By Natalie Myers
PBN Staff Writer
It doesn’t matter what you are financing. It could be a product you invented, a startup biotechnology venture or a play you wrote and would like to take to Broadway. Finding financing is almost always the greatest challenge.
At the first event in a new series created by the Rhode Island chapter of SCORE, presenters discussed creative ways for entrepreneurs to get financing or use the limited resources they have to their best advantage.
“You have to tell your story and make it interesting,” said Sixcia Devine, Providence regional director for the R.I. Small Business Development Center located at Johnson & Wales University.
But that is one of the toughest challenges entrepreneurs face.
Rusty Warren, a principal of the recently founded BioXcell, based in Beverly, Mass., attended the event because he and Claude Ranoux, inventor of a new medical device and procedure for treating infertility, are ready to go to market. All they need is the capital for a launch.
The challenge, he said, is in the competition for the same pool of funds, whether from angel investors or venture capitalists or banks or state and city economic development corporations.
“There are a lot of companies out there with good ideas, good people and experience,” Warren said. “We have to give the best story in the shortest amount of time.”
Hank Kates, an angel investor with the Providence-based Cherrystone Angel Group and presenter at the event, said about one out of 100 applicants gets financial support from the group, which generally awards $350,000 or more and completed 10 deals last year.
The group looks for companies that have been in business for at least one year, but, Kates said, current revenue is not as important as what the principals expect revenue to be in the future.
“We expect companies to become multimillion dollar firms,” he said.
For seasoned inventors such as Elizabeth Pierotti, who did not attend the event but spoke with Providence Business News about creative ways she has found financing for her product launches, angel investors are one of the toughest sources of financing.
“The problem is understanding who that angel group is you’re going to and what levels of money they offer,” she said. “If you ask for too little, they dismiss you; if you ask for too much, they dismiss you.”
Pierotti said the best advice she could offer is to reach out to individual angel investors who could provide an introduction to the group.
Marilyn Bogue, lead lender relations specialist at the Rhode Island district office of the U.S. Small Business Administration, urged attendees not to overlook SBA 7a and 504 loans.
And presenter Karriem Kanston, assistant vice president and small business development officer at Coastway Credit Union, urged attendees not to overlook credit unions; Accion, an organization that provides microloans; and cities and towns, which sometimes have loan funds. He also suggested CircleLending.com, now renamed Virgin Money. It is a Web site that assists people in structuring loans with friends and family or acquaintances.
But for Pierotti, who’s been making a living as an independent inventor for 25 years (READ MORE), the best method for financing a product for market has been a mixture of personal investment, patience, thoroughness in due diligence for intellectual property protection and having the credentials that lead investors to trust her competence level.
“It takes a lot of background grunt work,” she said.
And a lot of time. Pierotti has been working on her most recent product for eight years and just recently got an investor on board, someone she had worked with before.
For those new to the process, Pierotti suggested taking a concept to a company that has the assets to make it happen and contracting services to them, thus building a reputation that could be useful in getting future financing.
She said to always remember: “You have to be able to offer something better. You have to have a value proposition. And you’ve got to talk the language of the people who will put the money in.” •
