Editor’s note: Jim Roberts is the Senior Entrepreneurship Consultant for TIP Strategies, an Austin, Texas based economic development consulting firm. Roberts is still living in Asheville, N.C., but will soon relocate to Austin. He was the founding Executive Director of the Blue Ridge Angel Investors Network (BRAIN) and the Blue Ridge Entrepreneurial Council (BREC). BRAIN is a member of the Angel Capital Association. Jim Roberts can be reached at jim@tipstrategies.com or to learn more please go to tipstrategies.com.
WRAL Local Tech Wire asked Roberts to write about what happened at the summit.
ASHEVILLE, N.C. – Recently at the Angel Capital Association Summit in Chicago, many angel investors from the Southeast played a prominent role on the main stage. Southeast representatives been particularly active in the organization from the start, and their experience is now paying off in leadership roles.
There were also new participants from places like the Atlanta Urban League, Georgia Tech, Charlottesville, Va., south Florida, Sumner County, Tennessee and Greenville, S.C. And there was a noticeable absence of angel leaders from the Triangle and Charlotte. Granted the Triangle is already sophisticated about angel investing and has mentored other regions for years.
Angel investing plays a big role a region’s economic vitality for entrepreneurship. Can an underfunded company survive without an influx of seed capital? Consider that as much as 60 percent of small businesses fail in the first four years after starting.
Reason No. 1 for failure? The business was undercapitalized as companies usually need three times as much money as they budgeted for startup costs. Also, another most misunderstood part of entrepreneurship is that while the company may have the greatest idea since sliced bread, an underfunded company will not be able to hold onto first mover advantages as companies with more resources easily take over momentum as the original company runs on fumes and loses talented employees due to lack of resources.
Most regions complain about the lack of venture capital in the community but fail to recognize the need to get entrepreneurs prepared to achieve the level of success where the venture capital firms begin to play. As venture capital firms continue to invest in later stage deals to reduce risk and employ bigger chunks of money due to bigger funds, the angel investors will have to fill the gap of early stage investing.
The first day was an optional and more general seminar called the “Power of Angel Investing”. This seminar has previously been held in North Carolina by the Small Business and Technology Development Center (SBTDC.org) by leaders like Horace Stimson, Tim Janke and Bill Parrish. All of the Chicago sessions were sold out and attended by people from across the US, Canada and even the UK. There were additional half day sessions on the importance of thorough due diligence and on term sheets.
I was proud to see my friend Michael Cain of the Wilmington (N.C.) Investor Network as one of the panelists at the “Power of Angel Investing” seminars. He was among the other “rock stars” of angel investing, including John May of New Vantage Group, Susan Preston of Seattle/LA and James Geshwiler, from the Common Angels of Boston, who is brilliant. (Must be a result from his experience at the University of Texas in my eventual new home of Austin.) Also participating was Luis Villalobos, founder of the Tech Coast Angels, winner of the 2007 Hans Severiens Award for his contribution to the angel investing industry.
Over the next two days, brilliant people like the always friendly Al Rossiter of Springboard Capital in Jacksonville, FL and the always sharp Knox Massey of the Atlanta Technology Angels who told the crowd of over 300 attendees of their experiences and frustrations of running an angel network. (Trust me, it is not as sexy and glorious as it sounds.)
This is very much an 80-20 rule industry where 20 percent of the members do more than 80 percent of the work. What work? “Herding the cats” is a big time spend in managing an angel network. The average is 25 to 50 individual angel investors per angel group. These members are busy people in their everyday lives as all are not retired or did not inherit the wealth. It takes time to pin each of them down for a vote on an investment or to write the actual investment check. Attendees also learned from the brave leader of an angel fund that failed in the Chicago area and they returned the un-invested capital to the members.
Sid Chambless of the Nashville Capital Network had the stage to himself as he described the sensitive topic of having a sponsored angel network and entrepreneur support program. Sid was asked about his very successful program supported by Vanderbilt University, Bank of America, local law firms and serial entrepreneurs who are giving back, but also eager to have a seat at the table. The Nashville Capital Network is becoming a model for angel networks nationwide for communities that lack the resources to be 100 percent privately funded by the local angel investors to cover costs.
Many versions of angel networks were discussed during the three days. Each city or region has a different personality and a different level of risk tolerance. As a consequence each model differs in specific ways. Should the angel networks be part of an economic development strategy? Should members be charged an annual fee to cover administrative and managerial costs? Should the managers of the angel networks receive payment or a carry percentage for their efforts? (YES!!!) Should the region have an angel fund, an angel network or an angel forum? What are the best practices of angel networks to share deal flow for syndication of investments across regions?
Rest assured, the Southeast is covered by angel investors who have experience and now serve as mentors for new angels across the region and beyond. I am confident the Southeast will maintain its leadership role with the Angel Capital Association and will continue to support entrepreneurs. These efforts support each community through job creation and by retaining and attracting the best and brightest minds.
Jim Roberts can be reached at jim@tipstrategies.com or to learn more please go to tipstrategies.com.
