Tech Coast Angels is the investor of choice for Southern California entrepreneursIf your company is based in Southern California, matches TCA’s early stage and industry focus, and is seeking to raise from between $50,000 and $1,000,000, then we should talk. We have the ability to syndicate deals that require more capital. Are you ready to get started? It’s simple!
TCA’s Investment Criteria:
- Usually located in Southern California*
- Resourceful management team with impeccable integrity
- Solution to a compelling business problem
- Large identified market opportunity
- Defensible business model / proprietary technology
- Sustainable competitive advantage
- Some level of market validation
- Ability to attract future funding
- Credible exit potential
* If your company is located outside of Southern California we suggest that you connect with an angel group in your area. We do syndicate deals (inbound and outbound) with many angel groups in the United States. Have a look at the Angel Capital Association website for a list of member angel groups in the U.S.
Ventures That We Seek
We expect you to explain the relevant experience and domain expertise of your team. If the team is incomplete, we expect you to recognize who is needed to round out the team.
TCA defines technology broadly in many industries, including Hardware, Software, Digital Media, Consumer Products and Services, Financial Services, Life Science, CleanTech and Industrial. Regardless of industry, a successful applicant must be able to demonstrate market validation of its technology. Ideally, the company will have revenue and a strong sales pipeline.
You must demonstrate that you can achieve at least a 25% market share in a well-defined niche (i.e., show how you can sell cost-effectively into that niche). The niche can be within an existing market (e.g., Amazon went after the on-line niche for booksellers); or it can be a new niche (e.g., Gadzoox Networks pioneered and coined the SAN niche – Storage Area Networks). Grand visions of a multi-billion dollar market is not attractive unless you can convincingly show how you will dominate that market. With few rare exceptions such as eMachines, dominating a billion-dollar market is usually not possible; and in eMachine’s case, we doubt many would have believed that they could become the #3 PC company in less than one year.
This must be in either a developing market (e.g., Gadzoox Networks forecast the development of the SAN market based on projected storage needs), or in an existing market. You must present a credible plan for achieving that growth, not a Chinese Glove Syndrome (“there are over a billion Chinese, we will sell 1% of them a pair of gloves at $20/pair, which gives us revenues of $200 million”) without supporting data to show how you would sell them.
Some examples: a “blocking patent” (that can keep out competition); a vanity number (eg 1-800-WEDDING); a domain name (e.g., buy.com); “first-to-scale” advantage (i.e., show you already are the first company to achieve some scale in a new niche).
Because TCA members assume a great deal of risk by investing in early stage companies, applicants should be able to make a compelling case for a 10x or better return on investment within 5 years. Investments that are expected to require no more funding than the current round are especially valued.
TCA members look for opportunities where the capital sought will take the company to the next level, and materially increase its valuation. TCA investments often bridge the gap between proof of concept to a larger VC round. A company must be able to demonstrate how it will use members’ investment to complete at least some of the following:
- Proof of Concept
- Prototype of its product or technology
- Patent filing (for broad patent)
- Product development
- Market research
- Product launch
- Major contract or customers
- Management team
- Reduce other investment risks
Screening and Evaluation
Screening is an important part of the TCA funding experience. Each year we have about 500 companies apply on our website for TCA funding. Approximately 25 percent of these companies make it to the screening process and 10 percent make it into due diligence. Although each year varies, we typically fund between ten and twenty new ventures per year. TCA consists of five networks: San Diego, Orange County, Los Angeles, Inland Empire, and Central Coast. Although each network operates slightly differently, the general process is as follows.