Why we’re launching Corridor Angel Investors

NewBoCo, the 501(c)3 nonprofit that runs Iowa Startup Accelerator, recently announced the formation of a new angel investor network in Eastern Iowa: Corridor Angel Investors.

Background

Iowa Startup Accelerator formed in 2014, with the goal to drive a significant increase in the quality and number of startups in Eastern Iowa. Our program has built 24 startups so far, who’ve collectively raised almost $5 million. The majority of those startups are from, or stay in, Iowa. And we’ve made major improvements to the program this year, to keep the momentum going.

We’ve also launched a number of adjacent programs to support those startups, knocking down constraints they face in our region:

  • Our Vault Prototyping Labs — helping entrepreneurs build the first versions of their products
  • DeltaV Code School — creating new software development talent to join startups
  • A variety of educational programs, workshops, and resources to help grow more startups here.

The next constraint we’re facing is how to help entrepreneurs raise the money they need to grow their businesses here. When there was just one or two startups looking for funding around here, it wasn’t hard to point them to a few potential investors. But as our program (and other programs in Eastern Iowa) have grown, the number of high quality startups is increasing rapidly.

To be clear: startups can and do raise money in Eastern Iowa now; investors can and do find good investment opportunities in Eastern Iowa now, too. We just want it to be faster and easier for investors and startups to come together and build businesses here.

Therefore, in 2017, we’ve set out to build a strong angel investor network here.

Why an angel network?

From an investor’s perspective: angel investment can often produce returns that far exceed typical stock investments. But the trick to angel investing is to be methodical and to take a portfolio approach. The odds of beating the market are exceedingly low with just one or two angel investments. An angel network solves both of these problems: it allows individuals to see, evaluate and invest in large numbers of opportunities, and it provides a framework to make the investment process repeatable and reliable.

There are four reasons we’re launching the Corridor Angels program:

1. Make it easier for investors to identify and vet large numbers of early stage, high-potential investment opportunities.

The network coalesces deal flow into a single funnel, so investors can see lots of opportunities and compare them. We’ll provide both formal and informal educational opportunities for newer investors. And we’ll make the process as easy as possible for investors to get involved with.

A single funnel will take hundreds of potential investment opportunities and narrow it down to a handful we’ll likely consider actually investing in, and we’ll repeat that process continuously over years. Those numbers are crucial: the likelihood of returns grows as the number of investments made gets larger.

The Law of Large Numbers applies to angel investing. Via https://www.forbes.com/sites/mariannehudson/2015/06/17/build-an-angel-portfolio-like-the-experts/

The angel network also provides a strong methodology with a strict due diligence process. There’s power in a group of minds working together: it helps drive the process and get lots of perspectives on potential deals. Without it, individual investors have to do the due diligence themselves. This leads to “gut decisions” that are likely to fare poorly.

2. Give investors the ability to opt-in to see only deals that match their investment profile.

Having a single funnel for deals allows us to filter opportunities to your tastes. If you only are interested in manufacturing-related businesses, or you really only want to invest in later-stage companies, or you only want to see businesses headquartered in your city, we can filter those for you.

Today, investors get random asks all the time from entrepreneurs of all types looking for money. With an angel network, your response can simply be “go apply at CorridorAngels.com, and if you make it in, I’ll take a look.”

In addition, investors can have different levels of involvement: deeply involved with the whole funnel or just seeing the cream of the crop at the bottom of the funnel for potential investments.

3. Make it easier and more efficient for entrepreneurs to raise capital

Today, in Iowa, entrepreneurs are randomly reaching out to potential investors, unsure of which investors:

  • are currently active
  • have funds to invest in the right time frame
  • like the industry they’re in
  • like the stage of company they’re at

Entrepreneurs in Iowa spend inordinate amounts of time chasing investors. And a lot of it is wasted time.

From the entrepreneur’s perspective, they can now run one really strong gauntlet instead of thirty. The angel network gives entrepreneurs a way to hit large numbers of investors at once, while providing the control of the process that investors want.

The angel network saves time for everyone involved — the investors and the entrepreneurs.

4. To put Eastern Iowa on the map as a national startup powerhouse.

NewBoCo’s mission is to accelerate world-changing ideas, from Iowa. To do that, we need a strong angel network — we’re aiming for 100+ active angels by 12/31/17 in Eastern Iowa — in order to grow more and better businesses here.

We’ve already made a huge impact on the startup ecosystem in Eastern Iowa, and this is the next constraint we need to address to make an even bigger one.

This impact will benefit everyone:

  • the investors, who bet their hard-earned money on companies here;
  • the founders, who can grow their companies here more quickly;
  • and the community, when new jobs are created and new businesses are creating pride and energy for our region.

Interested in learning more?

Our next meeting will be April 27th at 4:30PM. If you’re an accredited investor, you can register here.


If you’d like to talk to me about angel investing, drop me a line at eric@newbo.co.

-Eric

Eric Engelmann founded Geonetric in 1999, and presently works as the Executive Director of NewBoCo in Cedar Rapids, Iowa. He’s a board member at Scrum Alliance, the Technology Association of Iowa, and GO Cedar Rapids.