Rockies Venture Club recently launched a beta program for due diligence analytics, assembling a team of highly capable industry and academic individuals in order to streamline the time consuming process and assist angel investors with making the most informed decisions possible. This is an extremely exciting prospect because research shows that extensively researching a company at the onset of a deal pays off for angel investors. Read more

 Transparent consumer markets have never existed in our current healthcare system.  This means that consumers don’t have access to information that is needed for making informed decisions about healthcare options.  The result is that we randomly select care providers without any knowledge of the costs to the payers – thus increasing the costs for everyone.
Lack of transparency is about to go away and the implications for health care providers, payers and consumers will be huge.
Here is an article describing eight new startups that are working to increase transparency in health care.
http://mobihealthnews.com/29400/8-companies-working-on-price-transparency/
If that is not enough for you, the Colorado Capital Conference (November 13, 2014 Denver, CO) will be addressing this issue.  Our keynote speaker, Tom Main (of Oliver Wyman) will address these issues and a panel of experts will dig deeper into the transparency issue to help investors make smart decisions about investing in early stage Digital Health companies in this area.  Visit www.coloradocapitalconference.org for more information and registration.

It goes without saying that the Internet plays a vital role in our lives. The Internet enables us to shop, watch the play from the playoffs that we missed and cat videos. It’s estimated that Americans spend 11 hours a day with electronic media like the radio, TV, the Internet and movies. Keeping the Internet affordable and accessible has been an important tenet of its growth and expansion.  While many people – especially Congress – have disagreed on the best ways to do that, Congress and presidents agreed for more than a decade that state taxation to access the Internet is a bad idea. Read more

If you are a Founder or CEO of a technology company that hopes to raise capital, the Rockies Venture Club would like to invite you to attend the Evening Party of the Colorado Venture Summit on June 19.

Read more

Finding capital is no easy task. Lots of start-ups struggle early on with where to find the capital they need to bring a great product (or service) to market or to tend to a broken technology in need of some work.  Funding Your Dreams: Calling All Entrepreneurs, a panel at this year’s WILD Summit, covered just this.  Once you’ve determined how much capital you need, how do you put together your fundraising strategy?  Who do you ask for funding and are you offering something in return?  What do you need to know before you start? Read more

You may think that investors assess value in the companies they back in a strictly financial way – analyzing the proformas, return on investment, key ratios and so on.  These things are important, but investors look at a lot more than just the financials.  In fact, the financials are driven by other less easily measured aspects of the company such as the Team, Patents and Intellectual Property,the social or environmental impact the company has, the speed at which it can scale up and grow,  their brand value, the solidness of their core mission, vision and values as well as a clear path to an M&A or IPO transaction for an exit. Read more

Like many of you, I have been watching the Olympics this week and while watching the Ice Dancing events, I had an observation – pitching your company to Venture Capital Investors is like competing in the Olympics. Read more

 There is one place where the most angel and VC investors gather in Colorado to see pitches every year and that is the Angel Capital Summit. Companies who are raising capital for a startup and investors from all over Colorado and around the country come to see some of the best of what Colorado has to offer – and with four of the five cities for startups in the US you can be sure that the quality of these companies will be high. Read more

Thanks for this blog post referral from Jim Callahan of Janiczek & Company in Denver.  Lots of new trends in angel investing including younger angels getting involved, more engagement by Registered Investment Advisors in the Angel community and a growing divide among companies that work with Angel groups vs. those that try to go the crowdfunding route.  It’s a good read.

 

A New Game Not Just For Rich Guys

http://www.fa-mag.com/news/a-new-game-not-just-for-rich-guys-15464.html

SEPTEMBER 17, 2013 • MICHAEL S. FISCHER

“Five or 10 years ago,  angel investing was a bit of a rich guy’s game,” says Allan May, managing director of Emergent Medical Partners, an investment group that focuses on the health-care, diagnostic and biotech industries.

Not anymore.

Accredited investors in fledgling companies who come together in so-called angel groups now are often in their 30s or 40s, says May. “They’ve made a block of money, they’re not über-rich in most cases. Often they’ve got day jobs or things they do. But they’re very serious angel investors; they’re not hobbyists.”

Advisors also need to take note: As angel investing becomes mainstream, RIAs will increasingly be the go-to people for fledgling companies looking for start-up funds.

What has changed since the 1980s, when the first angel investors were mega-wealthy individuals capable of putting a couple of million dollars into a start-up, is that the cost of starting companies has plummeted as technology development has gotten faster, cheaper and more powerful. Today, more accredited angel investors can fund more entrepreneurs for modest amounts of money.

Going Professional
In the mid-to-late 1990s, as more and more individuals started to invest in start-ups, they looked for kindred souls to help them find new companies and raise capital, according to David S. Rose, managing partner of Rose Tech Ventures and chief executive of Gust, an investor-relations platform. They began to form angel groups of a dozen to 100 people and, as the Internet came on the scene, put up Web sites seeking pitches. They would pool their deal flow and their expertise for doing due diligence on these companies. Then they would pool their money so each person could invest, say, $25,000.

In recent years, the angel group class of investment has professionalized. “One could say it has gone from being a hobby kind of enterprise, a club, to serious investing,” says May. The due diligence angel groups conduct is quantitatively and qualitatively much more sophisticated today. “It’s serious diligence on intellectual property, on the business model, the financial projections,” he says. In addition, the industry groups Angel Capital Association and Angel Resource Institute have educated investors about best practices.

Many angel groups, especially on the two coasts, are loaded with operational talent. More than 90% of Emergent Medical Partners is ex-CEOs, founders, CTOs and CFOs of biotech start-ups. “We bring to the table not only capital, but also commercialization skills,” says May. “We have successfully commercialized the technologies we’re investing in.”

As angel groups have matured, adopted best practices and become more professional, they have syndicated, sometimes in complex arrangements. According to the 2012 HALO Report, 70% of angel group deals involved co-investors. Syndication brings more deals, greater diversity and more investors. May sees this in his angel group, which co-invests with family offices and foundations.

Family offices and family foundations once used venture capital as their screen, and either co-invested or became limited partners in venture funds as the vehicle to address those investments. Now they’re investing directly without the middleman.

“With venture capital having collapsed after 2008, particularly in health care, they’re looking seriously at doing that same thing with angel groups,” May says. “The thought is that if we really focus on investing in deals where angel groups have or are investing and have or are participating in the management of the company, that’s a good filter and a good mechanism for building value going forward.”

The syndication phenomenon has also increased due diligence on prospective investments. In co-investment deals, companies are being vetted not only by the initial group, but also by every group that comes into the syndicate.

RIAs In The Game
Within the last decade or so, the average angel group member in Gust’s network has invested $25,000 or $30,000 per company and done five or 10 deals in total, Rose says. But there is a lot more money sitting around in family offices and under people’s mattresses. The SEC estimates that there are some 8 million accredited investors in the U.S., those with an income of $200,000 or a net worth of $1 million, excluding the value of their home. Big chunks of that money tend to be mentored by RIAs. “As the angel investing world goes mainstream, you’re going to find more of that capital coming in, and therefore more and more RIAs in the mix,” says Rose. “Ultimately, the RIA will be the person to whom the company is pitching on behalf of the client.

The RIA will do the grunt work of angel investing, he says. Because it is a complicated business, most investors interested in early-stage investing would prefer their advisor to handle the entire matter up to making the final decision to invest. In this scenario, it will behoove the advisor to join angel groups.
John Huston, founder and manager of Ohio Tech Angels, a group that invests exclusively in Ohio start-ups, is skeptical about RIAs’ enthusiasm for angel investing. “RIAs would lose fee income if a percentage of a client’s portfolio were taken out and invested with an angel group,” says Huston. “They would much rather put them into other alternative asset class opportunities in which they can get a fee.” Moreover, RIAs generally lack expertise to evaluate start-up investment opportunities, he says.

But Huston concedes that RIAs with clients who have enough interest to look at high-tech start-up deals would be well served to reach out to angel groups, attend meetings and get into the deal flow. He says his own investment advisor, who belongs to two angel groups, brings him deals that his clients bring to him. “One of the beautiful aspects of belonging to an angel group is that the smart RIAs use membership in a group as a big deflection bucket.” By this he means that when clients come in with an investment idea, their advisors can suggest that the idea be vetted by an angel group—people who see a deal every day and can provide a dispassionate assessment. In this way, the RIA takes himself off the hook. “Where so many people lose it is that they just don’t get an adequate return,” says Huston. “Just because a company turns into a great company doesn’t mean it’s a great investment in the start-up realm.”

The Liquidity Issue
One issue with private company ownership shares is lack of liquidity. “If you’re an angel investor and you invest in a company, you’re stuck holding on to that until the company goes bankrupt or is sold or goes public,” says Rose. “There’s no recourse for an angel investor.”

When Facebook and LinkedIn were edging toward IPOs a couple of years ago, a secondary market sprung up for outstanding employee or founder shares. “It was all about companies that people might want to buy into just because of their size or brand name without knowing their financials,” says Rose. “They ‘knew’ it would go public at a higher price. But nobody who was buying shares at that point could make a reasoned decision because there was no public material available about the company or its sales or anything else.” After the companies went public, the secondary market for private company shares dried up.

Rose expects this to change. At a recent Venture Forward Conference in New York City, panelists looked toward the emergence of platforms that would handle both the primary sales offering of a company’s stock and a secondary market for people to buy those shares. During the conference, Barry Silbert, founder of SecondMarket, announced plans for a platform to do primary and secondary sales of private companies.

Other platforms allow companies and investors to encounter one another. On the Gust platform, more than 200,000 start-ups display their financial and business information, and this is accessible to more than 1,100 angel groups searching for investment opportunities.

In July, the SEC lifted the eight-decade ban on general solicitation and general advertising on private securities deals. In a statement, Silbert says that “a much deeper, broader group of accredited investors will have the opportunity to hear about—and potentially invest in—private companies and funds.”
SecondMarket’s platform would be a general solicitation product that would enable issuers to handle a higher volume of investor interest and greater regulatory requirements that will accompany their general solicitation efforts, he says.

“This had to happen,” Rose says. “The general solicitation rules were to bring a little bit of sense into this operation. Now you can tell people that you’re raising money, but you can sell it only to the same people you were selling it to before, who are accredited investors.”

However, May expects angel groups, including Emergent Medical Partners, to adopt rules or practices that preclude investing with an entrepreneur who has advertised for investors on crowd-funding sites. Angel investors in biotech and diagnostics start-ups are going to need more capital than an initial $500,000 or $1 million to exit, he says. “You’re going to need follow-on investors, probably institutional money, whether [it be] venture capital or corporate strategic or family offices; you’re going to need partners.”

Huston’s Ohio Tech Angels will also eschew start-ups that advertise. He says those who invest through crowd funding invest in entrepreneurs they have never met and probably won’t. “Why would they do that? The answer is because they care less about building entrepreneurial wealth than their own wealth. I’m not maligning that. I’m just saying we take a much, much more personal view.”

 

by James Lester, Managing Consultant with Cleantech Finance

Rockies Venture Club presenter Sun Number has announced an award housesof approximately $1 million to expand the geographic coverage of its rooftop solar assessment services through the Department of Energy’s SunShot Incubator program. The award also enables Sun Number to expand the scope of its services by providing additional data that solar contractors will use to grow their businesses and lower customer acquisition costs.

“Being chosen as a SunShot 8 Incubator award recipient to commercialize Sun Number data will significantly accelerate our growth as a company.  The SunShot funding will be used to quickly expand into new cities increasing the number of buildings analyzed to approximately 35 million,” said David Herrmann, co-founder of Sun Number.

Herrmann added, “The funding will also be used to integrate additional data into the analysis of properties, including data on the likelihood of a building owner qualifying for a solar lease or loan, and the statistical likelihood that a building owner will be interested in solar based on a behavioral model that will be developed.  The data that Sun Number provides brings an installer closer to being able to complete the design of a PV system from their computer in a fraction of the time it currently takes.”

According to the company, Sun Number Scores will now include the economic suitability of a property for solar. Integrating the suitability of the roof for solar with the local cost of electricity, incentives, tax benefits, and the local cost of installation, the Sun Number Score will tell a homeowner if the economics of solar make sense for their building. The new Sun Number Score will be dynamic and as the variables mentioned above change, so will the score. Homeowners with a low score today will be able to set a threshold for the future and get notified when their Sun Number Score reaches that threshold.

The SunShot Program, initiated by the DOE in 2007, has incubated the emergence of 58 U.S. startups. The program has leveraged $104 million in federal money to generate more than $1.7 billion in private sector investment, or nearly $18 of private sector buy-in for every dollar of taxpayer support.

The long-term SunShot vision is for the U.S. to get 14 percent of its electricity from solar by 2030 and 27 percent by 2050 and to drive down the cost of solar electricity to $0.06 per kilowatt-hour.

“Over the last three years, the cost of a solar energy system has dropped by more than 70 percent,” DOE Secretary Ernest Moniz said in announcing the awards. The new investments will back more programs that reduce “soft costs like permitting, installation and interconnection” and “improve hardware performance and efficiency.”

Sun Number, previously profiled on the RVC blog here, was co-founded by Herrmann and Ryan Miller after receiving a $400,000 grant last year from the Sunshot Incubator. Sun Number used the funding to develop a tool to make it easier, faster and less expensive for both homeowners and solar companies to analyze the solar potential individual properties. The tool, known as a Sun Number Score, engages consumers by providing a solar analysis of their home or office building with an easy to understand score between 1 and 100, and then putting them in touch with a local solar professional. Solar professionals are able use the tool to reduce the costs of customer acquisition, often called ‘soft costs’.

If you would like to learn more about Sun Number, visit their website or contact David Herrmann at david.herrmann@sunnumber.com