Posted on March 14, 2011
Erie Angel Network Is Open for Business. Knox McLaughlin Gornall & Sennett, P.C. is a sponsor of Blue Tree Allied Angels Erie Network (“Erie Angel Network”). The Erie Angel Network formally commenced activities with its inaugural meeting on February 24, 2011. The Erie Angel Network is affiliated with Blue Tree Allied Angels, which has its principal angel investment group headquartered in Pittsburgh, Pennsylvania. The Erie Angel Network aims to be a catalyst for developing, retaining and growing new businesses and new technologies in Northwestern Pennsylvania.
Investment Resources. The Erie Angel Network is a group of accredited investors in the Erie region who seek to invest in early stage and start-up companies. There are many entrepreneurs who have developed novel technologies and have funded such concepts with support from family and friends. Pre-seed capital from such sources typically falls in the range of $100,000. Companies that progress may obtain further support from business or technology incubators or investment by “lone” angels familiar with the industry or technology. This seed level or start-up capital may reach $1 million as the company formally organizes, takes on employees and develops a prototype. After this start-up stage there is often been a funding and investment gap. At this stage the companies are too small for venture capital firms (which may enter when a company has achieved approximately $3 million capitalization) and lack the tangible assets or revenue flow to qualify for conventional loans. Companies that have exhausted friends and family capital often need funding of $1 to $3 million to continue start-up activity.
What Is An Angel Network? An Angel network is a group of accredited investors who work together in discovering, evaluating and considering potential angel investments. “Accredited” generally means a net worth of at least $1 million or an annual income of at least $200,000 for the past two years. By working as a group or a network, the angel investors are able to combine a diverse set of talents, skills and life experiences. Angels might be doctors, retired CEOs, lawyers, CPAs, engineers, consultants or entrepreneurs. The breadth of experience allows a broader outreach to attract potential investment candidates. This enables the group to screen many candidates in search of the best prospects. The breadth of angel knowledge and experience allows the angel network to perform meaningful due diligence, identify the terms upon which investment, if any, would occur, and utilize the various skill sets of the angels to assist the entrepreneur with the development of the company through an exit event for the network. Exit events may be the sale of the company, a negotiated redemption or some other event. Angel investing requires more patience than the typical venture capital investment. Angel investment holding periods may average 6-8 years before an exit opportunity emerges.
The Investment Question. Angel investment is speculative and consequently high risk. The entrepreneurs who come to an angel network are trying to predict the future of life sciences, manufacturing, retail, medicine on biology. Not all the prognostications will be wrong; not all will be correct. The angel network team provides the impetus to ask and answer the critical question, as posed by Blue Tree Allied Angels: “Is this team going to leverage these partners, to execute this plan, engaging in these activities, to defeat these competitors, in order to better serve these customers, selling this product or service with these current and future features and benefits, which solve this problem, at this price point and capture this market which drives these financial projections, which in turn accretes value such that I will one day see a return of this magnitude on my investment?”
Opportunity Knocks. For both angels and entrepreneurs in Northwestern Pennsylvania, the Erie Angel Network provides a new opportunity. Not only does it fill an existing investment funding gap, but it also affords budding entrepreneurs the opportunity to see first-hand the manner in which other companies are successfully asking and answering the critical investment question above. If you have an interest in attending a meeting of the Erie Angel Network, either as a prospective angel or an entrepreneur seeking to measure the development level of your enterprise please contact Dave Mosier at 814-459-2800.