![\"Tom](\"http:\/\/www.financenewmexico.org\/userfiles\/tjs_bw.jpg\")
Tom Stephenson, Managing General Partner, Verge Fund<\/p><\/div>\n
Entrepreneurs just starting out will often view all sources of capital as identical \u2013 money is money, right?\u00a0However, as we have learned previously in this series, there is great variety in the sources of capital available to entrepreneurs.\u00a0The primary distinction that has been highlighted so far is the difference between debt \u2013 borrowing money \u2013 and equity \u2013 selling a piece of your company.\u00a0However, the specialization continues even within the equity world, generally denoted by stage of development and area of focus.<\/p>\n
This specialization is not unlike what occurs in the medical field.\u00a0The cardiologist you might see for heart disease has very different skills and training from the oncologist you might consult to treat cancer.\u00a0Venture capital has similar specialization, and just as a pediatrician would not be appropriate to treat an adult, a \u201cseed\u201d stage investor is very different from an investor that provides expansion capital.\u00a0As an entrepreneur, you need to pick the financial partner that fits your stage of development and your particular industry.<\/p>\n
For example, the Verge Fund <\/span><\/strong><\/a>focuses on \u201cseed\u201d stage investing.\u00a0Some believe this means we invest in agribusiness, but it actually has to do with the stage of development of an opportunity when we make our first investment.\u00a0\u201cSeed\u201d stage refers to the time when the idea is just germinating and has not yet grown into a full company.\u00a0Often this means companies that are at the earliest stage of development \u2013 sometimes before they are even generating revenue. How do you know which stage is right for you?\u00a0While there are many different terms used to describe the various levels of equity financing, all fall close to the following:<\/p>\n Instead of \u2013 or sometimes in addition to \u2013 specializing in stage of company development, many venture capital firms focus on industry or geography.\u00a0Psilos Ventures, a firm that has recently come to New Mexico, only invests in later stage healthcare companies.\u00a0You would not want to approach Psilos if you had written a new software program to track farm and ranch inventory, any more than you would go to see a heart surgeon for cancer treatment.<\/p>\n While it is not possible to list all the areas of specialization among venture firms, it is usually easy to figure out what a firm\u2019s specialties are by doing some basic research.\u00a0Almost all venture capital firms have web sites that describe their areas of investments.\u00a0Individual investors can be harder to research, but a few direct questions early in your first meeting will make sure that you are not wasting time.<\/p>\n Just as all doctors have basic medical knowledge applicable to all areas, all investors have capital to invest and similar basic abilities to evaluate opportunities.\u00a0In each case, however, they concentrate primarily on what they know and understand.\u00a0Your job as an entrepreneur is to find the right capital \u201cspecialist\u201d \u2013 the firm or individual who invests at your particular stage of development and in your industry. While it might seem that a shotgun approach to financing would yield better results, you will actually improve your chances of success by researching potential sources of capital carefully, and making sure that the firms or individuals you are targeting do, in fact, invest in companies like yours.<\/p>\n Download 18_Picking Your Business Investor PDF<\/a><\/p>\n","protected":false},"excerpt":{"rendered":" Once you’ve decided that equity investment is right for your firm, this article helps you determine the right investment firm to approach. Continue reading
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