A visit to the South rarely leaves you hungry. I'm a Southern girl, so I know of what I write. But on a recent trip to meet with companies at Venture Atlanta, Georgia's largest investor showcase, I found plenty of companies left hungry--for funding. And that's a hunger that a heap of barbecue, fried okra and collard greens--washed down with tea, swaaait or unswaaait--can't satisfy.
"As a region, we're in a great position when it comes to innovation. We have more intriguing companies than capital, however," says Alan Taetle, general partner at Noro-Moseley Partners, one of Atlanta's oldest venture capital firms. "While we're actively working to attract more capital to the region, companies developing a business outside those areas are currently faced with a choice: Grow organically, which generally means slower, or go beyond our region to raise capital."
The situation isn't unique to the South. In markets across the U.S., local funding biases dictate the types of companies most likely to find at-home financial support. So how can entrepreneurs branch out and capture the funding they need when local isn't a viable option?
Look to the crowd.
If you're a dedicated do-it-yourselfer, you might want to explore internet fundraising. Crowdfunding sites such as Kickstarter and IndieGoGo are leading the way for entrepreneurs and businesses of all types to gain financial support from around the globe. (For more on crowdfunding, see this article.) They're powerful tools for publicity-savvy entrepreneurs who seek an established network to promote their companies, and a way to get cash without ties to angel or VC dollars. Remember: The sites charge funding and processing fees that will be deducted from successful capital raises; keep the fees in mind when creating your fundraising goal.
Look to the example of TripLingo, which launched in May 2011 with slightly more than $200,000 in angel funds. Though the company, creator of a foreign-language app, already had a proven audience base when it tried to raise seed funding, it couldn't get any traction in the Atlanta venture scene.
"Atlanta is a great environment for many reasons," says TripLingo CEO Jesse Maddox, "but there's simply not the density nor appetite for early-stage tech investments that exists in hubs like Silicon Valley. We've been able to use our local network to get introductions to West Coast angels and VCs, and those introductions in turn beget more introductions."
There's no shame in asking local funding sources for referrals to colleagues with practices more closely aligned with your company's market and mission. It's also worth developing relationships with other entrepreneurs and startups in your community; they might offer introductions to funding sources (especially if they've been funded recently) and share their experiences with raising capital.
No matter your industry, there's likely a conference with a startup showcase. Some of the biggies include Demo, TechCrunch Disrupt, ad:tech and SXSW Accelerator. But don't sign up without doing a little research--not all conferences will be ideal fits for your company. Check out the ones that cater to your industry to see if they offer a startup showcase or competition. They're a great way to meet investors already interested in funding companies in your industry.
Stick with it.
"If you're doing something interesting and have something to show for it, other entrepreneurs and investors are happy to be helpful and utilize their networks [to make introductions]," Maddox says. "After all, it may be you helping them out next time around."