Readers of Business Angel Blog will realize that I was in Prague recently looking at companies to invest in. The trip was organized for me through the BBAA www.bbaa.org.uk as part of the EASY program.

Many of the companies that were pitching, were based in the IT space. A point to note for other companies looking for angel investment in the IT space in the ‘West’ is that your valuations need to reflect the valuations that your competitors (for funding) elsewhere are asking for. The beauty and the problem about the IT space is that it can now be based anywhere in the world. Why should angels pay for start up costs such as salaries and rent in central London or New York when they can invest in a similar business in Central Europe or China?

However, the main lesson from this business angel blog is directed at IT companies in terms of the way they look at their solution. Time after time, entrepreneurs from central Europe were telling us that their solution was unique. Had they done a quick search on Google, they would have realized that similar if not identical solutions already exist outside of their region. Entrepreneurs who see the world as their market place - also need to see the world as containing their industry. You need to simply recognize that the world is getting smaller and that brings massive opportunities to scale up and threats from every part of the world as well.

Many of these companies wanted to sell to multi-national companies. Herein lies another problem. By definition, multi-national companies can also choose solutions from many territories. If you are setting up a business like this, you simply have to check the world scene. Nothing will lose you credibility more than saying you don’t have competitors - only for competitors to be found by angels during due diligence.

This is where I hope that a future blog about national differences may come in handy. Increasingly with IT companies you are going to have to take advantage of inherent advantages that are hard to replicate by competitors. For example, being based around the Silicon Valley area gives you a huge network advantage that is very difficult to replicate. In the same way a fashion company based in Milan will have the advantage of having easy access to the talent they need to make the business a success.

With an IT business - you should spend a little bit of time thinking through how you can sell your location to an investor. Are your customers based near you? (they may need to be involved in developing the software) Do you have access to a pool of staff in the area? Is it a low cost location? Is it well placed to give demonstrations to European clients? ( A selling point for Germany/ Central Europe) Or International clients (A big selling point for Dubai)

Or you could always just hope that the investor does not search beyond the local area.

Related posts

• Which structure? (2)
• The falling markets (0)
• Poverty Tourism (2)
• Why fundamentalists make bad business decisions (1)
• Where do I start in raising money? (2)