It may be easier to get private investors, known as angels, to help finance a start-up tech-related firm than to obtain money from a more structured venture capital fund.
But any start-up probably will need both types of funds at some point to become a successful business, experts told about 30 people assembled at Owens Community College yesterday for a Toledo Technology Summit.
Both private-funding avenues want to see "skin in the game," said business adviser Bob Savage, Jr., of Savage Consulting, Toledo.
The phrase, he said, means the entrepreneur or management team should invest some of his or its own funds at start-up.
"If you're a company trying to raise capital and asking them to take risk, it's hard for them to do that if you yourself haven't invested,'' Mr. Savage said.
All the technical genius in the world won't help a start-up that lacks salesmanship, he added. Also, when seeking funding, one cannot begin early enough or contact too many funding sources.
Angels, Mr. Savage said, don't need a consensus of investment experts to provide funding. They can move quickly to provide money, but they need to be convinced they will get a good return fairly quickly, possibly in four years.
Venture funds, however, have a set pool of money, usually invest a minimum of $500,000 in specific stages, and tend to set specific performance benchmarks a company must meet, such as annual sales or the number of customers.
Venture funds can invest up to 10 years, but most prefer to be finished with a company in five to six years, Mr. Savage said.
According to the Columbus Venture Network, which is part of the Greater Columbus Chamber of Commerce, 79 percent of start-ups receive angel money before venture funds.
Terry Osborn, president and chief executive at Gene Express Inc., a Toledo biotech firm that specializes in cancer detection, said an entrepreneur must decide early on whether an idea can sustain the company or whether seeking a patent and licensing the idea to an established firm would be a better approach.
Once the decision is made to start a company, "you can never raise enough cash,'' Dr. Osborn said.
Gene Express, begun in 1992, has gathered about $7 million, with $3.5 million in grants, $1 million of the founders' money, $637,000 from family and friends, $815,000 from angel investors, and $1 million from a state technology fund.
The firm had $500,000 in sales last year, projects $1.4 million in sales this year, and has reached a critical stage for a start-up: It has a client list, some repeat business, a developed product for a growing market, and somewhat predictable revenues. It needs venture funding, Dr. Osborn said.