Starting June 1, Wisconsin entrepreneurs seeking seed money for their young companies will be able submit a two-page executive summary on the Wisconsin Angel Network’s Web page, and those executive summaries will be forwarded to all of the angel networks in the state.
The Wisconsin Angel Network was created earlier this year to spur investment in early-stage companies in Wisconsin.
Businesses have long complained about the lack of venture capital available in the state. But angel investors, who typically invest in start-up companies earlier than venture capitalists do, are just as necessary, if not moreso, to growing the state’s economy.
"Wisconsin has a small but growing number of angel networks," said Tom Still, president of the Wisconsin Technology Council. "Angel investors account for nearly as much private equity investment nationally as do venture capitalists, and angel money is much more focused on early-stage companies."
Nationally, about $18 billion was invested by angel investors in 2003, and almost all of it was invested in early-stage companies, according to state officials. Venture capital also accounted for about $18 billion in investment nationally in 2003, but only about 2 percent of it was invested in early-stage companies, officials said.
"(Angel investors) are absolutely vital for the stage of company formation," said Joe Kremer, director of the Wisconsin Angel Network. "It’s incredibly difficult to find the source of your first round of financing."
Individual angel investors are often difficult to find because they usually keep low profiles to avoid being constantly bombarded with funding requests from entrepreneurs, Kremer said.
"One angel network told me they were getting 400 business plans a year," Kremer said. "That’s more than one a day. An individual angel investor does not have the time to review that many."
However, many of the angel investors are members of angel networks which are eager to receive and review business plans, Kremer said. The angel networks typically weed out the best plans so the investors only have to review a handful each month and decide if they want to invest in the companies, he said.
"The networks (review) all of the business plans they can because they want to do a lot of deals," Kremer said.
The angel investors are typically high net worth individuals and are usually people with a business background who have an affinity for entrepreneurs.
"We like the game, we enjoy the hunt and we like being rewarded for it," said Tim Keane, director of the Golden Angels Network. The Milwaukee-based angel investors group was formed in 2002 and has done three investment deals, ranging from $200,000 to $1 million. The network is close to completing another deal with a biotech company, he said.
Some angel investors were once entrepreneurs themselves and provide advice, in addition to capital, to the young companies they support.
"Some angel groups, like ours, try to be active investors," Keane said. "We try to be investors that help companies as opposed to just putting in money and saying, ‘Tell me when something happens.’"
Some angel investors take a more hands off approach, however. Entrepreneurs should find out how active angel groups are in advising the companies they support, to be sure a group that invests in their firm is the right fit, Keane said.
Angels invest in the very earliest stages of a company’s development, so their risk is great, but so is their potential reward if the company becomes a success.
The Wisconsin Angel Network (www.wisconsinangelnetwork.com) will make it easier for entrepreneurs to get in contact with angel investor networks. The network’s Web page provides a link to the NorthStar Economics Inc. Web page (www.northstareconomics.com), which provides a list of all of the angel investor networks in the state.
Before the Internet, entrepreneurs looking for angel investors pitched their business plans to their attorneys and accountants, who knew a lot of successful businesspeople, in hopes they would recommend their company to an angel investor.
That is still a useful approach, Kremer said, but now entrepreneurs can also contact the networks in the state directly through the Wisconsin Angel Network or NorthStar Economics.
There are at least seven angel networks in the state and another four or five that are in the formation stages and have not yet made any investments, Kremer said.
Angel networks often have a goal of improving the economy in their local area. However, Milwaukee-area entrepreneurs should not avoid an angel network even if it is located in a different part of the state, or even in a different state entirely, Kremer said. Angel networks are continuously looking for good investment opportunities, even if they are with firms from other areas.
"The angel networks want to do as many deals as possible," Kremer said. "I’m talking to a group (forming an angel network) in Ashland. They want to do deals with people from wherever. Don’t just stay with (angel networks) in your local area. Reach out to all of them."
The Golden Angels Network primarily invests in companies in Wisconsin and Illinois, but would consider deals with companies in eastern Iowa or eastern Minnesota, Keane said.
"We tend to be active investors," he said. "We want to be close enough to help the company."
Companies looking for assistance from angel investors must prove they have solid business plans. Angel investors conduct thorough due diligence before deciding to invest in a young company.
"I look at the business plan and say, ‘Who are these people? Do they know what they are doing? Do they know the industry? Do they have a level of experience?’" Keane said. "How does this business make money? That seems like an obvious question, but it isn’t always."
Entrepreneurs must show their business will not only provide a quality good or service, but also has a model to earn a profit and outperform its competition, Keane said.
The Wisconsin Angel Network’s mission is to connect Wisconsin entrepreneurs with angel investors, even investors from outside of the state.
"We’re looking to attract money from Minneapolis, Chicago and anyone that is interested," Kremer said.
The Wisconsin Angel Network is also working to encourage more people in the state to become angel investors. The network helps investors join with existing angel networks or form new angel networks.
If the state’s economy is to thrive, it must create a culture that supports entrepreneurs, Kremer said. Risk-taking investors helped fuel the growth of start-up companies that created Silicon Valley in California. Wisconsin needs more of its traditionally fiscally conservative residents to take some financial risks as angel investors to support and grow cutting-edge businesses in the new economy of the 21st century.
"A lot of people believe we have a lot of potential angels (in the state)," Kremer said. "Wisconsin has a lot of wealth within it. A lot of our money is closely held. I think we have a lot of potential to introduce angel investing as part of an investment portfolio. I don’t think that’s a part of our culture. We’re trying to encourage more entrepreneurial spirit in Wisconsin. Once you get that within the culture, you’ll see more investment happening."
Wisconsin Angel Network
Joe Kremer, president
www.wisconsinangelnetwork.com
(608) 267-1712
Milwaukee-based angel investor networks
• Golden Angels Network (www.goldenangelsnetwork.org), contact Tim Keane (414) 288-5722
• Silicon Pastures (www.siliconpastures.com), contact via e-mail at: Info@SiliconPastures.com
Other Wisconsin angel investor networks
• Chippewa Valley Angel Investors Network (www.chippewavalley.org/
brdirectory/angelnetwork.htm), contact James Hanke (715) 726-2727
• Marshfield Investment Partners LLC, contact Dan O’Connell (715) 384-2717
• Origin Investment Group LLC, contact Jan Gallagher (608) 785-8782
• St. Croix Valley Angel Network (www.stcroixedc.com/services.htm#StCroixValleyAngelNetwork), contact Kathy Bartelt (715) 425-3398 or Chris Bye (715) 425-3398
• Wisconsin Investment Partners LLC (www.wispartners.com), contact Richard H. Leazer (608) 832-6365 or Terry Sivesind (608) 238-7674
March 18, 2005, Small Business Times, Milwaukee, WI
