Media Coverage

Searching for angels
Group hopes to launch startup capital network

By Michael Schwartz, Inside Business - Hampton Roads, July 9, 2007

A lawyer, an accountant and a financial adviser are in search of angels in Hampton Roads.

Not your run-of-the-mill angels – they should be financially well-off.

Joel Nied, Gregory Stringfield and Paul DiNardo are in the process of forming an angel investment network in an attempt to bring together those with great entrepreneurial ideas with those who have money to make those ideas a reality.

In a time when venture capital has given way to multi-billion-dollar private equity firms, angels and angel funds still exist, quietly funding startup companies. However, no such angels officially call Hampton Roads their home base.

About a year ago, the proactive trio looked to places like Northern Virginia and Charlottesville and wondered why Hampton Roads was without its share of angel investors.

“We thought why does Northern Virginia have all the money?” said Stringfield, a financial adviser with A.G. Edwards in Gloucester. “Down here it’s more the old boys’ network with traditional real estate investing.”

As secretary of the Hampton Roads Technology Council, Stringfield has seen firsthand the pool of entrepreneurial ideas that exist locally, offering potential investors a risky chance at an above-average return.

“We want to show the old boys we have some good things around here other than real estate,” Stringfield said.

Since that time, the group has found at least four interested angel investors willing to listen to presentations from legitimate startups seeking $100,000 to $5 million in capital.

“In this area there isn’t a group of angels – a group of people that will put in $100,000-plus to get the ball rolling,” said Nied, an attorney with Williams Mullen in Virginia Beach.

The group has no current intentions of forming an angel fund.

“We’re the facilitators,” Nied said.

Angel investments are not for the faint-of-heart. They’re for investors capable of losing hundreds of thousands of dollars. Some of these companies are referred to as “pre-revenue”; in other words, they have yet to make any money. And others may come to the table with little more than an idea.

The first meeting between investors and startups will take place in September, Nied said.

“It’s an information exchange,” he said.

The need for such a network, Nied said, is because of the gap between people with good ideas and those willing to put in the money to make those ideas legitimate, thriving businesses.

The group knows Hampton Roads has its share of wealthy people. Their idea is to give investors a mechanism through which they can locate information and access to the best investment choices.

“Imagine investing in the stock market when you only had seven stocks to choose from,” Nied said. “But what if you could choose from 5,000 companies?”

While it has no angels to speak of, Hampton Roads is home to Waterside Capital Corp. and Envest Ventures, two companies that operate in the venture capital realm.

Lin Earley, CEO of Waterside, an SBA-licensed small business investment company in Norfolk, weighed in on the potential rise of an angel market.

“I think of an angel as seed money,” Earley said. “In many cases [the startups] don’t even have the doors open.”

Those early startups are the type that publicly traded Waterside typically stays away from as the company must keep its shareholders in mind.

“When people think about outside investors investing in startup companies, the first thing you think about is venture capital. But typically, VCs won’t put money into an idea or pre-revenue companies,” Nied said.

Waterside typically keeps its investments in a range of $500,000 to $3.5 million, so overlap with the angels is a possibility. But Earley thinks there’s plenty of room for some angels.

“The regional economy should be plenty strong to support that,” Earley said.

Nied argues that the local VC market could benefit from a growth in angel investments in the region.

“I envision that if we get a successful angel network, in five or 10 years there will be a new crop of VCs popping up in Hampton Roads,” Nied said.

Earley said there is logic in that. Companies growing with the help of angel funds could eventually reach the level where Waterside could step in to provide capital, creating a tiered pipeline of investment opportunities.

Tim Early, president of the Hampton Roads Technology Council, was excited at the idea of angels being able to give some of the region’s small tech firms a boost. He said even though the dot-com bomb is still fresh in the minds of many VC investors, the earning power of new technologies still carries clout for investors.

“Technology has a greater opportunity to hit it big,” Early said. “Some technologies are in areas that are wide-open, versus saying ‘I’m going to start a dry cleaners.”

Nied said the angel network is open to tech startups and anybody else.

“We’re pretty much wide-open,” he said. “It’s not limited to software or technology.”

Stringfield said leads to plenty of the potential companies will come from HRTC.

The big question that remains is why would Nied, Stringfield and DiNardo, an accountant with Wall, Einhorn and Chernitzer, donate their time to create this angel network. What’s the catch?

“We want to see more start-ups succeed in this area,” Nied said. But he admitted there is more to it.

“Let’s be honest. I’m an attorney,” he said. “I represent a lot of startups.”

And Stringfield specializes in serving small high-tech clients.

“Eventually I would hope they choose me to do their financial consulting,” Stringfield said. “It’s a way for me to prove my value.”

For those wondering what this angel network will be called, it’s still up in the air.

“We’re still struggling with the name,” Nied said.

IB