Wednesday, Nov 18, 2009
/ Source: Business Journal Daily
Few Entrepreneurs Find Guardian Angels
|
YOUNGSTOWN – Angel investors bless entrepreneurs with capital and the know-how to build successful companies, and bless communities with new jobs. Securing funding from angel investors, however, is no easy task, says Catherine V. Mott (WATCH VIDEO), president, CEO and founder of BlueTree Capital Group and BlueTree Allied Angels in Wexford, Pa., a suburb of Pittsburgh.
Mott, who holds an MBA in finance from Youngstown State University, returned to her alma mater Nov. 17 to discuss angel venture capital with students, faculty and members of the community as part of the Williamson Symposium series.
“Angel investors are not a new phenomena,” Mott told those gathered for a breakfast presentation. “But they are a lot more sophisticated.”
Most are retired entrepreneurs or businessmen who still want to be involved in developing and growing new businesses. Their average age is 54 with minimum annual incomes of $200,000 and networths of at least $1 million, Mott reports. Each investor must be accredited because of the risks involved, she noted, and men outnumber women as angel investors by as many as 19 to 1.
BlueTree Allied Angels, the angel investment group she founded, requires members to invest at least $20,000 in each deal in which they participate – individual investors opt in or opt out of every deal approved – with minimum investments from the group pegged at $200,000.
Since it was established in 2003, Mott said, BlueTree Allied Angels has invested $14.3 million in 21 deals, eight of them in cooperation with other angel organizations.
Among the companies in BlueTree’s portfolio are Quaker Steak & Lube, a restaurant franchisor based in Sharon, Pa.; ALung Technologies Inc., which is developing the world’s first commercial artificial lung; AppCompTech, a software development company focusing on an application for use in radiation treatment planning for cancer patients; and Biosafe, which produces anti-microbial materials that prevent disease and enhance personal safety.
BlueTree Allied Angels focus on “early stage technology companies,” 50% of which are in the healthcare and life sciences fields. That’s because there is a heavy concentration of companies in those disciplines in the Pittsburgh area and angel investers typically invest “in their own backyard,” Mott said.
They invest in the company’s very early stages, “right after family, friends and fools,” and want to be involved in the business to help ensure its success and a return on their investment, Mott stressed. So, she explained, they typically don’t invest in companies outside of a two-to-four hour’s drive. “They want to be able to ride past and see that the lights are on.” Mott described the angels’ involvement in the startups they fund as “an active watching of their money.”
While angels are interested in the products these companies turn out, their greatest interest is in the potential returns, she continued. The best business plan in the world, written for a company that will produce the best product may be wonderful, but if the potential for a significant return on investment is not there, Mott said, angels aren’t interested. That’s because the investors understand that of every 15 to 18 startups they fund, five will end in bankruptcy, one or two “will hit it out of the park” with great returns and the rest will provide a moderate return. So, it is imperative, Mott said, that they find the one or two companies that will pay off.
Thus far, BlueTree Angels have averaged a 27% return on investment. Average holding times for companies funded by angel investors are between 6.3 and 8.6 years.
Angel investors typically fill funding gaps that range from $500,000 to $5 million and “take the risks that banks can’t take,” Mott said. Her group typically funds six new companies a year while also funding second, third and fourth rounds for some of the companies in BlueTree’s existing portfolio.
Taking note of the students and other young people in her audience who may someday want to start a business, Mott advised entrepreneurs and potential entrepreneurs who may seek funding from angels to have a “top-shape business plan” and to get to know someone in the angel group. “Nothing works better than to have someone in that group champion your cause,” she said. Mott also advised would-be business owners to perform due diligence on their potential investors as much as the investors will perform due diligence on them and their business plans. Good matches among people whose expertise complement each other and who can work well together increase the chances that the business will succeed.
Mott also suggested those interested in seeking funding attend a meeting where other entrepreneurs make their pitches to potential investors. Many of them spend too much time explaining the technology and too little time laying out their business plans and describing potential returns, she said. Others never get to the end of their presentations because they exceed their alotted time limits.
“In real estate it’s all about location, location, location,” she said. With angel funding, Mott said, “It’s management, management, management. It’s all about execution.”
Mott worked in corporate banking for 17 years before founding her own companies, Synergetics Sales Performance Group and Indigo Capital Development. She co-founded BlueTree Allied Angels, western Pennsylvania’s first “business model angel network,” and BlueTree Capital Group in 2003. She became sole owner and CEO of both companies in 2008 after buying her partner out. By: Maraline Kubik
|
|
|
|
|
|
|