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Saturday
Dec042010

Dancing For Dollars: Raising Seed Stage Capital

Finding the right investor is about much more than finding someone to write you a check.

Dancing with the Stars continues to get good ratings, maybe because of the the Palin factor, maybe because of the ornate, skimpy outfits or bare –chested celebrities strutting their stuff in front of millions. I don’t watch the show very often, but I’m a big fan of another extravaganza of choreography, the early stage company money dance, the money minuet, the cha-cha for cash. In this intricately interwoven , highly developed two-step , inventors and investors feel each other out, try to find the right fit and come to terms in a process that easily trumps the best fox trot, flamenco or fandango.

One takes the lead, the other follows. Eye ball to eye ball, with dramatic flair, there are moments of action, suspense, intrigue, passion , deception, and dazzling technique, all summed up with an exciting lift or a death defying twirl before the big ending. What’s more, I work on both sides of the aisle as an advisor to an investment bank, HeadwatersMB and to early stage companies looking for money, so I get a front row seat to the finals.

There are several articles and tips on what investors look for. The titles of the articles typically start with “5 Things" or “What investors look for". Like a ballroom dancer, though, let’s talk about what inventors should look for in a good investment partner.

Firstly, can they execute? Does the investment banker , private equity or money manager have a track record, connections, a client list, business process and skill sets to find the money and get the deal done within your time frame and budget. With the IPO market deader than a duet without music, target investors will come from family offices, endowments, private money and strategic partners. BioAngels, are hard to find outside of most major bioclusters. For that reason, the geographic coverage of your investment partner should be broad.

Secondly, is there a fit? Like a well matched couple performing the paso doble, you should find a partner with the same risk temperament, personality, and business savvy as you. They should have a technical background and a client list in industries similar to yours, with a thorough understanding of the investment landscape in your industry or specialty.

Finally, there are the intangibles. That certain “je n’ais sais quois” -the drama of their pitch, the energy to do the job, compatibility or having a feel for what you are trying to achieve. They just get it.

Finding the right investor is about much more than finding someone to write you a check. Anybody can move their feet when the music starts. Your job is to find a partner with whom you are in synch and who will work with you over the long term even after the music stops.

Ok. One, two, three...

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