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U.S. Competitiveness Project Deems Entrepreneurship Essential; HBS Alumni Angels of NY Responds With Innovative Program

David Teten

Partner at ff Venture Capital and Founder and Chairman, Harvard Business School Alumni Angels of Greater New York

Where will the next generation of great entrepreneurs come from? Increasingly, they will be women or non-white entrepreneurs.

Harvard Business School Alumni Angels of Greater New York (HBSAANY) and the National Association of Investment Companies (NAIC) recently announced the launch of the Venture Capital Access Program ("VCAP©"), a pilot collaborative venture that provides women and diverse minority entrepreneurs nationwide with access to venture capital through accredited investors within HBSAANY.

VCAP© bridges the gap between venture capitalists and angel investor networks and women and diverse entrepreneurs, many of whom have not traditionally had access to these sources of capital. NAIC is the leading trade association of women and minority investment managers. HBSAANY launched this program in part in response to the Harvard Business School U.S. Competitiveness Project.

Both women and minorities are growing in economic importance. A McKinsey study ("Unlocking the full potential of women in the U.S. economy") notes, "Women have been a growing factor in the success of the U.S. economy since the 1970s…. But the full potential of women in the workforce has not yet been tapped. Now, it is critically important to do so: As the U.S. struggles to sustain historic GDP growth rates, bringing more women into the workforce and fully deploying high-skill women to drive growth through productivity improvements are essential to meeting that goal."

Minorities also represent a larger share of our economy as America transitions to a majority-minority country by 2050. According to the U.S. Department of Commerce Minority Business Development Agency (MBDA), diverse businesses are outpacing non-diverse businesses in gross receipts, employment, and number of firms. According to the Boston Consulting Group, "The Emerging Domestic Markets sector has long been underserved and undercapitalized. Now, however, it is poised for explosive growth."

As women and diverse people play an increasingly vital role in our economy, a focus on entrepreneurs in those groups will be critical to creating new jobs and maintaining overall competitiveness. However, the capital these entrepreneurs need to grow is highly concentrated in pockets of affluent networks like Silicon Valley.

In addition to serving as a catalyst for job creation, early-stage businesses can provide an important source of investment returns. According to a study performed by the Kauffman Foundation and the Angel Capital Education Foundation, angel investments in groups generate net annualized returns of approximately 27 percent, beating most traditional forms of investing.

While there have been a number of past efforts to target women and minority entrepreneurs, it's hard to point to a financially successful VC with this strategy. Angel networks in general have lots of disadvantages compared with VC funds, but VCAP© has three key advantages:

  • Bigger reach, because there are more "Partners" than any normal VC fund. HBSAANY has many Members who are institutional venture capitalists.
  • High quality. NAIC's involvement in VCAP© insures that a robust pipeline of diverse entrepreneurs will participate. Since 1970, NAIC Member firms who focus on private equity and venture have invested in and transformed more than 20,000 companies.
  • More precise matching of investors/board members with companies. Data from the Kauffman Foundation shows that angel investors get better returns when they invest in domains they know and/or when they get substantively involved in the companies. Because of our large network, we can identify angels who have very specific industry background pertinent to a given company, and solicit them to join a given syndicate.

Net, I think our deal flow will be higher in both quality and quantity than any normal VC. Once we filter all that, we'll get some great companies.

HOW TO APPLY TO VCAP©

The VCAP© program is open to women and diverse entrepreneurs running private companies seeking investment capital.

Step 1: Review VCAP Benefits at http://marathonfdn.org/vcap/vcap-benefits.html .

Step 2: Follow the instructions at http://marathonfdn.org/vcap/apply-step1.php .

Step 3: Apply to HBSAANY with your Company business plan and financials, indicating that you are a participant in VCAP.

There is no registration fee for members of the Marathon Foundation. For non-members of Marathon Foundation, a $500 registration fee is required to join the The VCAP© program. The VCAP© applicants will be reviewed in a series of screenings conducted by the Marathon The VCAP© selection committee, HBSAANY, and NAIC board members. The VCAP© finalists will be announced shortly after Monday, June 18th and will present their business plans to HBSAANY angel investors at a Pitch Night in New York on Wednesday, June 27th. The VCAP© finalists will also be invited to present at Marathon's 7th Annual DealMakers' Summit July 23rd and 24th at the Ritz Carlton in Chicago.

David Teten (Partner at ff Venture Capital and Founder and Chairman, Harvard Business School Alumni Angels of Greater New York), contributed this guest blog post.

Tags: Entrepreneurial, Innovation and Jobs

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  • 26 Jul 2012

    Taylor Moffitt of Holydean

    This is excellent. It will be interesting to see how HR 3606 (the JOBS Act) will help even more.