Banks Don't Like Small Loans

Banks typically have a $200,000 threshold loan limit.

Over the past 15 years, the number of loans given to companies over this $200,000 limit has grown over 30%. On the other hand, loans given to entrepreneurs who need less than $200,000 has been stagnant for the past 15 years. If you look at this number in real terms and account for inflation, the loans given to small businesses has actually been decreasing.

As Chuck Loewen from Online Business Systems says, 'Understand the real role of a financial institution is to lease safe capital to low-risk borrowers. Entrepreneurs, full of vim and vigour mistake the bank's role as the entity that will share the risks with them to see the entrepreneur's dream come true. Not so. Always understand you are the entrepreneur, he or she is the banker.'

For more information, visit www.EvanCarmichael.com.

Venture Capital - Silicon Valley survey on venture capital financing shows improvement

LawFuel - law, attorney, lawyer, legal news and legal resources: "Venture Capital - Silicon Valley survey on venture capital financing shows improvement, Fenwick + West reports PRESS RELEASE - IN THE NEWS
Submitted: 11:31 AM, Tuesday, August 30, 2005
Fenwick + West -
MOUNTAIN VIEW, Calif., August 29, 2005 - LAWFUEL - The Law News Network – Fenwick & West LLP, one of the nation’s premier law firms providing comprehensive legal services to high technology and life science clients, today announced results of its Second Quarter 2005 Silicon Valley Venture Capital Survey.

The survey analyzed the valuations and terms of venture financings for 92 technology and life science companies headquartered in the Silicon Valley/San Francisco Bay Area that reported raising capital during the second quarter of 2005.

“The results indicate a continuation of positive trends in the venture environment,” said Barry Kramer, partner in the firm and co-author of the survey.

“Up rounds outpaced down rounds 65% to 31% – better than a two-to-one margin,” said Kramer. “It was the sixth consecutive quarter where up rounds outpaced down rounds.”

For more information, visit www.EvanCarmichael.com.

Is Your Business Underfinanced

Join the club.

As we move from an industrial to an information and service society, a new generation of companies is spawning. Entrepreneurs no longer have to buy expensive equipment or inventories to get their businesses started. They rely instead on their intellectual capital.

Two simple examples are software developers and consultants. These entrepreneurs depend more on their own skills, time, and knowledge than any other �fixed� asset.

The good news is that these types of businesses are easy to set up and have minimal associated costs. The bad news is that because you don�t have many fixed assets, traditional lending institutions like banks don�t know how to valuate your business.

You can have rapidly growing revenues and still be underfinanced.

In fact, the statistics show that if you are a high growth company, you are more likely to be underfinanced!

Overall, 20.7% of companies are underfinanced. But when you look at companies that have grown their revenues by 20% or more over the past three years, you�ll find that 30.8% of them are underfinanced!

It is obvious from this data that it is the young, high performing companies that are currently experiencing the greatest difficulty in obtaining the financing they need to operate their businesses.

Many entrepreneurs are so discouraged that they don�t even apply for financing. In 2000, only 60% of small and medium sized companies tried to raise capital. Only 53.8% of businesses with zero to four employees applied for financing.

As a result, in the late 1980�s, only 15% of entrepreneurs were concerned over their financial situation. Fast forward to 2002 and that number rises to almost 40%! So why are these numbers so discouraging? Most entrepreneurs only turn to one source of potential capital: Banks.

For more information, visit www.EvanCarmichael.com.

Granite Ventures Raises $350 Million Venture Capital Fund

Granite Ventures Raises $350 Million Venture Capital Fund

"Granite Ventures II Will Continue Investment Focus on Early-Stage Technology Companies

SAN FRANCISCO, Aug. 29 /PRNewswire/ -- Granite Ventures has closed Granite Ventures II, a $350 million venture capital fund that will focus on investment opportunities in early-stage communications and software companies. Granite will continue the successful investment approach that the group has practiced for the last 13 years. The firm's total capital under management now exceeds $1 billion.

"The strong response we received from leading investors is a testament to the Granite Ventures team and network," said Managing Director Standish O'Grady. "We look forward to investing in great entrepreneurs and helping them build leading technology companies."

The Granite Ventures team has worked together for many years and has a combined 115 years of venture capital investing and technology industry experience. The team's diverse and complementary backgrounds give the firm a strong combination of investment, technology, entrepreneurial, operating, and transactional expertise."

Read more here.

For more information, visit www.EvanCarmichael.com.

How to Get in Contact with Northern Crown Capital

There are 2 ways that Matthew, Robert, and Michael can help your business raise capital:

1) Become your intermediary
� If you are based in Ontario and are looking for an intermediary to help introduce you to venture capitalists, present your case, and negotiate and close the deal on your behalf, visit www.evancarmichael.com for how to get in contact with Northern Crown Capital.

2) Review your business plan
� If you are looking to raise capital for your company and would like to know what investors would think about your business plan, you can get it professionally critiqued by Northern Crown Capital. Visit www.evancarmichael.com for more information.

For more information, visit www.EvanCarmichael.com.

Most Important Lessons from Northern Crown Capital To You

- Michael
- Use an intermediary. The benefits of using one have been discussed throughout this program. Hopefully you will use Northern Crown Capital, but if not there are many good ones out there.

- Remember that in most cases, the deal you end up with is not the deal you thought you would get when you started. You have to be flexible and able to turn on a dime in order to make the deal progress.

- Matthew
- Deal with people of quality. Associate yourself with experienced people who have gone through several cycles and have a proven track record in a wide variety of industries.

- Do not be greedy. In the market the bears can make money, the bulls can make money but pigs go to slaughter. If you are too greedy, you cannot make a deal. Markets will change. Windows open and windows close. To some extent investing is a fashion business. Certain types of deals are in fashion and then they are out. When money is being made available you are better off to take it when it is being offered.

- Always be very open and candid in your discussions. Do not hide. Do not play games. Be totally open. And whatever you do, do not bluff. An investor will find out quickly when you are bluffing and you will lose the deal.

� Bob
o Financing is just one f the tools you need to build a good company. It is like the blood in your body. Financing is not the heart and soul � your business is.

o Good entrepreneurs build great companies because they are good at motivating their employees, excellent at working with suppliers, have an obvious ability to satisfy customers and they also treat the venture capitalist as a supplier, albeit a supplier of money and not a physical product. If you think of investors with a �me against them� attitude or with any degree of hostility you should not enter into the deal. You will need their support when times get tough. A good working relationship with investors will help ensure your long term success.

For more information, visit www.EvanCarmichael.com.

Venture Capital: Firm matches investors with entrepreneurs

Venture Capital: Firm matches investors with entrepreneurs

Paladin Partners' Janis Machala -- the queen of Seattle's startup scene -- has quietly expanded her 10-year-old consulting business to include a new matchmaking service that connects entrepreneurs with angel investors, venture capitalists and private equity firms.

The new business unit, which has been in development for the past year and operates under the name Capital Advisory Services, is really an extension of the entrepreneurial soirées that Machala occasionally hosts at her Kirkland home.
But Machala said this takes the idea a step further, formalizing and strengthening the tricky process of connecting entrepreneurs and investors. "You can only hit so many people at an event like that," said Machala, who will continue to host parties in which entrepreneurs pitch their business plans to investors.

With the climate for venture capital and angel investing improving and an abundance of stealth startups popping up all over Seattle, Machala said it was a good time to create a group that helps early-stage businesses attract qualified investors.
Machala is not alone in her thinking. At least two other new angel investment groups are forming in Seattle -- signaling a potential rebound for those high-net-worth investors who lost their shirts on Internet investments in the late '90s.

"Angel investing has not come back to where it was," admits M. Todd Dean, president of the newly formed Seattle chapter of the Keiretsu Forum, a nationwide angel investment network that will host its inaugural event in downtown Seattle next month. "But it has picked up drastically in the last year."

Read more here.

For more information, visit www.EvanCarmichael.com.

How an Intermediary Can Help Close the Deal

- An intermediary can help save you a lot of time which you can then use to concentrate on running your business. An intermediary will help prepare you for going into the market, set up times and appointments and guide you through the presentations, get you to the point where you have a legally binding term sheet, and then close the deal by making sure that al the needed documentation is completed.

- This is not always a smooth procedure and requires someone to manage the process to ensure that your legal bills do not get out of hand.

- As an example, Robert from Northern Crown Capital was working with a well known law firm that was taking a long time to close his client�s deal. In Robert�s experience there was nothing that would indicate several more days were necessary so he flew out to see the lawyers who were 3 times zones away, walked into their office and made sure they finished the paperwork. The deal was closed 48 hours later. In fairness, the laywers may have had bigger and more important deals on the table at the time but from Robert�s perspective they were holding up his client and it was his responsibility to ensure the deal was completed.

For more information, visit www.EvanCarmichael.com.

Venture Capital Governance Requirements

- Once a venture capitalist becomes an investor they will want board representation. They will either nominate their own staff members or an outside representative of mutual consent. The last thing a venture capitalist wants to do, however, is run your company. They have enough problems trying to run their own firm and do not want to get involved in the operations of your business.

- Board members want to stay informed, monitor your progress and feel comfortable with the progress that is being made.

- A board of directors is like your own private management consultancy group. Some entrepreneurs are very good at getting the most out of their directors and some are not. Understand that directors are the cheapest consultants working for corporations.

- Board members are elected to represent shareholders. Since the venture capitalists will become significant shareholders, they will usually request at least one seat on your board.

- The board of directors is responsible for broad policies and strategies for your company. Directors will want to know what your budgets will be, who you are hiring and help you develop your ongoing business plan.

- Remember that the board of directors is in a position legally to approve or disapprove your actions.

- The frequency of meetings is usually a direct result of how effective you are at using your board and how well your group works together. The board can provide strategy and policy recommendations but can also help in specific ways such as introducing you to key players in the industry.

- Some of the items that directors care about are law suits, environmental problems, and when you are about to sign a major new contract. Directors are highly allergic to unexpected bad news and unexpected good news. Make sure to keep your board and bankers informed at all times.

- Generally, governance is a great help to you more than it is a hindrance. It will keep you focused on your business and help you grow. This is of particular importance if you have aims of one day going public.

For more information, visit www.EvanCarmichael.com.

The M&A momentum seems set to continue

The M&A momentum seems set to continue

"Welcome to the world of pre-IPO private equity deals. As long as the IPO window in India is wide open, we can expect the pre-IPO PE financing to gather momentum. Investing in mature companies just before their IPO and exiting at a profit, either at the IPO or over a couple of years, is a nice formula indeed. As long as the party lasts. I do not have too much of a problem with this phenomenon.

Over the last 18 months, one of the most significant trends in the private equity world has been the emergence of a clear stratification within the industry—i.e., who specialises in what, in terms of stage and size of financing. This is good since it lends depth to the market and can be expected to have a ‘trickle-down’ effect on start-up financing as well.

Angel investors and early-stage venture capital firms (which are a sub-set of private equity firms) can now invest in the confidence that their investee companies have multiple players to go to for follow-on financing at various stages of their growth. Until 2004, the main stumbling block for PE firms—with the exception of ‘old India hands’ like Warburg Pincus, Carlyle Group and Actis—to make serious investments in India was the lack of suitable exit opportunities.

In 2004, we tracked PE firms exiting their investments in six Indian companies via IPOs. The biggest PE-backed IPOs of 2004 were that of IT services company Patni Computer Systems and biotechnology firm Biocon. Other venture-backed IPOs during the year included that of enterprise software firm Four Soft, news television channel NDTV, agro-chemicals and pigment maker Meghmani Organics and stock broking firm Indiabulls. In 2005, data shows, private equity firms have already got exit routes in 10 of their investee companies via IPOs."

Read more here.

For more information, visit www.EvanCarmichael.com.

How Venture Capitalists Structure Their Investments Continued

� A 30% annual return may sound high to you. The reason why venture capitalists require such a high return is that anyone can purchase shares in the public markets in major companies and get a 15 to 18% return on their equity. Venture capitalists do not have this flexibility because, as a private company, your shares are not very liquid. Investors are locked in for a period of years and face the risk of your company failing. They therefore need a higher rate of return to compensate for this risk.

� Of every 10 investments, no one can predict at the outset which will be successful and which ones will not. On average 1 to 2 will be very successful, 1 to 2 will go bankrupt and the rest will be what are known as the �walking wounded.� They will continue to operate but investors will never recover their investments in these companies. Venture capitalists therefore need to average out the good investments against the bad to ensure their 30% annual return.

� An example is a department store that is unsure which items will sell the best over the next season. For that reason store managers will put a high markup at the beginning and at some point have to mark some of the products down. They just do not know which products they will have to mark down at the beginning of the season.

For more information, visit www.EvanCarmichael.com.

How Venture Capitalists Structure Their Investments

- It is first important to understand how venture capitalists achieve their targeted rates of return of 30% per year. Not every company will make this return on equity but there are ways around it.

- Much depends on the exit value of your company. A 30% rate of return reflects a price-earnings ration of 3. If the investor can exit at a higher price-earnings ratio they will earn more than their 30% desired return.

- Another way to reach this target is by offering options. An option is the right to purchase shares of your company in the future at a pre-determined price today. If you grow at 20% annually and your earnings were 100 in the first year, your earnings would be 120 in the second year and 145 in the third. By using options the investor can then immediately purchase additional shares at 100 and sell them for 145 which can be added to their 20% annual return to reach the desired 30%.

- A 30% return is an average figure and relates to the degree of perceived risk. If you have an early stage company you will need to provide a high rate of return. If you have a more mature business that has traction and you need financing for expansion or working capital, 30% may not be the required target due to the lower risk level.

- Younger companies may also be forced to give up a disproportionately high percentage of shares to compensate for the high degree of risk. However, venture capitalists will frequently sell a certain amount back to you based on you meeting clearly defined performance objectives.

- Another investment structure is subordinated debt. This usually caries a high yield and is usually not accompanied by equity. Subordinated debt is ideal for companies with solid cash flow and who need addition capital to grow thereby raising the value of their shares before raising any equity capital.

For more information, visit www.EvanCarmichael.com.

IBM sets up advisory panel of 7 venture capital firms

IBM sets up advisory panel of 7 venture capital firms
Big Blue wants to identify startups with hot future

"NEW YORK - International Business Machines Corp. has created an advisory panel of venture capitalists to help identify startup companies that may become suppliers, customers or acquisition targets.

Investors from seven firms, including Accel Partners, Hummer Winblad Venture Partners and U.S. Venture Partners, will meet with IBM executives four times a year to suggest products and companies that may be of interest, IBM said yesterday.

IBM's venture unit has identified more than 850 startups around the world with the help of venture capitalists and provides the companies with sales prospects and advice, said Mark L. Hanny, an IBM vice president.

The panel is part of a plan by IBM Chief Executive Officer Samuel J. Palmisano to spend about $1 billion a year to build relationships with investors, professors and researchers that may lead to sales, Hanny said.

"We don't want to be [a venture capital firm], though we see they play a very valuable role," Hanny said. "We don't go into it with the idea of just making money." "

Read more here.

For more information, visit www.EvanCarmichael.com.

What Happens After the Due Diligence Process

- If the venture capitalists are interested in your company after completing their due diligence, they will offer a binding term sheet. It will reflect the draft term sheet that has already been agreed to but this one will be a legal contractual agreement. Then the real negotiations start.

- There are different types of financing to consider: debt, equity, and mezzanine.

- Debt financing is the most objective and is therefore the easiest to negotiate. If you have the assets to support the debt and the income to support the interest payments, the negotiation period will be very short.

- Equity financing negotiating is more complicated and revolves around agreeing on valuation and percentage ownership. Discussions usually requires several days.

� Mezzanine financing involves a mix of equity, debt, convertible debentures and preferred shares. Negotiating the technical aspects of each so that an agreement can be reached between the investor and your company can be time consuming.

� Another dictating factor is the number and variety of financing offers that you receive. It is the intermediary�s role to help you bring more than one offer to the table and assist you in evaluating and negotiating which one is best suited to your company�s needs based on their previous experience.

� Venture capital term sheets are time limited. You have to quickly make up your mind if you want to accept or reject the offer. The short time period is in place to prevent you from using one term sheet to solicit new offers from other venture capitalists.

For more information, visit www.EvanCarmichael.com.

Venture capital industry still a boys' club

Venture capital industry still a boys' club
Observers say firms' small size discourages institutional change, but it is coming.

"If you thought the glass ceiling was bad in corporate America, take a look at the venture capital world.

As women have made gains in the executive suite, those who dreamed of making venture investing their careers have faced more headwinds.

A study conducted last year found that in 1995 there were 346 "professional women" — partners, principals and associates — making up about 10 percent of the venture capital industry.

By 2000, there were 510, which translated to 9 percent of the industry.

The study also found that 64 percent of female venture capitalists in 1995 were no longer in the industry by 2000, almost double the turnover rate for men. The study was conducted by the Diana Project, which is associated with the Kauffman Foundation, a group that fosters entrepreneurship.

More recent data are not available. But given the post-Internet bubble shakeout in the industry, it is likely that the situation has not improved.

The small number of female investors "says to me that the industry is not necessarily gender neutral, which isn't to say that it's outright discriminatory," said Davia Temin, president of the strategic-marketing firm Temin & Co., whose clients include venture capital firms.

Observers explain the persistence of the gender gap as in some ways a result of the structure of the industry, which is often described as a clubby old boys' network. But they say it is only a matter of time before that gap starts to narrow, given the advantages of a more diverse environment."

Read more here.

For more information, visit www.EvanCarmichael.com.

Start-Up

"Start-Up

Name: Wondir

Location: Bethesda

Funding: The company has raised a total of $1.25 million from founders, angel investors and Active Angel Investors, an investment group managed by New Vantage Group.

Big idea: Wondir blends search engine technology with message boards to help people with questions find people with answers. "We're different than a search engine in that we're not recreating static documents," explained Matthew Koll, chairman, chief executive and founder. "We're trying to create conversations and tap into the live knowledge, experience and expertise of other people."

How it works: Users are presented with a search screen and a blank box where they type a detailed question. Once submitted, the question is posted on a message board and can be answered by anyone via the message board, instant messages or e-mail (for the 200,000 registered users). Simultaneously, the questioner is taken to a results page containing similar stored questions and answers. Users can either register or use the service anonymously. The content of registered users' profiles and the questions they answer help Wondir's algorithms identify them as good candidates to answer certain kinds of questions."

Read more here.

For more information, visit www.EvanCarmichael.com.

How Long the Due Diligence Process Takes

- The due diligence process will very rarely last one or two weeks.

- Remember that the venture capitalist is also working on other transactions beyond your company.

- The due diligence will typically last at least one month. If there are any complex issues such as environmental approvals that have not yet been met, further delays are likely.

- When you are considering raising capital, make sure to get all your company records and documentation together in advance. You do not want to wait until you get a draft term sheet before trying to find important documents that the venture capitalist will need to move forward.

- More and more venture capitalists are also worrying about environmental assessments. You may consider getting your company and property assessed before approaching an investor.

- The venture capitalists will also want to speak with your clients, suppliers and bankers to get an understanding of how your company is regarded by the outsiders who deal with you on a daily basis.

For more information, visit www.EvanCarmichael.com.

Venture Capital Investing Holds Steady During Q2

Venture Capital Investing Holds Steady During Q2

"The venture capital market isn't as easy to tap as it was five years ago. Then again, it's also not quite as tough as it was three years ago.

Total venture capital investment in New England companies was $622 million during the three-month period ending June 30, according to PricewaterhouseCoopers LLP's quarterly MoneyTree survey. That total was down slightly from the previous quarter, and off 35 percent from the comparable year-ago period.

Experts say not to worry, though.

"Capitalist are still looking -- and finding -- good deals," said Matthew Littlewood, a partner in the Boston office of PricewaterhouseCoopers.

Littlewood said a drop in area biotech investments (down by almost $100 million, year over year) played a big role in the decline.

"The year-ago period was a strong one for liquidation events," Littlewood said, using the term for buyouts or initial public offerings -- occurrences that allow venture capitalists to cash in their holdings"

Read more here.

For more information, visit www.EvanCarmichael.com.

What the Venture Capitalist Due Diligence Process Looks Like

- The venture capitalist due diligence process is intense and can take weeks or months depending on the complexity of your company. It will be the most intensive look at your company that you have ever experienced.

- The venture capitalists will want to know everything from your standard articles of incorporation, directors, and shareholder agreements up to the details of how your business processes are run.

- The purpose of the initial meeting and draft term sheet is to get an approval in principle. From there the venture capitalist will carefully examine the details of your company before making an official offer.

- An intermediary can be helpful in speeding up the process, especially when dealing with the lawyers on both sides. The intermediary is responsible for �cracking the whip� and ensuring the process is progressing. The faster you can make lawyers work, the lower your bill will be. Generally, if you give lawyers enough time, they will make sure to use it and bill you accordingly.

For more information, visit www.EvanCarmichael.com.

The Next Steps After The Meeting

- If the venture capitalists are interested, they will very quickly come up with a draft term sheet for you which gives an overview of the conditions under which they would make an investment in your company. (see next page for a sample term sheet)

- They provide a draft term sheet so that they can get an understanding of what the deal could look like and ensure that there is not a disconnect between you and them on valuation, methodology or type of financing.

- The draft term sheet is not a commitment on the part of the venture capitalist. It is not a legally binding agreement. It is a proposed framework under which the venture capitalist is prepared to do business. The most important element of the draft term sheet is the valuation. If you are too far apart on valuation the deal will not go any further.

- The due diligence process is not a 24 or 48 hour process, it is quite time consuming. In order to save time the draft term sheet is put forward to ensure that a negotiable transaction can be reached before investing further effort.

- There are also considerable up front fees that the entrepreneur will have to pay. Among these are the venture capitalist�s legal fees. Some venture capital firms will also require a $20,000 to $30,000 non-refundable payment up front before going forward.

- The time period given to accept or reject the draft term sheet is not very long. You will have to commit to it or drop it fairly quickly.

For more information, visit www.EvanCarmichael.com.

How Intermediaries Can Help

- Preparing for the meeting is a key role of intermediaries. They will go through a number of rehearsals with you and sit down for several sessions that could last for a couple of hours each to go over the likely questions you will be asked. They will also make sure you have the right answers committed to memory and can back up your assumptions properly.

- A successful meeting with venture capitalists will result in good chemistry having been developed early on and at the end of the meeting. The venture capitalists will have openly expressed an interest in moving on and there will be a general level of enthusiasm at the end as supposed to the objective analysis of the business plan which occurs at the beginning of the meeting.

- The intermediary knows the venture capitalists and their different accounts. Intermediaries know the sensitive points and help tailor each presentation to the particular venture capitalist. Every venture capitalist will have a different approach and the intermediaries will help you prepare for their potentially hostile questions.

- Preparing for the meeting is much like preparing for a case in court. You only have one chance at it and you better do it right!

For more information, visit www.EvanCarmichael.com.

Small Firms Find Success Online, Too

Small Firms Find Success Online, Too

"A skeptic might call it a business idea doomed to fail: Take advantage of the Internet age by lending a monthly stack of books to customers who place their orders online, and charge a fee for the service.

That may sound like a market that libraries have covered, but a Vienna-based company called BooksFree.com Inc. has found a way to get in on it. It will never be a Fortune 500 company, but the small firm has loyal customers and is providing steady employment for its 14 workers.


Maria Solano and Wally Hamsher pack books for shipment at the Vienna office of BooksFree.com.
Maria Solano and Wally Hamsher pack books for shipment at the Vienna office of BooksFree.com. (Photos By Katherine Frey For The Washington Post)

The implosions of thousands of Web retailers compounded by the rise of Internet giants like Amazon.com Inc. and Overstock.com Inc. could suggest there is no room online for the little guys. Success stories of eBay merchants abound, of course, but less heralded are the local tales of companies like BooksFree.com and District-based firms Gratis Internet LLC and Varsity Group Inc., which found sustainable business models offering goods through their own sites.

"The ones who have stayed around and succeeded are the ones who have followed business precepts that have worked in small businesses for a century," said Allen Weiner, who studies online retailers for the market research firm Gartner Inc. "They created a product or service that resonated with the marketplace, they were careful with their money, and they were lucky."

The objective for these businesses was always to make money, not attract eyeballs or accrue page views, he said."

Read more here.

For more information, visit www.EvanCarmichael.com.

Length of the First Meeting

- The first meeting will very rarely last more than an hour. It is really designed solely to understand if you have the �horses for the courses.� This can certainly be understood in that first hour. The due diligence process will then follow.

Your Objective in the First Meeting

- To persuade the venture capitalist to move to the next level.

For more information, visit www.EvanCarmichael.com.

Venture capital hits 4-year high

Venture capital hits 4-year high

"Venture capital investment in Canada jumped to $627-million in the second quarter of 2005, its highest level in four years, according to industry figures released yesterday.

Investment rose 53 per cent from $409-million during the same period last year and soared 87 per cent from the $326-million in the first quarter of 2005, reported Canada's Venture Capital & Private Equity Association (CVCA) and Toronto-based Thomson Macdonald & Associates Ltd.

The gain reflects "the growth which has been under way for two years," Dr. Robin Louis, president of CVCA, said in a release.

During the quarter, foreign firms invested $219-million in Canadian companies, its highest sum in two years. Funds from venture investment firms abroad, most of them U.S.-based, accounted for 35 per cent of the total investment in Canadian companies."

Read more here.

For more information, visit www.EvanCarmichael.com.

Important Business Plan Questions They Will Ask

- The main questions about your business plan will surround the assumptions you have made. Mistakes are most often made at the assumption level. Prepare for your assumptions to be tested.

- Avoid unstated or assumed assumptions. Make sure to write down every assumption that you have made in your financial projections. This is a critical part of developing the persuasion chain and convincing the venture capitalist to understand your numbers and eventually invest in your company.

- Intermediaries such as Northern Crown Capital will ensure that you are ready. They know the questions that are likely to be asked and ensure that you have the right answers memorized before going in. You must be confident when walking in the room and in answering every question if you hope to instill confidence in the venture capitalists.

For more information, visit www.EvanCarmichael.com.

Major Questions You Should be Prepared For

- The first meeting is primarily a question and answer session to see if you have the right management team in place. However, the venture capitalist can have specific questions for you to test such things as your technology. They may bring in a technology expert to get further clarification on points made in your business plan.

- The venture capitalist can also use this meeting to test you on sensitive areas such as your company valuation and the eventual exit strategy. Investors will not want to go too far down the road with you if you cannot agree to basic terms with them. If you think your company valuation is $100 million and they determine your value to be $20 million, you have a sizable gap that may be too large to close and come to mutually acceptable terms on.

- Another potential problem is that if you are wedded to your company and do not ever want to sell, it decreases the likelihood of an investor exit which lowers your chance of receiving the necessary capital you need to grow.

- One example from Northern Crown Capital�s experience was when they found a perfect venture capital match for their client but the company�s management started disagreeing in front of the venture capitalists during the meeting. The marketing people were arguing with the research people and the venture capitalist needless to say did not invest.

For more information, visit www.EvanCarmichael.com.

News Update and Search Engine Optimization Partnership

Since adding the News section on my website, I've received numerous positive comments and increased traffic. As a result I've decided to expand it to include a much wider array of venture capital topics so your can stay on top of the latest developments. The news is divided by Industry, Firms, Regional, and Other categories. You can check out the new site here.

Also, in a quest to continue adding more value for entrepreneurs I've posted some great articles from Max Kalles of WSI on Search Engine Optimization Tips.

If you have a suggestion for the website, let me know!

For more information, visit www.EvanCarmichael.com.

Venture capital investment jumps

Venture capital investment jumps

Investment from the Canadian venture capital industry climbed to $627-million in the second quarter of 2005, the largest sum in a second quarter in four years, Canada's Venture Capital and Private Equity Industry (CVCA) reported Tuesday.

Investment rose 53 per cent from $409-million during the same period last year and climbed 87 per cent from $326-million in the first quarter of 2005.

The gain reflects “the growth which has been under way for two years,” said Robin Louis, president of CVCA, in a release.

During the quarter, investment in from foreign firms in Canadian companies reached $219-million, its highest in two years. Funds from venture investment firms abroad — most of them U.S.-based — corresponded to 35 per cent of the total investment in Canadian companies.

Read more here.

For more information, visit www.EvanCarmichael.com.

New venture capital program eyed for small firms

New venture capital program eyed for small firms

"Members of Congress want to establish a new government-backed venture capital program to replace one that's being phased out because of sizable losses.

The Small Business Administration stopped issuing licenses for the participating securities part of its Small Business Investment Company program last October. These types of SBICs accounted for more than half of the $2.8 billion invested by these venture funds in small businesses last year.

SBICs are privately managed investment firms that raise money from private investors and receive government-backed long-term loans from the SBA.

Small Business Investment Company deals
Type of SBIC FY 2004 financings Dollar amount invested
Participating security 2,114 $1.45 billion
Debenture SBICs 1,977 $1.05 billion
Bank-owned/nonleveraged 234 $317 million
Specialized SBICs 137 $23 million
Total 4,462 $2.8 billion
Source: U.S. Department of Commerce

They were created to provide capital to startups and early-stage businesses. These types of companies often have trouble getting conventional venture capital, particularly if they aren't high-tech firms located in Silicon Valley, Boston or other VC hot spots.

SBICs in the participating securities program make equity investments in companies, while SBICs in the debenture program make loans to small businesses that have enough cash flow to cover the interest payments.

There are no guarantees on venture capital, however, and many SBICs made equity investments in companies that didn't become profitable. Nearly 30 percent of SBICs licensed before 2001 have failed, and only 5 percent have repaid all of the money committed by the federal government. After three years of liquidating failed SBICs, the participating securities program shows a loss of $1.7 billion."

Read more here

For more information, visit www.EvanCarmichael.com.

What Happens in the Meeting

- Meetings with venture capitalists are also referred to as �the dog a pony show.� It provides the first opportunity for investors to meet the management of your company face to face and assess the people behind the business. You could have a brilliant business plan backed by poor management. This will only become apparent to the venture capitalist in the meeting.

- There is an old British banking expression that asks: �Is someone the horse for the course?� In other words, do you have the right management team for the task at hand. It then follows that different horses are needed for different courses.

- The point of this initial meeting is to test the management face to face. The venture capitalist wants to build confidence with the management team.

- The intermediary�s prime role is to get a �dog a pony show� together with a number of venture capitalists.

- The venture capitalist may question your business plan to test you. Make sure to have someone with you who understands the finances and who knows the product or technology.

- The meeting will usually start off with a 5 minute update as to what has happened since you submitted your business plan. The rest of the meeting will be a question and answer session.

- People like to do business with people who they have an affinity for. The development of trust between yourself and the investor is paramount. They must get a feeling that they can work with you and that there is positive chemistry.

- As an example, an entrepreneur who walks into a meeting dripping in gold, diamonds and flamboyant suits will have a hard time raising capital because the venture capitalists will not feel comfortable with this person.

For more information, visit www.EvanCarmichael.com.

The Intermediarys Role in Putting the Plan Together

- Intermediaries do not put your plan together but will help you clarify your offering. They will know how attractive your proposal looks from an investor�s point of view and be able to help you improve it

- The basic business plan is put together by the entrepreneur and the intermediaries know what the venture capital hot buttons are and how to turn them on or off. They can help ensure that the most attractive elements of your plan are clearly brought up to maximize the chance of investment by the venture capitalist.

- As an example, there are many entrepreneurs who have intelligence, common sense, and a great business sense but are not skilled at writing things down on paper and creating a logical business plan. Northern Crown Capital has helped such individuals in clarifying their business plan and assisted them in then going after a significant capital investment.

For more information, visit www.EvanCarmichael.com.

Business Strategy Tips

Since launching this blog, many of you have written in asking for advice on raising capital and submitting your business plans. I've received so many questions regarding business strategy that I sourced an expert, Michael Bedard, to provide me with some of his best material to put online to share with you. I hope you enjoy it.

In the coming weeks I will continue to add new content on the newly created Partners page on my website. If you have any suggestions for what you would like to see, let me know!

View Michael's Business Strategy Tips here.

For more information, visit www.EvanCarmichael.com.

Attracting angel investors requires dancing the finance fandango

Attracting angel investors requires dancing the finance fandango

"Question: I'm still in the early stages of building my business, and it's clear that my personal funds won't be enough to fully finance this venture. A bank loan is probably not an option, so I'm eyeing alternative financing sources such as angel investors and venture capitalists. What ammo do I need before I approach the money people?

Answer: With a limited operating history, you are probably correct that a bank loan for your business is a long shot.

The good news is this: The Internet has made the process of finding alternative sources of funding easier than it once was. "Angel" investors -- wealthy individuals willing to back attractive business ventures -- invest billions of dollars each year in tens of thousands of U.S.-based startup and early-stage businesses. Dollar amounts put up by angels generally range from $10,000 to several hundred thousand.

Many angels are willing to overlook a few holes in your business plan package if they like you and your idea. These investors come in several varieties, including passionate angels, entrepreneur angels, management angels and professional angels. Usually angels are more patient than venture capitalists who often demand a big return on their money, fast.

The passionate variety often back ventures that involve products, services, industries or technologies they have a special enthusiasm for. Entrepreneur angels tend to own (or have owned in the past) successful businesses themselves. They may see a fit with their own company, or simply like your idea and potential.

Management angels likely have experience in your field and will expect to become actively involved in the business in exchange for their investment. By contrast, "professional" angels such as doctors, lawyers and accountants might want to invest but won't want an active role."

Read more here.

For more information, visit www.EvanCarmichael.com.

How Many Venture Capitalists You Should Contact

- If you approach them on your own, your personal time constraints will dictate how many you can contact.

- It is an intermediary�s job to determine how many to approach. The intermediary will take you to a larger number of venture capitalists because you cannot guarantee that all of them will be interested. A further number will provide unattractive term sheets. The end goal is to get a reasonable offer on the table from a reputable venture capitalist.

- If the venture capitalist has lots of funds and is looking for deals, it is easier to raise capital. In today�s market, venture capitalists are saddled with too many problems from their current portfolio companies.

- It is the job of the intermediaries to know which venture capitalists are tapped out and which are looking to invest. They must have a knowledge of the market and know who to take your proposal to.

- There is a danger of �over shopping� the deal if you go to too many venture capital companies.

- If you are turned down by 4 to 5 highly targeted venture capitalists, something is wrong. Either your company has fundamental flaws, your terms are unreasonable, or your business does not reflect current market trends.

For more information, visit www.EvanCarmichael.com.

- What Venture Capitalists are Looking For

- Venture capitalists are in business to make money. They have to have the ability to select companies that will make more money than their rivals.

- There are 2 types of companies. The first is a lifestyle business. These types of companies are centered around the lifestyle of the entrepreneurs. The owners will use the business to drive expensive cars and purchase big houses. These are not businesses that attract venture capital.

- The second type of company is a gazelle. These companies are run by entrepreneurs who want to build world-class organizations.

- There are three ways for a venture capitalist to exit from your business: acquisition, public offering or management buyout. Half of the decision to invest in your company is derived from if the venture capitalist can see a clear exit.

- An example of a gazelle is Hewlett-Packard. Mr. Hewlett and Mr. Packard wanted to build a world class company. They recognized that they did not have the necessary skills so they hired professional management and became mentors and the elderly statesmen for the company. They were able to exit from the company and it became a huge success.

For more information, visit www.EvanCarmichael.com.

Northern Crown Capitals Non Disclosure Agreement

CONFIDENTIALITY AGREEMENT



BETWEEN: Northern Crown Capital Inc.
Suite 1705
8 King Street East
Toronto, Ontario M5C 1B5



AND: ABC Company
Street Address
City, Province / State
Postal / Zip Code

Attention:
Contact Name
Tel: (xxx) xxx-xxxx


RE: ABC Company
(the �Company�)



Northern Crown Capital Inc. (�NCCI�) has requested certain information (the �Information�) concerning the Company, which the Company considers valuable and confidential. As a condition of the Company furnishing NCCI with such information, NCCI hereby acknowledges and agrees that any and all written or oral information now or hereafter furnished to them concerning the Company, is confidential and that the Company�s business and operations could be damaged if any of the Information is disclosed to third parties.

NCCI agrees that such Information:

shall be kept confidential by NCCI and will not be disclosed, divulged or provided to any person without the Company�s prior written consent; provided however, that such Information may be disclosed:

(i) to the smallest practicable number of NCCI�s directors, officers, and employees, if any, who need to know such Information;

(ii) if such disclosure is required by law;

shall not be used by NCCI, and NCCI shall not permit the use of such Information, in a manner or for a purpose detrimental to the Company;

shall not be deemed to include information which:

(a) is public knowledge or becomes generally available to the public other than as a result of disclosure by the Company;

(b) becomes available to NCCI on a non-confidential basis, from a source who is not bound by a Confidentiality Agreement with the Company, and is in NCCI�s possession prior to disclosure by the Company.

In the event that discussions relating to this evaluation cease for any reason whatsoever, NCCI shall, within three (3) days of receipt of written notice by the Company promptly deliver to the Company and shall not retain, or permit its directors, officers, or employees to retain, any and all originals, copies, or extracts from the documents containing the Information.

It is understood and agreed that, in the event of any breach or threatened breach of the terms hereof, the Company shall be entitled to equitable relief, in addition to any other remedies which may be available to it, in any court of competent jurisdiction.

NCCI hereby acknowledges and agrees that the Company makes no representation or warranty, express or implied, as to the accuracy or completeness of the Information, and that the Company shall have no liability as a result of NCCI�s use of, or reliance upon the Information.

Acceptance of this Agreement by NCCI and the Company, and the terms set forth above shall be evidenced by the countersigning of this letter, and returning a copy of same to the parties.

Dated at City, Province / State this day of , 2005.


Northern Crown Capital Inc. ABC Company



_________________________ _________________________
Partner Contact Name

For more information, visit www.EvanCarmichael.com.

Area venture capital picks up

Area venture capital picks up

"Two thirds of area venture capital funds made at least one investment last quarter, although the growth in activity slowed from the first quarter.

The Mid-Atlantic Venture Association says 64 percent of VC groups participated in one or more investments in the second quarter. The actual investment figure rose 6 percent, compared with 58 percent in the first quarter.

Investment activity is expected to rise this quarter, with 72 percent of VC groups saying they'll close one or two deals in the third quarter."

Read more here.

For more information, visit www.EvanCarmichael.com.

The Web: Founder sales flourishing

During the late 1990s and into 2000, every Internet entrepreneur had the same dream: Start an online company and launch an Initial Public Offering on Wall Street a year or two later, becoming fabulously wealthy in the process.

Fast-forward five years and though the dream remains, parts have changed, experts told UPI's The Web.

Venture-capital spending remains flat, expected to be $21 billion this year, the same as last year, according to a joint survey by PricewaterhouseCoopers, Thomson Venture Economics and the National Venture Capital Association, and IPOs have not yet returned to their past peaks.

So, many online entrepreneurs have found a new way to cash in on their projects. The founders of companies such as eHarmony.com, the online dating service, and others, such as Fastclick.com and OptionsXpress.com, are selling stakes in their firms for cash. Because the sales add capital, not only to the firm's coffers, but also to the pockets of the founders, these transactions are called founder sales in the technology-investment trade.

"What we're seeing is founders reaching out for 'partial liquidity,'" said C.J. Fitzgerald, with Summit Partners, a venture-cap firm in Palo Alto, Calif., with about $9 billion in technology investments. "This is for companies that have been bootstrapped, and have been very successful, but the entrepreneurs are taking some money off the table now."

This is good for the companies, Fitzgerald said. They and their founding employees often invest 100 percent of their savings at startup. By giving up a share of their firm for cash, some of which they retain, they generally can feel more confident and perform better in their jobs -- and take the company to the next level of performance, experts said. It enables tech-firm founders to wait for the IPO market to recover, but still get rich in the interim.

Read more here.

For more information, visit www.EvanCarmichael.com.

How to Handle Confidentiality

� An intermediary should always sign a confidentiality or non-disclosure agreement (NDA). It is a 1 to 5 page document that acknowledges you have sensitive information that if released could harm your business and it should not be shared.

� Venture capitalists, however, will not normally sign a confidentiality agreement. They see so many companies in the same industry that they cannot sign one agreement and risk not being able to invest in other potential good deals.

For more information, visit www.EvanCarmichael.com.

VCs Psyched About Brain Investments - Venture Capital Journal

VCs Psyched About Brain Investments - Venture Capital Journal

"The venture business is famous for finding and funding the brainy and their ideas. Now the brain itself is becoming a hot area. One recent example: MPM Capital Partners was so crazy about psychiatric drug maker Somaxon Pharmaceuticals that it led a $65 million round in the company.

Of course, MPM isn't the only VC firm that's gaga over the so-called "neurotechnology" market. Investments in neurotech companies totaled $1.5 billion last year, up from just over $500 million in 1999, according to NeuroInsights, a San Francisco consulting and research firm. Neurotech companies make drugs and devices to treat disorders and diseases of the central nervous system (CNS), most notably the brain, as well as software and other tools to measure and understand the CNS.

Neurotech "is going to be one of several big areas [because] we have an aging population," says Jean George, a general partner at Advanced Technology Ventures of Waltham, Mass.

"Brain imaging is quite high resolution compared to a few years ago and seems to be marching in an exponential curve," says Steve Jurvetson of Draper Fisher Jurvetson in Menlo Park, Calif. DFJ has invested in two neurotech companies: Everest Biomedical Instruments and Posit Science. Everest, based in Chesterfield, Mo., is developing a device to monitor consciousness. Posit, based in San Francisco, makes software to keep brain activity high later in life.

Still, VCs are likely encouraged by a number of exits in the space. NeuroInsights notes that a dozen neurotech-related companies have gone public since January 2004, 10 of which are VC-backed. Most of the newly public neurotech companies are trading below their IPO prices, but two have done particularly well: Neurometrix and Senomyx. Both are trading at twice their IPO prices."

Read more here.

For more information, visit www.EvanCarmichael.com.

Why the Venture Capitalist is Interested in You

� Venture capitalists want to make money. They will either see you as an entry point into a new industry that that has potential or one where they are already invested in but you provide an exceptional case.

� The venture capitalist makes their decision on two variables: greed and the probability of failure or success. If your company presents a great deal but is accompanied by extraordinarily high risks, the venture capitalist will not invest.

For more information, visit www.EvanCarmichael.com.

What the Proposal Executive Summary Looks Like

� Make it so that your mother or grandmother can understand it. Entrepreneurs too often fill their business plans with of acronyms, tech terms, and buzz words. Intermediaries can usually tell after the first paragraph how difficult it will be to raise capital for your business.

� Condense what you do and what you want into a statement that you can make very promptly in seconds or minutes. If you cannot communicate quickly, you will lose the investor�s interest.

� You need to have a logical persuasion chain. You must persuade the venture capitalist to invest in your company just as you would persuade a customer to buy your product or service.

� If you cannot explain your business on the back of an envelope, you will not get financed. You need to grab the investor�s attention in the first 3 to 5 minutes. If you cannot get their basic interest, you will not get their money.

� Venture capitalists see 2 to 3 deals per day and will say no most of the time. You need to distinguish yourself through clarity.

� Prepare an elevator pitch. Imagine getting on an elevator at the 20th floor of a building with the venture capitalists and getting a commitment by the time you reach the lobby.

� Harold Ross� first prospective for the New Yorker was no more than couple hundred words. It was so clearly laid out that you could read it today, 80 years later and still recognize that it describes the New Yorker.

� The venture capitalists will also look to the people behind the company. They are looking to see what the reputations of your chairman and board of directors are. This will help create credibility and trust.

For more information, visit www.EvanCarmichael.com.

Second Annual Venture Capital Competition

Second Annual Venture Capital Competition

FundingPost (http://www.fundingpost.com/) proudly announced the start of its second annual Pitching Across America(TM) competition, with WolfBlock as the premier sponsor and PRNewswire as the media sponsor of the event. FundingPost, which has been introducing entrepreneurs to investors for over 4 years, established the competition last year in which 140 Venture Capital Funds and Angel Investors participated as judges, voting on 400 business summaries from emerging companies nationwide. It was the largest Venture Capital competition ever organized. The Pitching Across America competition is significant because it helps Venture Capital and Angel Investors quickly identify worthwhile investment opportunities. In addition, the competition helps provide entrepreneurs with useful feedback about the quality and professionalism of their pitch to investors. FundingPost expects to duplicate its success from last year’s Pitching Across America event again this year.

The emerging companies will be evaluated on a scale of 1 to 10. Judging criteria consisted of several key points including: the professionalism of the written summary, current stage of development (customers, revenue), competitive advantage and need in the marketplace, feasibility for success, and whether the company is "VentureWorthy(TM)."

Over 100 Venture Capitalist and Angel investors have signed on as judges of the event. Participating Venture Funds

Read more here.

For more information, visit www.EvanCarmichael.com.

How Long it Takes to Get the Money

� It will usually take between 3 and 4 months. It is very rare to obtain the money in under this 3 to 4 month period.

� Raising money is not like hiring people or purchasing new machinery. It is about building confidence between yourself, your company, and the investor. There is a certain of amount of due diligence that will be needed to build this confidence.

� Your ability to project your company in both a strategic and factual way will be critical to your success.

� The timing also depends on the sophistication of the entrepreneur. It the financing presentation is well laid it, it will make it much easier for the intermediary to get you in front of a venture capitalist.

� Make contact with intermediaries and venture capitalists before you need the money. This way they can track your progress, they know you before you need it and it will make it easier for you to obtain the necessary capital. Nobody likes to be rushed, especially venture capitalists.

For more information, visit www.EvanCarmichael.com.

How to Introduce Yourself to a Venture Capitalist

� The first option is to approach venture capitalists yourself. This is a very time consuming process and you risk taking your mind and attention away from your business.

� The best way to find a venture capitalist is through an intermediary. They know the important players on the street and what they are looking for and investing in. The venture capitalist relies on recommendations of the people they trust. If the intermediary has established friendly relationships with them, it will boost your chances of getting in.

� Going after a venture capitalist without an intermediary is like going to court and trying to represent yourself instead of having a lawyer.

For more information, visit www.EvanCarmichael.com.

Advice - How to Valuate Your Business

· The venture capitalists will usually look at your projected, or pro forma, earnings 3 to 5 years from the point of their investment. From there they will deduct a 30% annual return that they expect to receive and will subtract a further percentage for the fact that you are a private and therefore non liquid company. This is known as the pre-money valuation.

· Right now, investment money is scarce and the venture capitalists are dramatically lowering business valuations.

For more information, visit www.EvanCarmichael.com.

Local firm to set VC world on Fyre

BLUEFYRE ONE is a local company with no office and no product, but it will go public on the TSX Venture Exchange in the next few weeks.

BlueFyre, the brainchild of several Ottawa tech veterans and investors, is part of a growing crop of capital pool companies, or CPCs, in Ontario. A CPC is a group of investors that pools the individuals' money together and looks for a promising company to buy. The company purchased by the CPC receives a sizable investment and a stock market listing.

LOCAL FIRM FAVOURED

Local tech veteran Michael Gaffney, BlueFyre's CEO, said his group has been reviewing proposals from companies in Ottawa, Toronto and Waterloo. Ideally, BlueFyre wants to find a hi-tech company that is already turning a profit, with sales of $5 million to $15 million, he said.

The group would prefer to stick close to home. "We would like to see an Ottawa-based story,"Gaffney said.

BlueFyre's investors have already raised $137,000 of their own money and plan to have $600,000 in the bank when the shell company goes public. Once BlueFyre is listed on the Venture Exchange, it has 18 months to find a business to purchase.

Read more here.

For more information, visit www.EvanCarmichael.com.

Advice Valuating a Business Examples

� Over the past 3 to 4 years, venture capitalists have been very conservative with their investments. This is because they have had so many problems within their current portfolios that they cannot afford to take the same risks on new companies.

� The method of valuation will also depend on your industry. In a traditional, or smokestack, industry there are typically many comparative examples. Here you can work from the earnings before interest, tax and depreciation (EBITDA) of similar companies and apply a ratio to your own business.

� New products and technologies pose a valuation problem due to the lack of comparative companies. It is much more difficult to valuate these businesses.

For more information, visit www.EvanCarmichael.com.

Advice How Much Money To Ask For

� There is no such thing as an overcapitalized small company.


How to Select the Right Venture Capitalists for Your Firm

� Some venture capitalists have highly targeted funds. These fund managers would have a full knowledge of your industry and be able to help spot the opportunity for your business.

� Be comfortable with the venture capitalists. Seeking their money is only the beginning of a relationship with them. They will become board members and have a major say in the development of the company�s strategy and policies. It is important that you have good chemistry together, respect each other, and can get along.

� An intermediary such as Northern Crown Capital can help you determine the right venture capital company for you.

For more information, visit www.EvanCarmichael.com.

Advice The Types of Businesses Venture Capitalists Prefer

� Venture capitalists will not invest in anything illegal or immoral. Anything that involves laundered, dirty, or offshore money will not attract venture capital investment.

� Otherwise, a venture capitalist will look at any business providing that it meets their criteria of providing a return on investment, having good management, supplying a sound business plan, and demonstrating a developed product or service with revenues.

� Some venture capitalists as a matter of policy will restrict themselves to investing in a specific industry. It is the role of the intermediary to know which firms would be willing to invest in your company.

For more information, visit www.EvanCarmichael.com.

Advice Stages of Financing

� The first stage of financing is to raise money from personal savings, credit cards, friends, and family. It is sometimes known as �golf-course preferred� when you ask people to invest in your company after meeting socially or playing a round of golf together.

� You need to build significant critical mass before you can attract an outside angel or venture capital investor and eventually to secure an initial public offering (IPO). The developing of the necessary critical mass can take years of hard work.

� There are some companies called incubators that will take an early stage business and guide them through the entire process of building an enterprise but will take a large percentage of your company in return.

For more information, visit www.EvanCarmichael.com.

News - eMetagen gets $535,000 from MU angel investors

eMetagen gets $535,000 from MU angel investors

"MILWAUKEE - Madison-based drug discovery and development company eMetagen Corp. closed a $535,000 seed investment round with the Marquette University Golden Angels Network, the angel investors group reported Wednesday.

eMetagen plans to use the Golden Angels investment, along with two grants received last year - a $488,512 Phase I biodefense grant from the National Institutes of Health and a $150,000 Technology Development Fund award from the Wisconsin Department of Commerce - for the company's research and development programs.

eMetagen was founded in June 2002 to commercialize biotechnology developed at the University of Wisconsin-Madison for extracting genetic material from previously untapped soil microorganisms to develop new anti-cancer drugs and antibiotics for newer diseases like SARS as well as emerging antibiotic-resistant strains of sicknesses such as tuberculosis and Staphylococcus aureus."

Read more here.

For more information, visit www.EvanCarmichael.com.

Advice - Account Manager Turnover

Your bank account manager is responsible for understanding your business and going to bat for you within the organization when you need a loan approved. If she does not have an established long term relationship with you it will be difficult to get her to pull strings for you.

The chance of you being rejected for a bank loan depending on how many account managers you have is as follows:
• One account manager: 7.1% rejection rate
• Two account managers: 8.5% rejection rate
• Three account managers: 16.3% rejection rate
• Four or more account managers: 22.8% rejection rate.

Develop a good relationship with your banker early. Talk to her before you need the money and she’ll be there for you when you actually go for the loan.

For more information, visit www.EvanCarmichael.com.

Update - New Venture Capital Section

For those of you interested in raising venture capital, I’ve created a new section on my website to give you inside information on the process.

Topics include: Getting Ready, Putting The Plan Together, The First Meeting With The Venture Capitalist, Going From The Meeting To A Term Sheet, Closing The Deal, and Most Important Lessons From NCC To You.

You can check it out here. Enjoy!

For more information, visit www.EvanCarmichael.com.

News - 2005 Q2 Update

"According to the recent PricewaterhouseCoopers MoneyTree survey, VCs invested about $5.8 billion in 750 companies during the second quarter of 2005. This level was better than that of the first quarter’s $4.9 billion but slightly lower than the $6.1 billion of the same quarter last year.

Of the above amount, life sciences (biotechnology and medical devices) funding was $1.5 billion for the quarter in 154 companies (or a little more than 25 percent of the total), which is a healthy chunk. This level compared to $1 billion in 135 companies during the first quarter. For the full six months, life sciences represented 25 percent of all investment.

Investment in start-ups and early stage companies was $1.3 billion (versus $830 million in the prior quarter) or 22 percent of the total. This represents a three-year high for this segment and is good news. For the first six months of 2005, 473 start-up and early stage companies garnered $2.1 billion or 20 percent of all money raised."

Read more here.

For more information, visit www.EvanCarmichael.com.

Update - Bank Loan Tips

For those of you who are considering approaching your bank for a loan or who have been turned down, I've created a new spot on my website to provide you with some key tips on what to do to get your loan approved. Check it out here.

For more information, visit www.EvanCarmichael.com.

Advice - Key Loan Factors

According to the Canadian Federation of Independent Business (CFIB), there are four key factors that can dramatically increase your chance of obtaining a bank loan. They are: account manager turnover, business experience, business banking services, and size of company.

For more information, visit www.EvanCarmichael.com.

News - Mission Ventures Announces $210 Million Venture Capital Fund

Mission Ventures Announces $210 Million Venture Capital Fund

"Mission Ventures, an early-stage venture capital firm, announced that Mission Ventures III, a $210 million fund, closed on July 25, 2005. Founded in 1997, Mission Ventures manages over $500 million of capital across its three funds.

Mission Ventures III, like its predecessor funds, will invest primarily in early-stage information technology and technology-driven services companies in Southern California. Mission Ventures will continue to leverage its local presence advantage to exploit the exceptionally attractive investment characteristics of the region. The firm will continue to forge and build on constructive, trusting relationships with local high-quality entrepreneurs, investors, service providers and organizations that are able to add value to investment opportunities.

The managing partners of Mission Ventures III are Ted Alexander, Robert F. Kibble, David J. Ryan, and Leo S. Spiegel. Consistent with the prior fund, the partnership plans to make approximately 25 investments ranging from $3 million to $10 million, with a focus on early-stage opportunities.

"Southern California is fertile ground for investing in leading early-stage Information Technology companies," said Dave Ryan, Managing Partner of Mission Ventures. "We see attractive opportunities across the IT spectrum of communications, wireless, infrastructure, software and technology-driven services.""

Read more here.

For more information, visit www.EvanCarmichael.com.

Advice - Banks Don’t Like Small Loans

Banks typically have a $200,000 threshold loan limit.

Over the past 15 years, the number of loans given to companies over this $200,000 limit has grown over 30%. On the other hand, loans given to entrepreneurs who need less than $200,000 has been stagnant for the past 15 years. If you look at this number in real terms and account for inflation, the loans given to small businesses has actually been decreasing.

As Chuck Loewen from Online Business Systems says, “Understand the real role of a financial institution is to lease safe capital to low-risk borrowers. Entrepreneurs, full of vim and vigour mistake the bank’s role as the entity that will share the risks with them to see the entrepreneur’s dream come true. Not so. Always understand you are the entrepreneur, he or she is the banker.”

For more information, visit www.EvanCarmichael.com.

Update - Angel / Startup Capital

Since adding the new Angel Investors section on my website, I’ve been getting a lot of positive feedback, so I decided to expand it. On the site you can now find an example of angel investment from the Toronto Angel Group, why angels say no, who to approach, what to do, and where to find angels. Check it out here.

For more information, visit www.EvanCarmichael.com.

News - Venture Capital Funding Dipped In July

Venture Capital Funding Dipped In July

Funding in the electronics and semiconductor sector was relatively weak in July and re-affirmed a stop-and-go nature to 2005’s investments, particularly in Europe.
By Peter Clarke
EE Times

LONDON — Venture capital funding in the electronics and semiconductor sector was relatively weak in July and re-affirmed a stop-go nature to 2005’s investments, particularly in Europe.

Just ten deals were recorded by EE Times' Venture Capital Counter (VCC) and these raised $180.15 million, down from $239.7 million raised across 17 deals in June. July’s figures were also down form the same month a year earlier when 18 deals amassed $217.55 million.

The weakness was a despite a record-breaking $66 million raised by Alien Technology Inc. (Morgan Hill, Calif.) in a Series H round of financing. Venture capitalists are obviously betting on Alien becoming a multi-hundred million dollar giant in the RFID market.

Whereas in June activity in Europe had helped the Venture Capital Counter July’s deal flow was low with only one deal recorded in Europe, with California catching four, the rest of the U.S. three and Canada two deal.

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For more information, visit www.EvanCarmichael.com.

News - Inside Entrepreneurship: Use skill, not data, to land funding

"Q: My partner and I are trying to raise $2 million. During presentations the investors are very supportive until we get to our revenue projections. They just don't believe we can grow that fast with only $2 million. The more I try to convince them, the more push-back I get. I can change the numbers, but I'm not sure that will satisfy them either. How do I convince them I'm right?"

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A: Trite but true, getting a business safely off the ground is in many ways like flying a plane. Both pursuits offer great excitement but also considerable risks to everyone on board, especially the high fliers.

A flying instructor once told me that good pilots fly with humility and finesse. No matter how skilled the pilot, changing weather conditions may require a different course or even a delayed takeoff.

Investors know your projections present the best-case, sunny-skies scenario. I know of one early-stage investor who automatically cuts projected revenue in half, doubles expenses and increases the time it takes to get the proposed product to market.

While this exercise is extremely frustrating to entrepreneurs, the investor's real objective is to test the management team's mind-set."

Read more here.

For more information, visit www.EvanCarmichael.com.