I am back in Orange County, CA this week with a web analytics client to pitch their business to an angel investor group for capital funding. Private equity investors and firms are still hungry for stategic investment opportunities. The difference between now and a year or two ago, is that the investors who are still playing in the private market are able today to be more discerning on which investments they take part in. This is good news for investors; harder for companies in need of capital.
This is simple supply vs. demand. The number of companies needing capital has increased as debt financing has become harder to acquire and the number of investors has decreased as certain wealthy individuals and firms have lost money in the recession (I have noticed this as especially true for those in the real estate and banking industries).
With this in mind, it is important for a business to prove that it's investment opportunity is the cream of the crop. Show the market's need for your product; Show your business' ability to scale to satisfy the market need; Show the smart use of capital in product development and sales and marketing strategy; and Show a proven team that can convince investors that they can pull off the business plan.
Madoff, AGI, economic stimulus is the Web 2.0 world of Enron and Arthur Anderson. Investors have little trust these days in business leader's use of their funds. So, be transparent... be honest. Do not show unrealistic hockey stick graphs or world domination charts. Most private equity investors have built their own businesses. They understand the hardship of entrepreneurial growth. They understand that businesses take time to become profitable.
