| There are three major investment groups that | | | | owned and managed investment firms. |
| provide funding to small businesses including new | | | | |
| franchisors. Each of these groups has certain unique | | | | |
| features. Regardless of which investment group you | | | | |
| intend to pursue be sure you have a well written | | | | Facts about SBICs: |
| business plan and executive summary. The financial | | | | |
| projections must be realistic and sound. Finally, be | | | | - Administered by the Investment Division, US Small |
| sure to learn about these investment segments by | | | | Business Administration |
| attending workshops and networking groups, many | | | | - An institutional LP, managing $8.1 billion in |
| of which are available for a nominal fee. | | | | outstanding leverage and commitments |
| | | | | - An investor in 311 private equity partnerships |
| | | | | - 400 licensed SBICs in operation |
| Angel Investors | | | | - Only, companies defined as "small" (net worth is |
| | | | | $18.0 million or less) are eligible for SBIC financing |
| An angel is a high net-worth individual who invests his | | | | - Most SBICs concentrate on a particular stage of |
| or her own money in start-up companies in exchange | | | | investment (i.e. start-up, expansion or turnaround |
| for an equity share of the businesses. Angels typically | | | | - 361, or 24% of SBIC financings went to companies |
| invest between $25,000 and $100,000 per transaction | | | | less than 2 years old |
| individually, and from $250,000 to $750,000 as a | | | | - 1,477 companies benefited from SBIC financing |
| group. Angel investing represents a significantly large | | | | - SBIC financings totaled $1.8 billion |
| and growing portion of early stage capital available to | | | | |
| startup companies. | | | | For those seeking to contact a SBIC and make a |
| | | | | presentation for funding go to sba.gov where you |
| Facts about Angels: | | | | can navigate to a directory of SBICs by State. Be |
| | | | | prepared to follow the same attributes that are |
| | | | | outlined above for Angels. |
| - Usually receive a high equity value due to early | | | | |
| stage investments | | | | |
| - Due to risk, Angel investors usually seek returns of | | | | |
| 10 times their original investment | | | | |
| - Total investments in 2009 were US$17.6 billion, a | | | | Business Incubators |
| decrease of 8.3% over 2008. | | | | These programs are designed to assist the |
| - The total of Angel investments is larger than | | | | development of companies through an array of |
| investments by private equity groups. | | | | business support resources and services, developed |
| - A total of 57,225 entrepreneurial ventures received | | | | and orchestrated by incubator management and |
| angel funding in 2009, a 3.1% increase from 2008. | | | | offered both in the incubator and through its |
| - Post-seed/startup investing represented 62% of | | | | network of contacts. Incubators vary in the way |
| investments, an increase from 2008, indicating angels' | | | | they deliver their services, in their organizational |
| increased interests in the early and expansion stage. | | | | structure, and in the types of clients they serve. |
| | | | | Successful completion of a business incubation |
| If you're interested in pursuing Angel Investors | | | | program increases the likelihood that a start-up |
| be prepared to bring the following attributes: | | | | company will stay in business for the long term. The |
| | | | | BI can choose to serve select clients compared to |
| - They look for high-quality entrepreneurs with a | | | | SBDC that are required by law to offer business |
| track record of leadership and performance - either in | | | | assistance to any company that contacts them for |
| the company's specific industry or in prior | | | | help. |
| entrepreneurial ventures. | | | | |
| - Have a product or service that fulfills a need for a | | | | |
| large market that will produce revenue. | | | | Facts about Business Incubators |
| - The invested funds must be used to add value to | | | | - Designed to accelerate the successful development |
| the company not to instantly reward the owners or | | | | of entrepreneurial companies |
| retire debt. | | | | - Chapters in most major cities |
| - Have a competitive edge through a proprietary | | | | - Entrepreneurs who wish to enter a business |
| product or service. Investors will want to see entry | | | | incubation program must apply for admission. |
| barriers for your potential competitors. | | | | - Help with business basics |
| - Be able to demonstrate that your company can | | | | - Marketing assistance |
| have substantial growth and increased profits. | | | | - Help with accounting/financial management |
| - Have a clearly articulated exit strategy | | | | - Access to bank loans, loan funds and guarantee |
| | | | | programs |
| | | | | - Access to angel investors or venture capital |
| | | | | |
| Small Business Investment Companies | | | | To find a BI in your area go to the National Business |
| | | | | Incubator Association at nbia.org. The site includes a |
| Created by Congress in 1958 the mission of the Small | | | | directory of business incubators in the United States. |
| Business Investment Company (SBIC) program is to | | | | To summarize: For franchisors looking to obtain |
| improve and stimulate the national economy and | | | | investment capital the preceding three groups focus |
| growth of small businesses by supplementing the | | | | on working with smaller companies. Take advantage |
| flow of private equity capital and long term loan | | | | of these resources and as a reminder be persistent |
| funds. This multibillion dollar, government-sponsored | | | | and be willing to persevere. It can take from 6 |
| group of funds invests long term capital in privately | | | | months to a year to finally get you money. |