Adapted from the Journal of the Heartland Angels
By: Douglas Yau, PhD
When asked for funding, one of the most frustrating things investors do to a startup company is give them the “Slow No.” What I mean by this is dragging on the process of evaluating, requesting more information, and setting up teleconferences for weeks or months without a clear process for making the decision to invest.
Because Heartland Angels believes a “Quick No” better serves the startup than a “Slow No,” we recently initiated a new process. At multiple stages of the evaluation process, we can provide a quick no—to decline an application. This “No” does not mean “Never.” It means, at this time. A no is sometimes given because the risk associated with this startup is not tolerated by the general pool of investors. The mismatch may be due to a number of other reasons including the stage the company is at, the technology in general, or the comfort level of the investors in this particular industry sector.
The process begins when the company registers at the website. Though typically the companies that reach out to us are local, within Illinois or the surrounding states, we have received applications for funding from all across the country.
Looks good but it’s still a dog
Next, two Heartland Angel members from the respective industry sector review the company’s executive summary and business plan, perform SWOT analysis and evaluate the technology, evaluate the management team, identify competitors and study the market. At this point, there can be a quick no.
A point person is selected and the proposal sent to an internal discussion group for comments. Comments are posted on the discussion forum on the Heartland Angels website.
An internal conference call is scheduled. At this point, there can be a quick decision to decline.
Once all the questions and comments are gathered, the point person reaches out to the startup company to request more information. Typically a conference call is set up with that company and the discussion group. After the call, there can be a quick no, or further email or calls made to address any concerns.
Once all the questions are answered, the review committee can elect the company for presentation to the investors. The point person schedules the presentation and works with the startup company to help them tailor their pitch to the needs and interest of the group.
Invitation to Present
The current format for company presentations has alternated between a long detailed single presentation to a short 10-15 min pitch by multiple companies. The evaluations of companies on presentation day have also alternated between critique from the entire group and critique by a pre-selected panel. At the end of these meetings, the members are asked if the company’s product fills a need. Did the company present enough data? Is a prototype far enough along to minimize risk to investors? Is the management team the best one for the job?
If there is sufficient interest from members to invest, a committee is formed to conduct the due diligence and negotiate terms for the investment. ■
NEWS FROM HEARTLAND – the Journal of the Heartland Angels, is published quarterly as an information service to its members. Articles may be reproduced in full with attribution for educational purposes.
Copyright © 2014 Heartland Angels – John Jonelis, Editor – John@HeartlandAngels.com
CAVEAT EMPTOR – These articles are for educational purposes and not investment advice. Investment involves substantial risk. Please perform your own due diligence. Contact Ron Kirschner – Ron@HeartlandAngels.com
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