Venture capital topic intrigues budding entrepreneurs

Venture capital is the lifeblood of ambitious entrepreneurs seeking to be the next big thing. But Alan Taetle of Atlanta-based Noro-Moseley Partners said it’s not the ticket for all start-ups.

He and local entrepreneur John James, CEO of Acumen Brands, spoke candidly to more than 40 people who packed the Iceberg in downtown Fayetteville for the first of the new monthly Fireside Chats, sponsored by the Northwest Arkansas Entrepreneurship Alliance.

“Venture capital is near and dear to entrepreneurs wanting to grow their businesses, and our alliance is happy to host these monthly meetings that discuss relevant topics for start-ups,” said Josh Clemence, moderator for Wednesday’s event.

James said he and partner Terry Turpin, like most start-ups, had ample success boot-strapping the initial funds needed in their previous ventures long before Acumen was formed.

“Lots of start-ups can make it fine with $10,000 or so in seed money from friends, family and so-called fools such as angel investors,” James said. “Then there are big angel groups to provide up to $500,000 in financial backing.”

Taetle said venture capitalists like Noro-Moseley provide the first round of institutional backing in the $3 million to $5 million range, when a company has a solid business model and is already generating measurable revenue.

Firms like Noro-Moseley are the first level of institutional investors who source capital from pension plans and high net-worth individuals and then lend those funds to a number of budding companies.

James said Noro-Moseley fills a niche market for companies craving rocket fuel, but as more investors come onboard the pressure to succeed also increases, which is not what all entrepreneurs want to deal with.

James, an angel investor himself, said the local climate has changed tremendously in the past three years with respect to accessing seed money.

“Five years ago this was a pretty desolate place to seek out seed money. It was literally write on the back of napkin and pitch to a bored Walmart guy in hopes he would write a check,” James said.

Prior to the recession, James said lots of potential angel investors sunk their money into real estate, but thankfully, many are now ready to invest in local business start-ups.

Noro-Moseley provided $5 million in venture capital funding for Acumen Brands in December 2010. It was the first venture capital deal for an Arkansas start-up in five years, according to Taetle.

Taetle told the entrepreneurs jumping into the venture capital pool raises the stakes and dilutes the power and equity for the key founders.

“In about one-third of our meetings I tell the businesses they don’t need a venture capital partner. Owners wanting to sell their small businesses should not come to us. But If they want to grow the business to $150 million, give up control and ride the big wave, venture capital is the ticket,” Taetle said.