Angel networks are forming in locales around the country to identify small businesses worthy of financial blessings. From informal breakfast groups to broker-forged entities, these networks fill a need among high-tech start-ups that have exhausted their personal financial resources--family, friends, credit cards--but don't yet qualify for venture capital funds. However, the operative term here is "high-tech," virtually a universal condition for this type of angel funding.
AngelMoney.com (http://www.angelmoney.com), an angel network in San Diego, is one such entity. It's made up of a group of private individuals who invest their own money, in amounts ranging from $50,000 to $500,000.
"There are more than 60 groups like this operating in the United States, and many more around the world," says Chuck Teel, co-founder of Business Angels International (http://www.equityinternational.com) in Portage, Indiana. The 2-year-old company publishes The International Directory of Venture Capital Networks and Business Angel Networks 1999 (U.S. edition, $39.95, available at the Web site).
Another breed of angel network is emerging among structured firms. Like securities firms Spencer Trask & Co. in New York City and StoneGate Partners LLC in Boston, more and more financial consultants, merchant bankers and other executives are forging angel networks. StoneGate, for example, assembles groups of 10 to 15 angels to invest in high-tech/high-growth businesses in New England.
"These are smaller companies that have outgrown the capabilities of individual angel investors," notes Kenneth Wolfe, StoneGate's managing director and co-chairman. The broker-dealer considers privately held companies with a proven track record and significant growth potential fueled by technological change, preferably at a point where product development is complete and funding is needed to ramp up production and expand sales and marketing. When such an investment opportunity is identified, StoneGate arranges financing of $3 million to $5 million in expansion capital in return for a 20 to 40 percent equity position for the investor group.
Finding structured angel networks takes detective work; you can research firms online or contact brokers and ask if they are involved with or know of any angel networks.
Freelance writer Paul DeCeglie(MrWritePDC@aol.com) is a former staff reporter for Journal of Commerce and American Banker.