May 22, 2007

Can the location of the deal be a deal breaker?

Most investors have strong investment preferences. Preferences based on the industry, the stage of the business and how much capital needed are all important investment preferences. An additional preference, the location of the company, also seems to play a role in your decision to invest in a company.

Industry expert, Bill Payne, entrepreneur-in-residence at the Kauffman foundation explains the importance of location. “Angels have typically traveled for all of their business careers, so more business travel is not particularly appealing. Furthermore, angels are often retired businesspersons and part-time investors, so attending Board meetings in the morning, leaving time for playing tennis or golf in the afternoon, is attractive. Overnight trips to attend Board meeting and meet with company officials in portfolio companies is simply not as appealing as engaging with local entrepreneurs. Finally, the motivation for some angels to invest is to help the local economy and therefore local entrepreneurs. Appreciating this motivation helps the entrepreneur better understand the local investing style of angels.”

Do you agree or disagree with Bill Payne? What is the farthest away you could be from the company you invested in?