As financing options like credit and loans continue to dry up, many start-ups have looked to venture and angel fund investors for lifelines to finding funding through the downturn. 'With the banks off the scene, as an entrepreneur you're looking around going, ‘Where do I turn now?' said Sarah Endline, founder of New York City-based Sweetriot, which produces dark chocolate candy in recyclable packaging. The company is on the hunt for $250,000 in growth capital.
Endline was one of 50 small-business owners from inner city regions across the country who flocked to One Bryant Park in New York City last week for an opportunity to pitch their best proposal to 47 potential investors. The event was sponsored by the Initiative for a Competitive Inner City, a Boston-based non-profit focused on small businesses in urban areas, in partnership with Bank of America and the Small Business Administration.
The round of pitching was the culmination of a larger program, Inner City Capital Connections, that trains small-business owners on how to secure capital from investors. After a series of workshops and classes last month, the start-ups reconvened at the new Bank of America tower to test the mettle of what they had learned through networking, panels, and 'speed dates' with investors.
According to a report published by the organization, inner-city small businesses attract 31 percent less growth capital than the average U.S. business. Through the program, ICIC hopes to close the gap and has aided start-ups in obtaining $335 million in growth capital since the event's 2005 inception.
'Many of these entrepreneurs are trying to do everything, and they don't have the resources to devote to going out and finding what alternative sources of financing are out there,' said Deborah Shufrin, senior vice president and director of programs at ICIC. 'The first conversation happens here.'
The event culminated with five entrepreneurs making their best pitch to a panel of investors and an audience of other small business owners. After the investors were asked to choose their favorites. Sweetriot was a favorite, as was Coalescence, a Columbus, Ohio-based manufacturer of food ingredients.
'We believe we have a great story, but it's nice to see that others believe it as well,' said Angela Cauley, CEO of Coalescence, who runs the company with her husband, Ian Blount. Cauley and Blount were warned by the panel that a company run by a married couple might not be appetizing to other investors. 'The dynamics of a husband and wife team can be successful, but there's always the possibility of bringing business problems home,' said Gene Todd, a managing partner at Emerging Market Venture Partners.
Shufrin said she hoped the event would produce actual investments down the road. 'There will be a lot of information exchanged between the funds and companies,' she said. 'Ultimately, it will become a marriage if they both agree.'