Small Firms Want Angels on Their Shoulders

In medieval times, Christian monks debated whether the angels that fit on the head of a pin numbered in the hundreds or thousands.

By:
Jonathan Wegner
Omaha World Herald

http://www.nasvf.org/web/allpress.nsf/pages/8993

Today, Bryan Fairfield, executive director of Invest Nebraska Corp., estimates his contact book holds 120 Nebraska "angels" – investors who provide seed money, typically ranging from $250,000 to $2 million, for fledgling businesses.

Invest Nebraska, which received $500,000 from the state in 2001 to draw venture capitalists to Nebraska, finally has begun to deliver on its mission to pair promising businesses with potential financiers.

Fairfield said the payoff has been slow in coming, largely due to Nebraska’s lack of history dealing with venture capital and the general downturn in high-risk investment since the tech bubble burst.

The group’s first deal garnered $800,000 for Omaha-based Speed Stik LLC to rapidly expand sales of its golf-swing measurement system by scaling up production and producing an infomercial with pro golfer Vijay Singh.

Since then, two smaller deals also have come together for other local enterprises, but most of the entrepreneurs who reach out to Fairfield find their faith tested by the reluctance of "angels" to buy into their businesses.

Nebraska ranked 47th among states receiving financing from venture capitalists and angel investors, with $104 million in 2003, according to a recent study by the Center for Venture Research at the University of New Hampshire. By comparison, Kansas had $323 million and Colorado had $6.8 billion in venture investment in 2003.

Fairfield says Nebraska’s lackluster performance stems from its lack of angel investor networks and tax incentives, not a shortage of potential investors or prospective businesses.

"We have a lot of potential angel investors in the state, but most of them send their money elsewhere."

Angel investors are vital to growth because they finance 30 to 40 times more businesses each year than venture capital firms, according to the Center for Venture Research.

Venture capital firms expect airtight business plans and a fast return on investment, so the biggest challenge remains getting Nebraska businesses to the point where they become attractive.

"I look at more of our successes taking place before the angel stage, but the quality of potential deals is improving, Fairfield said.