Seed Capital Network - Help for Small Business

New Mexico Business Journal, Dec, 1990

Seed Capital Network

The Seed Capital Network was born in New Mexico in May, 1989, but the idea is the brainchild of a University of New Hampshire business professor 15 years ago.

There are three sources of business capital, says James Ray, president of Seed Capital Network: traditional, which usually means banks; institutions other than banks, which would include insurance companies and retirement funds; and the newest wrinkle, "business angels."

A "business angel" is someone who has some money, sometimes a little, sometimes quite a bit, who is retired and willing to make investments in a riskier business. In other words, something other than government bonds or the stock market.

In return for putting up money on riskier businesses, these "angels" also expect a higher return for their money.

An extensive survey conducted in the eastern sector of the country by the University of New Hampshire discovered that approximately $3-4 billion was available each year for adventure or venture capital. That was 15 years ago, and the amount of money has grown steadily, says Ray.

Eventually small companies like Seed Capital Network sprang up on the Eastern Seaboard. What was really being established was a non-threatening entity to bring together entrepreneurs and investors.

That's what Seed Capital Network does in Albuquerque, maintaining a database of entepreneurs and investors. Ray says it has a very decent portfolio of investors and is working to build up its base of entrepreneurs.

The company is in the business of playing matchmaker between investors and entrepreneurs through its database system.

The process of using Seed Capital Network involves an initial screening with the first telephone call to determine if the idea for a business is feasible and if there might be a chance for investors.

After hurdling the first obstacle, the applicant will file an application with a $100 fee. Part of the requirement in the filing process is to have a business plan, or at least an executive summary statement.

Seed Capital Network will sanitize the executive summary statement, which means it will take out all identifying information, so the person who is the entrepreneur will remain anonymous.

On the fifth and twentieth of each month, a computer search will match applicants with potential investors.

Information will be passed on to the investors who match the applicants. If the investor is interested, further information with all identifying statements are given to the potential investor.

If the investor is still interested, the investor will contact the applicant directly. At that point, Seed Capital Network is out of the loop.

Seed Capital Network is devising a program to track the number of matches it makes, and what happens to the potential businesses and investors down the road. The Network does not supply money, only matchmaking.

The non-profit company is housed at the University of New Mexico. Money for the program comes from the $100 fee paid by both investors and applicants. Investors will remain in the computer system for 12 months, while applicants remain on file for six months.

For further information, contact the Seed Capital Network at 277-3541.