Finding money to grow your company is as critical to the success of your business as securing customers. But it's probably 10 times more difficult.
The stumbling block is figuring out where to get it. Banks? Venture capitalists? Selling stock? Or something else? Business pundits agree-debt is not the best way to grow a business. Unfortunately, many businesses won't achieve growth that attracts venture capitalists, and angel investors may not provide enough. So who's left?
How about a Fortune 1000 company? Many corporations invest time and money developing partnerships with other businesses that can add value to their own. According to Venture Economics, a Newark, New Jersey, private equity research firm, there are 117 active corporate venture programs (including actual funds) in the United States. These corporate investors range from highly focused technology investors, like CMGI and Safeguard, to actual funds like Mustang Ventures, the venture-capital group of Siemens Information and Communication Networks Inc.
Wayne, Pennsylvania-based Safeguard, for one, is looking for "companies in e-communications or e-business," explains Steve Andriole, senior vice president and chief technology officer. "Then we ask general questions about market size and trajectory."
For the more than $1 billion Siemens Mustang Ventures fund, the goal is threefold, says Vernon J. Stevenson, vice president of Santa Clara, California-based Siemens Information and Communication Networks. "We want to find innovative technology through hot start-ups. Second, and similar to any venture capitalist or firm, is achieving a nice return; and the last goal is to be a mechanism for internal business units-for ideas from employees that can spin off into start-ups."
How do you locate corporate investors? According to Stevenson, try a company's Web site. Look for offices of business development, corporate or strategic planning, or strategic or corporate alliances. Also, try the "contact us" section of the site or simply call them directly.
Another good strategy: Meet with corporate investors at conferences that bring investors and entrepreneurs together. The IC2 Corporate Investment & Strategic Alliance Conference is a good start. It's slated for October 31 in Dallas. For details, visit www.ic2.org/CISA.
Always remember that demonstrating how you add value to the bottom line will lead to success.
On the Inside
There's a lot to be said for simply picking up the phone, calling a corporation and persuading them to invest in you. And that's exactly what Doron Aspitz, co-founder and CEO of Blue Pumpkin Software in Sunnyvale, California, did to get backing from Siemens Mustang Ventures. "I called them out of the blue and kept dialing until somebody listened," says Aspitz, 42.
Blue Pumpkin's software helps companies schedule their customer-service employees, whether they're helping by phone, e-mail or online. Aspitz targeted Siemens because of the corporation's routing engine.
According to Aspitz, talks of investment which helped Blue Pumpkin fund marketing, product development and more, evolved naturally-and came from both Blue Pumpkin and Siemens. But having someone at Siemens who believed in the product helped, too. Says Aspitz, "You usually [need] a champion on the other side who believes in your vision. We did, and he helped jumpstart the talks." It also helped that internally, Siemens was committed to supporting smaller firms that could strategically enhance its businesses.
Aspitz knows firsthand that success in securing corporate funding requires not only commitment to the idea of having a corporate investor, but also patience, persistence, passion and the ability to prove you can add value to their business.