Last year, Brookfield-based Golden Angels Investors LLC began adding members to its group that are not actually investors.
But they hope to be angel investors one day.
The new membership group is called Golden Angels Advisors and is comprised of about 80 young and mid-career professionals who want to learn more about investing in startup companies. They may eventually join the 105 investors currently active in Golden Angels Investors.
Tim Keane, director of Golden Angels Investors, started the program because he wanted to help more people become angel investors. He was inspired by the Sequioa Scouts Program, through which startups that have been funded by California venture capital giant Sequoia Capital identify and invest smaller amounts in pre-seed and seed technology startups.
“I think that it’s a great way to have a next generation of people see what you’re doing,” Keane said.
Under SEC rules, in order to become an accredited investor, an individual must have a net worth of at least $1 million, excluding one’s primary residence, and annual income exceeding $200,000 for each of the past two years, or $300,000 combined income with a spouse.
Golden Angels Investors is a member invitation group, owned and governed by its members. New applicants must have a member advocate and self-certify that they are accredited investors. New members are admitted to the partnership.
“Advisors are people who are interested in entrepreneurship broadly speaking and aren’t investors,” Keane said. “Most often, these are young to mid-career people who are really interested in what we do and want to see it in person and learn and participate and most of the time they aren’t accredited.”
When Golden Angels Investors hears a pitch from a startup, it conducts due diligence with the help of the Advisors, drawing on the whole group’s knowledge in different industries and their entrepreneurship experience. If it decides to invest, a new LLC is formed and only the members who choose to invest in the deal own it. That also makes it easier for entrepreneurs, since they only have to deal with one investor entity.
“With us, we’re all making individual decisions,” Keane said “In a venture capital firm, people put their money in and the venture capital guy makes the decisions. It’s a great model, but that’s not what we do. I like entrepreneurs and seeing growth happen.”
Which isn’t to say angel investing is easy. It’s a risky venture to bet on early stage startups, but it can also be high reward to get in on the ground floor.
“The one part of this that’s financial is fairly important and let’s call that recycling,” Keane said. “You have to get a return just to get enough money in the pot to keep doing it.”
From 2003 to October 2016, Golden Angels had 13 exits. Of those, four returned more than the original investment, five returned less and four returned nothing. It makes for a 17 percent rate of internal return.
The deal screenings aren’t intense and investor-focused like popular startup investing TV show “Shark Tank,” Keane said. The group hears entrepreneurs’ pitches and then discusses their potential and asks questions about the companies.
“The rewards are not always just financial,” Keane said. “The rewards are a network of people and building relationships. It’s foolish, I think, to be an angel investor who goes around growling at people. The reality is that we’ve seen 3,500 companies since 2002. We’ve tried really hard to offer something to everybody, not just, ‘Hey thanks, we’re not interested.’”
That hands-on nature of the Golden Angels Investors is what attracted several of the Advisors.
Briana Riordan, 33, general manager at Milwaukee-based RCB Awards, was one of the first Golden Angels Advisors in February 2016.
She took Keane’s courses on new venture formation and venture growth while in the MBA program at Marquette University. He called her up when he was starting the advisor group.
She likes getting the opportunity to tag along with the Golden Angels, see many of their communications and the pitch decks that entrepreneurs submit, and assist with due diligence research.
“It’s just a really valuable experience to be part of listening to how they think about deals and how they think about markets and opportunities and what they find interesting and important,” Riordan said.
Some of the advisors look at the group as a hobby, or see it as a more exciting and tactile form of investing.
In the future, if RCB were to sell a division, Riordan said she might become an investor.
“There’s this opportunity to really participate and be a partner and help a business grow rather than just make an investment in something like the stock market and kind of hope that it works out,” she said. “You have a little more stake in it and more ability to affect the outcome.”
Sam Klietz, senior vice president, global sales lead at Intermedix, is also a Golden Angels Advisor. He also took Keane’s entrepreneurship courses, and then worked at a company Golden Angels invested in, EMSystems.
“(Keane) wanted to create a funnel of investors that understood the program and how things work, to get them more interested in investing,” Klietz said.
Klietz, 39, said he could technically be an investor but wants to watch the group for a while before jumping in. He’s enjoyed offering his advice to some of the entrepreneurs using his skillset, learning why the Golden Angels pick an investment or don’t, and is becoming more comfortable with the process, he said.
“There’s a certain amount of energy there that you don’t get from traditional investing,” Klietz said. “Angel investing is interesting, as well, because you can actually impact, no matter how successful your investment might be. There’s very few other investment opportunities out there that you can play such a large role.”
