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November 26, 2006


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Elliott Dahan

Jason –

I will direct my comments to seed and early stage investments.

I have found that later stage investments are usually done or not done – not sold to investors. Either the growth, numbers, acceptance, hype, etc. are all in place and later stage investing makes sense or something is wrong. (I’m not going to get into the world of “down rounds”, “salvaging for spare parts” and “shotgun weddings”)

Misdirected Mixed Signals: First you say, “I have always believed that the markets are efficient. Great companies or great entrepreneurs + a good ideas are always able to get money. Always.” – Then you say, “But if you can't get capital from us and the other firms in your region, don't call it quits.” You then go on to say, “Instead, focus on building a list of VCs out of state that are interested in your geography.”

Your simplistic answer leaves out the most important element an entrepreneur should look for in a potential investor – The Space. Bio/Medical guys are not going to look at Software. Hardcore Platform/Infrastructure guys are not going to look at B2C. “Green” guys are only looking at Green. Instead of flippantly telling folks to look elsewhere, geographically, you should be telling them to look for investors who are in their Space.

You do not mention the need to know the financial investing parameters of any target investor. What is the minimum investment ? What is the maximum investment over the life of the company ? Does the investor require the entrepreneur to find a “lead” investor ? Lots and lots of research that must be done by the entrepreneur.

There is another reality check you did not mention – most non-RTP VCs will want a local-RTP VC to join in the funding round so there will be some local oversight. And, this brings us back to the problem of local-RTP VC firm as “gatekeeper” – not risk taker.

There is another reality check you did not mention – don’t bother “throwing your business plan over the transom” – or, the odds of you getting any attention from an investor without some kind of introduction or valid name dropping are little or none. (even a snappy LinkedIn intro is good).

The Angel Funding process, all too often, involves genuflecting in front of some folks with spare change who then add little or nothing to the entrepreneur. I have been involved in both the organized Angel and the individual Angel process both in the Silicon Valley and RTP. If an entrepreneur doesn’t really, really need money – he/she should avoid that route unless the Angel money is coming from active and knowledgeable people. Entrepreneurs should definitely source Angel $$ - but only after doing good research on the background of the Angels and their investments.

Do not confuse this institutional Angel funding from Friends&Family money.

There is a new development – probably the most important of all, that you didn’t mention – the recognition by both established and new investment firms that the Seed/Early Stage market is both underserved and potentially quite lucrative. Look at Charles River Venture’s “Quick Start”. I have been approached by some savvy folks in L.A. who are putting together a dedicated Seed Fund of about $25 million. Look at what other VC firms and new firms announce in Q1/2007. This will be the future of Seed investing.

I hope this helps.

Elliott Dahan

Knox Massey

Hi Jason--
Stop by next time you are in Atlanta. Atlanta Technology Angels (ATA) is still alive and well. We're very active in the Atlanta market with 3 new deals in 2006 (and 10 follow-ons). Other angels, VC funds and entrepreneurs are welcome to call or stop by anytime.

Knox Massey
Executive Director
Atlanta Technology Angels

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