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Area Groups Develop Angel Network
GRAND RAPIDS — The Right Place Program, Michigan Economic Development Corporation (MEDC), Small Business Development Center (SBDC) and Grand Valley State University hosted a seminar last week on angel investing. The meeting was intended to be an organizational, informational, brainstorming session to establish an angel network. Currently Michigan is one state that has only a fledging angel network. “Angels” are traditionally anonymous individuals looking to fund a business within their area of expertise.
The session attracted about 20 people from area accounting firms and legal firms, which may be able to help identify potential “angels” as well as support such alliances with their services. The group received a mixed bag of good and bad news.
“Ever since the story ran (in Grand Rapids Business Journal, March 26, 2000, edition) about angel investing, we have had about 50 phone calls, 10 people coming in to see how they can get involved, and I get about two to three calls a week regarding information. It is great that so many people want to be a part of this, but we weren’t expecting this volume,” said Nancy Boese, regional director of the SBDC.
What the area organizations hope to do is put together an angel network comprised of training and screening programs to pair angel investors and companies.
“There is a screening process we hope to put in place to see what companies need funding and which can make it on their own,” said Boese. “We would also like to create a training system to educate both sides on what to expect from each other.”
Boese added that it is a confusing process for both sides when an agreement like this is made. The company isn’t sure how to utilize its angel in the company and the angel isn’t sure how to place itself in the company.
By creating the network, the organizations involved are taking some of the work out of the process. During a transaction, the company and angel investor would have to contact accounting firms, legal firms and have an advisory board in place.
The angel network will assist with all that, putting both sides in touch with accounting and legal counsel as well as advising what steps should be taken and what practices need to be in place.
“We want to look at this and see how we can make it workable for everyone involved,” said Boese. “We can’t make any guarantees that the deal will succeed and that the business will be successful — these are high risk situations — but we can assist in the first steps of the process.”
David Mielke, dean of GVSU’s Seidman School of Business, stated it is important to keep in mind the value and risk of an investment of this kind. “This is not like going to a bank and buying a mutual fund or buying some public stock. This is an investment in sometimes no more than an idea. It is a high risk venture and something both sides must be educated on.”
Boese looks to assist with these first steps in the fall when the program should be up and ready to go. For the present time, the organizations look to start small but Boese said they have no way to tell what will happen.
“If a company comes in and needs a $5 million investment, we may need to look state-wide. So we will take it step by step,” she said. That is also where the MEDC comes in, in trying to establish a statewide program.
“We realize there are many technology firms out there that are waiting to be tapped, we just have to learn how to get in touch with them and put them in touch with interested angels,” Boese added.
Mielke said one problem is that most angel investors choose to remain anonymous to the public. “It would be nice if there were an intermediary that was able to be in contact with both the angel and the entrepreneur so that a level of anonymity was kept intact. This way they don’t have people knocking on the door asking for money, and they can be matched with an idea or business that will best suit the funds they wish to invest.”
The free service will most of all establish an avenue through which angel investors and entrepreneurs with ideas and already established businesses can connect, as well as provide an education method so each side may become better informed of the process, legal entities and survival techniques.