New Seed Capital Funds
A current capital crisis exists within the United States for any new business. Banks are lending a far smaller volume of money and have become more conservative. Venture capitalists are also more conservative, filling the gap left by banks and funding more mature companies. Angel investors have largely taken a wait and see attitude. As a result, if you are tyring to get a new business off the ground, you need to bring your own money.
I have told people that if they like the current status of technology, that is good because this is what they will have for the next 5 to 10 years as there will be relatively little technology innovation due to a lack of capital.
I have proposed putting together new early stage investment funds to address this problem.
Set forth below is one idea on one approach to putting together a new seed capital fund. I am talking to and working with anyone who is interested in putting together a new fund. This fund may be a single state, a single industry, a single stage of the business cycle or any combination of the above.
Concept for New Seed Capital Fund
As envisioned, the model for a seed capital fund will be a new source of funding that targets new small businesses.
At present, the desired size of the fund will be $50 million.
All money invested in the fund will be invested within 12 months with no money held in reseve for follow on funding.
The money may be raised from private individuals. The structure of the offering may be a ‘direct to public’. The offering may be limited to individuals within the State of Colorado (intrastate).
One of the questions is whether there will be a limit on the size of investment in any one company. At present, in my work with Velocity Investment Partners, we are looking at microfinance (up to $50,000), seed ($50,000 to $100,000 and growth ($100,000 to $500,000).
We are looking at different themes ranging from top industries to social enterprise funds.
Each company will receive funding in stages based upon performance of milestones.
Payback of investment will take the form of a share of renveue or ‘royalty’. This form of investment mirrors cash flow of the business with a percentage of the company earnings paid to the fund.
The fund will be designed as a template that may be implemented in other states.
