Innovation & Entrepreneurs: Angel investors help startups in Oklahoma sprout wings
By Scott Meacham
Copyright © 2016, The Oklahoma Publishing Company
Angel investors are called angels for a reason. These accredited investors are the primary source of early stage capital for startup firms.
The metric for angel investing is return on investment; however, angels, who are often former entrepreneurs or retired business persons, also show a strong desire to help entrepreneurs. They may want to stay engaged in building businesses and they frequently want to give back to their community or university. Angels, particularly those in angel groups, invest their time as well as their money in startup companies.
Angel investment and the expertise and connections that angels bring to a deal widen the runway for a startup to achieve the milestones that must be proven to attract any interest from venture capitalists — milestones that include market validation, a minimally viable prototype, and early adopters and beta customers.
This is especially true in Oklahoma’s innovation economy where venture capital for early stage, high-growth deals is virtually non-existent.
To help overcome that, the state appropriated funding for the Oklahoma Seed Capital Fund. The fund can invest up to half of the required capital in a qualified deal. The startup needs to match that investment with additional capital from other sources.
Angels provide a significant share of that capital match. Since 2011, for example, SeedStep Angels, Oklahoma’s largest angel group has invested $8.6 million in 38 companies, with $7.6 million in co-investment from i2E.
It’s likely that without the lift of angels, many those three dozen plus Oklahoma companies might not have gotten very far off the ground. Instead, the companies have reported 62 full-time equivalent jobs, jobs that pay 80 percent more than Oklahoma’s average wage.
Angel investing has taken hold in Oklahoma, and, as I often say, success begets success. Even though Oklahoma’s entrepreneurs’ access to early stage capital is greater than it’s ever been, it isn’t enough.
We need more, so we’re doing something about it.
SeedStep Angels meets monthly now, giving the angels the opportunity to review twice as many deals. Representatives from several venture capital and private equity firms have started attending.
SeedStep Angels also is forming deal-sharing alliances with other angel groups in the Midwest to facilitate syndication. And the group is offering formal sponsorship opportunities for the first time.
For accredited investors in Oklahoma who lack the time or desire to participate in the day-to-day mentoring and deal flow process of an angel group or who want greater diversification than is possible through one at a time investments, i2E has created an angel fund.
It allows investors to diversify their portfolios by adding early stage investments without being an active participant in deal flow or due diligence.
Just another step forward for startup capital in Oklahoma.
Scott Meacham is president and CEO of i2E Inc., a nonprofit corporation that mentors many of the state’s technology-based startup companies. i2E receives state appropriations from the Oklahoma Center for the Advancement of Science and Technology. Contact Meacham at i2E_Comments@i2E.org.
Did You Know?
The median size for rounds of angel investment reached $735,000 in the third quarter of 2015.
SOURCE: Halo Report