Angel Fund Encourages Community Entrepreneurship
ANCHORAGE - Home to more than a few Chamber of Commerce forums, the La Perouse Hall at the Egan Center attracted a different crowd Thursday morning.
Max Bullock, 19, sat around one of the circular tables near the back of the room, munching on a chocolate muffin and scribbling notes on the back of a sheet of paper. The UAA business student, possibly the youngest person in the audience of several dozen, was dressed the part - sharp navy blue suit jacket, striped tie, gold colored watch. He wore his hair in a short, neat cut and sat up straight in his chair, but he was still several steps away from becoming a card-carrying chamber member.
At the inaugural 49th State Angel Fund forum, the budding entrepreneur was looking for seed money for his first small business: Quick Speeds Airplane Snow Removal. It would fill a major niche in the local aviation community, he said. After all, most pilots didn't want just anybody touching their delicate crafts.
"My dad's a pilot," he said, smiling. Next to him, Bill Bullock nodded and took a sip of black coffee from a ceramic mug.
So, despite a slight fear of heights, Max Bullock said he was excited to take off on his own business venture. He just needed the money.
At the Angel Fund forum, there was more than $13 million on the table. The funds were awarded to the Municipality of Anchorage through the venture capital arm of a federal job-creation program, designated for high-growth businesses that could generate a ten-to-one return on investment within five years.
"You might think, 'What is government doing taking an equity interest in small business?’" said Municipality of Anchorage CFO Lucinda Mahoney, addressing the forum from a podium at the front of the room. "That's a question I ask myself often."
Mahoney said a fraction of total award would be invested directly in local small businesses, from conception to the point of expansion. Applicants had until August 31 to digitally throw their hats in the ring, where they would then undergo an initial feasibility review conducted by Project Manager Joe Morrison and an Anchorage Economic Development Corporation staff member.
If a proposal met the basic compliance and quality standards, an advisory committee of local small business experts would select applicants for in-person presentations and make funding recommendations. After a 90-day due diligence period, final approval authority falls to Mahoney and Mayor Dan Sullivan. The first businesses would receive their capital by the end of the year.
Despite the multiple steps, the chief financial officer said the concept was simple.
"We're looking for people who say, 'I have a new idea, I have no money, I need someone to fund my business,'" Mahoney said,
From his seat in the back, Bullock smiled broadly, poking a finger at his own chest. But the funds came with a set of high entrepreneurial expectations besides high returns and a rock-solid business plan.
"Right out of the box, we need to see a one-to-one match," Mahoney told potential angel fund applicants. "We need to see that other folks have confidence in your program."
Besides a matching investment, successful applicants were required to come to the table with a relatively quick financial exit strategy. Mahoney said the initial municipal investment should only be used to boost fledgling enterprises off the ground and attract further equity, and the 49th State Angel Fund program was slated to close in five years.
Minus nearly $500,000 in overhead costs, the program would disburse the remaining capital in three rounds: More than $4 million during the first, current cycle, and the remaining $8.5 million over two rounds in 2013. Only one-third was designated for direct business investment, though. Mahoney said the larger portion was intended to create sustainable local Angel Funds with community leaders and investors, bringing together innovators and the money they needed to get started.
Joe Morrison, the program’s manager, took the podium after Mahoney and told the audience the local, long-term funds could be the most important aspect of the project. He said it came down to building something that would last.
By creating sustainable funding sources driven by Anchorage residents, Morrison said the spirit of entrepreneurship would become ingrained in the community, encouraging innovation well after the original fund expired.
Playing off the recent slew of top-ten awards lavished on Anchorage in a multitude of categories, Morrison said the money presented a gateway to another, more profitable distinction.
“This is a chance to make us number one in entrepreneurship, too,” he said, gripping the podium and leaning forward towards the men and women sitting in front of him. “We can see that start today.”
Morrison’s enthusiasm caught on quickly: Bullock grinned and scribbled a quick note on the back of a piece of paper.
“He’s definitely one of those guys where he lives to go to work,” he noted.
For many people in the room, small business was a labor of love. Federal labor statistics show more than thirty percent of startups are destined to fail, but those that succeed often provide the backbone of job growth nationwide. In fact, the numbers revealed venture-capital backed entrepreneurs generated 11 percent of the United States’ gross domestic product and more than 11 percent of jobs with only one percent of total investment dollars.
At the end of the day, the high rate of return mandated the 49th State Angel Fund’s stringent investment requirements. Morrison said successful small businesses needed to prove themselves in a competitive financial arena.
Listening avidly from the back of the room, Bullock said he though Quick Speeds Airplane Snow Removal could stand the test. His plans required little overhead and a minimum $30,000 investment, and he said he thought local demand could easily generate $300,000 in equity over a five-year span.
But like the concept behind the Angel Fund program, Bullock said his own motivation was simple.
“My dad’s a big entrepreneur, and I kind of want to follow in his footsteps,” he said.
Learn more about the 49th State Angel Fund or apply for investment capital here.