Cincinnati is not an area that is growing its population like in the south and southwest that stoke small business activity. However, it is home to Queen City Angels, the second ranked group of angel investors in the United States by CB Insights.
Forbes has named Ohio as the 11th best state for small business and number 1 for quality of life. And in a recent survey by consumer research company Value Penguin, Cincinnati placed seventh out of 200 U.S. cities in a report on the Best Cities for Small Business.
There is access to capital, a low cost for office space, and a good talent pool available. In a conversation with Queen City’s executive director, we learn about what’s required to start a business and attract angel investors.
WHAT YOU’LL LEARN FROM SCOTT JACOBS OF QUEEN CITY ANGELS.
AT WHAT STAGE OF DEVELOPMENT SHOULD AN ENTREPRENEUR SEEK ANGEL INVESTORS? (2:53 in)
In Scott’s words – We like to engage as early as possible. We have a farm system. (mentoring program, bootcamp,) We’re looking for customers who have a paying customer or two.
Insight – Connecting with entrepreneurs as early as the idea stage is useful in evaluating the viability of a potential investment in the company.
ASIDE FROM HAVING CUSTOMERS, WHAT PART OF A BUSINESS PROFILE ATTRACTS QUEEN CITY ANGELS? (6:35 in)
In Scott’s words – Friends, families and founders. We like to see them have a little skin in the game. They’re not just looking for our money to move their idea forward. We want people completely dedicated to this business.
Insight – Developing a business part-time on nights and weekends will not interest them. Having a good management team that is coachable is key too.
ASISE FROM PASSION AND DEDICATION TO THE BUSINESS, WHAT OTHER QUALITIES ARE IMPORTANT IN THE BUSINESS LEADERS? (8:15 in)
In Scott’s words – Emotional intelligence and the ability to manage the stress.
Insight – Awareness of their own weaknesses and strengths is important..
WHAT ARE COMMON MISTAKES ENTREPRENEURS MAKE? (9:05 in)
In Scott’s words – They’re overly optimistic about the strength of their idea. Companies don’t know the amount of money they need to raise.
Insight – Because multiple rounds of capital are usually required to fund a growing company, over valuation of a company’s worth in its early stages of development can hinder the ability to obtain capital.
FROM THE INVESTING SIDE, WHY DO PEOPLE GET INTO ANGEL INVESTING? (13:52 in)
In Scott’s words – It’s fun. It’s intellectually stimulating. They want to hear about new ideas and they want to help.
Insight – To be an angel investor you enjoy shepherding companies and investing your time and expertise as well as your money.
WHAT SHOULD THE EXPECTATIONS OF RETURN BE FOR AN ANGEL INVESTOR? (15:20 in)
In Scott’s words – We’re in for the long run. The year in which most exits occur is year eight.
Insights– Angel investors are usually putting in five hundred thousand to a million dollars in the first round of financing.
ARE ANGEL INVESTOR GROUPS AT A DISADVANTAGE TO VENTURE CAPITAL GROUPS IN SEEING IDEAS? (17:30 in)
In Scott’s words – No not really. they need is more like practice management. What types of things should I look at to get to the next level….renewing that motivation
Insights – You’re wasting money if your sales training dollars are spent on standardized training for everyone in the sales organization.
WHAT TYPE OF COMPANIES ARE QUEEN CITY ANGELS LOOKING TO INVEST IN? (18:39 in)
In Scott’s words – Technology based companies, life science, IT oriented, the internet of things.
Insights – They’re seeking companies that others want to acquire instead of creating the product or technology themselves.