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To: Bill Harmond who wrote (57444)	5/20/1999 9:35:00 AM
From: Glenn D. Rudolph	Respond to of 164684

Start-up financing: Finding an angel to get going By Samuel Fromartz WASHINGTON (Reuters) - Just a few years ago, seed financing for start-ups was an arcane pursuit, left to specialty investors or wealthy company builders who wanted to give others a leg up. Now angel investing is one of the hottest games in town for wealthy investors and others who are seeking rich returns and want to diversify their portfolios to include pre-IPO companies. Many angels were people who built their own companies, cashed out and now want the vicarious experience, as well as the returns, that come from helping start-ups. David Gladstone, chairman of American Capital Strategies and a longtime venture capital investor, said money is now so plentiful that an impressive team of entrepreneurs with a great idea can probably find a way to get financing. "The 1990s will probably be known as the decade of the entrepreneur," he said at an angel investing conference in Arlington, Va., on Tuesday. Gladstone organized the most prominent angel group in the Washington region, the Capital Investors. The 20 business and high-tech luminaries in the group include America Online CEO Steve Case, MCI-Worldcom Vice Chairman John Sidgmore, and Marc Andreessen, founder of Netscape Communications. These investors meet for dinner and hear 15-minute pitches from entrepreneurs. So far they have invested in a handful of companies in the greater Washington region. But angels are not limited to these prominent business people. The Small Business Administration estimated a couple of years ago that about 250,000 angels invested $20 billion a year in more than 30,000 companies. That figure is likely higher now, given the money pouring into Internet start-ups and other technology companies. It's a fragmented market, without a good mechanism for matching angels and entrepreneurs. "This is the last frontier of the financing chain," said David Amis, founder of Amis Ventures in Washington, D.C. He estimated that 200 to 300 services try to match investors with entrepreneurs -- with varying success. Then there are regional investing clubs, where angels may pony up as little as $25,000 in start-ups. Both Amis and Gladstone spoke at a meeting sponsored by the Harvard Business School Club in Washington that focused on the mechanics of angel investing. Several companies also pitched to investors. Although attendance was thin compared with the venture capital fairs that lure hundreds of investors and dozens of companies, the event itself is an indicator of what's happening to private investing. Quite simply, it is moving downmarket, so that a wealthy individual has greater opportunity to get involved in the seed stage and reap the rewards after the company grows and, if successful, goes pubic or is sold. Why even look for money in this arena? Simply because venture capital has gone upscale, unlikely to invest in deals that are more than a few million dollars in size. Start-ups that seek out angels typically have spent the $50,000 or $100,000 raised from family and friends and are looking for the next $250,000 to $700,000 to prove their concept. If a company burns through $50,000 to $100,000 a month, they only have a small window to do so. Aside from the money that angels bring to the table, they also bring two other elements in short supply -- expertise and credibility. That's crucial as companies look for further rounds of financing down the road. "The most important thing is to find the right partners," Jeff Tonkel of the Capital Investors said. Harry Weller, who works at FBR Technology Partners, a venture capital fund, said, "if you can get in front of those super-Angels, obviously it will get our attention." Weller said VCs look at whether the company has met its milestones. Often, he said, he will try and look back at an original business plan to see if they company achieved what it set out to do. Ventur...