be harmful.

”I’ve Got It Covered.” I’ve seen many a startup go the way of the dinosaur due to the ego of the founding CEO. Often, financings become impossible because the founder refuses to consider stepping aside in favor of a more experienced candidate acceptable to the funding source. Not all founders make good CEO’s. Not all founders can cover “all the bases” in the successful growth of a startup.

”If I Had a Million Dollars . . .” The end-game in your startup is not taking in a round of institutional capital. Money will not solve all of your issues. Indeed, once you’re funded the real work begins. After you receive capital, you have to buckle in and actually execute on your business plan (you do have a plan now, right?). If you think financing is the hard part, wait until you have to deliver results.

Of course, these are just a few of the “bear traps” that await overly confident entrepreneurs. What perilous attitudes have you encountered when operating in “startup world?”

The Balance Sheet

Seth Elliott — Thu, 07 Oct 2010 18:23:32 +0000

The balance sheet is a snapshot of the financial condition of a company. Essentially, it reveals – at a set moment in time – what the company owns or possesses (assets), what the company owes (liabilities) and what the company is worth “on paper” (equity). Balance sheet items can be evaluated in various ways, but the core use of the balance sheet as a whole is to evaluate the financial health of a company.

As I’ve just implied, the balance sheet consists of three broad categories: Assets, Liabilities and (Shareholders’) Equity. We will examine each of these categories directly shortly, however, you should know that one of the most “famous” accounting equations comes from the balance sheet:

Assets = Liabilities + Equity

This tells us that certain elements of the balance sheet must remain in equilibrium (“balance” – thus the name). Failure to meet this test would mean that the balance sheet itself is not “in balance” – therefore invalid. Of course, this equation can be rearranged as desired, including:

Assets-Liabilities = Equity

Liabilities = Assets – Equity (though this is rarely used)

Let’s examine the primary categories of the Balance Sheet: Assets, Liabilities and Equity.

Assets are actual “things” that you own in your business such as cash, capital equipment, money due to you etc. Assets basically describe resources of your enterprise that are anticipated to provide some future benefit for your firm – primarily an increase in cash inflows or decrease in cash outflows. Assets are not always tangible in nature (we will discuss this in more detail in future posts), but they always represent some value that will inure to your company. Assets are generally categorized between Current and Noncurrent Assets.

Current Assets are those deemed most liquid – essentially assets that can be sold (turned into cash) or consumed (utilized) within 12 months of the date of the Balance Sheet. These include items like cash, marketable securities, current accounts receivable, inventory, etc.

Noncurrent Assets are those items that are unlikely to be consumed (used) or liquidated (converted into cash) in less than one year. These often include property, capital equipment and various intangible assets.

On the other side of the balance sheet, so to speak, are Liabilities. As the name suggests, Liabilities are obligations of your business. These represent debts of the firm or monies that are owed (or reserved) to others. Obligations can include borrowed funds, bills you have yet to pay, taxes due but unpaid, etc. Like Assets, Liabilities are usually categorized between Current and Noncurrent Liabilities.

Current Liabilities represent those obligations that a company is required to discharge within 12 months. These usually include accounts payable, short term debt, the current portion of any long term debt, etc.

Conversely, Noncurrent liabilities are those obligations that need not be discharged for more than 12 months. In most cases, this refers to long term debt instruments.

Finally, there is Equity. Equity is traditionally referred to as Shareholders’ Equity – sometimes Owners’ Equity. For ease of use, many simply reference Equity. Equity is the calculated “book value” of the company. Equity is simply the difference between assets and liabilities. In other words, this is what would be “left over” after a company liquidates everything it owns and then pays off everything it owes. Equity is equivalent to personal net worth.

Equity is generally broken down into two components: Paid-In Capital and Retained Earnings.

Paid-In Capital represents funds that have been invested directly into the business by the shareholders of the firm. In most cases, Paid-In Capital is initially small – the seed capital investment by a sole proprietor or a few founders for the start of the business. Any future infusions of equity – whether by private transactions or even initial public offerings subsequently add to the Paid-In Capital.

The more dynamic component of Equity is Retained Earnings, which represent the growth (or erosion) of equity throughout the life of the company. For each balance sheet period, the net income of the company from the Income Statement is taken and added to the previous period’s Retained Earnings. For example, if your Company had $200,000 of Retained Earnings and generated $35,000 of Net Income for the year, your Retained Earnings for that period’s Balance Sheet would be $235,000. Note that Retained Earnings can decrease (or even become negative) if the firm generates substantive losses (expressed as negative net income on the Income Statement).

In the next post, we will address the specific categories of Assets. We will examine various Asset types in more detail, as well as summarizing several key accounting ratios that can be used to examine the health of a firm. Thereafter, we will do the same with Liabilities.

You may wish to review other posts in this series, including:

Corporate Finance and the Entrepreneur

Leaping the GAAP

The Entrepreneur and the Income Statement

My EBITDA is Bigger Than Yours.

Income Statement Hide and Seek

Income Statement Hide and Seek

Seth Elliott — Tue, 28 Sep 2010 14:17:45 +0000

Before we finish with our examination of the Income Statement, it’s worth addressing some of the “games” that can be (and have been) played in reporting. Why is this important? At some point, you will likely be comparing your company to others in the industry for the purposes of analysis and valuation. Understanding some of these nuances can prove valuable when discussing your historical and projected Income Statement in regards to other market participants.

Revenue Recognition

As discussed in a previous post,
most companies choose to report financial performance using the accrual (vs. cash) methodology. As such, reported revenues may not reflect payments that were actually received. In order to recognize revenue, GAAP requires that the following criteria are met:

There is clear and persuasive evidence that a commercial arrangement between the parties exist.

The product or service has been delivered or rendered to the purchaser.

The purchase price is either fixed or readily determinable.

Collectability of the purchase price is reasonably assured.

It appears that revenue recognition is relatively straightforward. Essentially, it sets forth that revenue should not be booked until the seller has fully discharged his obligations to the buyer and has received – or is likely to receive – payment for providing goods or services.

Unfortunately, the last point – collectability – is not always so clear. Throughout the mid to late ‘90’s, a series of accounting scandals came to light around this issue. Without delving into too much detail, you can probably conceive of several ways to manipulate this part of the system. Suppose, for example, you offer to sell a product to a purchaser and structure the terms so that they do not have to pay you for several years and they can readily return the product during that time frame. Is collectability reasonably assured now? Or imagine that you have long-term payment structures (several years) and your customer base is primarily early-stage, small companies. Is there any reasonable assurance that those customers will be around when the time comes to collect?

As you can see, there are some aggressive positions that can be taken in regards to revenue recognition. In many cases, you can identify these issues when comparing against the balance sheet (which we will note in future posts in this series). The key is to be able to question and evaluate the revenue recognition policies of your company vs. your competitors.

Inventory and Cost of Goods

Decisions about assessing the value of inventory have a significant impact on the income statement. Although we will examine this concept in our review of the Balance Sheet in future posts, it’s important to gain a base understanding when evaluating cost of goods (and thus gross margin).

Briefly, there are two primary methods of accounting for inventory: “first in, first out” (known as FIFO) and “last in, first out” (known as LIFO).

Using FIFO, you calculate your cost of goods (including raw materials) based on the oldest inventory you are holding.

Using LIFO, you calculate your cost of goods (including raw materials) based on the newest inventory you are holding.

Let’s use a quick example to make this clear.

Assume your company sells carved marble blocks – which you purchase in finished form from a manufacturer. Now, let’s presume that you have paid the following amounts (we will simplify and pretend you purchase only 1 block each month):

June -$12 / July – $15 / August – $20 / September – $25

Now let’s say that in October, you sell 3 blocks for $30 each. You book your $90 of revenue. What cost of goods should be used in your Income Statement?

If you use FIFO, your cost of goods is $47 ($12 + $15 + $20) – making your gross margin $43.

If you use LIFO, your cost of goods is $60 ($15 +$20 +$25) – making your gross margin only $30.

At first glance, this may not seem particularly relevant. However, now imagine this situation multiplied by thousands (if not tens of thousands) of unit sales. If you extrapolate this same example over the course of 100,000 units – it means a difference in gross margin of $1.3 million!

As you can see, the choices made in regards to inventory recognition can substantively affect the bottom line. Once again, the key as an entrepreneur is to understand these basic nuances and be prepared to examine them. When comparing your company to industry participants, be sure to review the inventory recognition policies and be prepared to describe the differences.

In the next post in this series, we will move on and begin our examination of the Balance Sheet.

You may wish to review other posts in this series, including:

Corporate Finance and the Entrepreneur

Leaping the GAAP

The Entrepreneur and the Income Statement

My EBITDA is Bigger Than Yours.

Advisory Board Advice

Seth Elliott — Thu, 23 Sep 2010 14:58:35 +0000

When sitting through entrepreneurs’ presentations, I often find myself cringing when the “Advisory Board” slide makes its appearance.

Advisory Boards have been in vogue for some time. In the “go-go” years of the first internet bubble, every company had such a group filled with household names. Even today, I find many startups use advisory boards in an effort to bulwark legitimacy.

Used properly, an advisory board of 2-3 individuals can prove valuable for a young firm. Unfortunately, selecting the wrong individuals or using them poorly can actual be damaging to your efforts.

First, be sure you fully understand the difference between an advisory board and a Board of Directors. Members of an advisory board have no formalized powers – and likewise have no fiduciary responsibilities or accompanying liability. Advisory board members serve at the pleasure of the management team.

Of course, this means their impact is highly dependent on how you manage the process. If you’re looking to use them as ego boosters, cheerleaders or figure heads forget it. There is no real value to you or your business from such a group. You should be looking for individuals with relevant experience that will be frank and helpful in providing advice to you – and are uninterested in lending their name simply to portray your company in a more positive light.

If you give no incentive or direction, you’re likely to receive no value. However, used effectively, your advisory board can serve as a “kitchen cabinet” that can save you from making major blunders and provide guidance when evaluating key decisions.

Here are some tips on choosing and using your advisory board to achieve maximum results:

Identify Your Needs. Before you put together an advisory board, spend some time determining why you want one. Are you looking for specific skill sets? Advice on particular markets or distribution strategies? Someone with a rolodex of particular contacts? A background in sales? Expertise in growing a startup? The list goes on and on. Identify what you are looking for in your advisors and articulate how you intend to use your advisory board before seeking candidates. One caveat – don’t use an advisory board to fill an operational gap, design a product, head direct sales, etc. At a certain point, it’s more productive to bring on a partner or staff member. Advisory board members are useful in helping you identify and strategize, they aren’t there to run daily operations.

Consider Backgrounds. When building an advisory board, successful execution is critical. After all, you are looking to tap into a base of experience and expertise that are not available to you. As such, you want individuals with clear domain expertise and a history of success. In general, you also want people that have lived through the process of growing an early stage business into a successful organization.

Seek Complements. Generally, you want your advisory board to offer you perspectives and experiences that are different from your core management team. If you are primarily technologists, find a successful business builder. If you have little financial expertise, find someone with CFO experience. If you have no sales experience, find somebody that has successfully built and grown sales organizations. What you’re looking for is to plug high-level holes with advice from high-powered individuals with complementary backgrounds.

Formalize. Of course, most advisory board members agree to work with you because they want to help out. Nonetheless, you should offer some form of compensation for their participation. This can be a small monthly fee or some form of equity options (or both). Naturally, you should cover any direct out-of-pocket expenses incurred on your behalf. Also, appoint your advisory board members for a set term (6 months, 1 year, etc.) – you can always mutually renew.

Be Specific. By following the course of action thus far, you’ve carefully chosen your advisory board and created a formal structure. This creates a foundation for you to be very clear on the help that you are seeking. In addition to regular meetings (see below), you should identify in writing the types of assistance and advice that you are expecting from each of your advisory board members. This will allow you to ask for the kind of help you need and help to set proper expectations, leading to more effective use of your advisory board.

Manage the Process. In addition to formalizing compensation and advice, you should actively manage your advisory board. Schedule regular meetings (monthly, quarterly, whatever frequency works for you). In addition to individual advice, be sure to create written agendas and minutes of meetings – and keep all of your advisory board members informed. The idea is to access a pool of knowledge and experience so that the sum is greater than the parts. Regular meetings go a long way to helping achieve that goal.

Try-Outs. One other thought to consider – use the advisory board as a testing ground. If you find that commitment and contribution (plus personal chemistry) works well, you may consider asking an advisory board member to “upgrade” to your actual Board of Directors. Some will decline (primarily due to liability concerns), but many will be delighted to serve – particularly after you’ve worked together for a period of time. Of course, before making any such offer identify prospective advisory board replacements.

Advisory boards can provide real value to early stage businesses. Accessing complementary expertise and a broader array of contacts may prove to be invaluable. However, if you find yourself hiding information from your advisory board, rescheduling meetings or generally ignoring advice, you’ve chosen the wrong members (or you’re unable to get out of the way of your own ego). Try following these steps to get the most out of an advisory board and accelerate your company’s success.

My EBITDA is Bigger Than Yours . . .

Seth Elliott — Tue, 21 Sep 2010 13:00:48 +0000

Venture Capitalists, Investment Bankers and related professionals love to sprinkle their conversation with esoteric terms – most notably the fabled EBITDA and EBIT. Let’s examine the calculation of these items and, more importantly, why they are used.

EBITDA stands for Earnings Before Interest, Taxes, Depreciation and Amortization. Although this can be calculated from the Net Income line, generally it is determined by taking Operating Income and adding back Depreciation and Amortization (which are part of SG&A).

EBIT is simply Earnings Before Interest and Taxes. In most cases, EBIT is equivalent to the Operating Income.

Occasionally, you may hear the term EBT – which stands for Earnings Before Taxes. In many cases, however, this is simply referred to as Pre-Tax Income.

There are a number of reasons that the terms EBITDA and EBIT are used regularly. These include:

For comparing firms. EBITDA and EBIT are simple mechanisms for highlighting “profitability” at various levels on the income statement. By using Gross Margin, EBITDA and EBIT and Net Income you can more readily compare firms to one another. The effects of intensive capital equipment investments (which result in depreciation and amortization), debt financing (which results in interest costs) and other capital structure differences mean that using Net Income as a comparison figure can be misleading. By examining these various components, a more appropriate financial picture emerges.

To showcase profitability. EBITDA and EBIT allow enterprises to highlight the profitability measure that is most favorable. For example, if your firm has a high debt load and (consequently) large interest charges when compared to others in your industry, you may choose to highlight EBIT instead of Net Income. Similarly, if you have a lot of capital equipment that results in high levels of depreciation, you may choose to highlight EBITDA.

As a valuation metric. Many financial professionals use EBITDA (or EBIT) as a baseline and apply a multiple to determine the enterprise value of the firm. This has become an accepted convention in the last 15 years. In our future examination of valuation, we will see that this method actually uses EBITDA (or EBIT) as a proxy for cash flow. Strictly speaking, valuations based on EBITDA multiples are lazy – but they have become so ubiquitous that the method itself is now a baseline for valuation determination.

To foster appearances of brilliance. At times, it seems that the purpose of EBITDA and EBIT is to make financial professionals seem brilliant and sophisticated. As a former (and perhaps reformed) finance professional, I can assure you that I am not entirely joking. Every profession has it’s jargon and the finance profession more so than most. By using terms like EBITDA and EBIT, investment bankers and venture capitalists create a patina of expertise that can discourage and intimidate entrepreneurs and serve to make the professionals appear smart and indispensable.

As you can see, measures of profitability like EBITDA and EBIT are not particularly complicated. As an entrepreneur, it is worth the time to gain an understanding of how these metrics are calculated. More importantly, it is helpful to understand how to deploy these methods to showcase your company’s financial results and to prepare you to “hold your own” in discussions with financial professionals.

In the next post in this series, we will examine further nuances of the Income Statement, including revenue recognition, accounting for inventories and depreciation.

You may wish to review other posts in this series, including:

Corporate Finance and the Entrepreneur

Leaping the GAAP

The Entrepreneur and the Income Statement

The Viral Marketing Fallacy

Seth Elliott — Thu, 16 Sep 2010 13:10:16 +0000

More often than not, I find that business plans that are presented to me are woefully inadequate when it comes to the Go To Market section. We’ll explore Go To Market planning and needs in more detail in a future post. Today I want to address the “strategy” that many entrepreneurs expound when I draw my concern to their attention.

Quite frequently, I hear “We have a viral marketing strategy…” or some variation of those words. I have to restrain a physical wince when I hear that phrase or any of its cousins.

It’s tempting (and understandable) to believe that your product or service offering will be so compelling that it will be adopted by influencers who rapidly spread usage via word-of-mouth. The advent of social media (particularly Twitter) has made this approach seem even more achievable to entrepreneurs.

Before further analyzing this, let’s distinguish between a viral marketing “strategy” and word-of-mouth.

The fact is that word-of-mouth in of itself is not controllable. Word-of-mouth is unsolicited and (to a large degree) unmanaged action on the part of consumers. This activity can be positive (what you are hoping for) or negative (BP anyone?). In cases where this word-of-mouth has had a particularly widespread effect, we often term it as viral. To my mind, Hotmail was one of the first examples of this “viral effect,” but interestingly the founders did not, by all accounts, build a business model based on a viral strategy.

A viral marketing strategy, on the other hand, is a specifically coordinate set of activities that are designed to take advantage of potential word-of-mouth accelerators. Viral marketing consists of a set of tactics designed to grow attention and increase usage at exponential rates. A successful viral marketing program should have a massive result in regards to awareness and adoption.

In today’s environment, deliberately setting forth to achieve such a result is quite an endeavor. To purposely foster the “buzz-worthiness” of a product so that it “goes viral” requires significant resources. By no means should this simply be viewed as an afterthought to your Go To Market answer to a questioner.

By the way, I’m not suggesting that a viral marketing strategy is inappropriate – simply that it is part of a marketing plan. Thus, like any other marketing campaign, it must be created, costed and executed.

If you are considering a viral strategy as a key component of your marketing plan, it’s critical that you recognize the core elements and substantive costs involved. Here a three foundation elements of most viral marketing strategies:

Content. In order to achieve virality, you must have a message that resonates due to strong entertainment or informational value. This message must, of course, be resident in electronic or online form so that it can be passed along in an exponential fashion via social networks or email. It’s not so easy to activate people’s desire to share humorous, entertaining or useful information. Developing this content is often a resource heavy (and expensive) endeavor.

Proselytizers.. If you’re planning on virality as a core strategy, it cannot simply be left to chance. You’ll need a team of people that promote your offering online. Essentially, you need to secure a group of evangelists to blog about your product, get other key bloggers involved, post links, tweet and use social networks to full advantage. By the way, don’t neglect offline venues (cocktail parties, little league games, rotary clubs, parent-teacher meetings, etc.) in your planning process. Without a team of zealots to promote your offering, you’re simply hoping that the message itself will rise above all the noise and achieve it’s own virality – not a great strategy. Effective brand evangelist teams don’t come cheap.

Seedbeds. Even your proselytizing team is unlikely to be enough. You need to take steps to make your offering appear present throughout the marketplace – particularly online in search results, video sites, blogs, etc. In order to do this, you’ll have to spend some cash on search engine marketing and optimization, as well as designing a campaign to get placement online (review incentives, special offers, competitions, etc.). This process can become incredibly expensive. Long gone are the days when you could “seed” your offering into a few relevant communities and expect to achieve popularity. Entry costs for the seedbed component have risen dramatically. You should be expecting a high 5 figure cost at the least when building out this element of your viral marketing strategy.

The bottom line is that a well-planned and properly executed viral marketing campaign – one likely to achieve a measure of success – is likely to cost you at least $100,000 and probably will be far in excess of that. Many key brands that you think of as successful as a result of viral marketing have spent upwards of $25 million in order to secure their place in the pantheon of household names.

There is no question that viral marketing can be hugely successful – and when it is certainly the return on investment is well worth it compared to many other marketing strategies. Nonetheless, that investment must be made – and it’s not cheap. Plan accordingly, and try to avoid a flip answer of “We have a viral marketing strategy,” when speaking to prospective investors.