Star Capital invests in a broad range of industries with a geographic focus on companies and equity sponsors located in the U.S. and selected emerging markets.
Prior to seeking investment, it is important that your business is at the right growth threshold and that you are ready for the responsibility of having outside investors. Below is a checklist that will help you to decide if and when you should seek an angel investment.
We are looking for companies that have an established proof of concept and are poised for growth. We have invested across multiple industries but have a core strength in business products & services, media, internet/web services, mobile, and financial services. We tend to avoid investments that require regulatory approval in order to get their product to market, such as life sciences.
While the merits of each investment will vary, we evaluate your venture according to the following criteria:
Management team. Is your management team experienced, driven, coachable and willing to cede some control and decision-making authority to outside investors? We look for teams of high-quality entrepreneurs with a track record of leadership and performance - either in the company's specific industry or in prior entrepreneurial ventures. We also look at your team's passion for and commitment to the new business idea, and your ability to inspire confidence among future stakeholders, including employees, potential customers, and investors. As we will be working together as partners, your team's credibility is essential. In addition, your team must be open to and comfortable with receiving input provided by angel investors.
Market opportunity. We invest in solutions that address major problems for significantly large addressable target markets. Do you have an identifiable market segment? Is there a demonstrable and significant demand for your solution? Is the projected spending in your product category large and growing? Go to Market Strategy. Do you plan to achieve widespread market penetration for your products and services? How will you do this as efficiently as possible? Will you create an internal, direct sales team, or will you rely on external channel partners?
Financials. We are looking for well thought out, logical and reasonable revenue plans. Most financial plans do not achieve their revenue projections, so we will evaluate plans under the assumption of a revenue shortfall. Consequently, gross margin and cash positions are critical variables to manage.
Competitive advantage.Your company must have some proprietary features that distinguish you from potential competitors or provide barriers to entry that prevent other companies from capturing your customers with a similar offering. Attributes that convey competitive advantage include intellectual property protection, exclusive licenses, exclusive marketing and distribution relationships, strong brands, scarce human resources (i.e. knowledge and skills), and access to scarce raw materials.
Use of proceeds. Funds must be used to accelerate your company's achievement of key milestones that increase the company's value. We often fund activities that include research and product development, building a sales and marketing infrastructure and hiring key executives.
Growth potential. We look for companies that can grow quickly and manage the scale necessary to succeed. Your company must demonstrate a plan to generate significant profits beyond the initial product idea. Do you have a strategy to achieve multiple sources of revenue? Competition and competitive advantage. Have you identified potential competitors? Do you understand your company's differentiation points? Will true barriers to entry help your company to maintain a competitive advantage? Your company should have some proprietary features that distinguish you from potential competitors or provide barriers to entry that prevent other companies from capturing your customers with a similar offering. Attributes that convey competitive advantage include intellectual property protection, exclusive licenses, exclusive marketing and distribution relationships, strong brands, scarce human resources (i.e. knowledge and skills), and access to scarce raw materials. Have you protected your intellectual property? Have you performed an exhaustive search to be sure that you are not infringing on patents or trademarks held by others?
Fit. Our group members are all accredited individual investors with significant executive experience in a variety of fields. One of the benefits of working with angel investors is the active coaching and contact network that such investors can provide. As such, there must be a fit between members of our group and your idea, and your team.
Technology. We prefer to invest in first-of-a-kind new ideas, rather than incremental enhancements to common products and services. Is this a nice-to-have, or a need-to-have product or service? However, we approach highly complex, esoteric technologies with caution. The concept behind the technology must be proven and verifiable. Further, we avoid science projects that don't demonstrate a clear path to commercialization. Any breakthrough innovation must be accompanied by a strong business plan.
Exit strategy. Our members typically seek returns of ten to twenty times their initial investment, depending on the riskiness of the plan. This level of return on investment is essential due to the high risk and likelihood of failure among early stage ventures. Thus, a clearly articulated exit strategy - how will weextract such returns - is essential. For example, do you plan to sell the company to an established corporation in your industry? Or will your exit be through subsequent rounds of financing - venture capital or the public markets? We are not just interested in the strategy you select, but more importantly in the how - the operational strategy that shows specific steps you will take to achieve the exit.