Thursday, June 20, 2024

Smith: What does ‘Angel Investing’ mean?

by BIZ Magazine

Have you ever heard of the term “angel investing”? Did you wonder what that means? Angel investing is a type of private equity investing in which high-net-worth investors attempt to earn higher returns by taking on more risk compared with investing in the public markets. Angel investors typically finance a business startup at the very early stages and participate in two types of angel groups: angel funds and/or angel networks. An angel fund is made up of accredited investors who buy a membership interest in the fund and make investing decisions as a group. Angel networks, on the other hand, are comprised of accredited investors who independently decide in which startups they will invest and with what amount of capital but are organized as a group and regularly meet together to review deals. There are several angel funds and networks in Louisiana, including New Orleans, Lafayette, Baton Rouge, Lake Charles and Shreveport. Yes, Shreveport! Did you know there has been access to angel investors right here for the last seven years?

After establishing BRF’s Entrepreneurial Accelerator Program (EAP) as a business accelerator in July of 2014, Dr. John F. George Jr., President and CEO of BRF, then envisioned a Louisiana capital group to provide capital to entrepreneurs and investment opportunities to accredited investors wanting to promote high-growth, technology-based startups headquartered in North Louisiana. Dr. George and I traveled west to the University of Texas at Austin to meet with Dr. John Sibley Butler, a leader in the world of venture capital. Dr. Butler helped set up the Central Texas Angel Network in Austin, Texas, which has invested $120 million in 199 companies since 2006. Dr. Butler encouraged us to visit with several angel groups across the country to help focus our efforts and determine the best fit for North Louisiana. With guidance from Dr. Butler and many others, Dr. George’s vision of a local capital group came to fruition in 2015 and is now known as the New Louisiana Angel Fund (NLAF). 

To receive funding from NLAF, companies must show that they will have an economic impact in Northwest Louisiana, meaning they will generate jobs and provide benefits to the region, and that there will be a return on investment. As of today, NLAF consists of over 70 accredited investors who are truly involved in every step of the process from due diligence to investment. This is one of the many benefits to angel investing: the entrepreneurs receive invaluable insight and guidance in every aspect of their startup from investors who are passionate about helping startup companies launch and contribute to North Louisiana’s economy. 

NLAF investors have proven that they are deeply committed to the process over the last few years during the pandemic. Though we had to change the way we meet each month, investor participation and attendance at the monthly meetings has increased since the beginning of the COVID-19 pandemic. We have all learned to pivot, and angel investors are no different. COVID-19 may have forced entrepreneurs to alter their initial idea or way of thinking, but NLAF’s investors have been by their side helping to formulate new ideas and identify new opportunities for the entrepreneurs’ businesses to succeed. 

Julie Gilley Milam, Senior Financial Analyst at EAP, leads the NLAF group and says she has the coolest job in town because “Not only do I get to help entrepreneurs and hear cool ideas, but I also get to see the investment fund go through the process and watch these companies grow.” She also points out that the startup companies “have a higher success rate when the angel investors occupy board seats and actively participate in the startup company’s decision making.” Julie, and many others, know that the investors are not just providing capital but are also providing experience and tenured wisdom to truly impact the startups’ success. The angel investors in the NLAF group are well-known in their fields and bring credibility and networks that the entrepreneurs likely would not have known about without the investors.

Speaking of networks, NLAF is also a member of the Angel Capital Association, which gives NLAF the opportunity to syndicate with other angel groups statewide and nationally, allowing for an even greater impact. By joining efforts with other angel groups, NLAF investors can be a part of larger dollar investments than they would be able to make on their own, which provides the opportunity to be involved in bigger projects.

If you were to ask someone how to obtain funding for a technology-based startup, they would probably tell you that you need to go to Austin or Silicon Valley, but that couldn’t be further from the truth. With NLAF, we have the resources right here in North Louisiana! Ultimately, the goal of the NLAF group is a return on investment, but in every case, the investors are willing to invest in technology-based startups in North Louisiana that create jobs and opportunities for people to stay here. When angel investors invest in local startups and the startup is successful, the investors’ return is reinvested in the community. It’s a win-win! Many entrepreneurs claim to have heard negative stories about angel groups, and because of this, they hesitate to reach out to groups like NLAF, when in fact, getting in touch with the right angel group and investors can make the startup successful. Since 2015, the New Louisiana Angel Fund and its investors have invested $13 million in 20 high-growth startups in North Louisiana. Do you have a business idea but aren’t sure how it could ever be funded? There are accredited investors right here in North Louisiana willing to invest in you and your idea. Let’s build our region’s future with the help of our angel investors!

Dave Smith, Executive Director of EAP

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