Wednesday, June 22, 2005

Linkages Between Angel and Venture Capitalists

A new study by researchers at George Washington University looked at the relationships between angel investors and institutional venture capitalists (VCs). The survey asked angels and VCs about how they worked together and how they perceive one another. VCs have a very positive view of angel investors, with 94% of those surveyed agreeing that angels are beneficial to the VC business.
This finding may come as a surprise to angel investors, as only 72% said that VCs view them as beneficial partners. The industry’s prevailing view is that angels serve as a “feeder system” for VCs who tend to fund larger, later-stage deals. But, all is not rosy. These general positive perceptions tend to break down when angels and VCs are asked about specific deals. Fifty-eight percent of angels said that their experience with VC investment in their portfolio companies was negative. An identical number (58%) of VCs had the same opinion about angel investors. The authors argue that these results suggest that angel and VCs need to better communicate with one another, and also consider joint training sessions where each side can better learn about how the other operates.

Monday, June 20, 2005

Bankers Offer Advice On Gaining Financing

The American Bankers Association recently found that the most important step in applying for a small business loan—having all the necessary financial documentation—is also where most entrepreneurs make the biggest mistake.
According to an informal survey of its member banks, nearly 74% of the bankers responding to the survey said financial documentation was the most important aspect in securing a loan, but 67% also said applicants typically lack the documentation they need.
The survey also found that 52.3% of the participants believe a complete business plan is a key to securing a loan, and 45.5% want a completed application. Surprisingly, only 30.7% said collateral was one of the most important factors. Accordingly, the additional mistakes that applicants make include having an incomplete business plan 43.2% of the time, lacking collateral 27.3% of the time, and not having all of the application paperwork 22.7% of the time.