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Make the Right Match When Courting 'Angels'

June 24, 1998|KAREN E. KLEIN | SPECIAL TO THE TIMES

Question: My company is headquartered in El Paso and is looking for capital to purchase more equipment and move its corporate office to Southern California. Is there a current list available of angels willing to invest in the $400,000 to $500,000 range?

--Stan Jamieson, Planetal Technologies Corp., Rowland Heights

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Answer: Yes, there are lists of angel investors, including the 1998 Southern California Funding Directory, a compilation of lending institutions, partners, venture capitalists, angels and other funding sources in this area. The directory is published annually by the Tech Coast Venture Network. You can reach them at (714) 855-0652 and check out their Web site at http://www.tcvn.org.

For funding sources software, try a computerized directory called DataMerge, one of many small business tools offered by the Financing Sources Database. It includes information on venture capital, factoring the Small Business Administration, private lenders, asset-based loans and many other topics. Call them at (800) 580-1188 or visit their Web site at http://www.datamerge.com.

For an ongoing forum that matches up entrepreneurs with funders, try getting in on the California Venture Forum, sponsored by Edison International. The organization holds such events periodically throughout Southern California. You can get a schedule of upcoming events by calling (800) 3EDISON.

--Alan Arthur Tratner, president, Inventors Workshop International, Santa Barbara

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A: The real issue here is that angel investors, like all sources of capital, are best approached through personal contacts and mutual friends. It is rare that you would be successful in approaching a stranger and saying, "Here, fund my project."

There are a lot of angels who don't formally hang out their shingles. A lot of wealth has been created in recent years in the stock market and in private companies and there are people who want to invest in growing firms.

But the key to finding them is through relationships and familiarity with your industry. Your company needs to find someone who is willing to get to know you and invest in you--adding value not only financially but in interest and expertise.

There is a whole process your company should be going through in understanding what kind of money you need and whom you want to invest with at this stage. Most early-stage companies do what's known as staged investing. As you are raising capital at this stage you will need to think about the next stage of funding as well.

Logically, you want to bring people in who add business acumen and contacts with future advisors--like high-level networks for sales and strategic alliances. It takes a lot of thought about who your company should and should not use for funding. Some investors will preclude or discourage others in the future, so it could create more of a problem in the next round of financing.

Obviously, it is hard to establish local relationships when you are not in the area. Things you need to think about before pursuing funding: Who is the right kind of person to invest in your company; what amount of money do you need; when will the money be returned; what is the projected growth of your company; what is the history of your company; what is the chemistry like between the funders and the principals of the company, and what kind of experience does your company have?

There's a real art to choosing a partner or early-stage investor.

--Peter Cowen, Peter Cowen & Associates, an investment banking firm specializing in early-stage companies, Westwood

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If you have a question about how to start or operate a small business, mail it to Karen E. Klein at the Los Angeles Times, 1333 S. Mayflower Ave., Suite 100, Monrovia 91016 or e-mail it to Kklein6349@aol.com. Include your name, address and telephone number. The column is designed to answer questions of general interest. It should not be construed as legal advice.

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