Rough Times for Angels: Q&A With MarketStar Chairman Alan E. Hall
MarketStar founder and angel investor Alan E. Hall doesn't mince words: "These are really terrible financial conditions," he says about the the challenges now facing startups. Oftentimes, the best they can hope for is to tread water, cut costs, keep their concepts going and, above all, survive.
08/13/09 9:13 AM PT
You might say that entrepreneur Alan E. Hall lives in two business worlds. Don't complain to him how challenging it is to grow a business in today's fragile economy. He knows those struggles firsthand as a business owner. He also knows how next-to-impossible it is for startup business owners to find financial backers.
He is the founder and chairman of MarketStar, a US$4 billion sales outsourcing company that is part of Omnicom. In this role he is responsible for determining the company's vision, strategy and culture, as well as client and employee advocacy.
Hall is a player in the venture capital sector as well. He is an angel investor, and he runs several private equity funds.
His exposure to the many sides of business and finance give him a unique perspective on how startups can secure funding in this turbulent economy and what are investors want in potential investees.
"This is the most difficult financial environment I've even seen," Hall told the E-commerce Times.
Business Menu Full
To say that Hall has a lot on his plate is putting it mildly. Everywhere he turns, he tastes morsels of economic ingredients.
For instance, he is a member of the Board of Trustees for Weber State University, chairman of the Utah Technology Council, a trustee of the Intermountain Healthcare Foundation, a member of Wells Fargo Bank's Northern Utah advisory board of directors and a trustee of World Trade Center Utah.
Hall, along with his wife Jeanne, is the founder of the Hall Foundation, a private charitable organization. He is also founder of several investment funds, including Mercato Partners and Island Park Investments. Additionally, Hall is the founder of several entrepreneurial organizations, including Grow Utah Ventures and GrowAmerica.
Honored by multiple organizations for his business endeavors, he most recently was named the Mountain West Capital Network's (MWCN) Entrepreneur of the Year for 2009.
The E-Commerce Times spoke with Hall about his panoramic view of the world of funding business finances. His funding forecast leaves young startups with a sense of guarded hope. It gives more established entrepreneurs a bit more to hope for when looking for a funding source.
E-Commerce Times: How different is the role of providing funding in today's market?
Alan E. Hall: As an angel investor, most of us tried to learn the stock market. We lost a lot of our liquidity and are holding firm with what we have left. Most angels have left the game to the sidelines. The money just dried up.
ECT: Is it more a situation where angel investors are sitting on their money until better times arrive?
Hall: Angel investors are hurting just as much as the startups looking for money. These are very challenging times. None of the federal economic stimulus money comes our way to help struggling new businesses.
ECT: When might startups expect to see money flowing their way again?
Hall: We don't know when this money crunch will end. It will take a crystal ball. Venturing a guess, I'd say maybe a year or more. Then we'll see a slow improvement in the money flow.
ECT: What do startups have to do to attract funding today?
Hall: I have 60 angel investments. I go to all of them and tell them to survive. I urge them not to go out of business. Instead, they need to keep their concept going. They have to cut spending where they can.
ECT: What is the best advice you can offer to young startup owners?
Hall: These are really terrible financial conditions. Some companies will come out of this intact. But those with a lot of payroll will find it very hard to survive.
ECT: What do you see around the financial corner as far as the atmosphere for startups seeking investors?
Hall: Even though money is scarce for startups, I tell people to try finding investors. I also warn them to expect the worst-case scenario.
ECT: How are young companies faring with more traditional sources of funding?
Hall: Another bad side of this picture is that bank capital is also upside down. Banks want collateral for business loans. Most startup and many surviving entrepreneurs have nothing to put up.
ECT: What is the relationship between your private equity fund (Mercato Partners) and your angel investments?
Hall: I don't see my activities as a conflict. Rather, I try to coalesce and combine them to be mutually beneficial.
ECT: What are investors looking for in qualified startups?
Hall: On the venture capital side of things, we have money. To get it, a company needs at least $5 million. We'll give such qualified established entrepreneurs $5 to $10 million to help them grow their business.
ECT: So you're not saying that the economy is totally against struggling new businesses?
Hall: It all depends on where they are situated in the market. There is money out there for established companies trying to grow their companies.
ECT: What worries you most about the economic recovery cycle?
Hall: Because we (angel financiers) are on the sidelines, two or three years later, those startups still in business will be behind the curve regarding hirings and other business factors. That will have a ripple effect for 10 years or so.