Career Testing
Career Testing
Career Testing
ENTREPRENEURSHIP / JUN. 12, 2014
version 8, draft 8

How to Find Investors in the U.S.

investors guy with money

There is perhaps no country on earth that can boast more successful startups than the United States of America. Many of the most powerful and wealthy companies today got their start on American soil at some point in the past 100 years. No matter how big they are now, they all started small, with nothing more than an idea or simple product. Sure, European and Asian counterpoints are gaining ground, but the US is still the king of the startups.

You have a number of options when it comes to finding the money you need to give it a serious go. For the purpose of this article, we are going to assume you have already approached friends and family (as you most definitely should) in the first wave of investment. When you’re ready for Round 2, it’s time to look elsewhere.

Venture Capitalists

This is the traditional method for finding capital in the business world. The game has changed with the emergence of angel investors (more on that in a moment), but venture capitalists still provide millions and millions of dollars to the development and growth of American homegrown companies and businesses. A venture capitalist is in the business of making money. Period. They invest capital in a new (or established company looking to grow) business because they predict a huge return on that investment. Venture capitalists, for the most part, invest other people’s money. They are the manager of a pooled fund, and their job is to identify companies (new or otherwise) that show tremendous promise.

The best place to start looking for one is National Venture Capital Association, an open by invitation network of American venture capitalist firms. There, you can search their membership, read up on recent news and trends, and generally learn more about what VC entails (and what it doesn’t). Venture Capitalists will often require shares in the company, a seat on the board of directors, and/or veto power in exchange for their investment. Find one that has invested in your industry before, make contact, and make your detailed and researched pitch.

Other Useful Links

The Top 100 Venture Capital Firms

Top Ten in Venture Capital Today

Angel Investors

The easiest test of whether someone is a venture capitalist or angel investor is to look at the money. If they are investing someone else’s money, they are a VC. If they are investing their own, they are an angel investor. The test isn’t perfect, as the “rules” are changing, but it’s a decent approximation. Angel investors traditionally are wealthy individuals (celebrities, athletes, professionals) looking to grow their own portfolio. The Angel Capital Association (like its VC counterpart) is the best place to start looking. Investors can join as an individual, or a group (or join an existing one). It’s the perfect spot to search your area of the country to find people nearby (angel investors tend to invest locally) looking to invest in your idea. Angel investors generally do NOT require a board seat...but that is beginning to change. Find one, look contact, and sell your idea.

Other Useful Links

Floodgate (angel investment pool fund)

500 Startups (both an accelerator and seed investment firm)

Softtech VC (a “micro VC house” blurring the lines between venture capitalists and angel investors)

New York Investment Network

Funders Club

Accelerators

Accelerators are fairly new to the scene. Many compare them to boot camp in the military. You apply (and the competition is FIERCE), and if accepted, you’re given physical space at their location (where you share resources and equipment with others), access to professional mentors, a little bit of seed or startup cash, and a “pitch day” with investors at the end of the program. The programs usually run about 3 months, and they can really kick your company to the next level in a short period of time. Y Combinator out of California is one of the biggest, but there are many throughout the US. Accelerators tend to be private enterprises.

Other Useful Links

Seed DB (database of seed and accelerator companies)

500 Startups

TechStars

AngelPad

LaunchPad LA

Incubators

An incubator is similar to an accelerator, but they tend to be government-funded initiatives. Startups accepted into the program receive much the same cash and resources as those in an accelerator (seed money, physical office space, mentorship, training). The National Business Incubation Association should be your first port of call if you want to go this route. You’ll find detailed listings, tips, advice, and the latest news and trends...everything you need to make an informed decision and apply to one of the listed programs.

Other Useful Links

TechNexus

Summer@Highland

LaunchBox Digital

Flashpoint

The difference between an accelerator and an incubator can be pretty small, even negligible. They both offer essentially the same services and resources, but accelerators tend (but not always) to require a higher percent of ownership in your new company. Read the fine print!

A Word on SEC Regulations

The US Securities and Exchange Commission (SEC) has a number of rules and regulations that you should read up on. Ignorance of the law is no excuse. A company must register its securities if it wants to legally sell them in the US, but there are a number of possible exemptions to that rule in terms of investment. You need to find accredited investors as defined by the SEC (an annual salary of +$200,000 for the past two years, a trust in excess of $5,000,000, and so forth).

No matter which route you ultimately select - Venture Capitalist, Angel investor, accelerator, or incubator - there is plenty of cash available to the American entrepreneur. You just need to go out and find it.

 

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