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Seed Capital From Angel Investors: Elizabeth Marchi, Frontier Angel Fund (Part 1)

Posted on Tuesday, Oct 5th 2010

By guest author Irina Patterson

This is the twenty-eighth interview in our series on financing for entrepreneurs. I am talking to Elizabeth Marchi, fund coordinator at Frontier Angel Fund LLC. It’s a member managed pooled fund – that is, they review deals together and then vote to invest their pooled capital. Their investments range from $100,000 to $200,000 and they invest in companies based in Montana and the inland Pacific Northwest.

Irina: Hi, Liz. Let’s start briefly with your background.

Liz: I came to Montana ten years ago from North Carolina. And at that time I was running a public policy program, primarily representing larger corporations, and prior to that I had actually been a relocation director in a high-end real estate firm, moving corporate employees around — I didn’t sell property, but I was involved in real estate. And I have a background in banking.

So, I came to Montana to run a privately funded economic development organization that was extremely small. And over the period I was here — Montana’s a huge state with not a lot of people – I began to struggle with access to capital for small businesses and, frankly, the kind of capital that would grow innovative businesses.

Montana is, actually, very wired; we’ve got great telecom. So I saw the opportunity to grow some higher value businesses. We started to putting a little angel group together within that organization. And then between about 2003 and 2006, we progressed to wanting to do a fund, and in 2006 we closed the fund, and in 2007 I left my organization and took the fund with me.

So, I’m the fund coordinator. We live on a ranch in Polson, Montana, and I run the fund out of here. I’m also the director of the Montana Angel Network, with the goal of trying to create other active groups and funds in Montana. So, that’s kind of my background. I went to a women’s college, and I grew up in a college town — Auburn, Alabama.

Irina: Where did you go to college?

Liz: I went to Hollins University in Roanoke, Virginia.

Irina: Do you like it in Montana?

Liz: It’s the most amazing, wonderful, unbelievable place. I love it here. Today, it’s about 58 degrees and sunny, and the sky’s beautiful and clear and it’s quiet. And I’m watching deer outside my window. It’s wonderful!

Irina: Amazing. So, how big is your fund?

Liz: It’s very small; $1.8 million.

Irina: How long have you been in operation?

Liz: We actually started putting it together in early 2006. And we closed it in December 2006, because that’s when we made our first investment, and we decided that we didn’t want to go through all the accounting nuances bringing new fund members in after we’ve had already made investments.

At Ffrst we weren’t going to let other angels to invest with our group, but now we do. We let them co-invest with us. But the fund itself is now closed. We closed it when we made our first investment.

I have a list of people who said, “Call me when you do another fund.” We have a lot of summer-vacationer types. But we’re not looking for new members for our fund right now.

We actually now have two or three people that come to our meetings. They can invest side-by-side, and a couple of them have actually helped with due diligence, but we’re pretty particular about who that is. Just because we’ve developed a nice culture of working together over time and it has to be somebody that people know.

Irina: What is the structure of your fund?

Liz: We are an LLC; we have a detailed operating agreement that stipulates how votes are made, how proxies can be proffered, and how the unit can pass from one ownership entity to another. Actually, we spent a fair amount of money putting together a very good LLC document.

We meet every other month as a fund, and then in the opposite month a screening committee meets and screens all submissions for funding that we get.

And we do use AngelSoft. We were a very early adapter for that because my fund members — well, I have 33 investors, five states of residency in my fund, and a lot of people travel, globally, constantly. And that allows us to keep business going.

This segment is part 1 in the series : Seed Capital From Angel Investors: Elizabeth Marchi, Frontier Angel Fund
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