An Entrepreneur Walks into a Bar - joke by Anne Giles Clelland, made exponentially funny via cartoon by Kelsey Sarles.

Of possible further interest:

A Guide to Angel Investors in Blacksburg, Virginia
Ten Bottom Line Stats on Angel Investing
Becoming an Angel Investor
Angel Investing category on Handshake 2.0

"Angel Investors and Venture Capital" is the cover story of the October 2010 issue of Valley Business FRONT.

The cover model is the spirited Bob Summers of 460 Angels.

The full story "Angel in My Pocket: An Investment Guide" by Susan Ayers is on moreFRONT.

These links to posts and categories on angel investors and venture capital may be of further interest:

Angel Investor Guide to Blacksburg, Virginia

Pitch and Polish Clinics from 460 Angels

Hutchison Law Group's HLG Launchpad Series 
(Next seminar is November 11, 2010)

DayOne Ventures on Handshake 2.0

Angel Investing on Handshake 2.0

My Hometown's Women Angel Investors

Valley Business FRONT is the monthly magazine for in-depth business news in the Roanoke Valley and the New River Valley of Virginia. You're invited to read moreFRONT and to follow Valley Business FRONT on Twitter, @vbFRONT.

According to Pat Matthews, a DayOne Ventures mentor, applications are still being accepted for its seed stage investment and mentorship program for technology-based startups.

We were delighted that Handshake 2.0 was the venue selected to announce the launch of DayOne Ventures.  With the program beginning May 31, 2010, we look forward to learning about the entrepreneurs and companies selected for mentorship in the inaugural session.

DayOne Ventures has been in the news.  Here's a list we've compiled, most recent first:

Mentorship program gives money and more to technology startups, Blue Ridge Business Journal, May 3, 2010

How To Get Funded or Get Acquired, Building 43, April 2010 (video includes DayOne Ventures mentor Bill Boebel)

DayOne Ventures Brings Small Town Flavor to Startup Incubation, ReadWriteStart, March 31, 2010

Mentors-Plus-Capital Programs - Intense Incubation by Jim Flowers - Startup Professionals, March 17, 2010

DayOneVentures @ VT KnowledgeWorks Launches, PRWeb, March 17, 2010

DayOne Ventures Launches @ VT KnowledgeWorks - Inside VT KnowledgeWorks, March 12, 2010

DayOne Ventures Launches - Seed Stage Investment for Technology Start-Ups - Handshake 2.0, March 12, 2010

DayOne Ventures is a seed stage investment and mentorship program for technology-based startups. Each spring DayOne engages with up to three early stage startups through a competitive evaluation process. Winning teams can receive up to $16,000 to cover personal and business expenses related to participation in the summer mentorship program, plus class A office space and high-speed internet access during their stay. Throughout the summer, each team receives regular mentoring by successful entrepreneurs who have built and sold technology businesses. The program concludes in late August. At the end of the summer, each firm has the opportunity to present to potential investors via a demo day event.

You're invited to read more about DayOne Ventures on Handshake 2.0 and to follow DayOne Ventures on Twitter @dayoneventures.

***

DayOne Ventures is housed at the VT KnowledgeWorks Business Acceleration Center, located in the Virginia Tech Corporate Research Center in Blacksburg, Virginia.  VT KnowledgeWorks is a client of Handshake Media, Incorporated, the parent company of Handshake 2.0.

Having written several posts about Angel Investing on Handshake 2.0 and having heard questions about angel investing from the constituents of local angel investing initiatives in the Blacksburg, Virginia area, I was fascinated to receive this announcement from Bob Summers:

"The NewVa Corridor Technology Council's (NCTC's) Access to Capital Committee and 460 Angels are seeking local businesses which need capital to grow.  A business pitch is the first step to communicating an entrepreneur's idea and opening doors to the required $. The Pitch and Polish Clinic is an activity which is designed to help  entrepreneurs make their presentations better before they go to the funding source."

Bob Summers was open to answering the questions I've heard (and asked myself): 

Q. I'm an entrepreneur with an idea, but I don't have a company.  Can I still pitch?

A. Yes, but you need to have prepared a two-page executive summary to get the most out of the presentation.  A well-prepared business pitch includes details on the Market opportunity, the Technology/Product, and the Team that is going to lead it.
 
Q. I have a company, I have an idea, but I don't know if I'm an entrepreneur.  Can I still pitch my idea to see if this is the path I want to take with my company?

A. Depends.  The Pitch and Polish clinic is designed to help entrepreneurs tune an investor pitch to raise needed seed or early stage capital.  Time is best used for those product companies which have global scale that require angel or venture capital for rapid growth.
 
Q. I'm not sure my idea is good enough to pitch.  How can I decide whether or not it's good enough?

A. Is your idea the basis of a business that can have $50+ million in revenue in three years?  Software product companies that meet the needs of an untapped market can meet this metric and are good ideas.  Think hard about the market opportunity (who will buy) and competition (who will stop you).  If your product will solve a problem that is worth paying for and you can beat the competition, then it is a good idea worth giving a pitch.
 
Q. I want to pitch, but I'm not sure I'm ready.  How do I know I'm ready?

A. If you can explain the idea and business in 10 minutes with 6-8 slides, then you are ready.  The Pitch and Polish Clinic is designed to give you a chance to practice, so go for it!  This is not Shark Tank...we don’t bite.

Thanks for the information, Bob.  I'm still working on my killer app.  " $50+ million in revenue in three years"?  Piece of cake.  I look forward to being in touch with you when it's ready. :)

***

For more information about the Pitch and Polish Clinics, to learn about upcoming clinics, or to request a pitching slot, please contact Bob Summers, bob@460Angels.com.

Pitch and Polish is open to all technology product companies with a 10-minute business presentation that want feedback from a room of experienced business people. The clinic provides an entrepreneur with the opportunity to give a 10-minute investor pitch and receive feedback on how to improve.  The clinic is held monthly at the Virginia Tech Corporate Research Center.  The first Clinic will be held in May, 2010.

460 Angels is a seed and early-stage angel investor group focused on funding and coaching hi-tech entrepreneurs with scalable business models based in the New River Valley and Roanoke region of Virginia.

The goal of the Access to Capital Committee, formed by the NewVa Corridor Technology Council, is to increase communication between technology firms that need funding and investors willing to fund them.

For more information about angel investing, feel free to read Angel Investor's Guide to Blacksburg, Virginia and our category Angel Investing on Handshake 2.0.

The NewVa Corridor Technology Council (NCTC) is a client of Handshake Media, Incorporated, the parent company of Handshake 2.0.

1.

"Fast-growing young firms, comprising less than 1 percent of all companies, generate roughly 10 percent of new jobs in any given year." (Kauffman Foundation)

2.

"...less than 3% of young companies raise equity from external investors." (BusinessWeek)

3.

Nationally, only 312 seed stage companies received funding in 2009.  (National Venture Capital Association)

4.

"…while venture capital is important for the development and growth of certain firms, it doesn’t appear to be universally important for creating high-growth companies. Of several hundred fast-growing companies on the Inc. list over the last decade, only 16 percent ever received a venture capital investment.” ("High-Growth Firms and the Future of the American Economy," Kauffman Foundation, March 2010)

5.

"Industries receiving the most dollars in first-time financings in 2009 were Biotechnology, Industrial/Energy and Software. Industries with the most first-time deals in 2009 were Software, Media/Entertainment, and Biotechnology." (VC Investments Q4 '09 - Money Tree - Press Release)

6.

"Women run 40 percent of privately-owned businesses, but only 8 percent of venture-backed tech start-ups." (Inc.) 

7.

In 2009, women angels represented 11.3% of the angel market. (March 31, 2010 report, Center for Venture Research)

8.

At U.S. start-up programs, the mentors are predominantly male: Capital Factory, 18 of 20, DayOne Ventures, 9 of 9, LaunchBox, 29 of 31, Tech Stars, 144 of 158,  Y Combinator, 3 of 4.

9.

"...when women do seek angel capital they lag behind the market yield rate by 5%." (Center for Venture Research)

10.

"...at least half of all angel investments lose money and 48% of investments with final outcomes result in a 100% loss." (Wall Street Journal)

***

Angel Investor Guide to Blacksburg, Virginia

Handshake 2.0 on Angel Investing - All posts in the category

Whether an entrepreneur is seeking funding for an idea, an individual is seeking to become an angel investor, or an angel investor is seeking the like-minded, here's how to make contact with those in the know on the angel investor scene in Blacksburg, Virginia, the New River Valley of Virginia,  and the nearby Roanoke, Virginia area.

460 Angels

460 Angels is a seed and early-stage angel investor group focused on funding and coaching hi-tech entrepreneurs with scalable business models based in the New River Valley and Roanoke region of Virginia.

Contact: Bob Summers, bob@460angels.com

Access to Capital Committee

The goal of the Access to Capital Committee, formed by the NewVa Corridor Technology Council, is to increase communication between technology firms that need funding and investors willing to fund them.

Contact: Bob Summers, bob@energyware.com

DayOne Ventures

DayOne Ventures is a seed stage investment and mentoring program for technology-based startups, funded and operated by experienced, successful entrepreneurs who are also angel investors.  It is housed at the VT KnowledgeWorks Business Acceleration Center, located in the Virginia Tech Corporate Research Center in Blacksburg, Virginia, home of Virginia Tech.  

Contact: Lindsey Eversole, lindsey@dayoneventures.com

Hutchison Law Group Angel Investment Education Series

Hutchison Law Group offers a series of workshops and seminars for prospective angel investors and for entrepreneurs seeking angel investor funding.

Contact: Ken Maready, kmaready@hutchlaw.com

LeClairRyan SCOUT Award

The LeClairRyan SCOUT Award was created to recognize an entrepreneur or emerging business in southwest Virginia that has a unique idea and is ready to evolve. If you have a business plan and are ready to seek angel or venture capital financing, the SCOUT award may be for you. Every new venture needs someone to guide them through the common pitfalls that can end a good idea before it emerges.

Contact: scout@leclairryan.com
 
Virginia Active Angel Network, VAAN

Virginia Active Angel Network, VAAN, is a professionally managed and member-led group of accredited investors that meet monthly in a dinner model in Charlottesville, VA. Members from outside of Charlottesville, in Blacksburg, Roanoke, Richmond, NY and Georgia participate either by driving to the Charlottesville dinner or through on-line access. VAAN considers opportunities to provide funding and mentor capital to early and seed stage ventures primarily in the central and southern Virginia region, and the greater region, including Maryland, Washington DC, North Carolina, Kentucky and West Virginia. VAAN also syndicates opportunities with other Angel Capital Association angel groups.

Contact: info@virginiaactiveanglenetwork.com
 
VT KnowledgeWorks Entrepreneurship Summit

The VT KnowledgeWorks Entrepreneurship Summit is a yearly two-day comprehensive workshop for prospective company founders, entrepreneurs launching or re-vamping a business, growing companies seeking expansion capital, and individuals interested in investing in early-stage companies. The Summit includes open and student business concept competitions and live angel funding sessions.

Contact: Lindsey Eversole, lindsey@vtknowledgeworks.com

In Becoming an Angel Investor, I wrote, "I want to be an angel investor.  At least I want to know how an angel investor thinks." 

Okay, I'll practice.  Let me pretend I'm an angel investor.  

Let’s say I have $100,000 to invest.  I qualify as an accredited investo r- I have a net worth of $1 million or more, my annual income is $200K or more, or I meet other criteria to be an accredited investor. 

Following the advice of my mother, “Don’t invest anything you can’t afford to lose,” I can lose the whole $100,000 and not experience financial hardship.

Where could I invest my $100K?  I could get about 3% for 5-year CDs.  I might make 6% on real estate if I’m in it for the long haul, maybe 8% in stocks, again over the long haul, but in these days and times...

Gosh, can’t I get a better return than that?

“Angel investors expect a 500% return in year five.”

A 500% return in year 5?!  Now that’s R.O.I.  I’m in!

So, I give my money to a cool start-up to do what it needs to do, I get an equity stake in the company, and all the great things that happen to the company happen to me, too, because I’m now a shareholder.  Rich, rich, I’ll be rich!

Hey, wait, if bad things happen to the company, I want my money back, okay?

What?!  I don’t get my money back?  With a CD, I can get my money back.  Real estate, hey, people need a place to live.  If I don’t like what’s happening with stocks, I can cash out in a second.

You’re telling me that if I give this company my $100K and the company tanks, I don’t get a cent back?

According to the Wall Street Journal, "at least half of all angel investments lose money and 48% of investments with final outcomes result in a 100% loss."

This is risky business.

Yes, but 500% in year 5...

As an angel investor, I'll go stealth to the VT KnowledgeWorks Entrepreneurship Summit on April 7 and 8 in Blacksburg, Virginia.  I’ll sit in the crowd and watch those 15 presentations by companies who want my money.

Given the risk I’ll take if I invest, I don’t care how cool the idea is, how "green" it is, how earnest the entrepreneur is, how altruistic an investment in his or her company would be, or whether or not the PowerPoint includes a cute music video with everyone shaking hands.

I have one question and only one question:  “How are you going to make A LOT of money?”

***

I seem to be writing a series of posts on angel investing.  Here's what I've got so far, most recent first.

Angel Investor Comments on Becoming an Angel Investor

Talking About Money

Becoming an Angel Investor

An Entrepreneur in Every Garage

***

Handshake Media, Incorporated, the parent company of Handshake 2.0, is a VT KnowledgeWorks member company.  VT KnowledgeWorks is a client of Handshake Media.

At least I didn't get trashed this time. And "swayed by Anne's good looks"! I like that!

In Angel Investor Video Pitch Trashed, I shared a comment left by David Rose, angel investor and founder of Angelsoft.  He pointed out in detail the shortcomings of my angel investor video pitch.  To quote comedian Dom Irrera, I'm sure he meant it in the nicest way.

Although I called it a "trashation," David Rose's comment actually included an expert guide to creating an angel investor video pitch.

David Rose has done it again.  Becoming an Angel Investor describes what's required to become an accredited investor.  In a comment he left, Rose shares reasons for the requirements.  With thanks to Rose for his time and expertise, I share the whole of his comment here:

The reason that most angel groups require their members to be Accredited Investors is for the sake of the company, not the group itself.

Here's why: The SEC was set up in the aftermath of the Great Depression to protect people from being scammed with wild and crazy schemes floating their shares on the stock market and promising the moon. The result was a requirement that anyone selling equity (shares of a company) had to register with the Securities and Exchange Commission, and file a whole lot of detailed paperwork on the actual historic earnings of the company, the risk factors, background on the company management and owners, etc. etc. etc. That's what being a 'public company' is all about, and why your widowed Aunt Martha and your simpleton cousin Ferdinand are able to call up their stock broker and buy two shares of Google, for example.

BUT...the SEC realized that there were certain times when all that filing and paperwork wasn't necessarily required, so they established certain exemptions to the registration requirements. The exemptions are detailed, and cover several different categories (you can sell stock in Handshake 2.0 to Goldman Sachs, for example, or Kleiner Perkins), but the exemption that will typically be most appropriate for most entrepreneurs, as Ken [Maready] pointed out, is the asset/income test for individuals. The thinking is that someone who has that kind of money in the bank and/or continuous earning power, should be able to absorb the loss of the entire investment in your startup company if things go bad.

One of the other things about being an Accredited Investor is that you need to have business experience, so you can make a good case that you're not just throwing darts at a dartboard, or being swayed by Anne's good looks but that you really have made a considered decision to invest on the merits. (The test for "knowledgeable investor" is a bit more nebulous than the hard asset/income numbers, but get to the same point.)

SOOO...the bottom line here is that a company such as yours is exempt from all the public registration and filings when you sell your equity, but ONLY if everyone to whom you're selling falls under one of the specific exemptions laid out by the SEC. What happens, I hear you ask, if you fudge a little and sell to people who aren't accredited? Well, at some point in the future, when things get into trouble, they can turn around and accuse you of taking advantage of their poor, innocent, naivete, causing them to lose their hearth and home. And if a court upholds that claim, then not just THEIR purchase, but the entire ROUND in which they purchased equity can be unwound, with you having to give all the money back, with penalties. This is NOT something you want to do! And it's therefore why you, as the entrepreneur, want to make sure that you ONLY sell equity to Accredited Investors.

It is for THAT reason, to reassure you about taking their money, that angel groups require their members to meet those qualifications. All that said, the burden for ascertaining their investor status is, and remains on, the company. So part of the closing paperwork in every deal in which I've invested as an angel is what's called the Investor Questionnaire, often a six or seven page document wherein I tell the company exactly WHY selling to me is exempted from the SEC filing regs. This is something you keep with your closing documents, so that if things ever hit the fan, and I accuse you of taking advantage of me, you can whip out my signature and say "But David TOLD me that...and I relied on his representations."

In Becoming an Angel Investor, I wrote, "I want to be an angel investor.  At least I want to know how an angel investor thinks."  Thanks, David, for helping this happen.  The more company founders understand about angel investing, the better deals we all can do.

I want to be an angel investor.  At least I want to know how an angel investor thinks, given that I'll be pitching to a group of angel investors at the VT KnowledgeWorks Entrepreneurship Summit on April 7, 2010, and given the culture of entrepreneurship and angel investor funding developing in our region.

Many angel investment groups require their members to be accredited investors.

I started my research on accredited investors with the U.S. Securities and Exchange Commission:

An "accredited investor" is:

• a bank, insurance company, registered investment company, business development company, or small business investment company;
• an employee benefit plan, within the meaning of the Employee Retirement Income Security Act, if a bank, insurance company, or registered investment adviser makes the investment decisions, or if the plan has total assets in excess of $5 million;
• a charitable organization, corporation or partnership with assets exceeding $5 million;
• a director, executive officer, or general partner of the company selling the securities;
• a business in which all the equity owners are accredited investors;
• a natural person with a net worth of at least $1 million;
• a natural person with income exceeding $200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year; or
• a trust with assets of at least $5 million, not formed to acquire the securities offered, and whose purchases are directed by a sophisticated person.

Expecting an online application similar to that for an Employer Identification Number (EIN), I looked for the button to click to view the online application.  No button.

Sometimes Google won't do, but one still needs a Google-like source.  When searching for answers about all things legal, I ask Ken Maready of Hutchison Law Group.

I asked, "How does one become an accredited investor? How does a company founder know he/she is talking with one?"

Because he is, as I term him, an entrepreneur's entrepreneur, Ken replied right away:

Although the term "accredited investor" makes it sound like there's some kind of registration process or certification with some third party, it's really much more simple than that - they just have to meet one of the tests below, and there's no filing or other process for them to become "accredited."

The most common accredited investors you'd be speaking with (outside of venture funds) would be individuals who meet either the net worth test ($1,000,000) or the annual income test ($200,000 per year - or $300,00 per year combined with spouse - for the last 2 years with an expectation of earning that again this year).

Net worth of a $1 million or $200K per year, eh? Not for this start-up's founder.  Not yet.

Especially given this caution from Tracy Wilkins, quoted in the Blue Ridge Business Journal:

"A lot of us are entrepreneurs who have made it ourselves and love the game, like to help and we love building companies," said Tracy Wilkins, an angel investor and president of TechLab, a medical diagnostics firm in Blacksburg. "Angel investing is very hard to make money out of, to be honest with you. Unless you can afford to lose it, you shouldn't do it. It's gambling."

Good to know a little more about with whom I may be dealing, though. Thanks, Ken.

"A chicken in every pot and a car in every garage."
- Presidential campaign slogan attributed to Herbert Hoover

Allen J. Fuller, III asked me via Twitter, "You have talked about regional development in the past.  What would the NRV [New River Valley of Virginia] look like if your vision were realized?" 

Yes, I certainly have talked about regional economic development. A vision of the awesome power of social media to contribute to a regional economic revolution is fundamental to Handshake 2.0's business model.  We walk the talk of economic development through social media and Regional Economic Development on Handshake 2.0 certainly has its own category on the site.

If realized, what would regional economic development look like to me?

An entrepreneur in every garage. 

Or in every basement, coffee shop, dorm room, home office, bedroom or established corporation - wherever computer power and tools and materials could exist for a creative mind to invent.  And then for that mind to think, "This could be a business."

That's part of my vision.  It's only part because of this:

“When I started my company, I had to find my own mentors and scrape together capital in an ad hoc manner - and also do all the work required to make the enterprise succeed operationally.  I’m excited about helping the next generation of entrepreneurs by systematizing those critical tasks.  And Blacksburg [Virginia] is a great place to live and work.”
- Pat Matthews, DayOne Ventures Mentor

That's a hard way to go.  For my vision, which is impatient, I want new companies now, funded now.  That can happen when a culture of entrepreneurship is born of consciousness rather than opportunism.

I see our region creating a culture in which entrepreneurs are valued as individuals, as creators and inventors, as potential world-changers and as potential generators of profits, enriching their companies, their investors, and their communities.

Just look at these recent entrepreneurship launches, some within the past few days:

• Access to Capital, NewVa Corridor Technology Council, NCTC
• VT KnowledgeWorks Entrepreneurship Summit - In its second year, designed to bring together entrepreneurs and the partners and investors they need to succeed.
• DayOne Ventures

Allen, thank you for asking about my vision for regional economic development in the New River Valley of Virginia.  It's already taking shape.

BTW, Allen, are you an entrepreneur?  Got a garage?  Around here, it's a good time to be an entrepreneur.

***

Handshake Media, Incorporated, the parent company of Handshake 2.0, is part of the culture of entrepreneurship through membership in business acceleration center VT KnowledgeWorks. VT KnowledgeWorks is a client of Handshake Media.