BY Nick Manes
Amid resurgent investor interest and general tumult in traditional investment markets, angel investing groups around the state say they’re having success bringing new financiers into the fold.
Those running angel groups — which often provide the necessary back office support for cohorts of high-net-worth individuals to pool money and invest in emerging tech startups — tout the diminishing options for many as pandemic-induced challenges continue to throw a wrench into many investment theses. Moreover, some investors highlight the social aspect of angel investing.
Still, the interest ultimately boils down to fundamentals, and angel funds around the state are raising multi-million dollar rounds to invest in startup technology companies, many of which are growing right in their investors’ backyards.
With $65 million in assets under management and 170 members across five angel groups around the state, the 2022 outlook is bright, according to Dale Grogan, managing partner with the Grand Rapids-based Michigan Capital Network. The group manages operations for Grand Angels, Ka-Zoo Angels, Woodward Angels, Flint Angels and the Blue Water Angels.
If 2021 serves as an indicator, with $7 million in capital invested in 18 deals for MCN, Grogan said he’s bullish for at least the first half of 2022.
“There has been such pent-up energy for investing,” he said. “2019 and 2020 were stagnant. In 2021, it felt like the dam broke for sure.”
New capital abounds
Through September, investors had committed $2.7 billion to angel endeavors, according to a November report in the Wall Street Journal, citing data from Pitchbook.
For all of 2020, angel groups affiliated with the Angel Capital Association invested a total of $650 million, according to an annual report from the ACA trade group.
More locally, angel groups around the state are ramping up fundraising efforts, as well as working to bolster their membership.
Doron York and David Weaver, the CEO and chief investment officer, respectively, of Birmingham-based City Side Ventures, have recently launched the new $10 million Great Lakes Angel Fund, which is geared toward early-stage startup investing.
The nascent angel fund stands in addition to their active Birmingham Angels group, which has about 25 members.
Additionally, the Ann Arbor-based Michigan Angel Fund is in the process of raising its fifth fund, according to Skip Simms, the fund’s managing partner. Simms said the key goal with fundraising efforts is more about bringing in new members rather than hitting a specific dollar amount.
“My No. 1 goal for the fund isn’t the amount or size of the fund,” Simms told Crain’s. “It’s the number of people participating in the fund. That’s what I want to do, and it’s in line with … getting more people in the asset class, and learning by doing.”
Michigan Angel Fund has raised upward of $10 million over its five funds, according to Simms.
Getting more high-net-worth people involved in angel investing stands as a key theme for many sources.
York with City Side Ventures, as well the Birmingham and Great Lakes angel funds, said getting that message across to would-be investors has gotten increasingly easier, particularly ongoing economic tumult during pandemic times. That’s because more traditional investments like the stock market or commercial real estate are increasingly volatile, according to York.
“So I think it’s more attractive to wealthy individuals right now, because there’s not too many alternatives,” he said.
The idea of diversifying beyond the stock market was appealing to Zeno Windley, a member of the Birmingham Angels investor group since late 2019 who has invested in around 15 companies. But the social aspect, and the opportunity to learn about new technologies and companies, is something that has “energized and “mentally stimulated” the 75-year-old investor, he told Crain’s.
“I was just looking for something rather than just continue to put money in the stock market,” Windley said. “I wanted something that would energize me some, plus offer an opportunity for some significant return.”
Lyle Wolberg, the CEO and senior financial life adviser at Southfield-based financial advisory firm Telemus Capital LLC, said he takes a “vintage” approach when it comes to advising clients on a variety of public and private market investments
“Just like stocks have a cycle, we think the private markets have a cycle as well,” Wolberg said. “So you allocate a percentage of money to private investments over three to five years. You might not find the one diamond, but at the same time, your chances (are greater) over five years.”
Like many others, Grogan with Michigan Capital Network said he’s anticipating some sort of slowdown in angel activity to occur at some point. Like most, though, he remains unsure when that will happen.
For now, however, conditions are ripe for investors like those who are part of the MCN to experience substantial returns.
“So long as the exit market is active — and it’s certainly (right now) frothy, feverish, record-setting, all of those adjectives,” Grogan said. “As long as that remains strong, that gives us confidence to invest.”
Angel vs. VC
Angel investing groups differ from venture capital investing in that angel investors — individuals or groups — provide their own resources to help fund startups or business expansions, usually investing less than $100,000 into the business.
Venture capitalists invest in a new or growing business that has a realistic potential for high profits. A VC firm does not use its own funds, but rather capital culled from a variety of sources, including large corporations, wealthy investors, investment corporations or subsidiaries of investment banking firms, pension funds, insurance companies or other similar resources. Their investments are typically bigger than those of angel investors and are often measured in millions rather than thousands or hundreds of thousands.
Source: SCORE
Angel funds in Michigan
Michigan Capital Network has $65 million in assets under management and 170 members across five angel groups around the state:
- Grand Angels in Grand Rapids
- Ka-Zoo Angels in Kalamazoo
- Woodward Angels in Detroit
- Flint Angels in Flint
- Blue Water Angels in Midland Saginaw
Other angel funds in Michigan include:
- Michigan Angel Fund in Ann Arbor
- Ann Arbor Angels in Ann Arbor
- Great Lakes Angels Fund in Birmingham
- Birmingham Angels in Birmingham
- BELLE Michigan in Detroit
- Commune Angels in Detroit
- Capital Community Angels in East Lansing
- Pointe Angels in Grosse Pointe
- Innovation Shore Angels in Marquette
- Muskegon Angels in Muskegon
- Northern Michigan Angels in Traverse City