Can seed, early stage, and angel investment capital be found in the DC metro area? This question and others were discussed by NVTC’s Small Business and Entrepreneur Committee’s engaging All Star Seed/Early Stage Investor Panel on November 15, with some of the area’s most active early stage investors. Moderated by Aronson partner Norm Snyder, the panelists included Ed Barrientos, “super-angel” investor and entrepreneur CEO of Brazen, Steve Graubart, CFO of 1776, John May, founding Partner of New Dominion Angels, Liz Sara, angel investor and entrepreneur and Chair of the Dingman Center, and Tom Weithman, Managing Director of CIT GAP Funds and Chief Investment Officer of Mach37.
During the event, panelists discussed their recent experiences, desired investee profiles, and offered practical advice to an audience of start-up entrepreneurs engaged in navigating the challenging early stage investment world. While the general consensus is that early stage capital is available in the DC metro area, it takes persistence and hard work for entrepreneurs to successfully attract sufficient investment from the right investors. According to Weithman, over 100 companies have been funded in Virginia by CIT with a focus on tech, fintech, cyber, and life sciences. However, he stated there is a dearth of seed funds generally available for cyber. Sara stated that approximately 15 deals were funded in the last year by her Dingman Angel group. Barrientos has made significant angel investments in a number of companies and has raised VC funds for Brazen. May stated that almost every deal that should be funded is funded, but it is rare for one angel to fund the entire deal. Graubart said 1776 has made 30 investments to-date with a focus on regulated industries such as edtech, health IT, fintech, smart cities, and transportation.
So how does an investor stand out in the crowd of early stage companies? Panelists offered a range of suggestions. Research potential investors, plenty of information is available to find out what they are interested in. Don’t waste your time and theirs chasing investors not interested in your company’s profile. For early stage, investors are betting first on the entrepreneur and their team and not on a single idea or concept, which is likely to evolve several times before it goes to market. Put together a passionate team with strong domain experience and the ability to sell themselves to attract investors, customers, and future team members. Remember, the team should include an experienced advisory board with strengths and experiences that compliment and extend the abilities of the entrepreneurs. Put together well thought out and concise pitches and applications. Be persistent – get in front of groups of investors. Warm referrals tend to get looked at first, so use your advisors to help you get noticed and invest time building relationships. Be able to demonstrate market acceptance and traction. Be coachable; you may be the “master” of your technology, but each successful start-up faces different challenges and there’s a lot to learn. Early stage entrepreneurs shouldn’t focus on trying to get the “highest” valuation – high valuations can scare away very qualified investors and may lead to future disastrous down rounds. Convertible debt, instead of preferred stock, can help take the focus off the subjective valuation issue for early stage companies.
Most importantly, the closing advice to attendees: be passionate and persistent and make sure you enjoy what you do!