Angel comes to the rescue for small investment needs

Minneapolis/St. Paul Business Journal - May 12, 2006
by Mark Reilly
Staff Writer

A group of Twin Cities investors are joining together to launch an early-stage angel fund, giving a boost to the hopes of startup companies stymied in the search for capital.

The fund, called Twin Cities Angels, has raised about $1.5 million from its 30 members so far, with plans to go as high as $3 million. With additional side investments from members, the fund could eventually have $5 million to $7 million under management.

Twin Cities Angels will focus on deals between $50,000 to perhaps $1 million, said founder John Alexander. That puts it between the stages of friends-and-family funding and low-end venture capital -- an area that's been lacking in Minnesota, critics say.

Alexander said the fund could improve the traditional angel model, in which entrepreneurs seek out individual investors. "We've been looking for a way to do it better," said Alexander, a former executive at St. Jude Medical Inc.

The angel-network model pools the funds of individual investors, who also contribute time to research prospective deals. Unlike a venture-capital firm, members don't collect fees, which keeps = overhead low.
"This is an experiment, but it's one that's been tried before [elsewhere] and it's worked pretty well," he said.
Alexander's effort has attracted about 30 people so far, including Tom Kieffer, a veteran entrepreneur and a member of the Itasca Project, a business-development group.

Kieffer had met Alexander while researching ways to improve small-business development in the Twin Cities.
One of the things Kieffer liked about the Twin Cities Angels project was its willingness to be public. Many angel investors don't like to advertise their existence, which makes it hard for entrepreneurs to find them.
"Having a network that's high-profile is tremendously useful," he said. The group will be able to connect startups to a "shadow network" of more secretive investors, as well. "I think this will help stimulate a lot of activity."

The group's Web site, http://www.tcangels.com/, is expected to go live this weekend.
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