When an entrepreneur goes out to raise investment capital, it's a daunting task.
The business plan must be compelling. The entrepreneur must show that the concept works, that the management team can execute and that the company's product solves a real problem for a substantial market with customers who are willing to pay.
Then the entrepreneur has to figure out which source of capital matches the company's stage of development and pursue those relationships stage by stage, investor by investor.
Risk capital is segmented, dependent upon the stage of commercialization and total capital requirements. For the entrepreneur, it's like jumping from stone to stone to cross a river.
Proof-of-concept funds, typically from incubators or public sector sources, range from about $25,000 to $100,000. Angel investors typically look at early-stage deals of $250,000 to $1 million. Venture capitalists seek later-stage deals of $5 million to $10 million.
The gaps between funding stages increase the startup risk. We refer to it as crossing “the valley of death.”
Capital-raising efforts pull the entrepreneur away from business building. As most early stage startups operate in the red, time equals real money, not opportunity cost.
At i2E, we combat the “valley of death” with a continuum of “smart” capital that moves with an entrepreneur across the risk profile, from major milestone to milestone associated with funding a startup.
The Concept Fund provides proof-of-concept money to develop a marketable concept or product. The Oklahoma Seed Capital Fund allows companies to build an infrastructure around their concept or product. Three distinct Accelerate Oklahoma! funds provide emerging growth and later-stage capital as well as co-investment.
Our relationships with Oklahoma's SeedStep Angels and with angel groups in adjacent states connect Oklahoma entrepreneurs to angel money and mentoring. Angels and other investors respect our vetting and due diligence, especially when we match their investments through the Oklahoma Angel Sidecar Fund.
It isn't only the continuum of capital that makes i2E's model so impactful; it's the mentoring we bring.
We get to know our portfolio companies from the ground up. We drill deeply into their concepts and markets to help them become investment ready. We stick with them, using our expertise and relationships to build a coordinated, efficient capital plan that helps mitigate early-stage risk and shorten the timeline from concept to job creation in Oklahoma.
Scott Meacham is president and CEO of i2E Inc., a nonprofit corporation that mentors many of the state's technology-based startup companies. i2E receives state appropriations from the Oklahoma Center for the Advancement of Science and Technology. Contact Meacham at i2E_Comments@i2E.org.
DID YOU KNOW?
In 2012's third quarter, the median angel investment round size was $1.59 million when angel groups co-invest with other types of