Angels among us

For a decade or so, Angel Fund investors elsewhere around the country have been dropping the middleman — the professional investment expert and his hyper fees — along with the expectations of quick and high returns that characterize so-called venture funds. Then they’ve pooled their money and their wisdom and chosen early-stage entrepreneurs to back.

In 2007, the year the recession began, 57,120 entrepreneurial ventures in the United States received $26 billion in angel funding, according to the Center for Venture Research at the University of New Hampshire.

None of those dollars were invested in Southwest Florida.

But that was then.

Now, says Tim Cartwright, managing director of the Compass Advisory Group, part of Fifth Avenue Investors, the economic constellations have aligned themselves and conditions are right. That says a lot about how much money exists in Naples, and something about economic recovery post-recession, too.

“Never waste a good crisis,” Mr. Cartwright notes cheerfully. He’s president of the Gulf Coast Venture Forum, whose brand new Tamiami Angel Fund is seeking stellar start-up entrepreneurs from the region or state. Beginning this month, 30 investors, most from Collier County, are putting $1.5 million on the table — $50,000 each for the good idea.

They won’t have to observe the typical venture fund business model of 2 by 20, either.

“Two percent gives you money to buy fancy offices and pay your team good money, and investors generally agree to give 20 percent of the profit to the team,” explains Mr. Cartwright, who has worked on the Tamiami Angel Fund idea since 2005.

“The Angel Fund is different because you don’t hire a professional team. You allow the angels — the investors — to make the decisions. We’re at a fixed administration fee and 5 percent carried interest.”

None of this could have happened before the recession, when real estate, tourism and agriculture were the only games in town, and investors could turn a quick buck — or a million bucks — on homes, condos or land, Mr. Cartwright surmises. Now, he says, we have an innovation economy, with universities of scale or specialized research such as FGCU, the University of South Florida and The Jackson Laboratories, and with access to seed capital and professional networks such as the Southwest Florida chapter of BioFlorida.

The Jackson Laboratory, for example, is a Maine-based medical research firm getting taxpayer-funded benefits to open a Florida branch in Collier County — which proves that local government is on the side of business and investment.

Seed capital, in this case, means the Tamiami Angel Fund.

For an entrepreneur who can sell an idea to a committee of five chosen from among the 30 investors — and then sell it to the entire chorus of angels — this may be the blessed intervention that inspires success.

“Most of these investors have more money than $50,000 to put into play, so if the Angel Fund invests and they like the deal, they’ll do add-on investing,” Mr. Cartwright explains. “You might get somebody who will add on another $150,000,” he adds. “The power of the Angel Fund is the collective wealth that sits in the audience and that can be activated at any point when they feel the right company has come along.

Mr. Cartwright expects many to apply and only a few to be chosen, an expectation born out by the experience of a successful Angel Fund called Springboard Capital based in Jacksonville, Fla. There, according to published comments by Vice Chairman Alan Rossiter, roughly 300 entrepreneurs are picked to pitch their ideas to investors each year, and about five actually receive money for early- or mid-stage businesses.

Many of the good bets are recommended by lawyers or accountants, by members of the fund who become aware of them or by venture capital funders who want something larger but who recognize a good bet and pass on the information, Mr. Rossiter told an online publication looking at entrepreneurial opportunities, sramanamitra.com.

“Our investors want to give back to entrepreneurs,” explains Mr. Cartwright. “It’s a double bottom-line investment. They say, ‘If I break even, I’ll be OK.’” 

in the know

• Almost 700 Angel Funds exist in the United States. • The U.S. Securities Exchange Commission requires investors to be wealthy, goals to be set out and a time line to be established for an Angel Fund. • In 2008, 12 public and private organizations through Southwest Florida studied the strengths, weaknesses, opportunities and threats to the region’s economic health and came up with the recommendation an Angel Fund be established here. Academic and professional organizations involved in the study included economic councils and corporations or offices from Collier, Lee, Charlotte, Sarasota, Glades and Hendry counties. • The Tamiami Angel Fund has 30 investors. • Entrepreneurs will be recruited for the local fund beginning in October. • Companies typically receive $50,000- $200,000 from an Angel Fund, with add-on investments from individual Angels as they see fit. • Learn more at www.tamiamiangels.com.

Profile of an angel investor

• Who: Tim Cartwright, president of Gulf Coast Venture Forum, an Angel investor network • Title: Managing director, Compass Advisory Group LLC, a Fifth Avenue Advisors company • Education: University of Wisconsin undergraduate degree; MBA from the J.L. Kellogg School of Management at Northwestern University • Experience: Began his career at Arthur Anderson in Chicago; founded By-Products Interactive, an electronic trading, market-research and publishing company; founded Benchmark Solutions, a supply chain consulting company • What the GCVF does: “We look at companies that are pre-revenue — a product has not been sold yet — for need in the marketplace based on customized research. We look at revenue companies that aren’t cash-flow positive — they still aren’t making a profit. And we look at companies making money but looking to do a new product line to expand to another region. “This is a five-year fund starting Aug. 1, 2010. We anticipate investment to occur during the first two to 2½ years, followed by 2½ to three years of investment monitoring and mentoring.”