VENTURE CAPITAL
When video-software developer Reality Fusion first knocked on the doors of venture capitalists, it got nowhere. So the company turned to the Internet, where it found Garage.com, a matching network for entrepreneurs and investors cofounded by former Macintosh guru Guy Kawasaki.
In December Reality Fusion became the first success story for Garage.com, which hopes to arrange start-up funding for 50 such companies this year. Garage.com fields business plans from high tech start-ups online and presents those that it feels are deserving to an impressive list of individual "angel" investors, venture capital firms, and corporate investors, including Microsoft, Hambrecht & Quist Venture Associates, and George Gilder. So far, Garage.com has fielded more than 3,000 first-stage applications, and in less than four months it has already whittled that list down to 12 clients it will promote.
Meanwhile, the Small Business Administration has also jumped into the game. In 1997, the SBA created the Angel Capital Electronic Network, or ACE-Net, an online resource for angel investors and for start-ups seeking between $250,000 and $5 million in capital. Unlike Garage.com, ACE-Net takes all comers who file the appropriate forms. Entrepreneurs need only fill out a federal Small Corporate Offering Registration Form, while investors need only prove they're officially accredited investors according to the Securities Act of 1933. The SBA's not-for-profit status prohibits it from screening start-ups or vetting investors, which may hobble its credibility.
Still, while the Internet may help bring entrepreneurs and investors together, the old adage about location, location, location is still relevant. "Our research has always indicated that angels invest within a half day's drive," says Jeffrey Sohl, director of the Center for Venture Research at the University of New Hampshire, which built ACE-Net. "Angels feel that they need to be close to the operation to monitor that investment."
Garage.com: www.garage.com.
Angel Capital Electronic Network (ACE-Net): ace-net.sr.unh.edu.
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