I met yesterday with three Georgia Tech executive MBA students. They are all in their late twenties with careers in F500 companies and are working on an assignment to create a new business. They chose to create a business plan for a crowd funding platform believing there is a gap in the marketplace between entrepreneurs needing funding and people looking to invest.
They are correct. Entrepreneurs are in need of seed money as the next stage of funding beyond friends and family. Non qualified investors want to get in on the big returns. One of the the MBA students told me, “The guy on the street wants to participate in the American Dream.”
They were referred to me because I am the Angel in Residence at the Advanced Technology Development Center. They wanted to know if the crowdfunding platform they described in their business plan would be of interest to angel investors. I met with them hoping to help them, but I also wanted to have a serious discussion on crowd funding for early stage startups. Maybe they had it figured out.
Their plan is to meet with entrepreneurs and vet them as ready or not ready for their crowd funding platform. They would come up with a simple set of rules to score and qualify the startup. If qualified, they would first work with the entrepreneur to clean up his capital table, i.e. formalize and rationalize the friends and family money in the business. Then they would clean up the financials, finalize the business plan and negotiate a term sheet. Finally they would record a video of the company presentation to investors and post it on a crowd funding site.
Their question: “Would this be valuable to you as an angel investor?”
Heck, yes! They clearly identified what all passive angel investors need and want before investing—a qualified lead angel. Their platform would be the lead angel. They would do everything a lead investor does to get a deal done.
The question is: Who is smart enough to vet deals for “the crowd?” Nobody has answered this one yet.
As I thought back on the discussion, one thing became clear to me. A successful business understands and respects the nuances of the market. They know exactly how the market works and how the people in the market think and make decisions. This is high value, and high value is rewarded with paying customers.
These MBA students are working on a class assignment. They are not intending to start this business. If they wanted to make this business work, they would have to dedicate their lives and livelihoods to learn the secrets, the nuances, of the market they are serving. Then they have to solve them. That’s entrepreneuring.