Question: Where does one with limited resources find investors willing to provide the capital necessary to mass market an innovative product?

Ralph C., Naples

Answer: Ralph, when traditional financing is not available or desirable, entrepreneurs often seek out “Angel Investors”. Wikipedia, the free encyclopedia, defines an angel investor as an affluent individual who provides capital for a business start-up, usually in exchange for convertible debt or ownership equity. A small but increasing number of angel investors organize themselves into angel groups or angel networks to share research and pool their investment capital.

Angels typically invest their own funds, unlike Venture Capitalists, who manage the pooled money of others in a professionally managed fund. Although typically reflecting the investment judgment of an individual, the actual entity that provides the funding may be a trust, business, or investment fund.

Angel capital fills the gap in start-up financing between friends and family who provide seed funding and venture capital funds that usually invest in established businesses. Of the US companies that received angel funding in 2007, the average capital raised was about $450,000. However, there is no set amount and the range can go from $25,000 to as high as $2,000,000.

Angel investments bear extremely high risk and are usually subject to dilution from future investment rounds. Because a large percentage of these investments are lost when early stage companies fail, the investors seek a return of at least 10 times their original investment within five years, through a defined exit strategy. As such, the investor will have an ownership interest in the company and may insist on a say in its operations.

Angel investors are often retired entrepreneurs or executives who may be interested in investing for reasons that go beyond pure monetary returns. These include mentoring another generation of entrepreneurs, and making use of their experience and networks on less than a full time basis.  Thus, in addition to funds, angel investors can often provide valuable management advice and important contacts.

The past few years have seen the emergence of networks of angel groups, through which companies that apply for funding to one group are then brought before other groups to raise additional capital. The Gulf Coast Venture Forum (”the GCVF”) is a Florida 501(c) 6 non-profit corporation, formed in 2001. The primary purpose of the GCVF is to promote the success of Southwest Florida’s new and emerging businesses by bringing together the best entrepreneurs and Angel Investors. For more information, refer to their web site http://gcvf.angelgroups.net or call 239-262-6300.

The Go Beyond Network brings together a group of private accredited investors dedicated to providing early stage capital with entrepreneurs seeking investment capital. Their goal is to make the angel investing process easier and more accessible for investors while helping to grow the community’s economic base. The group meets monthly to review business plans from prospective companies, share due diligence activities and discuss recent news from the investment community.  For more information, log on to their web site http://www.go-beyond-network.com or call BethAnn Kassman at 941-893-0881.

To learn more about management issues facing your small business, contact the Naples Chapter of SCORE, Counselors to America’s Small Business. Counseling is provided FREE of charge to all U.S. citizens and legal aliens.  Call 239-430-0081 or visit our web site www.scorenaples.org and click on “request counseling now as a first time client.”

SCORE Naples will present a workshop titled “Business Plan Part II” dealing with the financial components of a business plan. Saturday, January 23, from 9:30 to12:30 PM,at the Greater Naples Chamber of Commerce, 2390 Tamiami Trail North, Suite 210. To register, log on to www.scorenaples.org and click on “workshops”, or call 239-430-0081.

If you would like an answer to your question, please fill out the form located at  http://tinyurl.com/askscore . A counselor will contact you within 48 hours.  Please include your name, email address and a contact phone number.