Tech startups depend on angel investors – Without them, most would not reach venture capital stage

“There are hundreds of early-stage companies with great or even mediocre ideas here. It’s amazing to see what dies on the vine in this city.”

Julie Howard
The Idaho Statesman

http://www.idahostatesman.com/Business/story.asp?ID=56587

By Brad Wiskirchen´s count, there are plenty of angels in the Treasure Valley.

The Boise technology attorney calls them “cowboy angels.”

That´s not a reference to the rangelands and ranching background of this Western state, but rather to a fiercely independent attitude exhibited by the area´s angel investors.

So-called angel investors are those wealthy individuals who provide financing for start-up companies — sort of like a gift from heaven when other forms of financing are unavailable. In the technology arena, start-ups typically cannot get bank loans because they have no collateral and need the cash to even produce a product.

“To bring ideas to scale, you need money,” said Wiskirchen. “Having angels around is vital to early-stage companies.”

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BRAD WISKIRCHEN is a partner at Holland & Hart http://www.hollandhart.com/Office.cfm?IDName=OfficeID&ID=3 in downtown Boise who focuses on helping technology companies. He is one of the individuals working to implement an angel investors organization that would benefit entrepreneurs.

U.S. Bank Plaza,

101 S. Capitol Boulevard

Suite 1400 Boise,

ID 83702-7714

Phone: 208-342-5000

Fax: 208-343-8869

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Angel investor

As defined by the Securities and Exchange Commission: An individual with a net worth of at least $1 million who helps an entrepreneur develop an idea into a business.

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Rounding up the area´s angels into a more organized structure is an important next-step in developing a vibrant entrepreneurial culture, say area entrepreneurs and economic development experts.

In other technology-rich communities, angel investors have their own organizations, Web sites and monthly breakfast meetings to discuss and visit with new companies. Sometimes they are given state tax incentives for making investments.

A few small groups here have angels cooperating in their investments, such as Stellar Technologies and the Northwest Angel Network. This year, however, a more public gathering will be launched out of the venture capital committee of the Boise Metro Economic Development Council.

The Idaho Angel Alliance, a newly formed group spearheaded by that committee, plans to hold at least two angel gatherings this year, said Phil Reed, who heads seed capital investments for Highway 12 Ventures http://www.highway12ventures.com/ in Boise.

“People thought venture capital would answer the industry´s funding needs here, but that´s just been part of the answer,” said Reed.

What Highway 12 discovered is that most of the emerging tech firms in the Treasure Valley that are seeking funding are too early-stage to qualify for venture funding. That venture capital firm has made some Idaho investments, but the bulk of its investments so far has gone to companies in other states.

“Without angels, we´re not going to see enough deals ready for Highway 12 investments,” said Reed, who has linked several start-ups with local angels to help them get launched.

A more formal network, however — where entrepreneurs can present their businesses to a group of angels — will propel more startups forward, said Reed. In addition, he said, by working with others, individual investors can share the risk with others and perhaps make more informed and researched decisions.

“Idaho just needs more angel activity,” said Bill Basham, an angel investor himself and head of the Northwest Angel Network http://www.theangelpeople.com/ , which has operated quietly in the community, helping entrepreneurs and area angels meet. “Does that come through a more formalized structure? I think so.”

Basham, too, subscribes to the “cowboy” theory about Idaho´s angels, saying that wealthy people here are more reluctant to declare themselves wealthy and seem to prefer to invest alone.

“Some enjoy being the Lone Ranger and funding what they like by themselves,” said Basham. “They´re pretty independent guys.”

And not all angels are created equal.

“There´s money and there´s smart money,” said Wiskirchen. “Smart money brings connections and mentoring.”

For Dedicated Devices Inc. in Nampa, attracting that combination made all the difference.

The firm, which makes a device that networks all electronic and wireless components in a home, was launched last May and has received $500,000 in funding from several Idaho angels.

“We came up with the idea for this company, but if we didn´t have the resources and encouragement, we wouldn´t be here,” said Jeffrey Moeser, CEO of DDI. “Those investors told us here´s how to set up a company and here´s how to do a killer powerpoint presentation, and here´s how to raise more capital.”

Stewart Laney Oaas, a partnership best known for its real estate developments, was one of the angels for DDI, joining in with Highway 12´s seed venture initiative to fund the startup.

Moeser said he was successful in attracting angels because he previously knew and worked with the partners in Stewart Laney Oaas. If an entrepreneur didn´t know an angel, he said, it´s unlikely he´d know how to find one.

“I think others are having trouble because the angel community here is fairly loosely banded,” said Moeser. “Angels are something the state needs in order to grow because the economy grows from small companies. There are a lot of potential ventures sitting out there at HP and Micron — those people need help to get started.”

To offer story ideas or comments, contact Julie Howard
[email protected] or 373-6618