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Seed Capital From Angel Investors: Elizabeth Marchi, Frontier Angel Fund (Part 2)

Posted on Wednesday, Oct 6th 2010

By guest author Irina Patterson

Irina: So, not all of your fund investors are based in Montana?

Liz: No, five are not. Some are here part of the year, and they really wanted to be  part of this, and that was part of the discussion when we formed the fund. For example, of the 33 investors, at my last meeting, I had 27, which is phenomenal, three years into the fund.

But we consciously, as a group, said, “That’s OK.” I’ve got somebody in Atlanta and somebody in California whom I’ve never met in person. But they knew we were doing this, and thought this is really important for Montana.

Irina: Just out of curiosity, how many women do you have in your fund?

Liz: Oh, I’m so proud of my fund. Let me see . . . I have seven with me.

I think women are critical to your fund decision process. Did you ever sat in a room with all men in a board meeting? The dynamics of that are completely different. When you’re looking at an entrepreneur, every question needs to be asked, every perspective needs to be brought up, and I just think women add a ton to the process.

Men are not good consumers, they tend to be enamored of all the bells and whistles. I mean, they love all the nuances of the technology.

I tell you, I was doing some research last year. I was trying to really look at the revenue model. There’s not a really good revenue model for running an angel fund anywhere in the country. But one of the things I found is that the men I talked to who run all-male groups, hated it. Because you wind up getting like sort of testosterone fest going on. So, I thought that was sort of interesting.

Irina: So, how many total investors in you group now?

Liz: Thirty-three, and some of them bought more than one unit.

Irina: I see, you have units. Do you have membership fees?

Liz: No membership fees. We’re very low overhead. We meet at a local hotel — the same place ever time; we do a “no host $10-dollar lunch.”

We started it out very differently, we were going to this really nice club. Then we just said, “You know, what we all about is investing in entrepreneurs.” We do an annual social as a group, but that’s it.

The way we operate, this fund spends $300 hundred a month to offset the cost of my office and the printing, and I do all the maintenance and keep all the documents for our investments and financial statements, that sort of thing that has to be done.

Irina: What is your geographical focus?

Liz: We have a primary focus in northwest Montana, because Montana is huge. And then our secondary focus is all of Montana, and then our tertiary focus would be the inland Pacific Northwest, that’s eastern Washington, northern Idaho, northern Wyoming, and western North Dakota. We co-invest quite a bit with the PAN, the Portland Angel Network.

Irina: What are your sources of deal flow?

Liz: Our deal flow comes from the most disparate sources. It comes from universities, from people in the state, from the economic development groups, it comes from other angel groups — we get a lot of co-investment opportunities, and we actually have a syndication chairman who looks through all those deals. And we like to syndicate, because we want a diverse portfolio. And our deal flow is — we would like for our deal flow to be stronger, but it’s very erratic. Sometimes it’s great, and then sometimes it’s not. It’s just hard to predict.

Irina: Out all of those sources, what is your best source so far?

Liz: Probably other angel groups. I mean, the deals that they’re looking at, and they need other investors. That’s probably actually a very good source for our deals.

Irina: What is the best way for entrepreneurs to reach you?

Liz: They can do it either by phone or online — usually by e-mail it’s easier.

When we formed our group, we sort of defined what kind of culture we want to have, because it’s not like I’m in downtown Atlanta. We wanted to be able to fund – and I’m sort of the gatekeeper for that – but we wanted to be educators. Because we’re going to say no most of the time, but we always wanted to do it in a culture of respect, and to give entrepreneurs some value added directions, like,  “This might not be a good idea because . . . ” or, “You need to do this first . . . ” that kind of thing.

This segment is part 2 in the series : Seed Capital From Angel Investors: Elizabeth Marchi, Frontier Angel Fund
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