Often, the challenge for new business growth in states like Iowa involves reaching a critical mass of support. For Iowa’s independent angel investor group Plains Angels, that means extending its reach to other parts of the state.
An initiative of the Greater Des Moines Partnership, the group recently invested a collective $325,000 into a medical device company called Iowa Approach. The investment marks the continual expansion of the Des Moines-based Plains Angels to the eastern Iowa community.
“Three months ago, we started talks with Iowa Approach. Not everyone who pitches their concept receives funding, but since there are many experienced angel investors in the Iowa City and Cedar Rapids area, funding happened very quickly,” Plains Angels co-founder Mike Colwell told SPN. “We’ve actually heard a lot of pitches from the eastern Iowa corridor, where a lot of medical, telecom and software opportunities are present.”
Colwell says angel groups like Plains Angels typically invest around $200,000-250,000 per pitch, so the Iowa Approach investment is considered above average.
Previously, investors were frequently traveling to back-to-back pitch meetings, so Plains Angels adopted a new, more efficient multi-day approach to the process, based on a similar angel investor group in Alabama.
“Now we ask a company to pitch on the second Monday of the month in Des Moines, then again in Iowa City or Cedar Rapids the very next day,” Colwell (right) said. “The Iowa City/Cedar Rapids group sees identical presentations and hears identical asks as the Des Moines group.
“For entrepreneurs, we want to be respectful of their time as well. If you’re from Sioux Falls or Kansas City, instead of making two long trips, you can make one long trip. This approach gets everyone moving at the same time and then we can quickly identify interest and move forward on potential funding. Overall, it’s a great model and we’ve gotten good support from the community this way.”
In addition to Plains Angels, the Greater Des Moines Partnership recently launched an early stage investment fund called NestMint.
“We are literally financing the idea stage of companies to help them get to the product or service launch stage, as well as hopefully increase the number of new businesses in Iowa,” Colwell said.
NestMint is owned by accredited investors and the fund is managed by a board of five directors from across the state. Investors participating in its funding also will qualify for an Iowa angel tax credit. Investments in all business types and ideas will be considered, and the application process is detailed online. If initial financing is provided, NestMint takes an ownership stake in the business as well.
“Everything is transparent and all agreements are listed on the site,” Colwell said. “We talked to a lot of serial entrepreneurs who said that our terms were set at reasonable amounts based on how early we might support a business. Obviously, the further a company gets down the road, the more valuable it is, but at an early stage, it’s not uncommon for investors to have equity.
“What’s unique about NestMint is that we offer opportunities for entrepreneurs to buy back those investments later on, per board approval. For a lot of companies, they’re not bankable yet, so NestMint not only finances their growth, but also allows them to continue down the path of being a private company down the road and gives them an out that’s reasonable at that point.”
At this point, NestMint continues to seek capital with a goal of raising more than $600,000 by September.
At the end of 2013, Plains Angels had invested a little more than $1 million in its first year and a half of operation. Colwell says the group hope to match or exceed that number within the next year. The group currently has no plans to expand outside of Iowa.
“Strong angel groups already exist in surrounding states, so it makes more sense for us to focus our efforts here,” Colwell said. “The reason we work together is for leverage and negotiation on the investor side and to support entrepreneurs and increase the number of new businesses in Iowa.”