Funding Gap
The “chasm” between Angels and Traditional VC

Have you ever thought about reaching out to Uncle Bruce or Cousin Mike in search of a few hundred thousand dollars to jumpstart your business? Have you considered how far that money might take you and where such investors might end up in the capital structure when it comes time to raise further funds? All too often, dollars raised from friends and family amount to little more than kindling in the scorching fire of an enterprise you hope to some day build. While it’s nice to have something to start with, it’s difficult when you must continuously search for more wood to keep the flame ablaze. While a growing fire is not ready to consume huge logs, a hefty pile of branches and chopped wood is ideal.

Welcome to the world of raising venture capital. Angels, friends and family are a great source of kindling but rarely can they provide enough fuel to keep a fire burning or blazing as high as you’d like. Traditional Venture Capital, on the other hand, is more like a large lumber yard, only capable of providing giant logs of un-chopped wood which are too big for any growing fire to consume. Enter Cava, a source of exactly what any growing fire (business) needs: A healthy dose of kindling to get the flame ablaze, a well positioned structure of strong and balanced branches to maintain a solid base and freshly chopped pieces of wood ready to send the flames growing high.

To put this analogy into more financially relevant terms helps to explain what is known as the Capital Chasm. Between the limited levels of capital raised by friends, family and Angels (under $1 million) and larger sums invested by traditional venture capital and private equity firms ($5 million and up) lies a funding gap. Due to fund sizes raised in the last 10 years, many firms have changed their focus and essentially abandoned true early stage and seed investments. Conversely, Angel Investors can provide seed capital but rarely offer the appropriate funding or multi-disciplined actionable advice required to initiate significant scaling of the business. Consequently, entrepreneurs are often forced to revisit the fund raising process sooner than anticipated, resulting in lost time to market, lack of focus, and the inability to assemble the best team for success. What’s missing is a true early stage venture firm in the Metro New York region that focuses on entrepreneurs and brings significant yet appropriate levels of capital and operational experience to help each company successfully execute business strategy. Cava is purpose built to do just that, utilizing our Active Venture Investing (AVI) methodology.