Venture Capital / Angel Investors: Angel group watches for early-stage rising stars

" Delta Angel Group, a nonprofit alliance formed here three years ago to bring together early-stage, mostly technology-oriented companies with private investors, is making gains in its efforts to stimulate business growth here, says Norm Leatha, its president.

“There are not enough people who have the money doing this” type of higher-risk, higher-return investing in the Spokane area yet, nor are there as many great investment opportunities bubbling to the surface yet as he’d like to see, Leatha says.

“On the other hand,” he says, “we’re not being starved for opportunities. It’s amazing how many things are percolating in the community.” Inland Northwest universities, in particular, have started to feed a lot more business-venture ideas into the seed-money pipeline, he says.

A major catalyst for Delta “will be when we have a major success”—an angel-ignited business takeoff perhaps not on par with Microsoft or Starbucks, but substantial enough to create big economic impact here, Leatha says.

Since the group was founded, he says, proposals from 31 applicants have been presented to the group’s member investors, or about 10 a year. Data just now are being gathered on how many of the companies that have sought angel funding through Delta eventually received money—either from the group’s members or indirectly, such as from members’ friends, Leatha says. He estimates, though, that probably half of the companies that have applied got some amount of angel funding.

He declines for confidentiality reasons to name them, or identify most of Delta’s members, but says some of the recipient companies are well-known emerging ventures here, and many of Delta’s members are prominent businesspeople.

Its members’ backgrounds vary widely, he says, but “they are almost always entrepreneurs who have been successful on their own and understand how the process works, and want to give back in a way that is meaningful to where they live.”

Angel investors are wealthy people who provide capital for startups, usually in exchange for an equity stake, and look for a higher return than they would garner from more conventional investments. They often provide the first outside financing that early-stage companies receive beyond what they can raise from family members or friends while they’re still too immature to seek financing from venture firms or financial institutions.

The use of the term “angel” in this context comes, according to Web sources, from the practice in the early 1900s of affluent businesspeople investing in Broadway productions. These days, angels provide to the enterprises they help finance not only seed funding, but also business guidance, management expertise, and contacts.

Unlike venture capitalists, they normally don’t pool money in professionally managed funds. However, they often organize themselves in angel networks or groups to learn more about how to invest, discover new investment opportunities, to share research, and to pool investment capital to varying degrees."