Some Colorado business owners who are seeking funding may be so relieved at receiving term sheets from an investor that they fail to do further due diligence. However, researching the venture capitalist ahead of time can give an entrepreneur an idea of how reliable an investment offer may be.
Entrepreneurs in Colorado often look for angel investors after the initial development of their new products or services. Angel investors can be individuals or groups of investors. A typical angel could be prepared to invest between $25,000 and $100,000 with the expectation that the investment will produce a return within three to five years. Angels and investor groups often focus on certain industries in which they possess expertise. Entrepreneurs should research appropriate investors to approach with proposals and prepare thoroughly for those meetings.
In 2004, roughly 5 percent of angel investors were women. In 2016, that number jumped to 26 percent. This is important for business owners seeking capital in Colorado and throughout the country. As the number of women angel investors has surged, the number of companies run by females that have received funding has also increased.
There are multiple financing options for entrepreneurs who have good business ideas. In addition to using their own funds, asking family members and friends to invest or trying to obtain a loan from a financial institution, they can attempt to obtain funds from venture capitalists. Startup entrepreneurs may be able to take advantage of social media to get the desired outcome when seeking venture capital.
Colorado entrepreneurs and others who are looking for venture capital may be able to get it from Sony. The conglomerate corporation has created a $100 million pool called the Sony Innovation Fund. This fund, which was created in 2016, has invested in roughly 25 early stage technology companies in the United States, Europe and Japan. On average, those companies have received millions of dollars each from the fund.
Venture capital firms are raising billions of dollars to put into companies in Colorado and elsewhere. For example, SoftBank has a $100 billion fund and placed $7 billion into Uber alone. Sequoia Capital is looking to raise as much as $12 billion for its global growth fund as well as funds in the United States and China. It is believed that Sequoia is trying to position itself as an alternative to SoftBank for business owners.
Entrepreneurs in Colorado and throughout the country often rely on venture capital to help their companies succeed. In 2017, business owners received $84.2 billion in funding from venture capital firms according to the National Venture Capital Association and Pitchbook. However, there were fewer deals done as the tech industry is going through a period of contraction. This is partially because the median age of companies seeking capital has increased since 2013. The median age of companies seeking Series A funding is about 3.5 years.
Venture capital investment in 2017 reached levels not seen since the dot-com boom that occurred more than 15 years ago. Entrepreneurs in Colorado may be interested to learn that some $84 billion was provided to more than 8,000 business ventures behind a variety of products and services. Sources of funding included angel investors, seed capital specialists and firms specializing in high-risk business ventures.
In a world that is moving towards gender equality, numerous beacons pop up in Colorado and elsewhere throughout the country to help light the way forward. A case in point is a San Francisco woman who is an angel investor thriving in an industry that is male-dominated. For context, 7.4% of angel investors are female, and this imbalance affects who ends up being funded. Consequently, this woman strives to level the playing field and offer female entrepreneurs the same opportunities afforded to their male counterparts.
Colorado startup business owners may be interested in knowing that 75 of the Fortune 100 companies provide some sort of corporate venture capital (CVC). However, these companies will not invest in just any startup. To improve the odds of securing an investment, a startup will strive to have as much diversity as possible in its team of founders. This is because that team will have a variety of backgrounds and skills from which to pull.