Over the last several years many venture funds have shied away from funding companies that do not yet have revenue or customers. Looking for a surer deal, they focus on expansion-stage companies that want to develop their sales and marketing capabilities.
But despite the media’s recurring suggestion that no funding is available, Philip Politziner, president of the Bridgewater accounting and consulting firm Amper, Politziner & Mattia www.amper.com), says opportunities do exist for firms of all sizes. “There is absolutely funding available for people who are properly prepared and can demonstrate that there is something unique about their company or their product.”
A company’s uniqueness may be something as simple as a management that has already been successful in its sector. Or it may own a patent or have developed a concept that is unique. “There are organizations that have money they want to invest, but they are being more discriminating,” says Politziner. “If companies are better prepared to show why someone should bet on them, there are opportunities for funding.”
Politziner is moderating a panel on “Funding Availability in the Economy” at the NJTC Capital Conference at the Westin hotel on Friday, January 30, at 8 a.m. Cost: $225. Speakers at Politziner’s panel include Joe Allegra, general partner of the Lawrence-based Edison Venture Fund www.edisonventure.com); Benjamin Burditt, portfolio manager of the Special Situations Fund; Tom Gordon, vice president of the Silicon Valley Bank www.svb.com); Steven Pivnik, co-chief executive officer of Binary Tree www.binarytree.com), an IT consulting firm; and Ray Thek, member of Lowenstein Sandler www.lowenstein.com), the Roseland-based law firm. Register online at njtc.org/events, or call 856-787-9700.
Keynote speaker is Mark Heesen, president of the National Venture Capital Association www.nvca.org). Other panels will look at “Cleantech: Creating Investment Opportunities from Need for Sustainability,” “The Credit Crisis: Where To Go, What To Do, Who To See,” “How to Make More with Less,” “Making Tax Dollars Work for Your Business,” and “Where is the Exit: Exit Strategies.” Politziner outlines several potential funding sources.
Government programs. State programs through the New Jersey Economic Development Authority (njeda.org) provide loans, loan guarantees, and other support primarily for “companies coming out of the garage and needing capital to build a prototype product and get it into a beta test,” says Politziner. These financing programs are looking particularly to invest state money in ways that promote job growth.
NJTC’s Venture Fund and other early funds. This fund supports entrepreneurs in New Jersey and the surrounding area with capital and resources at the seed, start-up, and early stages of their businesses. The fund provides from $250,000 to $5 million in capital over the course of a company’s development. Politziner adds that a handful of other funds also invest in pre-revenue companies.
Angel investors. Angel investors usually prefer to invest locally and often will negotiate a board seat. If the company they invest in is sold, the angel’s return will be based on the percentage stake in the company.
Jumpstart www.jumpstartnj.com) is one of the state’s largest angel networks. Cosponsored by Amper Politziner, the Stevens & Lee www.stevenslee.com) law firm, and the New Jersey Technology Council, Jumpstart invests in early-stage technology companies in the Mid-Atlantic region. Since its founding in 2002 it has provided about $15 million, with average investments in the $400,000 to $500,000 range.
Jumpstart’s 40 members meet monthly to hear about three company presentations. The monthly presenters are selected from companies that have submitted business plans. A complete business plan should include: description of the proposed business, management background, a description of the potential market, a sales and marketing plan, how proceeds will be used, and exit strategy.
Venture capitalists, private equity funds, and hedge funds. These groups usually invest in later-stage companies and will generally put down more money than angels. They also take board seats, but they have more restrictive terms than angel groups and are more involved in management, says Politziner. These groups usually specialize in an area like clean technology, healthcare, software, or telecommunications.
Wherever a company is looking for funding they must work carefully on their presentations. Politziner also reminds entrepreneurs not to be too detailed in their presentations to potential funders. “Nobody wants to sit and read 300 pages,” he says. The businesses must also be prepared to discuss their companies from a business, not an engineering, perspective.
Politziner grew up in Highland Park. His father was co-owner of a wholesale toy company and he taught his children to work hard. After graduating from New York University with a bachelor’s in accounting, Politziner worked in mid-sized firms in New York and New Jersey and in 1965 helped found Amper, Politziner & Mattia. Today this accounting and consulting firm has more than 650 people in New Jersey, New York, and Pennsylvania.
Politziner is also on the board of NJTC and is married, with three children and six grandchildren.
The best way to link up with investors, says Politziner, is through a recommendation from a well-connected accountant, lawyer, or other professional advisor. “You want to be introduced by somebody who is a player, well known, and respected, and who, if they pick up a phone can get a meeting with so and so,” he explains. And one of the best places to meet well-connected professionals, he says, is to go to events where they are likely to gather.