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The Newsletter of Anchorage Economic Development Corporation
1st Quarter, 2007
Entrepreneurship and innovation are vital components of a vibrant and robust economy. In November at the Hotel Captain Cook, Alaska InvestNet Presented a program of the Ewing Marion Kauffman Foundation entitled The Power of Angel Investing: Starting an Angel Organization. The workshop detailed how Alaska could harness angel investors to promote entrepreneurship, business growth, economic development and diversification. Angel investors are accredited investors, usually independently wealthy individuals, who provide capital for business start-up in exchange for equity ownership in the company. Angel investors are generally part of an angel investing group, or network, which provides capital and assistance to start-up businesses.
Angel networks are markedly different from venture capital organizations. First and foremost, the deals are much smaller. The average outlay of venture capital is approximately $7 million. Angel Investors operate and provide capital to companies needing about $5000,000 up to roughly $2 million. This capital is seed money to start-up the companies. These businesses typically have more risks associated with them than the companies venture outfits are engaging. Because of these risks, by and large, angel investors are extremely active with their investments in start-up companies. Angel investors conduct due diligence of the companies in which they invest and angel investors also provide mentorship and technical assistance to these young companies on business models, marketing, operations, and other business functions. In this way, angel investors are much more than a source of investment capital. Angel investors are pro-active in the development of entrepreneurial efforts and business growth in their communities.
Sue Preston, an Entrepreneur-in-Residence at the Kauffman Foundation was the workshop's lead presenter. She discussed how investors in Alaska could form an angel investing group - an angel network that provides capital and assistance to entrepreneurs trying to start-up potential Alaskan businesses.
The workshop made an impact in Anchorage. Later that month, Alaska InvestNet hosted a Venture Forum where six very early stage companies pitched their business ideas to a room of over 20 accredited angel investors. The face time with potential investors was invaluable not only in the pursuit of early stage capital but also because of the advice and mentoring the companies received. The success of the Venture Forum marks the beginning of great interactions between private capital and entrepreneurship in Alaska. Alaskan private equity investments keep entrepreneurial talent in-state and encourage Alaska's entrepreneurs to build fresh economic infrastructure.
Alaska high-tech firms look to lure angels in Anchorage
By Rob Stapleton
Alaska Journal of Commerce
Publication Date: 12/10/06
With the exception of members of the media, you had to be worth a million dollars to be in the company of angels recently in Anchorage.
“Potential angel investors invited to this meeting had to have a net worth of at least 1 million dollars,” said Kevin Wiley, executive director of Alaska InvestNet.
Alaska InvestNet, an Anchorage-based nonprofit that aims to connect entrepreneurs with investors, hosted an investment opportunity meeting Nov. 27 at the Hotel Captain Cook in Anchorage.
Five technology companies made presentations at the invitation-only meeting in front of potential angel investors and faculty of the University of Alaska Anchorage.
Angel investors are individuals who seek companies ready for private funding in which to invest. Unlike a typical investor, angels come into a project at a very early stage. These rough-around-the-edges business pursuits are risky. However, the return on a successful investment can be rather lucrative for an angel, who looks for a return in terms of a multiple — 10 or 100 or even 1,000 times — of their initial investment, rather than a percentage.
The ideology that offsets angels from other investors is that of mentorship. While the angel investor's monetary participation in a project is obviously important, perhaps of more importance is the investor's role as a mentor to the entrepreneur.
Representatives from Biopar LLC, Borealis Broadband, Dalson Energy, MontAska Technologies Inc. and Variance Dynamical Corp. made their case for private investment financing to angel investors who sat with poker faces listening to each pitch.
The rules were stiff, and the presentations brief and to the point.
“The hardest part for us was the limitation of a 10-minute presentation, and only five minutes of Q&A,” said Gerald Jerry Winchester, chief executive officer of Variance Dynamical. “How do you explain why you need funding if an investor doesn't understand what you are doing.”
Variance generated many questions from investors with its concept of using how the mind works to create machine intelligence that will allow computers to recognize speech and vision, much like humans do.
“It was difficult to boil this down into 10 minutes when other people, like Doyon Ltd., gave us hours to make our point,” Winchester said later.
Variance had its mastermind, Paul Goodwin, a PhD who founded the company and is chairman of its board, on hand to answer investors questions.
“I was looking at Variance both from a personal and a business development aspect,” said Wayne Westlake with Kikiktagruk Inupiat Corp., the Alaska Native village corporation for Kotzebue. “I am just getting back into Alaska and feeling out the lay of the land.”
Westlake, who worked in Washington, D.C., indicated that he had queried several of his Washington, D.C., contacts in the defense industry about Variance's technology after the presentations.
“I am doing my homework right now and checking this out,” Westlake said.
One of the main supporters of angel investing in Alaska is Allan Johnston of Wedbush Morgan Securities in Anchorage. Johnston, who attended the presentations, agrees the due diligence and networking between Native corporations is needed to instigate early-stage investment growth in Alaska companies.
“That's just what is needed — more cooperation between Native companies who may not even know what each other is doing,” Johnston said. “This could become a vehicle to finding other strategic partners — that is important to making business stronger and better in Alaska.”
The variety of the presenters ranged from a medical data transmission device by MontAska Technologies to woodchips being burned to create energy for rural use in diesel, gas or turbine engines by Dalson Energy.
Biopar LLC rocked the house with a large funding request, when its presenter, Barbara Bach, asked investors for $4.2 million. The funding would allow Biopar to continue with its development of a patent-pending invention that digitally creates a database of animals by using automated pattern recognition, similar to what is used with humans' fingerprints.
Investment funding requests ranged from $500,000 to $4.2 million. If any of the potential investors at the meeting were interested in funding any of the projects, none tipped their hands to their intentions.
Representatives from well-known Alaska investors were present at the meeting, including Mead Treadwell for the Hickel investment camp, and John Wannamaker representing the Rasmusons. But there were some new faces too.
“We have to invite in the known investors, but this also attracts some newcomers,” said Alaska InvestNet's Wiley. “Those coat-tail investors are just as important as the better-known entities.”
Johnston characterizes Alaska investors at the bottom of the heap nationally. “We have a very new and immature angel investment network here in Alaska,” Johnston said.
There was no word from the presenters about potential angels who had come forward. InvestNet officials indicated that the exercise is just the beginning.
“We spent a year getting these investors together and setting this up,” Wiley said. “This is just a door-opener for these companies. Besides, we wouldn't have invited the press if it was strictly to make a deal.”
Rob Stapleton can be reached at rob.stapleton@alaskajournal.com.
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Entrepreneurs seek a few good angels
INVEST: Matchmaking group stages a "first date" for the hopeful and the rich.
By RICHARD RICHTMYER
Anchorage Daily News
(Published: December 1, 2006)
Paul Goodwin and Jerry Winchester have an idea for a new kind of electronic circuit design that mimics the human nervous system and might someday enable computers to see and hear in much the same way people do.
Horst Popperl runs a small wireless networking company that has been making inroads in Anchorage and rural parts of the state but hasn't quite crossed the line to profitability.
Theirs were among a handful of business ventures pitching their ideas this week at a gathering of local "angel investors," a term that refers to wealthy people who are looking to put their money and expertise behind an early-stage business venture with the potential for big future profits.
"We've been working on this pretty much for four or five days straight," said Goodwin, who with the other would-be entrepreneurs was sequestered in a separate room from the potential investors before and after making their 10-minute pitches.
The conference was organized by Alaska InvestNet, a nonprofit corporation that tries to bring Alaska entrepreneurs and investors together. No money changed hands at the Wednesday evening event. Doing that might violate federal rules on stock offerings, said Kevin Wiley, InvestNet's executive director.
Instead, the aim was to introduce the people with ideas to the people with money in the hope of scoring a "second date."
About 20 potential angel investors and their guests attended the gathering, which was at the Hotel Captain Cook. The pool was limited to people whose net worth is at least $1 million, not including the value of their houses, or whose annual income is at least $200,000.
Some of the entrepreneurs weren't looking for that much money. Goodwin, who calls his company Variance Dynamical, said he needs about $500,000 to make his prototype chips.
Others were looking for a bit more. For example, representatives of BioPar, which pitched an idea to use digital imaging technology for tracking fish and other wildlife populations, were seeking more than $4 million to get their business idea off the ground.
Each of the five startups at the investor gathering was pitching a technology idea that is separate from Alaska's core resource-development and tourism industries.
A small group of Alaska businesspeople have been trying for years to foster the kind of angel investing environment that has seeded the growth of tech startups in Silicon Valley, Seattle and other parts of the country.
Some of them believe that just one big success story could be enough to garner that kind of interest.
"If we can generate just one success, people will say, 'We can really do it here,' " said Hans Roeterink, one of the investors at Wednesday's gathering. "But right now, the market isn't really conducive to it. You can make more money by owning a backhoe and digging holes in the ground than investing in a startup here."
Roeterink once headed the Alaska Science and Technology Foundation, a former state agency that used investment profits from an endowment to provide seed money to manufacturing and technology startups. In 2003, state lawmakers shut down the foundation.
Jim Gottstein, an Anchorage attorney and another of the investors, agreed that technology startups face a tough challenge in Alaska, a lesson he learned in part by backing a small local Internet service company that went bankrupt in 2001.
"Getting past the chasm to positive cash flow can be really tough," he said.
That company, called Spectrum Wireless, later came back to life as Borealis Broadband, one of the five companies on the agenda at Wednesday's gathering.
Popperl, who founded and runs the company, said he was heartened by the number of potential investors in the room.
"This was the biggest local event with the most qualified angels that I've seen in 10 years," he said. "And it wasn't just us putting on a show. They asked very pertinent questions, so I knew they were really listening. That was very encouraging."
Daily News reporter Richard Richtmyer can be reached
at rrichtmyer@adn.com or 257-4344.
Copyright © 2006 The Anchorage Daily News (www.adn.com)
Clock ticking on companies' hopes
INVESTNET: Startups will have just 10 minutes to sell investors on opportunities.
By RICHARD RICHTMYER
Anchorage Daily News
(Published: November 28, 2006)
Finding investors for a business idea in its early stages can be a daunting task, particularly in Alaska.
But there are angels in our midst.
A half-dozen homegrown companies will pitch their ideas to a room full of "angel investors" in Anchorage this week.
Each company will have 10 minutes to sell its idea, followed by a five-minute question-and-answer session from the group of about 20 potential investors from Alaska expected to turn out at the Wednesday evening event.
"Angel investors" is the term that describes wealthy individuals who are looking to put not only their money but also their business acumen behind start-up companies.
This week's gathering was organized by Alaska InvestNet, a nonprofit group that helps Alaska entrepreneurs find money to get their businesses going.
Over the past year, the group met with more than 40 early-stage companies and selected six that its board and advisers deemed the best and brightest of the bunch. They also limited the audience to "accredited investors." That means they have a net worth of $1 million or more or have annual income of at least $200,000, said Kevin Wiley, Alaska InvestNet's executive director.
"We've got some of the top technology startups as well as growth companies that are seeking venture capital. And we've got folks with the financial wherewithal to take some risks," Wiley said.
Unlike in California's Silicon Valley, Seattle or other tech-centered economies, entrepreneurs with ideas for high-tech businesses in Alaska frequently lament a lack of available seed money. They say wealthy Alaskans are more interested in ventures connected to the state's resource-development economy.
Variance Dynamical, one of the companies that made InvestNet's cut, has run headlong into this problem.
Variance is designing electronic devices that it says will enable computers to recognize speech and see the way way humans do. It got started with money from friends and family, as well as some from the Fairbanks regional Native corporation Doyon Ltd., said Jerry Winchester, Variance's chief executive.
Now it needs $500,000 so it can build marketable prototypes based on its designs and take the company to its next level, Winchester said.
"Raising money has been tough because people here tend to be more interested in investing in real estate, oil or mining," Winchester said. "And when we talk to Outside groups, they look at us and say, 'You're from Alaska, and you do this?' We just don't make a lot of inroads with those folks."
Allan Johnston, a longtime investment banker with the Anchorage branch of Wedbush Morgan Securities and chairman of InvestNet's advisory board, said that kind of attitude has hamstrung Alaska's business community for years.
The state's wealthy people tend to put their money into familiar types of ventures, and until more get involved in other types of endeavors, such as the technology-oriented outfits slated for Wednesday's program, it will be tough for the local business community to break out of that mold, Johnston said.
But the good news is that as Alaska's population ages, there is an ever-growing legion of retirees with not just wealth but the desire to continue working by mentoring young entrepreneurs. That's what angel investing is all about, Johnston said.
"There are a lot of people who would like to get involved, but they're not quite sure how to do it. This could really help them," he said.
Only six businesses made the cut
Alaska InvestNet is hosting a venture-capital gathering, an effort to match investors with businesses that need seed money. Six companies pitching their ideas this week are:
• Variance Dynamical Inc.: Electronic speech and visual recognition devices
• Biopar: Computer imaging technology for tracking wildlife
• Ocean Renewable Power Co.: Hydro power
• Dalson Energy: Alternative energy
• MontAska Technologies: Telemedicine
• Borealis Broadband: Wireless networking
These companies were selected from more than 40 that applied. Potential investors must meet certain criteria in order to participate. To find out more, call Alaska InvestNet in Anchorage at 569-2123 or visit its Web site, www.alaskainvestnet.org.
Daily News reporter Richard Richtmyer can be reached
at rrichtmyer@adn.com or 257-4344.
Copyright © 2006 The Anchorage Daily News (www.adn.com)
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