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'Smart' capital supports Oklahoma startups from milestone to milestone

Oklahoma's i2E Inc. helps startups survive funding gap labeled “valley of death.”
By Scott Meacham Published: February 5, 2013

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.

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In 2012's third quarter, the median angel investment round size was $1.59 million when angel groups co-invest with other types of investments.

SOURCE: Halo Report


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