Greenville Business Magazine 2010 March issue : Page 40
Angel send me an [ S ] BY KRISTI KEENAN | PHOTOGRAPH BY COMMERCIAL IMAGING o you’ve got an idea for the next great thing – an innovative product that will change the way people all over the world do business (or treat diseases, or help the environment, etc.). Your friends and family have given you as much seed money as they can bear to hand over and you’ve spent your former retirement fund down to single digits getting your initial products out the door to a public anxious to gobble them up as fast as you can ship them. Your needs don’t really qualify you for the kind of money venture capital firms look to invest, so where do you turn? This kind of need is the niche angel investors were made to fill – but only when the fund seeker’s business has the potential for high rewards commensurate with the inherent high risk – angels invest their own money and are selective about those they help. “With the tightness in the financial markets, bank reluctance to loan money for start-ups, and VCs moving to later stage companies, the angel is more important than ever to getting new ideas off the ground,” says Tim Reed. Reed and J.B. Holeman are co-founders of the Upstate Carolina Angel Network (UCAN), the area’s only angel investment group. J.B. Holeman says,”High growth start ups, as a general rule, do not have assets, they have potential – promise. Therefore the only thing these types of entrepreneurs have to offer is a piece of ownership in the company or an equity investment. We make the same bet as the entrepreneur – when they win,we win!” Based out of the NEXT Innovation Center,UCAN looks for companies with “aggressive growth opportunities.” According to managing director Matt Dunbar, those growth opportunities often come from “companies that are bringing new technologies to market – such as information technology, software, advanced materials and medical devices.” Fortunately for the local entrepreneurs looking for funds,UCAN’s angels not only 40 GREENVILLEBUSINESSMAG.COM | MARCH 2010 offer money, they offer knowledge and experience. Reed says, “The importance that an angel group adds to an economy is not only by supplying the financial capital, but also the intellectual capital needed to nurture start-ups. It is a must for growing local economies.” Accord- ing to Dunbar, the depth of experience and expertise among UCAN’s members “is an extraordinarily valuable resource, so when we can match our investors’ knowledge with an entrepreneur's opportunity, it can be a true value-added capital scenario.” UCAN investors recently helped fund local company SensorTech. Investor Tom Govreau now represents UCAN on the company’s board. “I have a fairly deep background in startups similar to SensorTech,” says Govreau, “so hopefully I will be an effective representative for my fellow UCAN investors.” According to Dunbar, sometimes interaction comes through a formal board structure, as with SensorTech, and other times its an informal advi- sory or consultative role, such as ongo- ing consulting for the development of internal process management tools. So what does it take to get angel funding from UCAN? “In a network model like ours," says Dunbar, “the ultimate decision rests with each
Send Me an Angel
Kritsti Keenan
So you’ve got an idea for the next great thing – an innovative product that will change the way people all over the world do business (or treat diseases, or help the environment, etc.). Your friends and family have given you as much seed money as they can bear to hand over and you’ve spent your former retirement fund down to single digits getting your initial products out the door to a public anxious to gobble them up as fast as you can ship them. Your needs don’t really qualify you for the kind of money venture capital firms look to invest, so where do you turn?
This kind of need is the niche angel investors were made to fill – but only when the fund seeker’s business has the potential for high rewards commensurate with the inherent high risk – angels invest their own money and are selective about those they help. “With the tightness in the financial markets, bank reluctance to loan money for start-ups, and VCs moving to later stage companies, the angel is more important than ever to getting new ideas off the ground,” says Tim Reed. Reed and J.B. Holeman are co-founders of the Upstate Carolina Angel Network (UCAN), the area’s only angel investment group.
J.B. Holeman says,”High growth start ups, as a general rule, do not have assets, they have potential – promise. Therefore the only thing these types of entrepreneurs have to offer is a piece of ownership in the company or an equity investment. We make the same bet as the entrepreneur – when they win, we win!”
Based out of the NEXT Innovation Center, UCAN looks for companies with “aggressive growth opportunities.” According to managing director Matt Dunbar, those growth opportunities often come from “companies that are bringing new technologies to market – such as information technology, software, advanced materials and medical devices.”
Fortunately for the local entrepreneurs looking for funds, UCAN’s angels not only offer money, they offer knowledge and experience. Reed says, “The importance that an angel group adds to an economy is not only by supplying the financial capital, but also the intellectual capital needed to nurture start-ups. It is a must for growing local economies.” According to Dunbar, the depth of experience and expertise among UCAN’s members “is an extraordinarily valuable resource, so when we can match our investors’ knowledge with an entrepreneur's opportunity, it can be a true value-added capital scenario.”
UCAN investors recently helped fund local company SensorTech. Investor Tom Govreau now represents UCAN on the company’s board. “I have a fairly deep background in startups similar to SensorTech,” says Govreau, “so hopefully I will be an effective representative for my fellow UCAN investors.”
According to Dunbar, sometimes interaction comes through a formal board structure, as with SensorTech, and other times its an informal advisory or consultative role, such as ongoing consulting for the development of internal process management tools.
So what does it take to get angel funding from UCAN? “In a network model like ours," says Dunbar, “the ultimate decision rests with each individual investor – but the investment thesis includes (a company with) a robust solution to a compelling market need, rapid growth and healthy return opportunities, a viable go-to-market strategy, and
a talented, trustworthy team.” In the examples of both SensorTech and past fundee Selah Technologies, “The fact that these companies were local, with technologies developed at Clemson, and run by entrepreneurs our members know and trust,” made their case for funding even more appealing to UCAN investors.
“At the end of the day,” says Dunbar, “we’re investing in people, so the experience, credentials, references and character of the entrepreneur often make the difference between an investment and a pass. For that reason, a ‘warm’ introduction to our group is always better than a ‘cold’ business plan submission – although we certainly look at all the plans we receive. In addition, a well articulated executive summary with a clear description of a compelling market need and an executable go to market plan will stand out among the crowd.”
Since its founding in April, 2008, UCAN has:
››Attracted more than 85 investors
››Reviewed over 380 business plans
››Invited 28 companies to present to our members
››Invested $2.2 million in 8 companies (5 in SC, 2 in NC,
and 1 in GA)
››Hosted two investor seminars offered by the Angel Capital Education Foundation
Dunbar says angel groups around the country, on average, invest in 4 or 5 new deals per year – so for UCAN to be in line with the average in its second year in a tough economy is a very encouraging sign that they are seeing quality deal flow. “UCAN provides a vital function in the growing entrepreneurial infrastructure of the Upstate,” he says. GBM
UCAN members generally seek to invest in companies that:
››Are startup or early stage ventures located within
a 4 hour drive of Greenville, SC
››Address large and/or fast growing markets and
have a defensible competitive advantage
››Anticipate annual revenues in the tens of millions
of dollars within five years
››Are seeking between $150K and $1 million (up to ~ $2 million in a syndicated round)
››Are willing to offer a 20-40 percent equity position in the company on a post-money basis
››Have developed a clearly articulated plan for use
of the investment dollars
››Expect to create a liquidity event that can provide investors with a return of 10x or higher
››Are led by passionate entrepreneurs with relevant experience (or a strong Board of Advisors)
Upstate Carolina Angel Network expects their investments to generate:
Expected revenue by year 5: $20,000,000 - $80,000,000
Expected returns: 5x investment - 30x investment
Expected years to exit: 3 years - 6 years
Expected years to break even: 1 year - 2 years
info from www.upstateangels.org
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