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1. Angel Investing and Economic Development
June 2014
Presented to: VCEN 2014 Conference
Yes, Virginia…there is such a thing!
2. VCC has built its reputation on…
Financing affordable housing projects
Funding community development ventures
Delivering technical assistance to small businesses in underserved
markets
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3. How did we do it?
1. Leveraging government guaranty programs
2. Partnering with private foundations and corporations for grant
funding and capital investment
3. Launching new loan products tailored for VCC’s target markets and
delivering technical assistance for borrower capacity building
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4. VCC’s Vision as we expand our brand
To be the first choice for innovative capital and
collaborative leadership promoting vibrant local
communities and enhanced quality of life.
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5. Innovative capital: What is angel
investing and why angel funds?
Accredited investors invest growth capital in start-up and early stage
companies in exchange for (most often) an equity percentage and
expected ROI
After “friends and family”, but before venture/institutional capital
Individual angels are often successful entrepreneurs themselves
Angel funds vs. angel networks/groups
Operational efficiency
As early stage funding moves upstream, more funding power
Easier syndication on deals
“Side-car” investing amplifies impact to small business
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6. Collaborative leadership: VCC as
Administrator of regional angel funds
Appalachian Regional Commission
Federal-state partnership promoting economic and community
development across the Appalachian region
Appalachian Capital Policy and Angel Capital Fund
RAIN Source Capital
Contracted by ARC to provide T.A. to VCC
Industry leader in guiding rural communities through angel fund creation
and capitalization
Three Phases
Feasibility and design
Fundraising
First Organizational Meeting
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7. Leveraging partners
Entrepreneurs
Serial
In-residence/fledgling
Angel investors
Individual
Corporations/Institutions
Economic development officials
Local
Regional
Service providers
Professional (lawyers, accountants, bankers)
Technical Assistance (SBDC, SCORE, etc.)
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8. Leveraging capital
Typically $1MM - $4MM in committed capital
Smaller group of accredited investors (20 - 25)
More formalized in structure
Operating agreement
Code of conduct
Committees (due diligence, screening, monitoring)
Administered (vs. managed) by a third party (e.g. VCC)
All investment decisions are made by the investor members (not fund
administrator), usually majority rules
Real-estate centric revenue growth to build solid loan portfolio/bottomline; “soft services” to meet non-profit mission
Direct impact leveraging strategic partners – very typical operating model for most econ dev entities.
Just as there’s a sea-change in the social enterprise world (B-corps – which we are! - and non-profits in the same sandbox), as well as the investing world (impact investors vs. value and bottom-line investors), there’s a big change underway in the econ dev world in VA with VCC….(enter angel investing)
For third bullet tie it to T.A.
Touch on crowdfunding relative to fourth point….laws are still up in the air, so it’s a wait-and-see approach for us
ARC and RAIN = model for convergence of angel investing and econ dev
Institutions can be higher ed, foundations, econ dev., etc.
Common denominator among investors is often altruistic – i.e. econ dev born out of affinity to a particular region
Impact investors (patient capital) and “regular” angels
As previously mentioned, note difference b/n this and an investment network/club (although mention syndication networks)
Also note difference b/n this model (member-managed) and other fund models (with a fund manager)