CTAN streamlined its application process so that all deals now fall into five categories: business to business software, business to consumer software, hardware, life sciences and consumer products/other.
The goal is to capture more deals and side deals into the funding cycle, reduce time to decision to less than 10 weeks from up to 16 weeks, increase member engagement and eliminate redundancy, said CTAN Executive Director Claire England.
“The process is to get to an answer faster,” England said.
CTAN decided to do the overhaul of its processes after looking at the practices of other angel groups, surveying its members, surveying entrepreneurs and holding member focus groups, England said.
The Angel Resource Institute, in a 2015 report, named CTAN as the most active single chapter in the nation.
Interestingly, over the past two years, CTAN’s deal flow has almost tripled, England said.
“We’ve gone from having about 20 companies per funding cycle to having about 60,” she said. “We’ve had 60 in the last two funding cycles. That is one of the biggest reasons why we needed to make this adjustment and restructure our process. That’s tough for members. About 60 percent of our members work full time. And they don’t have the time to review 60 startup applicants. That was part of the impetus.”
CTAN’s funnel for deal flow was too narrow for that level of activity, England said.
All the people moving to Austin and the growth that the city has seen in its entrepreneurial ecosystem has led to the increase in the number of deals being pitched, England said. Also, in 2016, CTAN opened its applications to companies nationwide. Although members have a preference to invest in Texas companies, now they can invest in companies based outside of the state, England said.
“Our visibility has increased,” England said. “One of the board’s goals over the past couple of years has been expanding our partnerships and collaboration in the startup ecosystem.”
CTAN has not been impacted yet by the change the U.S. Securities and Exchange Commission enacted in 2016 to make equity based crowdfunding available nationwide. It might just be too early for it to have an impact locally, England said.
“I remain excited about the possibilities of online platforms and syndication in the future,” England said. “The more funding that is out there for entrepreneurs the better.”
Under the new process, in the first week, companies apply to CTAN through Proseeder, its online platform. During that process, they get to classify their companies into one of the five categories, participate in a short workshop to learn about the funding process and participate in mentor hours to meet member investors in a speed dating style format.
“They should come to that funding cycle forum for their round,” England said. “They are going to increase their odds of making it through the cycle successfully if they have met a member to advocate for them.”
During the entire ten-week process, companies go through screening, pitching, if they are selected, and due diligence and closing with legal counsel if an investment deal is made.
In 2016, CTAN members invested in more than 40 companies including both portfolio and new companies, England said. In 2015, CTAN members invested in 43 companies. CTAN has more than 165 members.