So You Want To Be an Entrepreneur

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A How-To on How to Get Funded

By Larry Wood

     Scalable companies — a venture capitalist’s dream (consider Google) — are capable of fast, often explosive growth. They are disruptive with their innovative products, own significant intellectual property, operate with a winning management team. They possess other unfair advantages over the less-sexy-but-more-common “lifestyle” startup companies (privately held, founder-run, with up to $10 million in revenue).
     Scalable startups balance metaphorically on a three-legged stool. Lifestyle startups tilt only on one and need two other legs — venture funding and excellent legal services. After initial funding, which is either self-infused or an emotional investment by family and friends, venture capital  for lifestyles comes primarily from VC firms and angels.
     If you’re considering VC funding to launch your company, the first question to answer is whether it’s a lifestyle or scalable company. Either way, in the Sacramento region, venture money could be there for the asking.            

Sacramento’s Startup Climate
     The startup climate is warming up after languishing in the backwaters of the dotcom craze and subsequent ebb tide. Five years ago, Sacramento had virtually no capital market and few world-class private enterprises. Now, several active VC firms and angels (private investors) exist. They concur that during the fourth quarter of 2004, more startups were knocking on their doors and presenting business plans than they’ve seen in years. More initial funding events closed, including the recent funding of JIWire. 
     In fact, much of the infrastructure is in place to establish Sacramento as a global technology center. According to Dan Lankford, managing director of Capital Valley Ventures, “Sacramento currently has available about 0.4 percent of the VC market” (the total funds invested by VCs annually in the United States). For perspective, consider Denver, with startups now enjoying 4 percent of the VC market share and 16 VC offices. Denver recorded Sacramento-type VC spending numbers about 10 years ago.
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