KALAMAZOO — The Kalamazoo affiliate of Grand Angels easily exceeded expectations after launching more than a year ago.
Members of Ka-Zoo Angels invested $435,000 in eight companies in 14 months since forming. That’s far more than what Grand Angels President Tim Parker said he expected the affiliate angel group would do early on in its existence.
Parker thought Ka-Zoo Angels would take several months “to really watch a lot of deals and get a feel for the types of companies that are coming across to them.” The group’s founding members instead have “been active and regular investors in deals and bringing their expertise to portfolio companies.”
“We didn’t really know for sure how long it would take for a group to gel and really start being productive and active with their checkbooks to help companies,” he said. “They jumped right in and haven’t slowed down since. We couldn’t be more pleased with how it’s worked out.”
Seeing an opportunity and interest in the Kalamazoo area, Grand Angels formed Ka-Zoo Angels in August 2017. The affiliate group uses Grand Angels’ administrative structure for deal flow and to vet and conduct due diligence on prospective investments.
All of the deals for Ka-Zoo Angels have been co-investments made with Grand Angels members.
Formation of the group as an affiliate of Grand Angels brought to the Kalamazoo area a key potential source of capital for startup companies in their early stages.
“Companies that I have helped start would not have gotten off the ground if not for angel funding,” stated Eli Thomssen, a founding member of Ka-Zoo Angels and associate director of the Apjohn Group in Kalamazoo that has launched life sciences companies.
Ka-Zoo Angels started with 14 founding members and wants to begin growing membership in 2019, Parker said.
As the newest angel group in Michigan, Ka-Zoo Angels initially “wanted to make sure we could handle so many more members and not skip a beat with our portfolio management, with our investor communications and everything else,” he said.
“We definitely wanted to make sure that everything worked well and smoothly and that our members are pleased with the communication and interaction,” Parker said. “It needs to be a flawless experience for our investors and also the portfolio companies, so we’ve taken a careful approach to make sure that the Ka-Zoo Angels came out of the blocks successfully and that we addressed any types of issue that came up.
“Now we’re ready to start to move into the growth phase. There’s all kinds of capital (in Kalamazoo), intellectual capital and financial capital, and a lot of people do want to become involved in this type of activity.”
Grand Angels and the Ka-Zoo Angels affiliate are among 11 angel investment groups in Michigan that invested $41 million in 37 startup companies in 2017, according to an annual report by the Michigan Venture Capital Association. There were 797 people in Michigan who were active angel investors in 2017, an increase of 229 percent from five years earlier.
Extending Grand Angels into the Kalamazoo area with the affiliate group in 2017 made “perfect sense” because of geography and “we already knew a lot of the players in Kalamazoo,” Parker said. Ka-Zoo Angels partners with the economic development organization Southwest Michigan First to “make sure that we are identifying all of the best opportunities in the Kalamazoo region and Southwest Michigan.”
The early success of Ka-Zoo Angels validates the model of creating an affiliate investment group outside of Grand Angels’ home market and using its administrative structure for support, Parker said.
The Grand Rapids-based Grand Angels wants to replicate that model elsewhere across Michigan. The group is “very close” to forming a couple of new affiliate groups and has been talking to two existing groups about affiliating and using Grand Angels’ administrative structure to orchestrate and coordinate deals.
“There are so many potential angel investors around the state, and we can organize them and help them think as a group and share deals back and forth, and we can bring more capital to more entrepreneurs,” Parker said. “There’s innovation happening, there are companies starting, and there are angel investors wanting to be organized and to become part of a group and to be able to make these types of investments as a group, rather than individually.
“We’ll continue looking at that model and finding other areas of the state where investors may want to get involved and organize investment capital that way.”
Grand Angels today has more than 50 members. Since forming in 2004, the group has invested about $30 million in 41 companies through 125 capital rounds, including $1.9 million in 10 companies so far this year.
Grand Angels also operates venture capital funds and last summer began fundraising for Grand Angels Venture Fund III LLC that seeks to raise $15 million to $25 million. The new fund would target investments in advanced manufacturing, advanced agriculture, life sciences and software, all of which were focuses of the previous funds.
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