Blog Archives - Paladin and Associates

Raising Capital - Consider Grants

Bill Warner Tuesday, November 25, 2008

With private equity being squeezed by the economic downturn, sources of start-up financing are becoming harder to find. If you don’t have some immediate cash flow to bootstrap your business, or assets against which to borrow money from a bank, you face an ugly world where money is harder to come by.

So far, government programs like the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) grant programs are still going strong. These programs are a very good way to get some early financing to perform your market research and then to perform commercialization on your business idea. Usually divided up in two phases, an entrepreneur can initially get $100,000 for research and then another $500,000 to $1,000,000 for commercialization work, depending on which agency you are working with.

These programs are quite selective in that only a few government agencies sponsor them and there are strict timeframes in which grant applications can be made. The beauty of these programs is that the grants to do not have to be paid back and there are matching programs from certain states, like North Carolina, that can add further funding on top of the government grant.

To learn about these programs the place to go is the Small Business Technology Development Center (SBTDC). Their website at www.sbtdc.org offers a wide range of small business development assistance, including guidance on how to apply for government grants. They know all about how to apply and know the process for each of the agencies. Talk to John Ujvari, who can help you get started. Note also the events page for upcoming seminars. There is one scheduled for December 10th and 11th, in Fayetteville. You can learn about the “art” of completing one of these applications.

Although a long and competitive process, this can be quite an effective way of getting early financing. Many companies have gotten their start on these kinds of grants and sometimes continue applying for additional grants to carry them through the first few years when cash flow is minimal. Of course, you should also search for other foundation grant programs in your area. Check with your local economic development organizations or state department of commerce for guidance as to what programs are available in your area.

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Biotech Heading Towards Hibernation

Bill Warner Monday, November 24, 2008

The global economic crisis is causing massive reductions in funding for biotechnology companies to the lowest level in a decade, triggering bankruptcies and threatening the development of drugs based on biomedical breakthroughs.

What has happened?

Some reports indicate that the amount raised this year by biotechnology companies fell by $9.7 billion through September, or 54 percent, compared with the same period in 2007. The venture capital portion of that fell by $2.9 billion, or 16 percent, over the same period. There has only been one IPO in this market this year. This will mean that work on dozens of potential drugs will stall as companies reduce their spending or outright die as companies fall into bankruptcy.

Some very notable companies have hit the dust. MicroIslet and Accentia Biopharmaceuticals sought bankruptcy protection to reorganize, each citing an inability to raise money. AtheroGenics Inc., filed for bankruptcy after defaulting on $302 million in debt the previous month. Amylin Pharmaceuticals said it would cut 16 percent of its workforce, or about 340 employees, to try to save $80 million in 2009. Unfortunately there are many more to follow in these footsteps.

Who is in danger?

The drug companies in the most danger are those that are nearing human clinical trials but need additional financing to take them through that phase. The most likely companies to seek bankruptcy are those with less than six months of cash, just a few drugs in development and no definitive clinical data to attract investors.

A Darwinian survival of the fittest will weed out those companies that are not at a point of clearly having something extraordinary to offer investors. Some may think this is not new or even dangerous. The problem is that an inordinate number of companies will be eliminated before they have had a chance to prove themselves, leaving a large gap in the continuum of companies moving through the various levels of drug development maturity.

Awaiting the return

Amid these recent bankruptcies of biotech companies, what will save the remaining ones? One alternative that is seriously being taken is hibernation. That is, reducing the company’s cost and expense structure to only what is needed to keep the company alive until the financing markets recover.

The fortunate companies are those that have the most promise will find acquisition partners and get picked up by cash rich companies.

Investors will likely return to biotechnology once the economy stabilizes because the industry still promises attractive returns. For now, this is an industry that is greatly impacted and investors are only going to stay with the very best and not invest in the most speculative of opportunities.

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Raising Capital - Consider Debt Financing

Bill Warner Friday, November 07, 2008

Debt can be your friend. It can be used in many ways to strategically fill out your overall financing plan. However, there is no doubt about it, loans have to be backed by some form of collateral and the money has to be paid back over an agreed upon period of time and interest rate. Here are some important possibilities for the use of debt financing:

Early market research can be financed with debt. You can use a credit card or borrow against your assets. A nominal amount of money is usually needed to conduct a disciplined market research on your entrepreneurial idea. There is usually no need to buy expense research reports, but some money is needed for travel for testing the market and for the development of materials for your research work.
Once you have satisfied yourself that you have a good market opportunity, it is often necessary to develop an early prototype and perform some more in-depth market testing. Again, bank loans are a viable source of financing for prototype development and for filing patent applications.
Most businesses in the US can actually be started through bank financing, as long as the entrepreneur has the necessary backing. The backing can come from the founder or from friends, family and business associates. Of course, these people that take the risk to back the loan should be rewarded by the company. Approaching local banks that offer SBA backed business loans is an excellent way to get the money you need to start a company. It is not always necessary to approach angels of any kind. This way, the entrepreneur does not have to sell shares in the business and will therefore own the entire company, keeping control of its destiny.
Also for most small businesses, getting loans from other people is very common. Many businesses get financing from family members, friends and business associates without every approaching a bank. These loans have to be paid back with interest but the terms are usually more attractive than with banks.
There are several banking institutions that will loan money to early stage companies for them to purchase capital equipment, where the equipment acts as the collateral for the loan along with the company’s cash position after having received its first round of financing. Sometimes personal guarantees are required which founders can consider and perhaps get assistance from their backers to accomplish as well.
A fairly common use of debt is for investors to actually loan money to a company that will later be converted to equity at the next round of funding. This helps a company gain some financing without having to declare the value of the company until the next formal round of funding. Other considerations are provided to the debt provider in the form of discounts and warrants.
Companies that have ongoing revenue and a good financial track record can get a line of credit from a bank that can serve to plug the drain to cash flow that occurs during periods when accounts are not yet paid and to meet periodic payroll demands. The accounts receivable backlog can often be used as collateral for such loans as well.

Bank financing can be a valuable tool at all stages of company maturity. As with any financing activity, it has to be approached with discipline and a well thought out and managed business.

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Raising Capital - Private Equity Gets Tighter

Bill Warner Wednesday, November 05, 2008

More evidence is mounting that private equity is going to be increasingly harder to get. Yesterday’s Wall Street Journal had a cooling article about how large institutional investors are starting to be much more cautious with their investment strategies.

Also, pension funds and large foundations, the limited partners of private equity firms, are starting to turn down the opportunities to make investments in private equity firms. These limited partners are feeling the pain of the market downturn as a result of the reduced confidence in the economy and are reprioritizing their investment strategies. The article cited some examples:

California Public Employees’ Retirement System, one of the largest pension funds, is asking its private equity firms to “ease off on requests” for additional capital.
Harvard University is seeking to offload $1.5B in private equity investments.
Kohlberg Kravis Roberts, who has been trying to go public, has reduced the valuations of several of its largest holdings.
The market value of public private equity firms is falling like a rock, far greater than the overall market.
The market selloff is putting some institutions in danger with oversized allocations of private equity investments.
Many firms, like Madison Dearborn Partners are reducing the amount of money they are raising for new funds.

This is all eating away at the foundation of a house of cards. Follow each of the falling cards:

As institutional money tightens, less money will go to the private equity firms (VC’s).
The private equity firms will have less money to invest in companies, so that only the best of the best will get institutional financing as the hold more and more money to protect their portfolios.
Angel investor backed companies, or any other companies that are expecting institutional money, are going to have to lean on their current investors to give them additional life.
Angel backed companies are also going to feel a lot of pressure to conserve cash in order to lengthen the runway they have before needed any additional financing.
Finally, angel investors are also feeling the same pinch that institutions are feeling. Their portfolios are squeezed and may have to reprioritize to less risking investments.

This is not good news for entrepreneurs, especially those who have companies that are strained for cash and in need of additional financing now. I just met with an early stage company this afternoon that has been stalled on getting a VC investment as the VC firm tries to close on a new fund from their limited partners. Who knows if they will ever see closure.

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Angel Investment - Harder to Get For Entrepreneurs

Bill Warner Sunday, November 02, 2008

In the midst of this economic mess, entrepreneurs wonder what the heck just happened to their chances of getting angel financing. They have done all this research on their business, proven that their business idea has commercial merit, gotten grants to assist them in the early process of forming their business, gathered friends and family financing to get into a position to be able to launch their companies and now are faced with the end of the road before they get a chance to go to market.

Getting needed financing is always tough, but now it is going to be even tougher. Here’s what they are faced with:

Government budgets are going to come under scrutiny which will impact the lucrative grant programs that are available today. This means that the proposals that are submitted for these programs have to be even more compelling and address a strong and urgent need.
Foundations whose investments are also in the public markets are going to experience lower returns which will reduce the amount of money they will be able to offer to new business ventures. As with government grants, the pressure is on the entrepreneur to have a stronger and convincing story to justify the foundation grant.
The limited partners of venture capital firms will also feel the pinch in the markets, putting further pressure on venture firms to perform. Raising further funds from limited partners for venture capital will be more difficult as well. As entrepreneurs approach venture firms, they are going to have to show greater returns over a shorter period of time, and the risks have to be well mitigated.
Angel investors will back away from new investments, unless they see a clear winner that they will be able to get into at a very attractive price. Start-ups are going to have to show a very attractive market opportunity and accept lower pre-money valuations as they have to offer more of their company in order for investors to mitigate their risk.

All of this means that entrepreneurs are going to have to be a lot more diligent. Agencies that offer grants, angels and venture firms are going to be much more selective. Here’s how entrepreneurs are going to have to react:

Entrepreneurs will need to propose businesses that reach profitability and positive cash flow much sooner than ever before, because they are going to have less money to get their companies launched.
Their business models will have to be focused and the path to revenue will have to be very convincing, supported by early customer feedback and rapid marketing and sales progress.
The financial pro forma will get a lot more scrutiny, with emphasis on solid cost and expense planning and a clear eye on cash flow management.
Angels will spend more time reviewing financial performance, so entrepreneurs will have to prepare for more scrutiny on how their money is being spent.
For the limited amount of credit that will be available, the terms for borrowing money for new equipment are going to be more onerous, almost making it worse than spending valuable cash to purchase equipment outright. In the same manner, leasing will become tighter as well. Entrepreneurs are going to have to be even more inventive about finding used equipment or align themselves with partners to share in the use of equipment. Outsourcing the need to companies who have it will have to be a strong consideration.
Entrepreneurs are going to have to establish strong credit, mainly through the credit worthiness of the company’s founders and of the company’s business partners who are willing to back them.
For the many rapidly growing companies who need to partially finance their early success through AR financing, they will see even tighter restrictions on the quality of AR backing. Entrepreneurs will need to negotiate more attractive payment terms with suppliers in order to survive, or choose to grow slower, within the limits of their cash flow.
Lines of credit, the vehicle by which short term cash demands for payroll and other payables are sometimes met, are going to be tougher to get, putting cash-squeezed companies at great risk. This too will force entrepreneurs to reconsider payment terms and other means of conserving cash will be even more important.

Entrepreneurs have to become strong business people. More and more will have to partner with seasoned business people in order to establish the management team that will not only develop the business idea but also bring it to a rapid business success. Strong management teams nurturing great ideas will undoubtedly pull us through this newest burst in our economy’s bubble.

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Raising Capital - Bank Loans Are Still Quite Possible

Bill Warner Wednesday, October 29, 2008

I have been talking to some of the local banks, those that serve our region only. Some people might call them community banks. They are the banks that take pride in their independence, provide services to both small businesses and individuals, and act responsibly with good judgment about taking risk.

Despite all the bad news you are reading about the major banks, some of whom are failing, community banks seem to be much better off. Sure, they have some mortgage loan failures, but are well within the bounds of their reserves for such risk. They are not panicking and are still making loans at reasonable interest rates. The stall in the flow in credit is not being felt as significantly as the “Wall Street” institutions. I asked them why this is. The answer I got was that they do not have a substantial portfolio of these bad home mortgages. They did not drink the Kool Aid and buckle under congressional pressure, through organizations like ACORN, to provide loans to people who do not qualify for them.

We are all reading stories about many banks who are taking the bail-out money. The large banks were given an ultimatum, even though a few of them did not want it. Unfortunately, some of these banks are not using the money for loans to small businesses and individuals. I read about one that is actually using the funds to buy another bank. So, the misuse of these funds is already starting. Thank you Mr. Paulson for your oversight and leadership.

Over $100B of the bail-out fund of $700B is being targeted at the smaller banks. Under some mild duress, banks have been notified by the Treasury of the offer to loan them money at reasonable interest rates and payment terms, along with provisions to take warrants in their banks. I am proud to report that many of our community banks are flatly refusing to take the money. They don’t need it and don’t want government intervention in the banking system. They were even told that “it is the patriotic thing to do” to take these funds so that more loans can be made. Many of them countered by saying that the patriotic thing to do is to not take this money and let the free market system work.

This is good news for small businesses that need loans to support their businesses, whether it is for capital purchases, business expansion or simply a line of credit. Target your quest for loan financing at local community banks and you should find a lot more positive response than you will get from the large banking institutions who are struggling to recover from the credit crunch and a boat load of bad loans. Do your homework though. Approach these institutions with well thought out business propositions supported by a solid financial analysis of your needs and how you will back the loan. What is making these banks successful is discipline, so you need to walk in the door with a disciplined approach to your business.

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Angel Investors Want Disciplined Entrepreneurs

Bill Warner Friday, October 24, 2008

With credit tightening and the markets crumbling, entrepreneurs are facing a rapidly increasing competitive situation when vying for angel money. Angels are going to be a lot more selective and pick only the best opportunities, with best being defined to be:

Quick to profitability
Quick to positive cash flow
Quick to exit
Managed by an extraordinary team

So what is new about all that? Nothing really, but the pressure to be right and to really achieve it has gone up an order of magnitude. Entrepreneurs are going to have to make fewer mistakes, because there is not a lot of room for more financing to make up for them.

Angels are different than institutional investors. Institutional investors, like venture capital firms, have limited partners that provide the funds under certain financial performance terms. Angles are investing their own money. Angels care about their portfolios in many of the same ways as institutional investors, with one exception. Angels have a deep desire to see the entrepreneur become successful, and will be very much more forgiving, flexible and supportive during tough times. They, like the entrepreneurs, are the ultimate risk takers with a passion for the business surpassed only by the entrepreneurs themselves. But, like the institutional investors, they want to make money.

Raising angel financing is going to be much tougher, which will require entrepreneurs to present a very compelling business proposition that materially demonstrates a plan for rapid success:

The description of the market will have to be well vetted. Paper analysis will not be good enough. Entrepreneurs will have to show that they have really tested their market entry with real customer feedback and survey results. If angels cannot see and talk to real and potential customers, the entrepreneur may be passed over.
Entrepreneurs better know their competitors’ businesses about as well as they know their own. No more passes on competitive matrixes full of yes’s and no’s, and loosely spelled out SWOT analyses. Angels will need to see examples of competitive situations where you are winning as verified by customer feedback. It can’t be just the entrepreneur saying they have a winner. A buyer or potential buyer will have to say it.
Marketing strategies are going to have to come alive with real contact information and lead generation productivity assumptions that have been verified by test marketing programs. The Excel spreadsheets will still be needed, but verification of the assumptions will be required.
Sales targets have to be substantiated with an emerging pipeline of sales prospects, some of whom having been contacted and will verify their interest in the entrepreneur’s product or service. A verifiable list of additional sales targets have to be shown that demonstrate great confidence that the first year’s sales targets can be met. It is almost like the company has to have a rocket loaded with fuel and the entrepreneur has the match already lit to launch it.
The financial forecast is going to have to be well thought out, demonstrating that the entrepreneur knows how to manage cash. Sold estimates for cost and expense, along with capital purchases, will have to be verifiable. The sales estimates have to correlate with the sales targets in the marketing and sales plans.
The management team has to be very strong. First time entrepreneurs are going to have a tough time getting financing without having a seasoned executive at the helm. Angels will want a management team with a proven track record and relevant industry experience. These are the people that will mitigate a substantial part of the risk the angel is taking.
Due diligence will become much more thorough. In addition to the usual process, much more scrutiny will be put into customer feedback, alliance relationships and credit worthiness of the company and its backers. Angels are going to have to have organized due diligence material, showing that the entrepreneur has a good handle on the business and what drives it.

If they haven’t done so already, entrepreneurs should be looking for assistance from seasoned business professionals to help them not only get ready for angel investors, but to help them run their companies efficiently and effectively. Entrepreneurs that form the right teams are the ones that are going to get the gold.

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CEO Coach - Orders For The New Economy

Bill Warner Wednesday, October 22, 2008

Credit is flowing slower than tree sap in a New Hampshire winter. The board of directors demand actions to respond to the economic mess and wants everything to happen immediately. Investors want to save cash and get to exit as quickly as possible. New investors are renegotiating their terms or backing away all together. Customers are starting to reprioritize purchases they had previously committed to. Wow, it’s a great day in the life of a CEO.

Let’s take a breath and not panic. Action certainly needs to be taken and it is very much the same thing that a CEO has to do in a turnaround situation:

Reassess where you are with your revenue forecast. Talk to your most loyal customers and reassure them that you will be there for them and see where they are on future purchases. Take a hard look at new customer purchasing to verify that purchasing timeframes are still real. Adjust the revenue plan based on this brutally honest near-term view of customer purchases.
Tighten the belt on the cost structure of your products and services. It’s time to take cost reduction actions that will provide a short-term yield. Cut personnel that are not essential to the manufacturing of products and to providing services.
Take a hard look at expenses looking for ways to save cash on discretionary spending, payment terms to suppliers, lease payment terms, unnecessary personnel and even look at stabilization of salaries. If an expense item is not serving the main mission of the company, question it.
The conservation of cash is what this is all about. More drastic actions could include the curtailment of development of future products and getting out of markets and discontinuing customers that are not profitable. Any action like this has to be done in the context of the company’s cash position and a judgment made as to whether there is enough cash in reserve to take the company through these hard times which could last through all of 2009.
Rerun the income and expense report, cash flow statement and balance sheet forecasts with the operational changes you have made. Take a hard-nosed look at whether or not you will have enough cash to sustain your business. If not, more cost and expense is going to have to be removed from the business, which might mean you have to change the fundamental strategy of the business. You must get cost and expense in line with your realistic view of the revenue outlook.

You may be faced with the need to raise additional funds to get you through these tough times. Do not go to outside investors without having first done your homework. Bank loans are much harder to get, but if you have a realistic financial outlook and satisfactory past performance, you have a reasonable chance of getting help. If you have angel investors, you need to work closely with them and give them the same brutally honest view of the business and ask for their continuing help with additional funds. If you need to get institutional money (VC’s), you are faced with a tough negotiation.

This is going to be survival of the fittest, requiring much more discipline and focus than ever before. The necessary actions are well known. We have been through this before. The difference will be in the execution of what needs to be done.

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Angel Investors Deal With New Economy

Bill Warner Wednesday, October 15, 2008

Well, who isn’t angry about this economic mess we find ourselves in? Angel investors are positively angry. That is, they are just as angry as anyone else, but they also see positive action that is needed to pull through this.

I just returned from a three day conference of the Southeast Angels held in Savannah, GA, where 75 angels from 8 states were in attendance, representing 16 of the 25 Angel Capital Association member organizations in the southeast, including North Carolina angels from the Inception Micro Angel Fund, Piedmont Angel Network, Triangle Accredited Capital Forum, and the Wilminton Investor Network.

The conference was the best ever, with greatly increased attendance and some very interesting investment deals presented. But, the talk that penetrated every presentation and discussion was about what they are going to do concerning the failures in the financial markets.

Reasons for Anger

A lot of realities have just hit angels very hard, and it isn’t pretty. Most are not new, but have suddenly become very pressing:

If they are invested in the public markets, they are seeing a tremendous decline in the value of their investments.
Depending on what they are invested in, their losses could be astronomical especially if they are invested in financial institutions or the real estate market.
Their own companies are feeling the impact of the slow movement of credit as they try to borrow money for business operations.
Revenue growth for their portfolio companies is curtailed because customer buying is declining.
The chances of getting another round of funding, either from angels or venture capital are greatly reduced as sources for these funds tighten up.
Any portfolio company that is not cash flow positive now is in trouble.

The Angel’s Response

Overall, most angels are focusing on the fundamentals by instructing their companies to pay attention to what they can control. They are getting back to basics on sales generation, cost management, expense control, wise capital expenditures and reducing debt, as they batten down the hatches for the rough times ahead. Here’s what is going on:

Angels are insisting that their companies have a realistic view of sales generation and revising their revenue, cost and expense forecasts accordingly. In other words, it’s now critical to be really real.
If one of their portfolio companies has a chance to close an investment round now, they should do it without delay, even though valuations will probably be lower. The opportunity may be short lived.
A portfolio company that is not cash flow positive now and hasn’t figured out how to make it so very quickly may face a rapid shut down. The likelihood of getting another chance to achieve positive cash flow is slim.
They realize that venture capital is going to get squeezed by their limited partners and new funds are going to be tougher to find, and subsequent rounds, if any, will be smaller. That means they are going to have to hold more in reserve to provide further financing of the part of their portfolio that has a chance of surviving.
The capital calls that are made to fuel additional investments are going to feel resistance as angel members have less money to invest.
Valuations will be dampened and M&A transactions will be tougher to find. Angels want to see more aggressive strategies for exits and they will be willing to take a lower return to cash out earlier.
Getting them interested in a new start-up investment is going to be extremely difficult. Entrepreneurs will have to really focus on putting together businesses that move rapidly to profitability and positive cash flow by showing how customer sales will occur reliably and that cost and expense infrastructures are appropriate.
Angels will become much more prescriptive about financial management by digging into every aspect of marketing and sales plans, development operations, support infrastructures, capital expenditures and employee salaries. They are going to pay a lot of attention to how their money is spent.
As occurred early this decade with VC’s, angels may move to more mature companies that represent lower risks. This will challenge entrepreneurs to form businesses that can rapidly reach profitability and positive cash flow.
Angel groups will engage in increased syndication in order to aggregate enough money to finance new companies and to further share in the risk of these investments.
Individual angels that are not experienced and are not members of an angel organization will get weeded out as their confidence gets shaken by the failure of their current investments.

As one of our most seasoned angel investors, Horace Stimson, recently told me, “I am always looking for the silver lining when times are tough. Capital does need to be put to work at some point and in productive ways.” Horace, like many angel investors, see opportunities for great deals at low prices as the demand for capital continues to be strong. Horace also sees a movement of private angels to joining angel organizations where they get the opportunity to share risk, learn from the judgment of others and diversify their investments. The Inception Micro Angel Fund and the Triangle Accredited Capital Forum have been growing recently as more and more angels take the opportunity to join angel groups.

As we have done over and over again, we will pull through this and respond to the new economic realities. After all, we are dealing with the beginnings of new businesses that fuel the majority of our economy.

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Angel Investors Are Feeling The Crunch

Bill Warner Sunday, October 12, 2008

Private angel investors as well as organized angel investor networks and funds are already feeling the impacts of the economic downturn that has just hit us. The average angel investor is well over 50 years old and is getting ready for retirement or is already retired. Their portfolio of investments is financing their lifestyle. With the volatility in the public markets, some are seeing their net worth and their cash flow from investments drop by 30% to 40%, and they haven’t seen the bottom yet.

The Impacts to Angel Investors

Angels are getting hit in many ways. Whether it is an impact to personal wealth and cash flow, ability to borrow money, downturn of business for their own companies, or ability to find new angel investor money for additional investment, the picture isn’t pretty.

If they are invested in the public markets, they are seeing a tremendous decline in the value of their investments.
Depending on what they are invested in, their losses could be astronomical especially if they are invested in financial institutions or the real estate market.
Their own companies are feeling the impact of the slow movement of credit as they try to borrow money for business operations.

This all adds up to a need to conserve cash and reprioritize their investments to lower risk opportunities.

Depending on their investment strategies, they may decide to sell the securities that have been irreparably harmed.
They may conclude that the depression in the market is not over and that we are going to fall deeper into depression, and therefore put their money into very low risk investments.
They may actually increase investments in areas that are fundamentally sound, getting great deals in this depressed market.

No matter how you look at it, their personal portfolio is in turmoil and is undergoing some massive reengineering.

The Impacts to Angel Investment

Like the VC’s, angels are encouraging their portfolio companies to conserve cash by getting even more focused on their core businesses and driving profitable revenue.

If the company can make a deal for additional angel investment now, take it, no matter what the valuation. Angels realize that any portfolio company that is not already cash flow positive is in dire trouble. Raising money later is going to be very hard.
They want to see more aggressive strategies for exits as they will be willing to take a lower return to cash out earlier. Entrepreneurs will have to focus on creating earlier exit opportunities and creating greater shareholder value faster.
Many will become much more selective and even pull back on making any further investments until the economy stabilizes and they find out exactly where they stand, holding in reserve some funds to protect their current company investments.
Getting them interested in a new investment in a start-up is going to be extremely difficult. Entrepreneurs will have to really focus on putting together their business plans to show not only an attractive opportunity but a substantial return more rapidly than ever before.
As occurred early this decade with VC’s, angels may move to more mature companies that represent lower risks. This will challenge entrepreneurs to form businesses that can reach profitability and positive cash flow earlier.

Angels are angry right now. Well, actually, who isn’t angry? I wish our presidential candidates were angrier though. We all have been let down by every agency that is supposed to protect us as well as businesses who lost all common sense. In less than ten years, we burst another bubble. We need a new administration and congress that will provide appropriate oversight and make the changes necessary to continue a free market economy without government influence for purposes of social engineering.

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Bill Warner
has been helping businesses grow for over 20 years. Bill is a Paladin Knight. More on Bill and the rest of the Paladin Team. >>