For countries or regions having vigorous knowledge-based economy or the said creative economy will inevitably possess well developed business angel networks. Silicon Valley is a conspicuous example. Knowledge-based economy or creative economy needs to be equipped with some essential conditions. Among them, angel investors and founding advisers are the key persons to foster creative new business ideas during their infant stage.
Angel investors own financial capacities to back up startup teams. They also have domain know-how to recognize the potential of creative new business ideas. They are specialists or retired veterans in certain areas; so are insightful to make decisive investments in those early stage startups. They are the talent scouts to discover brilliant entrepreneurs, and are enthusiastic about new business ventures.
Founding advisers are professionals in dedicated area and full of management experiences in company operation. They can also provide valuable business connection to help business development. They enjoy getting involved in new business ventures and are willing to spend times with entrepreneurs.
Angel investors and founding advisers are important to early stage companies, some of the key points are revealed in the following:
- General VC funds invest very small percentage of total fund size in seed to early stage companies. Why? First of all, compared with large scale of VC funds, investing in small size of capital need sought by one seed to early stage company is not cost effective in terms of the efforts devoted to the investment analysis and post-investment management. Secondly, venture capitalists tend to invest in a case, for which ROI analysis, risk assessment and team capabilities can be quantized, weighted and judged with common practices and analysis models. A brand-new idea is too vague to be analyzed. Instead, the domain know-how and in-depth mastery over industrial trend make business angels the daring investors. They tend to play not only as a money investor, but also a coach to guide company operation. Angel investors just good to fill the gap large-scale VC funds in general don’t actively involve. Angels’ professional judgments can also lead to co-investments by others who need some knowledgeable judgments to follow.
- New business ideas in general are based on front-end technologies, brand-new services or business models. Founding teams may be full of entrepreneurship, but might not possess much of real business operation experiences, and could likely lack extensive business connection either. Especially, they are apt to be fascinated with the innovations and fall into unilateral wishful thinking about the products and services. Hence, will overlook the importance of having an objective market analysis on real market demands. They may also underestimate the difficulties and costs of marketing efforts; not mention about unfamiliarity with how to forming organization and handling personnel administration. In this regard, proficient operation experiences, insightful suggestions and extensive business connections are the intangible values angel investors and founding advisers can complement founding teams to guide them through the learning curve.
- When venture capitalists contemplate on the potential return and risk of an investment case, “person” (the key founding members) is always the focal point to consider. Statistic data indicate that open-mindedness, trustworthiness, enthusiasm are positive attributes of the management teams that can lead to smooth investors relationship and higher supports for new round of financing along the way company grows. Hence, will reach final success easier. On the contrary, CEO’s enormous ego scores the top reason for VCs’ failure investments. Therefore, if entrepreneurs can get supports of renowned angel investors and veteran advisers, it just indicates that they have higher EQ. Angels’ assistance and advisers’ professional guidance will also augment the success rate of a business venture. That will vastly boost the confidence of investors to join a corporate financing.
Then, where to seek renowned angel investors and veteran advisers? Initially, entrepreneurs will look for supporters from his/her limited connection on hand, like personal friends, research advisers in university or graduate school, appreciative former boss or colleagues, or from parents, relatives and their connections, etc. So is why the “Angel Round” of capital raising is also called the “Rolodex Round”. These supports are mainly out of mutual understanding and trusts, therefore will not definitely conducive to real business development.
In Taiwan, government sponsored investment forums provide some matchmaking services for entrepreneurs and investors. But, the frequency of such events can’t provide sufficient availability; and geographic inconvenience for joining such face-to-face meetings from far-off places is always a pity, especially, under the trend that cross-border collaboration is highly stressed in this flat world. In areas where entrepreneurship is prosperous, Business Angel Networks come on the scene to provide frequent gatherings. But, geographic inconvenience is still limiting the gatherings to be pretty much localized activities. This is why when a VC company plans to have cross-border business extension it’s always initiated by setting up a local team in new territory. Same as investors in looking for deal sources, when entrepreneurs want to look for investors or business partners, they face the issues of lacking effective channel to reach candidates and the contacting costs (including the service fees for middlemen) is very high, too.
A matchmaking service platform based on worldwide reaching capability of the Internet and new IT technologies is a potential way to help entrepreneurs in seeking investors, advisers, and many other resource demands for company growth. It offers some benefits previous practices cannot offer:
★ It offers uninterrupted 365-24 services;
★ Web-based and computer automation can offer more integrated services, more efficient and targeted matchmaking. Costs for information exchange and interpersonal contacting are lower;
★ Worldwide penetrating power of the Internet can help entrepreneurs to reach business development resources across the geographic and industrial borders, with much lower cost. It can therefore make it possible for SMEs to acquire business development resources in the worldwide base that previously only large-scale enterprises can afford.
「Venture Aid Platform」 fully implements these concepts by making use of the Internet power, web-based application technologies and creative service model. Resources supply and demand sides can easily meet with each other via very simple settings. Members will be informed of successful matchmaking every day; be offered the screening function and closed-door meeting space for going into detailed discussion with candidates invited. Business secrets and personal privacy are carefully protected. Looking for angel investors and advisers are only the partial services provided. Platform also provides the services that entrepreneurs can brainstorm startup ideas, seek founding partners, join franchise business, look for business partners, deal with assets selling, seek business service providers, etc. All the critical needs required to support company growth are integrated in this platform, and the services are offered to anyone who should connect with the business world.