A group of 19 high-net worth investors, almost all from Omaha, have signed on to a new angel investing model backed by Dundee Venture Capital.
The Omaha-based venture capital firm has launched a “syndicate” through AngelList, a Web-based database and network of angel investors that tracks investment deals and startups seeking capital.
The goal of the syndicate is to grow the community of venture capitalists and angel investors, Dundee officials told The World-Herald.
“There isn’t a day that goes by where someone doesn’t ask about how to be part of this movement,” said Mark Hasebroock, founder of Dundee Venture Capital. “Why not invite them to be part of this in bite-size pieces?”
Syndicate participants include executives and directors from regonal companies, including Great Western Bank, Ballantyne Strong, the Buckle and DLR Group.
The syndicate’s launch comes as local startup accelerator programs Straight Shot and NMotion are introducing 14 new companies to investors at this week’s demo day events.
“Many people have approached Dundee Venture Capital since Straight Shot started, but to get into (our funds), there’s a steep curve of about $250,000 or so,” said Beth Engel, partner at the organization.
Participants in the new Dundee syndicate can invest as little as $1,500 in a company that will be vetted by the syndicate’s founders. That takes away two big barriers to entry, said Bart Dillashaw, president of the Nebraska Angels and an attorney with the Koley Jessen firm.
“Generally speaking, (the syndicate) is a platform to effectively drop the participation point to as little as $1,000, in some cases, and create a very accessible platform to get basic information about a company and see who else is investing in it,” Dillashaw said.
Participants must still be accredited by the U.S. Securities and Exchange Commission, which defines accredited investors as those with a net worth exceeding $1 million — excluding the value of their primary residence — and with an annual income of $200,000 or more for at least two consecutive years.
Professionals familiar with investing in early-stage companies see the year-old AngelList syndicates — and similar platforms like CircleUp, FundersClub and SeedInvest — as a natural offshoot of more traditional angel investors like the Nebraska Angels.
That group has about 60 angels that average an individual investment of about $25,000 per deal, according to Dillashaw.
Jeff Sharp, principal at SilverStone Group, is part of the Dundee syndicate and has become familiar with the local startup landscape as a mentor to Straight Shot companies.
His own experience in the wealth management industry has demonstrated the local interest in private equity investments.
Venture capital investments have been happening in Omaha “for a long time,” Sharp said, and are appropriate only for investors suited to the significant risk they involve. The new venture as he sees it is a platform that will “cater to those individuals who have ... either never done venture capital investing or have done very little of it.”
“This gives them the opportunity to dip their toe in the water,” Sharp said.
Unsurprisingly, the largest AngelList syndicates are located in Silicon Valley and are led by investors who were involved early on with such tech companies as eBay and Facebook. The top two have more than $8 million in committed capital.
Dundee’s syndicate pales in comparison with $86,000 in committed capital so far, but that money is likely to stay in the Midwest.
Research from the Angel Resource Institute, Silicon Valley Bank and CB Insights shows 75 percent of angel investors invested in companies in their same state or region during first-quarter 2014.
Marianne Hudson, executive director of the Kansas City-based Angel Capital Association, has watched as the number of startup companies has grown throughout the Midwest in recent years along with the volume of interested investors.
She said the capital needs of growing companies have outpaced the money available from individual investors, however, so conglomerations of angel groups have become a necessity. Branching out into Web-based syndicates is a reflection of the Internet’s increasing influence, though Hudson and others don’t think syndicates will replace traditional angel groups or venture capital organizations.
Syndicate leaders must still put in their own money, and just as they do within their own funds, will perform due diligence on companies receiving investments.
In the case a company performs well enough to send returns to investors, syndicate leaders will receive 20 percent of profits.
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