Two California Based Angel Groups Try Expansion Promotions

Angel group model fuels expansion

The Keiretsu Forum, http://www.keiretsuforum.com/ an East Bay angel group, is taking its show on the road with the launch of two chapters in Southern California, one in Canada and the promise of more to come.

By:
Mark Calvey
San Francisco Business Times in NASVF.org

Keiretsu is in talks with angel investors about creating chapters in Hawaii, Las Vegas, New York and Pittsburgh, Pa.

"We’re not pushing out with any marketing. We’re quietly being approached by other angels," said Art Monk, general partner with Meridian Executive Partners LLC and the Keiretsu member overseeing the expansion efforts.

The interest in forming Keiretsu chapters signals wealthy investors’ growing desire to back entrepreneurs and suggests that they find the angel forum’s model appealing.

"There’s real value in the sharing and learning that occurs among members," said Randy Williams, founder of the angel group.

Keiretsu’s model allows individual members to make their own investment decisions. Other angel groups create a structure in which investors put money into a fund, which is then invested on behalf of the group — often by a vote of the membership.

The number of angel groups has tripled in the past five years to an estimated 170, according to Jeffrey Sohl at the University of New Hampshire’s Center for Venture Research.

Keiretsu Forum, founded two years ago, has invested almost $23 million in 25 companies in a wide range of sectors, including technology, biotech, consumer products and real estate.

Some of the basic tenets of the Keiretsu Forum will remain in place as it expands to other cities, Monk said.

The angel group will continue to be structured so that investors write investment checks directly to the entrepreneur, letting each Keiretsu member decide in which companies they want to invest. Keiretsu will also continue its policy of not taking warrants or commissions on the money entrepreneurs raise from its members.

"We want investors to understand how a Keiretsu Forum chapter operates just as they would with a local chapter of the Rotary Club," Monk said.

Keiretsu established chapters this month in the Canadian city of Calgary, Alberta, and Long Beach, its second chapter in Southern California.

In addition to backing entrepreneurs, the angel group also pursues social activities and charitable initiatives.

For instance, the Keiretsu Forum Charitable Foundation earlier this year worked with the nonprofit Social Stimulus in launching an annual nonprofit funding competition designed to incorporate principles of running a successful business into the operation of a nonprofit.

The grand prize winner of $50,000 was Respond Inc., which will use the money to assist battered women and their children though the sale of CDs by well-known artists. San Francisco-based MyTwoFrontTeeth.org, which makes it easier for donors to give toys to needy children, and Rainn, which is building a national sexual assault online hotline, each received $25,000.

"There’s far more to Keiretsu than finding investment opportunities," Monk said.

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Touched by an angel

Affiliation could help entrepreneurs generate capital

By:
Eileen Brill Wagner
Phoenix Business Journal in NASVF.org

Valley entrepreneurs in need of capital may not have to look skyward with the hopes of finding angels. The answer could be in their own backyard.

Angel Legacy, a California company that matches angel investors with companies needing funding has chosen Phoenix as the first city outside of its hometown Sacramento area to launch its network.

The business model combines a Web-based matching system aided by local individuals familiar with the capital landscape in their markets.

The company, which plans to serve 80 communities within the next five years, chose Phoenix as its beta test site because it is "fertile turf for private-equity transactions," said Don Hawley, chairman and chief executive.

"There are very few venture capitalists and a number of accredited investors who either visit or live in the locale," he said, emphasizing the need to bring such opportunities to the area. To qualify as accredited investors, individuals must make more than $200,000 a year or have a net worth, excluding their homes, in excess of $1 million.

"Also, universities graduate a great number of individuals who are entrepreneurial-minded and Phoenix has a reputation of being business-friendly to startups," he said.

Wesley Morgan and Jack Eberenz of Capital Consortium in Phoenix were selected as the local "angel pros." They will be working with high-potential companies, as well as advisers to investors and the network. The goal is to increase the odds of a local match and expose firms here to investors throughout the country.

"We were looking for well-respected professionals, who have a significant reputation as leaders in the community advising entrepreneurs," Hawley said. "We left Phoenix extremely enthused about the quality of the pros, and the receptivity of the bankers, lawyers and accountants.

"We had an overwhelming sense that this is a community ready to embrace an orchestrated, well-conceived approach to dealing with the funding gap," he said.

"Angels are hard to get to, and they don’t want to listen to a dozen presentations," said Eberenz, a former executive who has served as a consultant for more than 200 companies in the region. "The capital community has started to realize that it must come together to match companies with the best source of funding."

Morgan said that one of the advantages of the database is that each angel writes his or her own check and there is no pooling of funds. That way the angel can be matched with the company that best meets a checklist of criteria.

"Companies here will be able to go into the network and expose their business plans not only all over the Valley, but across the United States," said Morgan, who has participated in early-round funding for a number of companies, including Nike.

"What I like is that they seem to have taken a very studied approach as to how to properly put together all the constituents to be successful," said Kent Petzold with local venture-capital firm Arris Ventures. Petzold said he was been approached about investing in the company and becoming one of the local angel pros.

One of the most powerful aspects of their approach is linking up investors’ money managers, or their "trusted advisers," in a systematic way, he said. "It will help them support their portfolios and individuals within the portfolio by introducing them to appropriate investments.

"Historically there has been a real gap between friends and family helping start the business and the point where venture-capital firms show legitimate interest," Petzold said. "With the economic situation, that gap has widened."

While Fountain Hills author and consultant Dee Power said, "Anything that has the potential to bring additional capital to Phoenix is good," her research shows that Web-based matching services are not used by venture capital and private investors very often.

Also, added Power, who wrote "Inside Secrets to Venture Capital," "If I were a money manager, I would be hesitant to put my clients into any kind of risky investment since most new businesses fail."

Hawley, a former CPA with Deloitte & Touche who describes himself as a "lifelong entrepreneur," said there have been several attempts by other companies to create an electronic platform to match investors and entrepreneurs.

"The reality is that neither an entrepreneurial company or an adviser, left alone, will seek each other out," he said.

Steve Boatwright, a securities partner with Gammage & Burnham law firm in Phoenix, said he believes Angel Legacy will provide a way for angels to "weed out independently which ideas they want to pursue."

He said having people like Eberenz and Morgan involved, who are familiar with the local market, will provide an important screening function — a big plus in a place such as Phoenix that has among the highest percentages of startups in the United States.

"This is great for Phoenix," said Boatwright. "Angel groups have historically been regionally based. But this could provide Phoenix-based companies with sources of capital outside of the local angels."

Get connected

Capital Consortium: http://www.4lec.com.

Angel Legacy: http://www.angellegacy.com.