Kentucky Enterprise Fund (KEF) declined to invest in our project.  I’ve known this for just over a week now and I was hoping to be able to post an update here with additional information from our other sources of funding.  Unfortunately, it seems as if mother nature got in the way of communications over the past week.  With all the school closings, days off and snow (Snow that Louisville is not prepared to handle), I’m left waiting on updates from the private equity investors that I’ve spoken to over the past couple of weeks.  I’m expecting answers soon.

It’s been difficult to convince an investor that they need to drop $15M - $18M into our company and the reasons for this have mostly been external to the project or the team.  For instance, Kentucky Enterprise Fund had 55+ applicants for a grand total of $1M in funding dollars.  We were asking for $250K from them to build our technical demo.  KEF would receive a return no earlier than three years from now and there were/are serious questions pertaining to where we would raise the next round of funding.  As a matter of fact, the “next round of funding” seems to be a major road block towards getting a green light for our project.  Most angels in the Louisville market do not believe Louisville VC has the resources to fund a $15 - $18M deal or the contacts to enable that level of institutional investing.  I don’t believe it.  I think it is small market thinking but hey, I’m not the one with the money.  I do know that Greater Louisville, Inc keeps track of regional investment dollars and that the total investment in Louisville was just over $20M in 2009 with one company receiving $5M while the rest of the companies received less than $1M so there may be truth to the notion that the Louisville market can’t do our deal.  In any case, the feedback we received from KEF was that there were too many other companies with applications that lead to revenue faster for fewer dollars invested.  The companies they invested in didn’t need additional rounds of funding to get to revenue.  Our project, vision, team and plan checked out but we didn’t make the cut because there were faster paths to a return for KEF.  They left an open door to come back when we were further along which we may or may not take advantage of.

Hope still springs eternal though.  The KEF fund application forced us to answer the second round of funding question sooner than I would have thought and we’ve begun to make headway into other VC markets in the country.  The idea is to secure $500K in funding to build a technical prototype of our concept and then to shop that concept to institutional investors that we’ve already lined up prior to securing the initial $500K.  The whole thing makes me wonder how multi-round funding deals are done though that thought may simply be a product of the current economic conditions.  Updates will follow as soon as I have more information.