The valley’s second angel fund, The Treasure Valley Angel Fund is now open for
business. It reached its first close milestone of $750,000 in July. Full disclosure: I am an investor in the fund and my firm,
Loon Creek Capital helped guide the fund through the organizational effort.
The new fund presents a case study in the process
of raising seed capital in Idaho. It took about 24 months from early
discussions until the capital was raised.
Active fund raising began in
January of this year and reached the minimum in July.
Why does it take so long to raise capital? There are several reasons:
- Investors are conservative. There are always more reasons not to invest than there are to invest.
- Investors are busy. It’s hard to get the attention of busy people. In most cases someone has to sit down personally with an investor to review the business plan, explain the risks and the potential benefits. It takes time to get these appointments.
- There is usually a “minimum raise.” Most security offerings have a minimum amount to be raised before capital can be released to the company. In the case of the angel fund, that minimum was $750,000. While a minimum raise protects the investors, it usually means it will take longer to conclude the offering and begin to put the capital to work.
The implication for entrepreneurs is it takes a
long time to raise capital. You must
plan for this and be sure you are beginning to raise capital well in advance of
the time you actually need it.
Now that the fund has reached its minimum raise,
it is accepting applications from entrepreneurs for funding. Applications will be managed by the parent
organization, the Boise Angel Alliance and can be submitted at www.boiseangelfund.com.
In the first fund about 5% of the applicants
actually received funding. I don’t
expect the second fund to be any less restrictive. So entrepreneurs should make sure they have
done their homework before applying.
The web site contains information on the kinds of
deals in which the fund will invest, the typical terms, and the processes used
to make the investment decision. I
strongly advise entrepreneurs to read through this information before
submitting an application. And they are
welcome to contact me for an informal discussion if they believe that would be
helpful.
The fund is authorized to raise a total of $2
million and will continue to seek qualified investors as it begins considering
investments in local entrepreneurs. To
be qualified, investors must be residents of the State of Idaho, must qualify
as an accredited investor (generally a net worth of more than $1 million not
including the equity in his or her primary residence), and must represent that
the investment does not exceed 10% of the investor’s net worth, exclusive of
the investor’s home, automobiles and furnishings. Additional information for potential
investors is available at www.treasurevalleyangelfund.com.
_____________________________
Dr. Kevin Learned is a counselor at the Idaho Small Business
Development Center (www.idahosbdc.org)
at Boise State University where he specializes in counseling with entrepreneurs
seeking equity capital. He is President of the Boise Angel Alliance (www.boiseangelfund.com), an investor
in both of its funds, and is a principal in Loon Creek Capital (www.looncreekcapital.com) which
assists angels in forming angel funds. He can be reached by email to kevinlearned@boisestate.edu
or by phone at 208-426-3875.
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