Research. Analysis. Strategic planning. Identifying, qualifying,
and negotiating with strategic partners and investors. A large part of the
business development process comes down to money. And for many Israeli companies,
that means looking to America. We look to America for capital and for strategic
partners — sometimes that’s the same thing.
Unfortunately, “raising
money” is a pair of words that evokes a seemingly Pavlovian response. “Venture
capital” is another such pair. But venture capital is just one of the choices
on the money-raising menu. It's not the right choice for most companies
most of the time. There are other options, especially for those who think broadly.
Friends and family — a great starting point. Typically
your parents and cousins are the least knowledgeable and least sophisticated
investors, but they invest because they love you, not because they know your
business. And they often violate the first rule of investing (which
is invest in what you know), but we forgive them because they are our friends
and family. Remember, just because your have friends and family living in America,
it doesn't mean that they can — or should — invest
with you. There is a definite risk to these types of investors. Consider
not just their risk, but the risk to your relationship. But often this is a good
place to start.
Angels. Sometimes lumped together
with
friends and family (and referred to as "friends, family, and angels" or "friends,
family, fools, and angels"). An important source of funds in America,
angels are high net worth individuals (or those who overreach while aspiring
to such status). There is a tremendous range of sophistication in this investor
class. Interestingly, this is an important funding class in America, but one
that is weak in Israel. The Israeli angels class seems best characterized
as car dealers and contractors.
Israeli government funds. Israel’s Ministry
of Industry, Trade and Labor’s Office
of the Chief Scientist is an obvious important
source of funding, but there's more in Israeli government programs — even
with the budget cutbacks. And benefits can vary depending upon where you're
located in Israel. Marketing in the States and development in Israel is a very
common Israeli company strategy. The world of "alternative funding" begins
with government funds.
International/binational funds. The Israeli government
has established cooperative funding programs with various foreign governments.
You and your foreign partner need to bring matching funds for these programs;
in many cases, these programs will help you find a partner. Best known among
these programs is the BIRD
Foundation which provides funds
for joint Israeli-American projects. The newest such fund in this class is
the Maryland/Israel Development Fund for cooperation between Israeli and
State of Maryland companies. (Full disclosure: My firm, Trendlines, represents
the State of Maryland in Israel and is involved with this fund.) And these
funds are not just available in Israel — substantial funds are available
from American government programs. There’s a lot to look at here.
Technological incubators. Israel's
business incubator system is the world’s most sophisticated. Any
start-up should look at this opportunity — it's surely not for everyone,
but it's absolutely worth the time to understand your potential opportunities
here. Incubators should be part of your review of government funding opportunities,
but with the equity requirements made of you, this review stands apart. (Full
disclosure: Numerous incubator companies are Trendlines' clients and
the Misgav
Technology Center is a Trendlines Israel Fund
investment.) Note the American incubator systems is wholly different than
the Israeli system. It’s a bit simplistic to say so, but with few exceptions,
American business incubators are really just about the office space.
Foundations and loan funds. Follow the money.
Look for private foundations giving grants or loans. Focus — it's
all about getting to the right match. Many foundations have a local or regional
focus; a partner may give you that needed local presence or maybe it's
time to think about a U.S. office location.
Strategic partners. Nothing is more important.
(For the purpose of this article, I'll define a strategic partner as a
company that others will acknowledge knows your market very well.) The strategic
partner who invests in your business by purchasing equity or by providing you
with an advance payment that you can employ as working capital is the company
you most need. When a strategic partner gets involved
with your company, it's "proof" that your concept or product or technology
is a right thing. That proof is
critical on the path to locating other funding sources.
Strategic partners mean different things to different folks. A related concept,
but on a much simpler level, is selling something to someone. If you sell something,
it demonstrates a compelling argument that your company is on the right path.
Well, not anything actually. You should sell something that is consistent with
your vision. And selling something to someone in America suggests that you know
something about the market.
Toxic investors. I'll just slip this one
in. A toxic investor will ruin your company and make you miserable because
unbeknownst to you, their agenda is very different from yours. They will become
a drain on your resources — time and money. When investors are performing
due diligence on you, you must do the same with them. Before you approach
an investor, you'll certainly have spent time understanding what interests
and motivates them, what they want to invest in, and how they want to do it.
As the process continues, you must speak with their portfolio companies just
as they will speak with your references. Not all money is good money.
The closer the better. And here's one last raising money
cliché:
closer money (geographically, that is) is better money for the company and
for the investor.
When it comes right down to it, it's not easy work searching for money.
You need a vision and the strategy and plan achieve it. For more than 10
years, Trendlines’ business
development work with Israeli companies large and small has been performed
with a singular focus — raising money in Israel and in America through strategic
partnering and with financial partners.
Unfortunately, “raising
money” is a pair of words that evokes a seemingly Pavlovian response. “Venture
capital” is another such pair. But venture capital is just one of the choices
on the money-raising menu. It's not the right choice for most companies
most of the time. There are other options, especially for those who think broadly. 
