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Raising Angel & Venture Capital Finance
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Few entrepreneurs succeed in raising Angel or Venture Capital
f i n a n c e . M a n y b u s i n e s s o w n e r s d o n ’ t b o t h e r t o a p p l y
knowing that they won’t be successful. Others simply don’t need it and have
an operation capable of generating the free cash flow they need to grow their
business. Only a very few are able to meet the requirements of the Angel or
Venture Capital (VC) fund and succeed in getting an injection of funds.
However, this type of funding is not a recipe for success. Around 50% of Angel
investments are in ventures which fail. More than 20% of VC investments are
written off and at least a further 20% fail to achieve their target returns. On the
other hand, Angels and VC funds do succeed in picking winners and spectacular
returns have been achieved in a limited number of deals.
Over the period 1978 to 1999, I was fortunate to have raised venture capital
twice. The first time involved a software firm in the UK which I started in 1978
with two partners. By 1984, we recognised we needed to acquire one of our
software suppliers to be able to control the direction of software development
we were dependent on. We spent more than 12 months walking the streets of
London looking for venture capital to finance the acquisition.
Eventually we were successful in raising US$1.5 million for 20% of our equity
from a corporate venture fund. A few years into the new structure, the business
was in trouble. Our investor was acquired and our investment did not fit in with
the investment objectives of the new owners. We were successful in buying back
most of the shares of the VC fund for about US$30,000. A few years later, with
160 employees, 16 distributors and more than 4,500 customers, we sold out to
a US-listed software company for US$9.6 million. Had the VC fund stayed in, it
would have made a positive return on its money, although not the ROI it would
have liked.
Tom McKaskill - Organizational Body
1st Edition
978-0-9806458-4-2
NONE
Raising Angel & Venture Capital Finance
Management
English
Breakthrough Publications
2009
USA
1-238
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