Tuesday, October 17th, 2017

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Angel Investors Can Help Fund Startups

One day, a few years ago, Chris McAleenan, gripped by hunger, was burrowing though a phonebook for a pizza shop that delivered. Suddenly, McAleenan, then a Williams College student, thought, “This is kind of silly; someone should take this to the next level and make a way for pizza to be ordered on-line.” Thus, the idea for SimpleDine.com was born.

First originated in 2003 on the Michigan State University campus, SimpleDine.com allows students to place orders with local restaurants through the Internet and have the food delivered directly to them. “We (McAleenan and his business partner, John Dodge) raised money from friends and family and just went to work,” McAleenan recalls.

When more than 10.5 million of Americans are self-employed, according to the U.S. Small Business Administration, stories such as McAleenan’s are becoming more and more common. Yet, what is not uncommon is the need for initial funding, which can sometimes cripple a young entrepreneur’s dreams.

“We were looking for different capital sources,” McAleenan says. “Then we came across a company that told us about Grand Angels.”

A Devine Alternative

Grand Angels, located in the Grand Rapids region in Michigan, is one of the many Angel organizations throughout the country. As a team of investors, the group works to source, invest and nurture young companies in the west Michigan region, according to Patrick Gaughan, member of the board of directors and a co-founder of another Angels network in West Michigan.

The Grand Angels are members of the Angel Capital Alliance, an organization started by the Ewing Marion Kauffman Foundation in Kansas City, Mo. Currently, every state has at least one local Angels organization.

“For an entrepreneur, raising capital is a very difficult undertaking, so they turn over every rock they can find to locate friendly capital like that supplied by the Grand Angels,” Gaughan explains.

Grand Angels boasts a total of 40 selectively-exclusive members, all of who had to pass the SEC guidelines for being accredited investors—they have to have an individual worth of more than $1 million.

Overall, there are more than 400,000 such active Angel members across the nation, according to the Grand Angels website.

Serving a Greater Purpose

To aid entrepreneurs in need, Grand Angels assembles a smorgasbord of investors diverse enough to minimize any possible risk and maximize return on capital. However, that is not the only way this organization spreads the wealth. Its actions trickle down benefits to the entire Grand Rapids community. By providing capital to start-up businesses within a region, Angels organizations boosts the local economy while making sure that fresh entrepreneurs stay and grow in the area, instead of taking their ideas somewhere else, Gaughan said.

“They’ve helped in number of ways,” McAleenan says. “One is financially, but Grand Angels also sit on our board and we meet with them. They provided networking connections and continue to provide feedback and support that goes far beyond just financials.”

Who is Good Enough?

“We went through a pretty long process with Grand Angels,” recalls McAleenan. “We presented business plans and had discussions and eventually, they funded us.” The lengthy selection is not uncommon with Angels organizations.

“It could take several years to have a fully diversified portfolio of investments necessary to share the risk of early stage investing over enough management teams and market sectors,” Gaughan explains.

Just like their selection process for the investors, the search for entrepreneurs is just as discerning. Because the Angels organizations are all locally-based, they tend to provide support to entrepreneurs in their area. In addition, to be considered for financial support, the vying company must score well in 10 areas, including strong management, a strong market for the company’s products or services, a proven revenue model as well as projected cash flow.

“Generally companies and entrepreneurs seeking capital find us,” Gaughan explained. “We have a website and many lawyers and bankers in town know of our organization, and when they hear of an opportunity requiring capital and guidance our Grand Angel organization will get a call.”

A complete state-by-state list of Angel groups can be found at gaebler.com/angel-investor-networks.html, where links are available to download applications for investor funding from various local Angels.

“We didn’t have 20 years of business experience that many Angels bring to the table,” McAleenan says. “I’d love to become an Angel investor if I reach that level of success someday—it would be a great way to give back.”

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One Response to Angel Investors Can Help Fund Startups

  1. fmgservices says:

    I am a private investor based in the United Kingdom. I focus on seed capital, early-stage, start-up, ventures, LLC and all round completion and expansion of investment projects that need funding. I am interested to invest in your company on a long-term business relationship. If this is alright with you kindly get back to me with more details about your company.

    Dr. Frank Morgan.
    (Individual/Angel investor)

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