The Central Valley Angel Group, a member managed fund created with the help of Loon Creek Capital has been up and running for almost two years. The fund has started to hit its stride and recently made a pair of investments in local startups. Read more here: http://www.thebusinessjournal.com/blog-local-venture-capital-group-makes-two-investments/
Our Fresno California client, the Central Valley Angel Group announced its first investment in a company called Boost Acquisition. read more here: http://www.thebusinessjournal.com/news/banking-and-finance/22029-central-valley-angel-group-makes-first-investment
One our fund portfolio companies was recently featured in the news. Crater is a company disrupting the moving industry. Read below for more, or see the original article here: http://www.petaluma360.com/news/6620504-181/nimble-tech-startups-grow-in?artslide=0
Nimble tech startups grow in Petaluma
SEAN CURZONFOR THE ARGUS-COURIER | April 18, 2017
Among the shops at the Great Petaluma Mill, two tech startups have moved in recently, bringing new life to Petaluma’s technology industry. The new companies provide niche services to movers and nonprofits.
Crater, a startup that makes and sells software to moving companies that allows them to connect with costumers and give them estimates on moving costs, works with more than 200 moving companies, including Pickfords and Nor-Cal Moving Centers.
Nonprofit Easy handles data management for nonprofits. They work with many local nonprofits, including Petaluma Educational Foundation and the Charles M. Schulz Museum. Sharing an office downtown, both companies are looking to make their mark on Petaluma.
Crater is an app that moving companies can add to their websites, allowing people to schedule moving estimates and the companies to interact with their customers and provide estimates remotely.
“Consumers are buying products in a different way, like Amazon, and people expect things to be instantaneous or on demand like Uber,” said Alex Alpert, founder and CEO. “They want to be able to buy services much in the same way.”
Alpert and Lomesh Shah, founder of Nonprofit Easy, met at SoCo Nexus, an incubator for new companies in Rohnert Park. The two noted similarities between their companies, and decided to set up shop together.
“He was trying to restructure his company, and we started talking about my experiences,” Shah said. Alpert said they chose Petaluma because of its favorable business climate.
“We wanted to put ourselves in an environment where we were going to flourish,” he said. “You want to be in a place that is inspiring. We’re both using disruptive technologies which are changing the way that people move and the way nonprofits work and so it was really important to us to be centrally located so that we feel that energy of being in downtown.”
Shah said he thinks that Petaluma has a great small-town feel. “The Theatre District really changed the vibe for the city,” he said. Missy Singh, director of operations for Nonprofit Easy, was impressed with the wide variety of activities in downtown Petaluma, and its many restaurants. “There’s literally everything here,” she said. Singh started with the company when it was created, working as an intern. She said the startup creates software that can track donations and help nonprofits with fundraising.
“Our goal is to serve the nonprofit industry and provide them with what they need, which is a database that can track all their operations,” she said. “You can get consultants, you can have a platform that’s really expensive and nonprofits don’t have the budget, so we’re focusing on small- to mid-sized nonprofits.”
Alpert founded Crater in March 2015. His family has been in the moving business for three generations. He got the idea for the platform when his wife, Daniella, was doing moving cost estimates in the Bay Area and she had to drive to San Jose for an estimate.
“I looked at her and said it makes no sense for you to drive four to six hours right now to go to San Jose for a 15-minute estimate,” he said. “Why don’t you just call the customer and see if they can use Skype.”
The Skype call went well and Alpert realized the potential of online meetings.
“I realized right off the bat that somebody had to develop this technology because moving companies needed it badly and Skype and Facetime are consumer-grade applications which are not built for enterprise-level environment, and nobody was filling that need. That’s when we decided we had to build Crater.”
Shah was approached by local nonprofits Mentor Me and Petaluma Bounty to build database software that keeps the data in one place and keeps track of where the donations go. Nonprofit Easy was founded in 2011 under one of Shah’s parent companies, but was spun off on its own in 2013.
“The original idea was to build something that would help them out operationally,” Shah said. “As the requirements started unfolding, we realized that the only way to justify the cost would be if a lot more nonprofits could use it. So, we pitched it to a dozen local nonprofits and they all joined in the effort.”
Alpert wants to show people that Petaluma is a fostering place for technology companies and startups.
“Some of our employees are coming from San Francisco to work here in Petaluma, which is kind of nice with the reverse commute,” he said. “Lomesh and I both have kids, and this is a great place to raise a family as well as start a business.”
Loon Creek Capital offers administrative and consulting services to angel funds and alliances. The Boise Angel Alliance, one of our long standing clients was just featured in online investing blog Funding Sage. See below for the article which can also be found here: http://fundingsage.com/startup-investor-series-boise-angel-alliance-baa/#more-3420
Startup Investor Spotlight: Boise Angel Alliance (BAA)
April 26, 2017 by Pam Goforth - Startup Investor Spotlight, Startup Stories
Boise Angel Alliance provides investor education and is active in collaborating and mentoring with other members of the Idaho entrepreneurial ecosystem.
Name of Angel Group / VC Fund: Boise Angel Alliance (BAA)
Dr. Mark Roberts, President
Current Active Fund, Gem State Angel Fund (GSAF) – 4th in a sequence
Location: Boise, Idaho
President: Mark Roberts
Screening Chair: Will Fowler
This article is part of our Investor Spotlight Series featuring Angel Networks / Funds and VC Funds. We hope these spotlights will inform and inspire the entrepreneur concerning funding options and opportunities.
There are numerous operating models being pursued by angel networks / funds and VC funds. How does yours work? How does it differentiate you?
The Boise Angel Alliance (BAA) acts as the parent oversight body for providing education to angel investors and for creation of new member-managed angel funds. Each fund includes investors who purchase units of $50,000, with cash contributions occurring in five separate trances as the fund approves investments. Units may be purchased by a group of investors that form a syndicate. The investors serve on three committees: Screening, Portfolio, and Co-Investment as well as participate in Due Diligence committees for potential new investments. The Due Diligence committees make recommendations for investments and a supermajority of 60% of investor units is required to approve an investment. Want to read more about the BAA funding process?
In what specific industries and sectors do you invest? Are there specific industries, sectors or types of opportunities in which you don’t invest?
The Boise Angel Alliance has a broad array of investments and are open to most industries and sectors. We prefer investing in companies that our membership has a depth of expertise in.
Does your organization have any geographic preferences upon which you build your portfolio?
We invest in Idaho companies only.
What key attributes do you look for when selecting companies for investment?
The Boise Angel Alliance is looking for companies in the ‘sweet spot’ for angel investment, ideally early revenue with valuations in the $1-2 million range, with a sizable market that could be addressed and rapid scaling of the business once a winning business model is arrived at. We believe company leadership is critical, perhaps as the overriding factor beyond the idea/business as it is initially conceived.
see related: The Perfect Entrepreneurial T-E-A-M: Transformer, Examiner, Architect and Mover
At what stage(s) of the startups’ development do you prefer to invest?
At an early stage. Some of our investments are companies that are pre-revenue, but most are early in generating revenues from current operations and have not completely settled on their business model.
What is the Early Stage of the Startup Funding Life Cycle?
Tell us more about your team. Do you work with companies beyond the provision of funding? If so, how do you support them?
The BAA is a not-for-profit entity with a volunteer board. The BAA primarily serves to provide investor education and has been active in collaborating with other members of the Idaho entrepreneurial ecosystem that assist with entrepreneur mentoring and other assistance.
Are their key startups which serve as examples of the types of investments you like to pursue? What specifically differentiates them?
GenZ Technology is an example. They address a significant problem in a sizable market, the application of pesticides in commercial farming with unique and protected intellectual property. We have participated in three funding rounds, beginning when they were pre-revenue and continuing through final product development and scaling of revenues. We have members with experience in commercial agriculture who could evaluate the deal and assist the company. Interested in learning more about GenZ? See Video.
What trends in the startup world are you most excited about?
SaaS companies. SaaS is a form of software delivery that allows data to be accessed from any device with an Internet connection. Companies don’t have to invest in extensive technology to host the software, and this in turn, allows buyers to outsource most of the IT responsibilities typically required to troubleshoot and maintain the software.
Can’t find the tools to guide you through the startup process? Turbofunder can help map your path!
Are you familiar with other Angel Groups / VC Funds you believe should be spotlighted? If so, we would like to hear from you. Tell us about them, sharing your comments below!
Business Startup Spotlight: Geo Verde
Pam GoforthPam Goforth is Research Manager for FundingSage, which provides valuable information, tools and resources to entrepreneurs seeking to start, grow and fund a business.
Tags: angel investor, BAA, entrepreneur, GenZ, GSAF, Idaho Investors, Mark Roberts, startup, Will Fowler
Enabling Startup Success!Learn More »
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The Gem State Angel Fund, Loon Creek's newest member-managed angel fund has made its first investment. Read more below:
The state-wide angel fund invested in User First Software, Inc. dba LeanLaw. LeanLaw markets software and IT services to make small to medium-sized law firms more efficient. Its first software product is for time-keeping and billing.
Gary Allen, User First’s CEO says, “We are proud to be one of the initial companies supported by Idaho's first state-wide angel fund. We appreciate the critical role the broader Boise Angel Alliance plays in nurturing early-stage companies like ours and the mentoring and support it has provided to LeanLaw.”
“The Gem State Angel Fund is pleased to be the lead investor in LeanLaw, says Mark Roberts, the Chair of the fund. “We are hopeful that our investment will help the company to begin to scale quickly."
The Gem State Angel Fund is member-managed; members are responsible for assisting with screening, due diligence, company monitoring and other duties. Objectives include promoting business and economic development in the region while providing members with the potential for investment returns.
The fund has raised $1.3 million and is still actively selling up to 40 units of membership at $50,000 per unit to accredited investors who are residents of Idaho.
The Gem State Angel Fund is affiliated with the Boise Angel Alliance and is the fourth angel fund formed under its auspices. Previous funds have limited their Idaho investments to companies located in the Treasure Valley. The Gem State Angel Fund is the first to seek investors from throughout the state with an intention to invest in companies statewide.
The Boise Angel Alliance was created in 2004. To date, funds and members associated with the Boise Angel Alliance have invested over $20 million, mostly in local companies. The portfolio companies of these investments have created more than 300 jobs in Idaho with a 2015 payroll of approximately $38 million.
Boise-based Loon Creek Capital Group provides administrative and consulting services to the funds.
At Loon Creek Capital, we're woking with the California SBDC and the founder of the Seattle Angel Conference, John Sechrest, to bring angel investing conferences to Central California. These conferences are a mix between a demo day for entrepreneurs, and an accelerator for new investors. A group of 30 or so investors each invest roughly $5,000 into a fund and then agree to put all of the fund money in a single company. The company that is vetted through a pitch event. Over the course of about 90 days, the investors meet to screen roughly 60 applications, listen to pitches, pick six finalists, conduct due diligence and negotiate terms. The six finalists pitch at a demo day event, and after each pitch the investors present their due diligence findings as well as ask the founders some additional questions. The group of investors then takes 30-45 minutes to decide which company will get the money. The audience gets to see pitches, due diligence findings, and witness the investment decision, while the investors leave with a portfolio company (the first one for some).
The model John has invented is creating new angel investors every year, so many that an annual fund has formed and others are in the works. A few weeks ago we were hosting an information panel on the conference in San Louis Obispo, California and the question of returns came up. It's a really good question. Investors should always ask about returns. After all, the money invested needs to give a great return so we keep investing. However, returns on the conference model are a little tricky to measure since each conference is, in essence, its own fund with only a single investment. Additionally each conference is comprised of a very different group of investors, so trying to track the conference returns as a portfolio is challenging. We asked John to weigh in on this and he wrote a great blog about it posted here: Seattle Angel Conference Blog. I've also posted his blog below. Thanks John!
When we talk to people about the Seattle Angel Conference, there is often a question about the previous returns that we are seeing from our efforts with our previous Angel Conferences. This is actually a hard question to answer in a couple of ways.
The main hard part of the question, is that is makes assumptions about Angel investment that are not particularly helpful early on. There are features of Angel Investing that make it different than your regular old stock market investing that people who ask this question are trying to compare against.
Rob Wiltbank and Wade Brooks at Willamette University have been studying Angel Investing and have collection some of the best data available. If you look at their data, you can get a more comprehensive set of data about general angel investing.
Out of that we learn that exits tend to take some time. Sometimes a long time. The typical expectation is that the Angel Investments make it to exit in 7-9 years. If you factor in that the ones that fail, tend to fail early, then the ones that win will tend to be later... even later than 7-9 years. So given that the Seattle Angel Conference is 5 years old. We would expect a few failures and no wins.... And that is where we are at….We have a list of companies and regularly track their progress. Over the last 10 cycles (5 years)
We have about 21 investments, depending where you draw the circle. We have deployed about $2M. And we have educated more than 200 Angel Investors.
Out of those efforts, we've seen:
Out of every 10, you will see 9 not give enough money back. You need to be in 20 deals to have a good chance of winning.
This assumes you do good due diligence, remove the bad ones and only start with very very very good companies at the beginning. However, more importantly, the Seattle Angel Conference is not about returns. It is about learning. While it can be risky if done wrong, Angel Investing overall seems to produce some interesting returns, as we see in the Wiltbank data.
What are the habits and behaviors that make it more likely that you will achieve those types of returns?
We believe that Angel Investing process can produce good returns if you engage it well. You can explore the Halo Report from the Angel Resource Institute and see that overall Angel annualized returns look like 25% / year. But these returns are not evenly distributed at all. More than 60% of the companies loose some or all of the money invested. Close to 30% provide some returns, but not a lot. So this is not a normally distributed return profile.
More importantly for the Angel Conference model, the process is a bit overly structured to make it possible to create more learning about the process of investing. So those companies that are exceptional, have previous experience, know the network of investors and have great momentum….They are already connected to people and are quick to get funding. So the angel conference never will be about optimizing the returns. Instead, it is a very low cost, simple way to get a deep look into the process and to learn about the issues that make Angel Investing interesting. And to see first hand some of the issues that are hard to deal with and deserve significant consideration before proceeding on a deal.
For New investors, who have never been inside an Angel Investment, it is a great way to gain perspective about the market, the structure of companies, and to build relationships in the market. It is the expectation that alumni investors of the Seattle Angel Conference will learn a great deal about their investment thesis and where they want to engage. And then will move on to the other Angel groups that match their goals.
If an early focus on returns is the highest priority for the investor, then it is likely that the risk profile is one of low risk and this may not be appropriate to engage in the process of Angel Investing.
To repeat a bit:
There are other Angel Organizations in Seattle that have a much stronger focus on building an opportunity for good returns:
There is some data about how they are performing here: (2015)
Every April, the MIT Forum has been doing a “Meet the Angels” workshop, where folks talk about how Angel Investing works
Other references and interesting information
Wade Brooks - http://willamette.edu/mba/faculty-research/faculty/brooks_w/
Rob Wiltbank - http://www.willamette.edu/~wiltbank/
Angel Investing Returns - http://www.willamette.edu/~wiltbank/angel_performance_report.html
Angel Investors do make money - https://techcrunch.com/2012/10/13/angel-investors-make-2-5x-returns-overall/
Angel Resource Institute - Halo Report - https://www.angelresourceinstitute.org/
At Loon Creek, we recently announced that I (Will Fowler) will be taking over as Managing Member. This transition comes at an important time in our firm as we expand our services and geographical footprint in the Angel Investing community. We’ve now raised five member-managed funds, serviced numerous SPVs (Single Purpose Vehicles) and syndicates, and currently provide back-end services for active Angel Funds and Angel Alliances in the Northwest and California. We’ve gone from being locally focused to being involved in regional and national efforts making early stage investing more accessible and transparent. I’m very proud of what we’ve accomplished so far, humbled by my new role, and excited about where we’re headed.
My transition to becoming Managing Member started when I lived in New York City. No, I didn’t work for Goldman Sachs, JP Morgan, or any kind of financial institution...I was an actor. After getting my MFA in theatre, I moved to New York, secured a reputable agent, and spent the next six years performing in theatre, TV, and film. As most actors can attest, employment in the arts is anything but dependable, and so I spent time in between acting roles doing an array of things in the corporate world of New York City. In an effort to defy stereo types, I never waited tables.
It was these in-between times and experiences that began to spark my imagination about how the arts and business are actually very similar. After moving back to Boise, I gained an MBA and simultaneously dove into the startup world. To my great fortune, Boise is a very interesting place to build a startup. It has a unique mix of corporate talent centers (HP, Micron, Simplot, Albertson’s), a reasonably mature Angel Investing scene, and a community based culture. People who move here tend to “stick”, and the community is small enough that everyone is accessible. This allowed me to get involved, learn, and contribute in a very short time.
I immediately saw similarities to the arts. Like the arts, angel investing is fraught with risk. Like the arts, startups are constantly building and iterating on what their audience needs and wants. Like the arts, both investors and startups are trying to create something new and meaningful. One of the things we said often in the Theatre was “If you’re going to fail, fail big.” Maybe this is why I feel so at home in the world of early stage investing.
With Loon Creek I’ve served as an intern, screening administrator, due diligence facilitator, SPV coordinator, fund administrator, and partner. Boise gave me opportunities to accelerate my learning and I’m grateful to have worked so closely with the Boise Angel Alliance and Loon Creek. In my new role, I no longer get applause at the end my workday, but the feeling I get when a new company finds a way to scale and makes an impact on their local community is just as exciting...and the upside when we have a liquidity event is nice too.
America just voted to elect a new president. One that has never held political office, but has made some astounding promises. Don’t worry this post is not about politics, but the election reminds me of something we see in Angel Investing: the lure of potential.
When startups have no metrics, it’s easy for them to pitch the idea of a future full of customers and cash. Investors sometimes get swept up in the story of how great the company could be and forget the reality that these companies are largely just good ideas with little traction.
On the other hand, we often see startups apply for funding that do have some level of traction. They might only have modest revenue and a handful of customers. These companies sometimes have a harder time getting investors to believe they can grow exponentially because investors see the numbers and are unimpressed.
However, something that is good to remember is that ideas are worthless. I’m going to write that again. Ideas are worthless. No matter how great they are, no matter what market research has been done, no matter how many customer interviews show it will be successful. An idea without execution is worthless.
So the next time a company with modest numbers pitches your group, think about the amount of effort it takes to turn an idea into revenue. Remember the lure of potential and look for meaningful metrics instead. After all, a promise without action is just air in the wind.
Entrepreneurs are always proud of their product or service. They frequently begin with how terrific it is. But angels and other sophisticated investors aren’t very interested in the product or service-at least not at the beginning of the conversation. Rather they want to know what problem or opportunity exists in the market place.
So many great entrepreneurs spend most of their time pitching how great their product or service is and don't spend enough time talking about the size of the opportunity. The main way in which Angel investors make their money back is when a company they've invested in has a liquidity event i.e. get's acquired. The acquisition has to be at a price that will return much more than the Angels initially invested to make it worth the risk of putting money in at such an early stage. If the market or opportunity size is not big enough to allow the kind of growth needed to become an acquisition target, it is often too risky for Angel investors.
Here are two examples of Idaho companies that have successfully raised capital from sophisticated angel investors in the past several years along with the problem and opportunity size their product adresses:
Inovus Solar™ (www.inovussolar.com) recognized that there are millions of streetlights in the United States drawing energy from the electrical grid. Energy is costly and in short supply. Each streetlight stands in sunlight during daylight hours. Inovus recognized that a streetlight could generate its own power by converting the solar energy hitting it during the day into electricity that the pole can use at night. It now produces and markets a line of solar light poles.
Hailey entrepreneur and scientist Cygnia Rapp suffered from digestive health problems. Her problems caused her to study the spread (e.g., butter and margarine) category. She learned the U.S. market for butter and substitutes is three billion dollars a year and that most butter substitutes are either unhealthy or targeted to address cholesterol concerns. She formed Prosperity Organic Foods, Inc. (www.meltbutteryspread.com) to develop and market healthy spreads, primarily to younger women. Prosperity’s Melt® buttery spread is now sold in more than 600 supermarkets in the West.
What is common about these companies is that they each began with a problem—streetlights consume electricity, many spreads are formulated from unhealthy fats. They each assessed the magnitude of the problem and concluded that they could develop and market a product that would profitably solve it. Both companies have successfully raised local capital to fund their journey through the Valley of Death, that period of time in every new company’s life when cash goes out the door faster than it comes in.
A successful request for investment capital begins with the question: what is the problem in the market place and how big a problem is it? Answer this question and you are well down the road to developing a business plan investors will find compelling.
One of our funds just got some great news. A portfolio company of the Treasure Valley Angel Fund and the Capitol City Angel Fund was just awarded a patent in Europe for its innovative pesticide spray recapture product.