PALM DESERT - For a business younger than five years old, Dennis Shelly's Palm Desert company, PC-Ology, has built up an impressive client list.
Shelly and his staff of 12 do nationwide product warranty work for electronics giants like Best Buy and Circuit City, and customers for his other networking and repair services include heavyweights like Washington Mutual and Pottery Barn.
Since starting the business in 2002, Shelly has been itching to expand, with San Diego his target for a second location. But getting the needed financial backing has been an obstacle.
"It gets to be a challenge," Shelly said, before Friday's forum on venture funding at UC Riverside's Palm Desert campus. "I'm here to find out about what venture capitalists are looking for, and what different avenues are out there to get the funding."
Experts on Friday focused on the assistance available from angel networks, local groups of entrepreneurs who band together to fund startup companies and expansions. Leaders of the recently formed Coachella Valley Angel Network note that 200 such groups around the country provide around $20 billion in business funding annually.
That's about the same amount financed by traditional venture capital firms - the larger outfits that helped create Internet giants like Amazon, eBay and now Google. The difference is that those venture capitalists nowadays rarely bother with any project requiring less than $5 million.
That would leave most smaller enterprises without help, save for the rise in recent years of the angel network. The Coachella Valley version was started in August by a group of local entrepreneurs including Richard Heckmann, Steve Weiss, Brant Cotterman, Bill Impey and Craig Vickers.
On Friday, Weiss said larger venture capital firms have shied away from small business startups for several reasons. One is that they simply have too much money to invest to be able to research and serve on the boards of hundreds of smaller companies. Another is that the collapse of the tech stock bubble in 2000 made major VC firms leery because of big losses.
"They have tended to become very risk-averse," said Weiss, a La Quinta resident who previously helped found an investor group in San Francisco called the North Bay Angels.
Paul DeRidder, a founder of Tech Coast Angels, a 270-member group serving Los Angeles, San Diego and Orange counties, said investment angels tend to be former executives and managers with "a large Rolodex" of contacts to put players together.
They are currently vital in an economy where first-round investment funding has become increasingly hard to find for new businesses. DeRidder said it is not unusual for angel networks to support funding between $200,000 and $500,000.
The valley's angel group is aiming to provide investment capital - in amounts ranging from $100,000 to $500,000 - to foster small business growth. Financing is focused primarily on companies in emerging industries like software technology, medical devices and film production.
While angel networks will fund lower-priced projects than traditional venture capital companies, their standards are still stringent. Business operators must pass a series of screenings and meet numerous criteria to be investment-worthy.
DeRidder said angel networks have multi-level screening processes in place to weed out pipe-dream projects. Businesses owners must accept active participation if they are funded by the angel group, including having network members sit on their boards of directors in some cases.
The business product must be something that scales easily, such as software, and the lead manager of the firm requesting funding must demonstrate vision and depth of experience in the field where he has chosen to set up shop.
Generally, applicants to any angel network must have a specific business plan spelled out, including target customers, marketing strategies, financial projections, and an idea that has been tested to be effective with an actual audience or client base.
Though they vary depending on the type of company, angel networks also have expectations for their investments. Experts said it is not unusual for them to anticipate a return of two to three times their investment within a time period of three to five years.
If the actual performance of a business doesn't come close, that company likely won't get future cash infusions from angel groups.
Organizers said about 200 were expected to attend the two-day conference presented by UC Riverside, with several local corporate sponsors.
For the second day today, small business owners who registered for the event will have the opportunity to meet privately with members of the local angel network to present their business plans.
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