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Los Angeles Times   "Small Talk"   July 1998
Advice from Small-Business Experts by Karen Klein, Special to the Times

Make the Right Match When Courting Angels

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.

- Stan Jamieson, Planetal Tech-
nologies Corp., Rowland Heights

 Answer:   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 is 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,
Investment banker specializing
in emerging companies, Westwood

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