Funding options still available for IE entrepreneurs
Inland Valley Daily Bulletin (Ontario, CA) - Saturday, May 16, 2009
Author: Sandra Emerson, Staff Writer
ONTARIO - Marlonia Ivy never thought she would become an entrepreneur.
But Ivy, a Marine Corps veteran and mother of three, founded Morning Star Lights in Corona a year ago after creating retractable lighting that can be installed under the eaves of homes.
She's since been on the lookout for investors to help get the business up and running.
"I've gotten all the finishings. I'm just really ready for production, so I made sure I had zero debt to bring to a venture capitalist," Ivy said. "I'm telling them within a certain amount of time, actually within the third month of selling only about 2,000 of these I actually would have gained over $3 million."
Ivy was a participant in the Inland Empire Fast Pitch Competition this week at the Hilton Ontario Airport.
Ivy said she signed up for the competition to "get a better grasp on learning how to work and partner with venture capitalists and angel investors. Also to see if there is a potential for funding for my invention to start production."
Finding loans, "angel investors" - people who invest in startups - or venture capitalists are three options entrepreneurs have.
Banks still are making loans as long as the applicants meet the proper criteria, said Stacey Sanchez, senior community loan officer for CDC Small Business Finance.
"As long as there's not a major credit issue, a lot of loans are being done," Sanchez said. "But if you were not creditworthy before, you're still not creditworthy."
The federal Small Business Administration says startup businesses should not be denied based on low collateral, Sanchez said.
"I'm making loans through SoCal Reinvestment," Sanchez said. "A lot of micro-loans (less than $50,000) are being made."
SoCal Reinvestment CDFI, a for-profit community development financial institution, provides up to $200,000 to entrepreneurs in San Bernardino, Riverside and Orange counties.
Sanchez said investors and loan officers are looking to invest in entrepreneurs who represent the "five C's" - capacity, character, capital, collateral and conditions.
"If you're weak in one of the five C's, you need to be stronger in one of the others," Sanchez said.
Finding an angel investor is another option for entrepreneurs. According to the Small Business Administration, 50,000 to 57,000 companies a year receive angel investments.
Funding from an angel investor can range from $150,000 to $1.5 million.
Although it's a large financial risk for the investor, the startup funding can help get a business off and running, according to John Morris, chairman emeritus of Tech Coast Angels and managing director of GKM Ventures.
Once the business reaches a certain level of success, it becomes a more attractive investment for venture capitalists, who have larger pools of money.
In 2000, more than $100 billion in venture capital was invested in startups, according to the SBA.
Although the investors want to have a say in the goings-on of the company they are funding, Morris said they don't want total control.
"We don't want 80 percent - we don't want to train anybody, we don't want to own the business," he said.
John Nelson, managing director of California Capital Partners LLC, said the key for businesses is to research potential investors.
"I see a lot of entrepreneurs come in with a deal to (raise) $2 million, which tells me one thing: They haven't done their research," Nelson said. "That is too much for an angel investor and too little for a venture capitalist."
He urged entrepreneurs to go online and investigate the investors' Web sites, and take the time to speak to individuals already in association with them.
Nelson also said it's important for businesses to come into the search for funding with concrete plans and real outcomes.
"Investors don't waste time," Nelson said. "I really want to see the product - I don't fund ideas, I fund things."
Michael Stull, the director of the Inland Empire Center for Entrepreneurship at Cal State San Bernardino, said people with big business dreams shouldn't be deterred by the recession.
"I think at this particular time, it just takes a little more courage and willingness to go do it than in the good times," he said. On the Web
Tech Coast Angels
California Capital Partners LLC
CDC Small Business Finance
Record Number: 12386964
(c) 2009 Inland Valley Daily Bulletin. All rights reserved. Reproduced with the permission of Media NewsGroup