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Sunday, 02 March 2014 22:37

Muskegon Angels put $600K into West Michigan companies

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Mike Olthoff Mike Olthoff

After committing all of its first-year capital, Muskegon Angels LLC may look to spread its wings further in 2014.

The angel fund could reach out for additional members and even consider setting up another investment group in neighboring markets such as northern Ottawa County.

Muskegon Angels started out in early 2013 with 22 members who committed $25,000 to the fund annually for five years. Two additional members came aboard during 2014, pushing the fund to $600,000.

Organizers decided to cap membership at 24 for the year and could go higher later this year, said Mike Olthoff, the president and owner of Nichols Paper & Supply Co. in Norton Shores who co-founded the angel fund last year.

“Quite frankly, we could have had more members, but our goal wasn’t to have huge numbers to start with. We wanted a reasonable number,” Olthoff said. “I would guess that sometime during the year, we will be looking for some more members and set up another group.”

One potential is going into the Grand Haven-Spring Lake area, where Chamber of Commerce President Joy Gaasch welcomes the conversation.

“I’m always interested in finding new ways to support our entrepreneurs,” Gaasch said.

During its first year, Muskegon Angels committed to funding five companies and closed on two deals — for Varsity News Network LLC and Grand River Aseptic Manufacturing Inc., both in Grand Rapids. Both the Grand River Aseptic and Varsity News Network deals were done with other angels groups in the state.

The investment in Varsity News Network was part of a $3.0 million Series A financing package that involved both angel and venture capital investors.

One of the funding commitments made in 2013, involving a Muskegon startup company that’s involved in interior building products, is now in due diligence and will probably close in April, said Eric Seifert, a finance and strategy specialist with the Michigan Small Business Development Center at Grand Valley State University in Muskegon who provides administrative support to the angel fund.

Overall, Muskegon Angels looked at 15 prospects in 2013, Seifert said. He typically will do the initial vetting of prospects and pass on those that meet investment criteria to a screening committee that decides which companies can pitch to the membership.

Targeting the basic and advanced manufacturing sectors, Muskegon Angels operates differently from the traditional angel model. Rather than individual members investing in a company once it’s vetted, the organization as a whole will make the investment.

While Muskegon Angels’ “first thrust” is to invest in early-stage small businesses based in Muskegon County, it needs to look across the broader region to generate an adequate deal flow, Olthoff said.

“When you form a group like this, you can’t look at just the county that you’re in. It’s more of a Western Michigan thing that we’re trying to do,” said Olthoff, who led formation of the angel fund with Larry Hines, the owner and president of Hines Corp.

“It’s not that we don’t want to do it in Muskegon County. We have to have the right opportunities,” he said. “If the right opportunities aren’t there, then we have to go outside of Muskegon County to look for those investment opportunities.”

Muskegon Angels will seek to step up marketing and promotion to generate greater awareness of the fund locally and create more deal flow from small businesses in the Muskegon area, Seifert said.

Members will also work their professional networks and the vendors they do business with at their own companies, Olthoff said.

“All of us have a number of local companies that we do business with. There may be some of those that are just prime for us to be able to help get to the next level, and that’s really what we’re looking for,” he said.

In assessing the angel fund’s first year, Olthoff said he believes it exceeded expectations. He’s “very confident” it will invest another $600,000 in 2014.

“We think it went well,” Olthoff said.

Read 4187 times Last modified on Sunday, 02 March 2014 19:44

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