Business to ‘angels’: Sow us the seed money

More help could be on the way for entrepreneurs needing seed money.

The St. Paul-based Minnesota Investment Network http://www.mincorp.org/ has launched five new "rainmaker" funds this year. Also, at least one other new proposal is likely to focus more attention on the continuing need for seed.

That’s good news.

Many players in today’s small-business world say seed capital — typically investments of below $1 million and often much less — is in woefully short supply.

Paul Moe, director of business and community finance for the Minnesota Department of Employment and Economic Development, welcomes the investment network’s growth.

Moe notes that others have been trying to meet this need for years. In Minnesota, for example, the McKnight Foundation’s initiative funds have done much to provide outstate businesses with small amounts of capital unavailable from other sources.

Even so, he and others say entrepreneurs’ need for more seed money remains.

Traditional venture capitalists usually shun investments of less than $1 million. The economics of making such small investments just doesn’t work for them.

The nonprofit Minnesota Investment Network, known as MinCorp, helps bring "angels" together in its affiliated funds. The angels, well-heeled individual investors willing to take risks, typically invest from $30,000 to $100,000 in early-stage businesses.

The idea is elementary enough. Start-ups that succeed create jobs and wealth for their communities. And for their investors, such businesses generate good returns.

MinCorp rolled out its rainmaker concept in 1998 when it started a fund in Alexandria, Minn. Through last year, it had helped to launch six more of these funds. This year, the pace has picked up markedly.

Eight of MinCorp’s 12 funds are in Minnesota, including four of the five started this year. The new Minnesota funds are in Willmar, Montevideo, Mankato and St. Cloud.

The other four affiliated funds are in Iowa and North Dakota.

"We started out small and, like a snowball going downhill, we’ve picked up speed," says Steve Mercil, chief executive of MinCorp.

MinCorp helps the funds with legal work, due diligence and other expertise.

Mercil and MinCorp’s chief operating officer, Brian Johnson,say they don’t know of any other angel networks with more separate funds than theirs.

They add that the MinCorp network is positioned for further expansion. MinCorp officials are working with groups to organize angel funds in South Dakota, Montana, Idaho, Washington and Oregon.

DAVE BEAL

Full Story: http://www.twincities.com/mld/twincities/news/columnists/13287492.htm