Smart Money Startups — Why is it Important?

Interview with J.D. Davids from the Fronis Group

In this interview with J.D. Davids from the Fronis Group, we discuss his concept of Smart Money Startups.

https://youtu.be/h1PAZKmuHfI

J.D. has been the CFO of eight different startups; three went IPO, and three concluded in successful M&A exits. J.D. has raised over $1 billion in financing and M&A transactions, on both the buy and sell side, in his career. J.D. is a former United States Marine, and has a passion for helping veteran entrepreneurs. J.D. is also a competitive sailor.

Fronis Group’s charter is to accelerate fundraising for startups using “Smart Money Startups” strategies. They provide online workshops, in-person workshops, speaking events, and seminars. They help entrepreneurs identify the right investors, and guide them through the process of raising money, and getting the money into their deals as soon as possible. Smart Money Startups focuses on getting the right investors at the right time.

In the interview, J.D. describes how many entrepreneurs take a “shotgun” approach to raising money, in many cases focused in a geographical area where they live. Smart money investors have verified domain expertise in the vertical markets that the startup serves, and they can catapult the business into greater success. Smart Money Startups have a better target list, and aggressively work that list.

The market for raising capital for startups is significant. According to the The Global Entrepreneurship Center there are about 50 million startups every year, and many of these startups will require outside equity financing to grow their businesses. However, according to a Harvard Business School Study, about 75% of venture-backed startups fail. According to the National Venture Capital Association 2014 Yearbook, the U.S. venture capital industry has about 900 firms and about $200 billion under management. There are about 6000 venture capital professionals managing this money. Also, according to the Halo Report, there are about 265,000 active angel investors in the United States alone. Smart Money Startups techniques can improve the odds of raising capital, doing it more efficiently, and with investors that can be helpful to your business.

In the interview, we discuss how the venture industry is evolving, and how this is impacting both entrepreneurs and investors. Generally venture capital funds are either going out of business or becoming mega billion dollar funds. This is opening new market opportunities for Angel investors, micro VCs, and family offices. In the last few years, we’ve seen the emergence of the likes of 500 Startups, First Round Capital, and Angel List, as examples.

I hope you enjoy this interview and it’s insights. Please feel free to leave comments and questions below!

This is Patrick Henry, CEO of QuestFusion, with The Real Deal…What Matters.

This article originally appeared in The Consulting Masters.