This past week I developed an itinerary for a Chinese investor’s trip to the U.S. that will take place later this summer. “Helen” is someone I met five years ago in Beijing. She and her investment firm have been highly successful in China working with technology firms spinning off from Chinese state-run enterprises. Helen’s trip represents a golden opportunity for at least one of my bioscience clients, as well as other technology companies in my home state of Colorado. There has been a shortage of both angel investment and private equity investment deals in the past few years especially in the alternative energy and bioscience industries. It’s an investor’s market, with plenty of high-growth-potential companies to be found. So should a company look internationally for their next round of funding?
Availability of Local Funding
Many countries have a shortage of angel and equity funding for their locally grown technology companies. Nowhere is this probably truer than in Israel, which develops countless cutting-edge technologies and then struggles to stretch local funding sources to cover all worthy companies. Israeli entrepreneurs are used to courting investors from around the world to consider their investment opportunities. In the U.S., our technology industry clusters gather uneven attention from potential investors with concentration in areas like Silicon Valley and Boston. There are angel investors based in Colorado, but certainly not enough to keep up with demand. Most angel investors prefer to invest locally in order to keep a hand in their invested companies. Later stage investors may be located farther afield. But in order to get to that later stage, a company must first secure funding to help it commercialize its technology.
One way to bridge this gap is to look for angels who have a trusted business associate in the area. This is the case of Helen from Beijing. A member of her “guanxi” lives in Denver and could therefore keep a close eye on any local investments made in the Denver area. This also helps to build a bridge between Beijing and Denver as the business relationships over investments deepen.
Finding Opportunity in the Investor’s Home Country
Foreign investors make the most sense when the foreign market is a prime market opportunity. My bioscience client immediately saw the connection between having one of three or four investors based in China and Chinese markets for their products. The Chinese market has high growth potential for those technology companies with strong in-country connections. I saw a similar situation a few years ago with then growing firm The Wheelabrator Group, who sought funding from a Polish investment group. This company then strategically set up manufacturing operations in Central Europe near both its investors and its growing markets. When foreign investors live close to top international markets, then investors can give market-specific advice and connections to further propel the company’s growth forward.
Where to Find These Foreign Investors?
This is the hard part… investors rarely advertise their available funds publicly. They would be risking a flood of interested companies and thousands of investment applications. As an entrepreneur with a great technology but limited resources, the best place to start is within your own industry. Investors traditionally stick to industries they know well. Ask trusted industry experts if they know of investors who specialize in your industry. If there are trade shows in a country of specific interest, quietly ask around for the names of potential investors. The actual introduction may require an intermediary.
I hope this helps your company to start thinking of less-traditional funding sources that could help you reach your next level of growth. Best of success in all of your business efforts!