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Seed Capital From Angel Investors: Peter Birkeland, RAIN Fund Program Manager, RAIN Source Capital (Part 2)

Posted on Thursday, Jul 1st 2010

By guest authors Irina Patterson and Candice Arnold

Irina: Would you consider yourselves regional and national at this point?

Pete: I would say we’re regional now with the goal of being national.

Irina: Since you have such a diverse membership, would you say that you have a specific expertise or a more general approach?

Pete: I think we’ve got expertise in multiple areas throughout our fund. Most of our members are business owners and entrepreneurs themselves. And we have a good background in traditional manufacturing, we have people who have medical backgrounds, high-technology backgrounds, energy, distribution, veterinary sciences, and biotech.

We can find expertise in the network. We’ve got access through our investors, through portfolio company managers, things like that, where we can, hopefully in a short period of time, find the expertise we need to evaluate a deal.

Irina: Is it important where the company is located?

Pete: Well, we’d like them to be somewhere in our network where we’ve got at least a fund close by. We have an investment in Boise, Idaho, [through which] we have five or six of our RAIN Funds invested in throughout the region. We have other investments here in Minnesota that have investments out in other areas. The one thing that indeed does work with pretty much everything in angel investing is someone’s got to be close enough to that company to keep an eye on it.

Irina: Do you have any general observations that you’d like to share?

Pete: I think one of the things we’re seeing is that the companies that we’re funding at a seed stage and angel stage level are growing. They are finding follow-on financing, whether some of it with us but some of it with third parties, and they’re growing their businesses. Now, where the exit comes out on that, we don’t know. But we feel that we’re doing okay in terms of our portfolio.

We did two test RAIN Funds, one in 1996 and the other in 2001. The one in 1996 still has two investments left, so we’re going on 15 years. The one in 2001 still has two companies left, too. One of those will be fairly close to breaking even, and one of them will have a positive IRR.

Irina: What are your best sources of deal flow?

Pete: I think it comes from three places. It comes from the members themselves. We encourage members to have businesses submit. Second, it comes from our partners.

We do have some people in the field who we work with, our certified RAIN makers. They have relationships and bring deal flow in. And then third, it comes really through us, through RAIN Source Capital, where people will contact us and say, I have an investment, and then we share that with the RAIN Funds.

Irina: If an entrepreneur wants to engage with you, what is the first step?

Pete: Really, it’s figuring out a contact point, whether it’s finding out if there’s a RAIN Fund in their community and finding a contact for that or contacting us and then just talking about their opportunity. Then we’ll make a decision and review an executive summary and see if we can find a fit for them in our network.

This segment is part 2 in the series : Seed Capital From Angel Investors: Peter Birkeland, RAIN Fund Program Manager, RAIN Source Capital
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