Growing Pains
"Make sure your angel investors won't hold your business back when it's time to graduate to larger investors.
These days, investors at medical services company Inoveon in Oklahoma City are a pretty happy lot. The company recently celebrated its 40,000th customer and revenue has passed the $1 million mark, so investors have much to celebrate. But Inoveon co-founder Dr. Lloyd Hildebrand will tell you that bringing together three founders, seven angel investors and five VCs was not always a party.
When Hildebrand, 48, and his partners decided to commercialize the technology they had been working on at the University of Oklahoma, they started the way most entrepreneurs do--by digging into personal savings and asking friends and family for help. In total, the three founders and seven outside investors put together about $250,000 in seed capital.
From the outset, however, Hildebrand and his team knew that the angel investors' capital wouldn't be enough to get the company off the ground. If Inoveon's technology to diagnose eye disease in diabetic patients was ever to see the light of day, they'd need millions more. Still, they couldn't afford to worry about that in the beginning.
"At that time, we needed dollars to demonstrate the concept would work," Hildebrand says. "Money was more important than smart money at the beginning. We needed capital to stay alive."
That's a typical--and potentially dangerous--predicament for a young company, says Jonathan Karis, partner and chairman of the Business Practice Group at Boston law firm Nixon Peabody. Karis advises entrepreneurs to consider the time when their company may need more money than the angels can provide. Too many unsophisticated or inexperienced angel investors create management headaches and get in the way of raising future capital from VCs."
These days, investors at medical services company Inoveon in Oklahoma City are a pretty happy lot. The company recently celebrated its 40,000th customer and revenue has passed the $1 million mark, so investors have much to celebrate. But Inoveon co-founder Dr. Lloyd Hildebrand will tell you that bringing together three founders, seven angel investors and five VCs was not always a party.
When Hildebrand, 48, and his partners decided to commercialize the technology they had been working on at the University of Oklahoma, they started the way most entrepreneurs do--by digging into personal savings and asking friends and family for help. In total, the three founders and seven outside investors put together about $250,000 in seed capital.
From the outset, however, Hildebrand and his team knew that the angel investors' capital wouldn't be enough to get the company off the ground. If Inoveon's technology to diagnose eye disease in diabetic patients was ever to see the light of day, they'd need millions more. Still, they couldn't afford to worry about that in the beginning.
"At that time, we needed dollars to demonstrate the concept would work," Hildebrand says. "Money was more important than smart money at the beginning. We needed capital to stay alive."
That's a typical--and potentially dangerous--predicament for a young company, says Jonathan Karis, partner and chairman of the Business Practice Group at Boston law firm Nixon Peabody. Karis advises entrepreneurs to consider the time when their company may need more money than the angels can provide. Too many unsophisticated or inexperienced angel investors create management headaches and get in the way of raising future capital from VCs."
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For more information, visit www.EvanCarmichael.com. |
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