Raising Capital for Early Stage Companies in a Post CoronaVirus Market Meltdown

Recent Market Sell-Offs and Volatility Have Investors on a Roller Coaster of a Ride

After ten years of rising US equities prices, many investors are selling (albeit off the highs) but with large capital gains. This sell-off gives investors a chance to rethink their allocation and potentially focus on private investments in earlier stage companies as a long-term hedge.

Anecdotally having met with hundreds investors over the past 24 months, smaller/private deals were more difficult in an era of seemingly predictable source of 8% plus returns in the public markets.

So what is the case for investing in technology at the earliest stage besides the fact that returns are the best and investors are seeking a long term game now? 

What is Your Investor(s) View of the World?

1. Understand the investor type and hypothesis and craft your pitch in response to their view of the world.A high net worth investor who is an angel, likely has public market exposure, capital gains and a fairly large amount of ongoing hypothesis.

Take the opportunity to remind your potential angel investors that this is a great time to move investment dollars out of the volatile public markets and into a business that is values-aligned and run by someone they know and trust.”

Angel investing has generated good returns over time for angels. The link below connects to a dense academic paper, however it is recommended that Early Stage Companies should be comfortable with this analysis so you can understand how your potential angels are thinking about this investment

Prediction and Control Under Uncertainty – Outcomes in Angel Investing

Assessing and Comparing Risk

2. Early stage pre-revenue tech startups become in relative terms less risky. At the early stage, risk doesn’t change much in absolute terms but changes dramatically in relative terms. If you at normal times evaluate a pre-seed startup risk to be, say, 100x higher than that of a later-stage company, at the time of crisis this could become only 20x. this of course assumes the crisis is bounded in time.

Finding and Leveraging Unique Advantages

3. Pre-revenue startups have zero exposure to market, and generally benefit from crises, because they can get cheaper workforce (this assumes employees will still want to join a company with financing risk).

If you expect the crisis will take x number of months, and the startup has >x runway, you know it will survive. There are almost no other variables except in the Coronavirus instance, we don’t know x number of months yet.

There’s always capital for companies that have the product market fit and a strong relationship with a diversified set of customers.

Companies should rework their financial models and capital strategy to ensure they can hold-off on deploying capital until they understand business drivers that enable them to become category-owning companies offering a defensible product or service.

If you are able to organize your company to qualify for opportunity zone funding, that could help your potential investor with the capital gains associated with their most recent public company stock sale. 

Source William Rosellini

Venture Capital Corporations – Tax credits in British Columbia ~ How They can Make a Good Investment … Even Better

With most investors looking for ways to save taxes, today we are going to look at Venture Capital Corporations, and the significant tax advantages they offer investors living in British Columbia.

*** Genesis Nanotechnology, Inc. integrates Government Grants, Supports and Non-Recourse Funding from Government Agencies Ex. NSERC, SRED, SBIR, DOE  in addition to the VCC program. Qualifying VCC/ EBC shares are also eligible for Canadian Retirement Savings Plans (RSP’s). ***

GNT Strategic Vision Chart 2015-page-001   

Watch our NEW Video ~ “Great Things from Small Things” ~ Coming June 2015

Published on Apr 20, 2015

“Harnessing the transformational POWER of Nanotechnology will usher our world into the age of the ‘2nd Great Industrial Revolution’. Nanotechnology will impact almost every aspect of our daily lives, from clean abundant Renewable Energy, Wearable-Sensory Textiles, Displays & Electronics to Bio-Medical, Diagnostics, Life-Saving Drug Therapies, Agriculture, Water Filtration, Waste Water Remediation and Desalination.”

“GNT™ is very excited to be a part of this ‘Revolution’. Bringing together leading ‘Nano-University Research Programs’ with Marketplace & Industry Leaders , engaging our Proprietary Business Model, fostering in a new paradigm in nanotechnology innovation.”

~ Bruce W. Hoy, C.E.O. of Genesis Nanotechnology, Inc. ~

CrowdFunding: What Are Contributors Looking For?

Contributors - CrowdFunding Incubator LLC - CFI - Douglas E_ Castle

CrowdFunding: What’s In It For Contributors? Douglas E. Castle

When a project is posted on a crowdfunding website or platform, the project’s sponsors are obviously there for the capital. But what motivates contributors to put their funds into any particular project – And what makes some projects more attractive or appealing to these contributors? What draws contributors to one
particular project instead of another?

Contributors are moved to donateor place funds into a project for a wide variety of reasons, but very few of
these involve their active participation (as in ownership) in the company or organization, as no securities in the project company are being offered. There is certainly no stock market or investment “killing” to be won from either the standpoint of cash flow, income, appreciation or capital gains. Indeed, the contributors are unlikely to do any better whether the project merely survives or its shares become publicly-traded and it is a trending item in all of the financial publications, news aggregators and social media. Return On Investment (ROI) to the participant just cannot be calculated based upon any traditional investment model involving risk, return and reward.

In the case of donations and gifts to humanities and charitable causes, the motive is principally philanthropy, with the occasional lure of a souvenir, certificate or newsletter subscription;
but more often than not, it is just the feeling of joy that invariably follows a small, unselfish act of philanthropy.

But what of all of the applications, gadgets, gizmos, food chains, tech start-ups and environmentally-friendly thingamajigs? What are contributors looking for there? What do Project promoters need to give them? To show them?

Here’s the way it looks to be shaping up according to CrowdFunding Incubator LLC

Contributors should be getting at least these five

1) Some value for their contribution – discounted tickets, discounted meals, preorders at a bargain price, and opportunity to advertise. No matter what it is, it should be worthwhile, and the chancier the bet, or the longer the wait, the bigger the perceived value in consideration of the contribution;

2) Respect and acknowledgment for what they have given you, based upon good faith, a belief in your potential, and a willingness to ride with you. Perhaps they could be offered co-founders’ status, certificates of appreciation, a chance to meet with and ask questions of the Project founders. If you’ve received contributions, wouldn’t it make sense to be gracious and say “Thank You!” ?;

3) Information – these individuals want to get updates from the persons responsible about the status and progress of their Project. Newsletters or bulletins to each contributor are a great idea. On the conventional wisdom (oxymorons, anyone?) that no news is bad news regarding any financial matter [except one involving the IRS], your contributors want to know that their money is at work. Don’t let them feel that you’ve absconded with the funds and that you’ve decided it best to keep them out of the informational loop.

4) Input – Ask for your contributors’ input on your Project. Let them participate in surveys, focus groups, beta tests. You might find this to be tremendously worthwhile. You might receive some critically
useful information, and perhaps — a wealthy accredited angel or a well-connected executive who wants to help you. You’ll never know if you don’t ask.

5) Glory – Every contributor would like to share in the glory when you’ve achieved some benchmark goal. There are many ways to do this. For goodness sake – Project Sponsors are supposed to be imaginative
and creative. Find a means through which those true believers can celebrate with you.

Make it worthwhile for your Contributors to support you. Let them share in the dream and the glory.

Victory is sweeter when it can be shared.

Thank you for reading me, re-tweeting me and completing me.