Highway To Heaven You don't need to look on high--and low--for angel investors. Try these proven paths.

Through the sheer ingenuity of their Internet-based promotionaland sweepstakes management service, RealTime Media Inc. co-founderChuck Seidman and his partners, Bruce S. Allen, Bob Auxier, PeterJensen and Charles Ruderman, have persuaded some of America'smost admired companies to hire them.

The Haverford, Pennsylvania, firm has a lock on the technologyfor creating scratch-and-win promotions on the Internet (patentpending). Rather than scraping faux gold leaf off of a paperticket, Internet surfers scratch away with their mice to revealwhether they've won prizes.

As it turns out, the lure of winning $1 million instantly--or,as with the current Beat the Street promotion, $20 million forcorrectly guessing the close of the Dow Jones and NYSE average on aparticular day--is an extremely effective technique for directingInternet surfers to a particular site. "It's all aboutdriving traffic," says Seidman, 47. "Being on theInternet means nothing unless you can get traffic to your site andconvert [surfers] into members or give them incentive to take adesired action." Apparently the heavyweights agree, becausethe likes of Microsoft, Lycos, Ford, Yahoo!, the NFL and CDnow havehired RealTime to create custom instant-win promotions to drivetraffic to their Web sites.

All this has been accomplished with the kind of entrepreneurialpanache successful companies are made of. Still, Seidmanunderstands that Internet promotion is big business--and hiscompetition is well-funded. "To compete and take this companywhere we know it can go, we need more capital," he says.

Seidman figures his company needs $3 million, which has himbeating the bushes for angel investors. Unlike the promotionshe's creating, bringing angels to the table is no game.

For companies like RealTime, raising money from angels, or anykind of investor for that matter, generally is done in four steps:identifying prospects, preparing to contact them, contacting themand closing them. But as with falling dominoes, everything dependson that first critical action. And in this case, entrepreneurscan't possibly hope to finalize deals with angel investorsuntil they succeed in locating prospects.

So where do angels hover? There are a number of predictablehaunts, ranging from Internet and chamber of commerce cliques touniversities, business incubators and your professional advisors.Here's a rundown on how to get started. (And remember, none ofthis will be easy, so be prepared to dig hard.)

Cast Your Net

For many people, a starting point in the quest for angels is theInternet. But keep in mind that at this point, the Internet is acommunications medium, not a capital-formation medium. It may turnup leads, but it's not going to deliver the goods lock, stockand barrel.

A good first stop is ACE-Net, an SBA initiative that uses thepower of the Internet to match entrepreneurs with accreditedinvestors. By listing your deal on ACE-Net, you make yourself knownto the thousands of angel investors who have access to thesite.

Moreover, according to Jere Glover, chief counsel of theSBA's Office of Advocacy, ACE-Net now offers contactinformation for 38 so-called nodes that can act asentrepreneurs' connections to angel investors. "Many ofthese nodes operate their own angel networks," Glover says.Their names, addresses and telephone numbers can be found athttps://ace-net.sr.unh.edu. (The"https" designation indicates that ACE-Net is a securesite, with limitations on access.)

You can also type the words "angel investor" into yoursearch engine, and all manner of matter will surface. There'ssomething new on the Internet every day and some of what comes upmay be worth looking into. But beware: There's a lot of junkout there, too.

Under The Bright Lights

Another place where angels sometimes congregate is the businessincubator. Angels like new business activity, and incubators areoften full of promising start-ups. According to Dinah Adkins,executive director of the National Business Incubation Association,some 60 percent of the 550 business incubators in North Americaoffer formal or informal access to early-stage financing, whichoften means angels.

In addition, many incubators screen applicants, offering whatamounts to a quality-control mechanism that attracts investors. Inshort, you can gain access to angel investors simply by being amember of the club. You can obtain a list of incubators nationwideby sending a self-addressed stamped envelope to the NationalBusiness Incubation Association, 20 E. Circle Dr., #190, Athens,OH, 45701-3751. You can also call (740)593-4331 or visit its Website at http://www.nbia.org.

The School District

Universities with entrepreneurship programs can be fertileground for finding angels. The connection between entrepreneurialacademia and successful business start-ups is so well-established(Stanford University and Cisco Systems--need we say more?) thatuniversities attract even more angel investors than incubatorsdo.

The important thing is getting in, seeing if there's a veinto be mined and, if there's not, moving on. Many universitieshave alumni angel networks, SBA-sponsored Small BusinessDevelopment Centers, and professors and deans who are wired intoangel investors, as well as new venture workshops that are reallynetworking opportunities.

If there's a university nearby and it has anentrepreneurship program (no matter how formative), it'sworthwhile to call someone on the teaching staff, make anappointment and sit down with him or her to see how the program canhelp you find investors. If you have a choice of universitiesnearby and you want to determine which has the top program, buy acopy of a study that was published in The Journal of BusinessVenturing called "Measuring Progress in EntrepreneurshipEducation" by Elsevier Science. Call (800)282-2720 for areprint of this article, which appeared in Volume 12, Issue 5 ofthe publication. The cost is approximately $44.

Press The Flesh

There are any number of formal networking events organized forthe express purpose of putting angel investors in direct contactwith capital-hungry entrepreneurs. For example, MIT EnterpriseForums, which are held in some 14 cities across the United Statesand five additional international cities, take the form of abusiness-plan presentation--followed by a critique of both the planand presentation--to professional investors, who are ofteninstitutional venture capitalists. But there's plenty of timebefore and after the program to network, see and be seen, pass outcards, and find leads.

Other formats include panel discussions, breakfast workshops,cocktail receptions and brown-bag seminars. Sponsors range fromchambers of commerce and professional consulting organizations touniversities and state economic development organizations. Thereare also venture fairs, which give entrepreneurs direct contactwith angels in a "walk the midway"-type arrangement. Youneed to be careful with fairs, however. Many such events areorganized to put companies in front of institutional venturecapitalists. If you don't qualify for that kind ofinvestment--and very few small businesses do--you'll findtrying to get a slot to be a frustrating and generally unproductiveuse of your time.

To find your venue, call the nearest chamber of commerce and askif they have a venture group. If you need to locate a chamber nearyou, call the U.S. Chamber of Commerce in Washington, DC, at(202)659-6000 or visit its Web site at http://www.uschamber.org. If youwant to find out if there's an MIT Enterprise Forum scheduledfor a city near you, call the MIT Enterprise Forum headquarters at(617)253-0015 or visit its Web site at http://web.mit.edu/entforum/

Hire A Professional

At the end of the day, it's still the lawyers andaccountants who best know where the money is. And either overtly orsubtly, part of what many of them are selling is access toinvestors that might have an interest in your business. In fact, ifyou own a hotshot technology or Internet company, some law firmsand accounting firms will actually defer some (or, if you'relucky, all) of their fees until funds are raised.

At RealTime, Seidman retained Philadelphia-based powerhouseMorgan, Lewis & Bockius, where Stephen Goodman is the lawyer ofchoice to the region's growing cadre of tech companies."If there's somebody we need to get to," saysSeidman, "he can be effective in making anintroduction."

Unfortunately, you can't simply call an attorney oraccountant and tell them to turn on the spigot; it's got to bedone in the context of an engagement--some engagement, anyengagement, that gets everything on a professional footing, such asassistance with financial projections. As the twist to the oldsaying goes, it takes money to raise money.

Meanwhile, back at RealTime, Seidman and his partners are caughtin the archetypal entrepreneur's warp. They're so busybuilding and running the business that raising money becomes evenmore challenging. "The only thing I can say," saysSeidman, "is that it's a good thing there are so manypaths we can take. Otherwise, we'd never find the time to findthe investors."

Next Step

In addition to the organizations listed in this column, thefollowing are some useful Internet privacy sources for smallcompanies:

• Association for interactive media (http://www.interactivehq.org)

• The center for democracy and technology (http://www.cdt.org)

• U.S. department of commerce (http://www.doc.gov)

• Electronic direct marketing association (http://www.edma.org)

• Electronic privacy information center (http://www.epic.org)

• Federal trade commission (http://www.ftc.gov)

• Privacyexchange.org (http://www.privacyexchange.org)

All's Fair

If you don't want to join an online privacy seal program,try following the Federal Trade Commission's principles of fairinformation practices, which are available at

Contact Source

RealTIME Media Inc.,http://www.realtimemedia.com

David R. Evanson's newest book about raising capital iscalled Where to Go When the Bank Says No: Alternatives forFinancing Your Business(Bloomberg Press). Call (800)233-4830 forordering information. He is a principal of Financial CommunicationsAssociates in Ardmore, Pennsylvania. Art Beroff, a principal ofBeroff Associates in Howard Beach, New York, helps companies raisecapital and go public.