The Private-Capital Survival Guide

Most angels, of course, invest money as well as passion, but in his willingness to work with no assurance of financial reward and his eagerness to share what he had learned over a lifetime in business, Hudson is typical of many angel investors. "They experience the entrepreneurial life vicariously," says Inatome. "They want to have an impact, but at their stage of life, they lack that entrepreneurial energy and conviction." Angels on the other side of the country share that involved-but-not-immersed attitude, says Hans Severiens, managing director of the Band of Angels, a group of investors who fund Silicon Valley technology start-ups. "I love to see new things," he says, "and be part of bringing them into the world. But it's not my full-time job." Severiens and Inatome, along with other veterans of the private-capital game, expect many well-off baby boomers to join the ranks of the angels as their careers wind down. "A lot of people at that stage in their lives don't want to lose their edge," says Inatome. "Angel investing is a way to keep their edge sharp without taking too much of their time."

What angels have to offer is what Inatome calls "career capital" -- contacts, resources, judgment. Such capital can be as helpful to a growing business as money, and experienced entrepreneurs stress the importance of lining up career capital even before beginning the search for real capital. "I was unbelievably conscious about seeking out relationships in the early going,"says Greenwich Technology Partners CEO Beninati. "I asked people to make introductions. For example, a board member introduced me to senior managers of Bear Stearns," which to this day uses GTP to help keep its IT infrastructure humming. Inatome, for his part, urges entrepreneurs to form business relationships "where money is not the initial goal. Well before you need money, recruit people whose reputation, values, and success you admire. Your relationships with them will make it a lot easier to raise money when the time comes."

Perfect Pitch and Other Money-Raising Secrets

How does an entrepreneur, immersed in the infinite details of building a business, form vital business relationships in the first place? A good place to start is the directory of private- and angel-capital firms and networks that appears on page 106. But that's only the beginning. SRC's Stack points out that local bankers are a font of knowledge about the local business and financial scene. Even if they don't have money to lend -- most early-stage businesses don't have sufficient assets or revenue to secure a bank loan -- they know who the local players are because banks are often invited to participate in private-capital partnerships. Another good place to start is the local chamber of commerce. Most chambers maintain close ties with local angels and private-capital firms and can often help match entrepreneurs with like-minded backers. Entrepreneurs should also consult local or regional business journals, many of which compile annual lists of business resources in the area, including law firms, insurers, professional-services firms, and private-capital outfits. People who are contemplating leaving the corporate world to start their own business have a particularly valuable resource: former colleagues who have already made the leap. They can help steer newbies away from avoidable errors and help sift the ranks of professional investors to find the best combination of money and what Inatome calls "nonfinancial currency."

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