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College Ties Can Help Search for Financing

October 25, 2000|JUAN HOVEY

Three Harvard Business School graduates have launched a Web site designed to make the "old school tie" an entrepreneur's keenest weapon in the search for angel capital.

UniversityAngels.com (http://www.universityangels.com) is an Internet matchmaking service based on the idea that entrepreneurs and angels could do worse than to look for one another through the networks of their own colleges and universities.

Launched last spring out of offices in Los Angeles, New York and Atlanta, UniversityAngels.com has so far fostered five deals raising about $3 million in angel capital, according to Rick Sasner of Los Angeles, one of the founders of the service.

One of the deals, announced in August, involves a San Jose start-up, the Continuing Education Channel, which distributes continuing education programming via the Internet. A second California entrepreneur, San Diego architect Robert Noble, expects to close a round of angel financing through the Web site for his start-up, Master Builder Network Inc., after the first of the year.

UniversityAngels.com--hatched by Sasner and two Harvard Business School classmates, James Marcus and Charles Sanford, at a class reunion last year--operates on the premise that a good bet for the entrepreneur who needs angel money is to network among graduates of his or her college or university.

"Alumni networks are existing communities," Sasner said. "We were sitting there at the reunion seeing these incredible resources around us--half the people in the room working for start-ups and the other half working for the investment firms financing those companies. We wanted to create a marketplace where people with the same university backgrounds would be predisposed to look at new business ideas--a place that would bring entrepreneurs and angels one step closer to a level of comfort."

For $199, UniversityAngels.com screens business plans from entrepreneurial alumni of 77 U.S. and foreign colleges and universities, posting standardized summaries on special Web pages open at first only to angel investors from the same schools as the entrepreneurs themselves. After one week the summaries become available to angel investors from other schools, too.

Since April, Sasner said, UniversityAngels.com has screened more than 3,300 business plans and posted about 150. So far five entrepreneurs have found angel financing via the Web site, and another three deals look promising, he said.

Among the California schools with special angel-investor Web pages are UCLA, USC, Cal Tech, UC Berkeley, Stanford and Cal State Los Angeles. The other U.S. schools range from Amherst College to Yale University; the foreign schools include Ben-Gurion University of the Negev in Israel, the London School of Economics, McGill University in Canada, and the private German university WHU Koblenz.

For Gary Goldman, chief executive and founder of the Continuing Education Channel, the key benefit of UniversityAngels.com was getting his business plan in front of angels with whom he had something in common. It took more than five months to raise $2 million in seed capital last year but only 30 days last summer to arrange a bridge loan through UniversityAngels.com, Goldman said. Because the bridge loan is part of a complex financing effort still under way involving venture capital as well, he did not disclose details.

"The thing I liked about UniversityAngels.com was having access to a wealth of high-quality investors with backgrounds similar to my own," said Goldman, who holds degrees in dentistry and medicine and did his residency in anesthesiology at Harvard. "That made it very different from raising seed capital from the investors in my first round--because we got instant access to investors without having to do all the legwork."

In fact, Goldman did most of his negotiating for the bridge financing via e-mail or phone, he said.

Architect Noble and a partner in Boston, Alex Schroeder, a Harvard MBA with experience in manufacturing and technology development, launched Master Builder Network last January with seed capital from their own pockets. The company went online in July providing architects, engineers, contractors and developers with online project-management and supply-procurement services. The partners began generating sales within a week of launch, and their strategy is to hold off bringing in outside capital until they reach positive cash flow, said Noble, also a Harvard alumnus.

"We're capable of funding the business for some time," he said. "We want to make sure that when we do bring in outside capital, we have a proven, sound business model with positive revenue trends. Investors can do the math if you show them a company with an Internet product and positive cash flow."

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Recent Financing and Insurance columns are available at http://www.latimes.com/finin. Juan Hovey can be reached at (805) 492-7909 or at jhovey@gte.net.

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