Angels helping local businesses soar in Las Vegas

A group of Nevada investors is helping entrepreneurs to soar by providing coaching and capital.

They’re called angel investors, and while they may not be sent from heaven, they make entrepreneurs’ dreams come true by investing in businesses that offer unique products and have strong growth potential in a short timeframe.

By:
Michelle Wafford
In Business
Las Vegas, NV

http://www.nasvf.org/web/allpress.nsf/pages/8911

Nevada has a limited number of angel investors, but there are more today than a few years ago and those in existence are eager to help companies with innovative ideas and good management teams.

Henry Valentino, chief executive of Las Vegas-based Smart Connect, was one of the entrepreneurs taken under the wings of Nevada’s angel investors. In February, his software company received $800,000 from 15 members of the Vegas Valley Angels to grow.

"When you begin to grow you need capital," said Steven Singer, chief financial officer for Smart Connect and co-founder of Vegas Valley Angels. "We needed to raise additional money to hire sales people. It’s really sales and marketing dollars."

Smart Connect combines video surveillance equipment with cash register data to strengthen loss prevention programs at places such as Caesars Entertainment Inc.’s hotel-casinos and HMS Host stores at McCarran International Airport.

Bill Payne, co-founder of the Vegas Valley Angels, said, "A lot of the food and beverage companies may want to purchase this product. We think it’s an interesting opportunity with a lot of growth potential."

The Vegas Valley Angels formed last fall and looked at 30 companies before selecting Smart Connect as its first investment. Each time a company is invested in, eight to 10 investors from the angel group contribute money, which ranges from $25,000 to $100,000 per investor, Payne said.

Companies can receive between $300,000 and $1.5 million from Vegas Valley Angels, he said.

Sometimes angel investors are the only financing option available to entrepreneurs, who turn to family, friends and their personal credit when they start and then need additional financing to grow.

In addition to providing capital, angel investors coach entrepreneurs and link them with venture capitalists, which tend to fund investment requests for more than $20 million to companies that are farther along in the growth process.

Investing in companies can be a risky business for angels, which often receive a return on investment from only one or two of every 10 companies they invest in, Payne said.

"Since this is an investment and not a loan, we’re looking for accelerated growth and the opportunity to have an exit by selling the company in seven years or so," Payne said. "We’re not banks. We’re investors so the company is not likely to be one where the entrepreneur wants to give the business to their kids."

Accelerated growth to an angel investor means a company has to generate a minimum of $40 million in annual revenue within five to seven years, Payne said.

Angel investors say there are several things entrepreneurs should consider before calling them. First, they should have a solid management team.

"The management team is really important," Payne said. "We all would rather invest in an A management team and a B business plan, rather than having an A business plan and a B management team."

He recommends having top executives in the company that have been chief executives or have run a company division.

Entrepreneurs should also have a product and customer in mind or most angel investors won’t consider their companies, Payne said.

Business owners who feel that they meet the requirements can get more information from angels’ Web sites. Companies who aren’t ready for angel investing but would like the opportunity later should consider entrepreneurial training courses offered by the Community College of Southern Nevada or Las Vegas-based Technology Ventures Corp., Payne said.

In addition to Vegas Valley Angels, Nevadans can pitch their business concepts to Sierra Angels, which is a group based near Lake Tahoe that has helped 46 companies in seven years with investments between $500,000 to $2 million.

Bob Goff, president of Sierra Angels, said his 50-member group focuses on early stage companies that have "unique solutions to really pressing problems or have a fair amount of intellectual property that prevents barrier to entry (in the market)."

The Sierra Angels co-invest with other angels groups such as the Vegas Valley Angels and Sacramento, Calif.-based Golden Capital Network.

"In the past Nevada has been chastised for not having much capital in the state," Goff said.

He said there is adequate money to fund qualified Nevada companies with two Nevada-based angel groups and a host of partnering groups in other parts of the country.