Shark Tank, Angels and More

Local Investing Groups Booming

March 30, 2014

Entrepreneurs Up North, get ready to ramp up your startup. If you have a sound business idea, there are groups of investors here in northern Michigan just waiting to invest, each hoping to launch local ideas into the realm of the Next Big Thing.

Bullet-proof ideas and modest dreams are both welcome, investors say.

SHARKS KEEP IT CASUAL

As Local As Possible is a loose group, one that simply asks prospects to come with a plan that is local, green and gives back to the community.

A recent board meeting reflected this decidedly laid back attitude.

After a vegetarian potluck in a Michigan Land Use Institute board room, the group talked business more like friends than investors meeting to vet a potential startup.

"We’re very casual here," said Zach Liggett, an As Local As Possible (ALAP) organizer. "We’re a pretty grass-roots group and we’re a pretty casual shark tank."

Shark tanks are modeled after a popular reality TV series, and feature business pitches from aspiring entrepreneurs to a panel of potential investors.

But at ALAP, someone taking a business idea to the group can use their session to just get feedback or refine their pitch.

"We try to mentor," Liggett said. "It’s not just one and done. We try to be very constructive with feedback."

TRIPLE BOTTOM LINE

An ALAP meeting can lead to business funding in the form of a loan from someone in the group. Or maybe it will lead to an introduction that will lead to funding elsewhere. That’s not to say there won’t be expectations put upon entrepreneurs who come to make a pitch, however.

As Local As Possible wants to hear from people with ideas that embrace the values of the group, what Liggett calls the "triple bottom line."

That means, in addition to a financial return, the business plan should aim for a social return and an environmental return.

"The folks that have been coming through here one way or another sort of embrace that ethic and way of thinking about their business," Liggett said.

SMALL BUSINESSES WELCOME

The kind of ideas ALAP is looking for tend to be networking-ready, Liggett said.

"We’re not really a fundraising platform," he said. "We’re really a networking group. We try to connect the business owners with local investors." He said ALAP watched as Grand Traverse Culinary Oils owner William Koucky has pitched ideas that turned into a developed product. [see sidebar] "He had no product when he first came, now he does," Liggett said, noting the case of canola and sunflower oil Koucky brought to share with the group. "He’s already selling the culinary oils."

In fact, ALAP wants to hear from established small businesses as much as people with just an idea for a new business.

"Most of our members are interested in small businesses that are looking to grow or maybe have a project they want to pursue," he said.

"˜IT GROUNDS YOU’

Bruce Odom, of Odom Reusable Building Materials in Grawn, founded ALAP. He’s also been on both sides of the table.

He most recently went to the group to raise money to open a second store in Grand Rapids. ALAP funded around a third of what he needed to open.

"Most of us, once were into our 50s and later, have a little bit saved away for retirement," Odom said. "Rather than have that in a mutual fund or somewhere, it’s a great feeling to say, "˜I know this money is at Northern Natural [cider house] or MIFarm- Market[.com.]’ It grounds you and it makes you feel like you’ve got some power and you got some say in your world."

Meetings and potlucks are held regularly at the Michigain Land Use Institute.

ANGELS AREN’T STODGY

New mother Stacey Feeley was frustrated by how many plastic products there were in the baby aisle.

After playing around with materials to protect glass baby bottles, she and her business partner found silicone was ideal for making certain baby products because it’s BPA-free, doesn’t collect bacteria and it stands up to heat.

Although Silikids became an overnight success in California, where they lived and founded the company, Feeley said she and her partner decided they needed to regroup around the time Feeley moved to Traverse City with her husband and family in 2012.

Funding became a concern after the families moved, but then Feeley was introduced to Northern Michigan Angels, a Traverse City-based investment group.

Silikids found funding for their relaunch. "We pitched to several different angel groups and Northern Michigan Angels is one of them that’s just really creative in the way they deal with you," she said. "They’re not like a stodgy group of investors."

LACK OF LOCAL PROSPECTS

An "angels" group is a collection of well-heeled people who are looking to invest in startup companies that have the potential to become massive hits.

Deanna Cannon, executive director for Northern Michigan Angels, said the number one problem the group has faced since its founding in 2012 has been the lack of local prospects.

"We’d like to invest in more northern Michigan companies," she said. "Our "˜local’ is statewide, but I would say our preference is northern Michigan."

They lack candidates because they are looking for those rare ideas that have the chance to take off and become successful very quickly.

They’re not looking for people who want to start a mom-and-pop shop.

"What we have in northern Michigan is a lot of people who come here and want to start a company really just to create a job for themselves," Cannon said.

The businesses receiving angel funding are not lawn mowing businesses or retail stores. It’s usually businesses with tech or medical products.

MORE THAN $1 MILLION INVESTED

The "angels" in the name shouldn’t fool you. It’s not philanthropy.

"Hopefully these aren’t charitable investments," Cannon said. "We hope these companies are successful."

Since they began just over two years ago, the group has heard 30 presentations from entrepreneurs.

They’ve invested roughly $1 million in 10 companies and they’ve teamed up with other angel groups in some investments.

Just two of those are northern Michigan companies, Cannon said. There have been three other pitches from northern Michigan people – the group passed on one and two of the proposals are up in the air.

In addition to Silikids, the other northern Michigan company NMA has backed is Altus Brands, an outdoors sporting goods company.

INCUBATOR COMING

Unlike As Local As Possible, the angel group is investing to get a share of the company.

"We don’t have any return until we actually cash out of the company," Cannon said.

And they take big stakes in the companies they select. Northern Michigan Angels invested $100,000 in Altus. They also teamed up with other Angel groups in the state and coordinated a total investment of $370,000.

Cannon said said she believes a business incubator will be established in Traverse City within the next year so that more great ideas they can fund come out of northern Michigan.

The incubator would help groom people with ideas into people who are able to successfully make a pitch for funding.

The group of 17 NMA investors does not just invest money, however. They also offer expertise and connections to help the companies grow.

"We end up being more than a silent investor," Cannon said. "We’re really engaged."

Interested businesses can apply to make a presentation through the Northern Michigan Angels website, northernmichiganangels.com. The next pitch event is scheduled for April 15. For more information on As Local As Possible, visit aslocalaspossible.com.