Show Me the $: Angels Fly at Capital Access Network

By Robert Felgar



Obtaining early stage funding is always a challenge. Many good ideas don't see the light of day because they cannot find the money to get off the ground; even companies with a few customers, a little revenue and a lot of promise may find it difficult to attract capital, and the current economic climate compounds the challenge. The other option, borrowing money, is frequently not available. Most early stage companies do not have sufficient assets to secure a loan.

Enter the Capital Access Network (the Network). The Network is managed by the Dingman Center for Entrepreneurship at the University of Maryland's Robert H. Smith School of Business. It provides early stage businesses in Maryland; Virginia; Washington, D.C.; Delaware; and Pennsylvania an opportunity to connect with accredited angel investors. But perhaps even more importantly, it provides entrepreneurs an opportunity for invaluable mentoring from experienced business experts.

Here is how it works. Entrepreneurs submit their business plans to the Network; the Network typically receives between 10 and 15 per month. MBA students review the plans and choose the best three to five. The selected businesses present their plans before the MBA students and entrepreneurs-in-residence at the business school, as well as Craig Dye, who is the Dingman Center's director of venture investments and runs the Capital Access Network.

Sometimes the businesses practice their presentations before this group two to three times. Dye then selects two or three businesses to present to the Network's angel investors at a monthly breakfast event. The entrepreneurs have about 10 minutes to make their pitch. The Network typically invests between $200,000 and $750,000 in a business.

The Network's angel investors are not just check writers. They remain involved with the companies after they invest their money. They open doors and provide mentoring. Thus, the investors are an asset far beyond the cash they provide. They increase the chance of business success by providing valuable advice and assistance.

Even companies that do not succeed in receiving funds from the Network benefit from going through the process. The companies are not simply told "no" and turned away. They often receive advice on how to improve their business. If they improve their business plans sufficiently, they may be invited to present in front of the angel investors in the future.

This process is not for every budding entrepreneur. While the Network does not have rules on the types of businesses in which it invests, the majority of its portfolio companies are in information technology, biotechnology and medical technology. The angel investors that make up the Network are sophisticated and generally will invest in areas in which they have personal experience and expertise. Thus, if you are trying to obtain funding for a unique business well outside of their area of expertise, the Network is probably not the right source of funding.

While the Network is run through the University of Maryland, entrepreneurs do not have to be students or graduates of the university. The Network invests based on the merits of the opportunity. In fact, the majority of entrepreneurs that receive funding are not current students or graduates of the University.

The Network, however, does focus heavily on the experience of the entrepreneurs seeking money. Like all investors, the Network's angel investors prefer putting their money in a company with a proven management team. If the company does not have that advantage, the angels are less likely to invest. They probably will want to see some revenue and operational success.

Dye noted that the current poor economic climate has not had much impact on the Network. The investors' appetite for transactions has not declined, and the amount of money invested in startups has not decreased. He believes this is because the quality of the investment opportunities brought to the Network is very high. As a result, investors are perhaps spreading their money around more companies.

According to Dye, the University of Maryland is the only university that operates a large angel investor network; in fact, it is one of the few large angel networks in the D.C. metro area. The other large local network is the New Vantage Group, based in Vienna, Va.

If you are an entrepreneur in search of investors, you may want to consider these angel investor networks.



Robert Felgar is an attorney at The Felgar Law Firm and helps clients navigate legal issues surrounding raising capital. He can be contacted at 703-517-9912.