We’re going on the Road Show…
Funding your start-up is a tricky issue. On the one hand, you’re focused on your next-best-thing concept and the work you are doing to move your idea forward. On the other hand, every business has bills, even if you opt out of a salary as a matter of financial necessity. Funding usually starts with family and friends. If you’re lucky, you get small grant funding based on the recognition that your business can create jobs, income and taxes. At some point, you need to involve professionals in venture capital. EMF Disturbance Monitors, Inc. has made it to that point.
Professional investors come in a variety of flavors like Investor Network Funding, Crowd Funding, Angels, Seed Funding and traditional Venture Capital. Network Funding is represented as a large group of small dollar capital investors who are advised by salaried staff about investment options. Typically, they request an upfront fee to present start-up investment opportunities to their network of investors. You choose a funding goal. Their network of investors can opt in/op out of your company. The Network Investor company then takes a percentage of the network funds directed to you (typically 4-6%) in addition to their upfront fee. Network investors like smaller projects, since the capital base they tap is smaller. Medical devices are expensive, slow investments that are not well aligned to Network Funding.
Crowd Funding is often used for B to C (Business to Consumer) companies. Crowd Funding companies charge an upfront fee to access a platform pitching to online consumers who donate money to help create a new product they might want to use. Crowd Funding companies also usually request a percentage of the funds raised online. This is called a Finder’s Fee (typically 10-15%). Some Crowd Funding companies use established platforms (Kickstarter, Indiegogo) and others have their own platform. EMF is not a B to C company so Crowd Funding is not our thing.
Angels and Seed Funding are professional investment companies that specialize in early investment for promising start-ups. They typically do not charge any upfront fees or take a percentage of the funds raised. Angels and Seed funds are extremely risky investments for their members, since more than half of start-ups fail. However, if one of their investments becomes a Unicorn (the eventual, ridiculously successful company), they can more than make up for the losses on their start-up investment failures. Several of the Angel investment firms we have contacted are offshoots of more traditional Venture Capital firms, allowing the firm to direct some funds to high-risk/high reward start-up investments. Angel and Seed funding is our sweet spot for funding this year.
Traditional Venture Capital funds have evolved recently to fund more mature, less risky start-ups. Often, the start-ups they fund are companies who are seeking expansion, rather than early, existential funding. Venture Capital firms are usually started by successful business executives as a vehicle for investment in the high-risk/high-reward start-up sector. Traditional Venture Capital firms usually do not charge a start-up fee or a Finder’s Fee. Many Venture Capital firms employ full-time staff to search for investment opportunities. These staff are often incentivized financially for discovering successful investment opportunities. EMF has contacted several traditional Venture Capital firms who accept medical device start-ups as investments.
Les Hamashima, our CEO, and I will be on the road in October to Pitch EMF Disturbance Monitors, Inc. as a good investment opportunity to Angel Funds, Seed Funds and Venture capital firms. The funding we are seeking will be used to complete our FDA clinical indications trial at UNC Chapel Hill and our application for FDA approval. We’ll keep you posted on our web site as we try to partner with additional investors and move our company forward.
