Today at TILE we talked about nurturing start up companies – why investing in young companies is a good idea. In the article about NYC Seed, an early-stage technology fund, it talks about why the fund is making investments, who is providing the capital (aka money), and what types of companies are benefiting.
New York Times: NYC Seed Nurtures Homegrown Start-Up
So what is “early-stage” investing? Basically, where a company is in its development determines its “stage”. Thus, investing in a start-up company is an early-stage investment. This is often called seed or venture investing – seed being the earliest. If a company is in mid-life or middle-age (e.g. already operating but needs some investment to get to the next level), that is later-stage investing. Terms such as private equity or mezzanine are often used in these cases.
In essence, seed, venture and private equity all represent investments in companies. When called an Angel Investor it is a person. When called a fund, it is “pooled” money intended to be allocated (e.g. distributed) across a large number of investments by an investment manager. In the case of NYC Seed, here are the players:
- The Investment or Fund Manager is Owen David. He decides which start up companies will “get funded” or receive $200,000 to start their business.
- The Investors, or people who gave money to the fund, include the New York City Investment Fund, Polytechnic University, and others. They have raised $2 million to date.
- The Fund is called NYC Seed. The rules (or terms) of the fund say that each company receives $200,000 each and the fund looks to invest in technology- oriented companies that plan to do business in New York and have a founder living in New York.
- Advisors are people who have experience in investing in young companies. This means that companies don’t just get money, they also get valuable experience on what makes a successful company.
What does this mean for the TILE Community? Well, right now the economy is shrinking – traditional companies in the automotive (e.g. Ford, Chrysler, GM), financial (e.g. Lehman, Bear Stearns, Merrill Lynch), and retail (e.g. Kmart, Linens ‘N Things) have either shrunk in size, been acquired by another company or gone out of business. That has a dual impact: 1) the company has reduced need for inventory/employees and 2) services previous used by those companies are less needed. For example, if the economy is shrinking, you need fewer lawyers, fewer advertisers, fewer consultants…you get the picture. Places you thought had full-time job potential may no longer be viable options. Thus, for the TILE Community, as well as the economy as a whole, it is important that new companies are given a chance to succeed – they are the future of our economy (and your paycheck, benefits, etc.).
From an investment perspective, have you considered investing in a start-up? Could you “seed” a cool business that you like and think has promise? If you could and want to, take a look in the NYSE Learn To Grow module and select the Private Investment Wizard – it will take you through some good questions to ask (e.g. does the management team have experience? What is the market potential?).
From a personal perspective, if you are currently in college, what are you thinking about doing after you graduate? Since the job market is difficult in a shrinking economy, maybe you want to go to graduate school? Travel the world? Work for a nonprofit? Or find a start up? By the way, TILE Financial is looking for interns…..
- Amy