On the Hunt

Finding investors for your business is all about targeting the right people.
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This story appears in the March 2008 issue of Entrepreneur. Subscribe »

Rob Brown doesn't have a rich uncle. So when the 41-year-old co-founder, president and CEO of Healionics Corp. in Redmond, Washington, needed to raise money, he started networking to find wealthy individuals who might invest in his biomaterials company.

An entrepreneur in one of his MBA courses at the University of Washington, Seattle suggested he try pitching local angel groups. So Brown presented at a meeting for Seattle's Alliance of Angels, an angel group focused on early stage companies in the Pacific Northwest. A member of the group who is the former CEO of a local biomaterials firm invested in Healionics' initial $200,000 funding round. Later, when Healionics held an invitation-only investor soiree, it attracted another major investor. Healionics was founded last year and already projects 2008 sales of more than $500,000.

As Healionics' success shows, you don't need wealthy friends or family members to find investors for your business. Knox Massey, managing director of Atlanta Technology Angels, says wealthy investors used to be mostly lone-wolf types, but now most belong to at least one individual-investors group. Massey advises researching individual investors and groups to get a sense of the business sectors they like to fund. Be sure to pitch any relevant experience your management team has in your company's sector. Also, have a concise, appealing story, says Joe Rubin, director of FundingPost.com."Our tag line," says Brown, "is that we are the Gore-Tex of biomaterials."

Allyson's Kitchen, a gourmet cookware and food company in Ashland, Oregon, had a strong sales tool to show investors: its first retail store, which opened in 2000. Husband-and-wife co-founders Allyson and Steve Holt, 45 and 58, respectively, enlisted the help of friends and colleagues to raise $385,000 for a second store. Granting their CFO, Lynne Galligan, a stake in the company in exchange for her help paid off in a big way--Galligan located several East Coast business executives to invest in Allyson's. Meanwhile, the couple reached out to customers for even more investment help. Now, with its second store opened this month, Allyson's projects 2008 sales of $3.7 million.

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