For business owners who want to attract private investors to their companies, the big question often is, How does one find them?
One way is by joining forces with the "matchmaking" services that have cropped up at universities and among local economic-development groups across the United States. David Gerhardt, executive director of the Capital Network, a group based in Austin, Tex., shared his insights with Inc.
Inc.: How is a group like yours different from an investment banker or broker?
Gerhardt: We're an information service. We tell prospective investors about business deals that fit their parameters, tell business owners about potential investors, and make introductions when appropriate.
But we don't take a percentage of any deals that get consummated, and we don't perform due diligence on either party. Our fees are also much lower: $450 for a six-month listing for companies seeking capital and private investors; $950 for a venture-capital or corporate investor.
Inc.: What kind of investors get listed in your database?
Gerhardt: Most are "angels," including successful entrepreneurs, lawyers, accountants, and wealthy individuals. But we also list venture capitalists and corporations seeking strategic alliances.
Inc.: What type of entrepreneurial situations are right? Or wrong?
Gerhardt: Our investors typically want a payoff of three to five times their investment in three to five years. If a company doesn't offer that growth potential, it's not right for this financing market. That's also true if the owner is looking for passive, rather than active, investors.