The business development agency Ann Arbor SPARK said on Wednesday that it has been awarded $500,000 from the Michigan Economic Development Corporation (MEDC) to continue the Michigan Angel Fund and to raise the group’s second fund, called Michigan Angel Fund II.
“The whole idea behind the Michigan Angel Fund is to allow qualified investors to participate in the growth of the tech startup economy in the state,” says Skip Simms, Ann Arbor SPARK’s senior vice president and the Michigan Angel Fund’s managing director. “Angel investing is critical to retaining companies in Michigan so they don’t have to leave to find capital.”
The Michigan Angel Fund is a for-profit, professionally managed equity fund focused on capital-efficient, early-stage Michigan startups. With $2 million and nearly 70 members, it’s the largest angel investing organization in Michigan. It has six investments in its portfolio, including Larky and Varsity News Network. The MEDC grant is intended for Ann Arbor SPARK to help educate angel investors and raise capital for the new fund.
As a managing member of the Michigan Angel Fund, Ann Arbor SPARK works with business incubators statewide to identify startups ready for angel investment, and it also oversees screenings of fund applicants, conducts due diligence, and works with the New Enterprise Forum to help startups prepare to pitch investors.
Simms says what has kept a lot of people out of angel investing is a combination of not knowing how to find or structure deals. The kinds of companies ripe for angel investing—tech-based startups that need between $200,000 and $2 million to hit the next milestone—are generally not of interest to venture capitalists, he adds.
“The venture community in Michigan has grown significantly in the last few years,” Simms says. “Companies that need venture capital have a number of firms to pursue. Not so in the angel investing world, because in Michigan, we’re just now beginning to build a vibrant angel community. That’s the reason the state is willing to invest [in the Michigan Angel Fund], because it recognizes the number of companies that need to get to commercialization. We need to help out individuals that have the capability of providing private capital.”
Simms says there are currently 10 angel investing organizations in Michigan. “Five years ago, there were maybe five. The number of active angels has doubled and more, really, in the past three years. There’s an appetite for angel investing, especially since we learned in 2008 that the stock market is not necessarily a safe place to invest.”
Simms points to Accuri Cytometers, an Ann Arbor-based medtech startup that had one of the state’s most successful exits in recent memory, as a company that could not have succeeded without significant backing from angel investors. “That company grew primarily on angel investment,” he says. “Accuri could not have stayed in Michigan to survive and thrive if there was no angel capital available.”
Startups interested in applying for Michigan Angel Fund investment can click here for more information about the selection process. Simms says qualified potential angel investors should contact Ann Arbor SPARK for more information about how to get involved in the Michigan Angel Fund II.
