Most entrepreneurs are facing a difficult fundraising environment, especially for seed stage capital. While most entrepreneurs bring great expertise in finding new, emerging markets they generally do not have an inherent strength in tapping investment sources. To help entrepreneurs understand the environment and various approaches to fundraising Outlook Ventures organized “Attracting Angel Capital” on September 24 in Pleasanton, California and September 25 in Palo Alto, California. This event was co-sponsored by Outlook Ventures, Comerica, Ernst & Young, and Morgan Miller & Blair LLC.

Dee Power kicked off the discussions with findings from her recently published book “Attracting Early Stage Capital”. Dee and co-author Brian Hill interviewed more than 250 venture capitalists and hundreds of angel investors in writing their book. They found that the average angel is 49 years old and invests $72,000 in a deal; 75% of angels earned a graduate degree and seek to help entrepreneurs be successful. Among the skills their research indicated as most valuable in successful entrepreneurs was selling, financial acumen, intuition and an ability to organize complex tasks. The fundraising process alone heavily taxes each of these skills.

Entrepreneurs apparently have many misperceptions about the venture funding process. For example, entrepreneurs believe that 64% of venture deals are sourced from intermediaries, such as brokers or investment bankers; in reality, only 17% are. Instead venture firms rely upon other venture firms for 34% of their deals and direct contact with the company for 30%.

Ms. Power also highlighted some of the differences between venture capital firms and angel investors. While both groups view the quality of management as the top priority, venture firms see the market size and the existence of proprietary technology as the next most important whereas angels see growth potential as key. Meanwhile entrepreneurs, who gather feedback from numerous investor sources, are often unable to discern what is most important; thus they’re left viewing management, growth, ROI, competition and numerous other factors as equally important.

A panel of venture capitalists and angels, including Bob Bozeman (Angel Investors LP), Nick Sturiale (Sevin Rosen), Randy Williams (Keiretsu Forum), Tim Wilson (Partech Ventures), Randy Haykin (Outlook), Patrick Sheehan (3i), and angel investors Keng Lim and Barry Waitte, also helped entrepreneurs understand the environment. They noted the good news from a funding perspective is that the number of companies seeking funding is down and thus reducing competition for funds, companies are more realistic on valuations and today’s companies are of a higher quality than the late 1990s. However, they observed, early stage fundraising is a very time consuming and challenging process with companies finding it difficult to build revenues given the reduced spending climate and Fortune 500 firms’ reluctance to trust start-ups. Each of them commented that entrepreneurs must bring a deep understanding of the customers and their needs in addition to an ability to build a superior product with advanced technologies.

The entrepreneurs in attendance viewed the discussions as fruitful for both networking with potential investors as well as getting a clearer view of the fundraising environment.