2min read You have to look beyond your backyard
Recently there has been a lively debate about the lack of funding in Texas. It’s not a new debate but an ongoing dialog between entrepreneurs and investors. Entrepreneurs feel funding is scarce in Texas compared to other parts of the country. Investors counter that they would invest more and more often if the deals were further along and better prepared.
The debate is not new. It comes up every year. The solution is to change the way fundraising is handled. It’s no longer in your backyard. You must have a national focus on your fundraise from day one.
When I was the director of the Central Texas Angel Network, we had just restarted the formal angel community in Austin. The previous group, the Capital Network, had gone out as they were tied to the dot com world, and when that went away, they went away with it.
At that time, it was a great boost to have a formal angel group in Austin so central Texas entrepreneurs could raise money in their backyard. It worked for a while. When we started, we had 15-20 deals on each round, of which 4 would receive presentation slots and 2 would get funding on average.
As the years progressed, two things happened. First, the number of deals grew. Today it’s not unusual to see 75 to 100 deals considering CTAN, of which 4 will get to pitch to the membership, and 2 will get checks. The funding rate is higher because there are more members, but fundamentally, entrepreneurs looking for funding have a 2% chance of getting it from the group.
The second thing that happened is that crowdfunding came into its own. After several years of debate and government ()activity, the rules are starting to change. It’s now possible to raise from non-accredited and accredited investors who are not in your backyard. At CTAN, we all gathered at the Headliners club in downtown Austin to see the live pitches. With crowdfunding, one can source angels from across the country, if not further, because the pitches are online. The tools are improving, and the entrepreneur’s ability to use those tools is increasing.
The world of angel investing is going vertical. The chance that an angel investor interested in your particular application (mobile apps, enterprise software, consumer product goods, etc.) is in your backyard is shrinking. You must reach the country to reach an investor interested in your stage and type of deal.
Crowdfunding is how you do that. By placing your deal, online angel investors can now find you. You can now reach angel investors from a broader area.
It’s helpful to have some support from your local area, but from day one, entrepreneurs should have a national perspective on their fundraise. If you have a real business (not just an idea), you probably have an investor out there who would be interested in your deal. He’s no longer in your backyard.
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Hall T. Martin is the founder and CEO of the TEN Capital Network. TEN Capital has been connecting startups with investors for over ten years. You can connect with Hall about fundraising, business growth, and emerging technologies via LinkedIn or email: firstname.lastname@example.org