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Seed Capital From Angel Investors: Tim Cartwright, Chairman, Tamiami Angel Fund – Naples, Florida (Part 2)

Posted on Thursday, Feb 24th 2011

By guest authors Irina Patterson and Candice Arnold

Irina: Who are the people who invested in the fund?

Tim: They are all angel investors, all private individuals. We don’t have any venture funds or other institutions in the fund right now.

Irina: Where is the fund located? Does it have a physical address?

Tim: Yes. The angel fund is located in my office. I’m an investor in the fund, so I have my own $50,000 in the fund – but then my company, Fifth Avenue Advisors, has a subsidiary called Peninsula Fund Administrators, which acts as the third-party administrator for the Tamiami Angel Fund. We do have a physical address. It’s 350 Fifth Avenue South, Suite 203, Naples, Florida 34102.

Irina: Did everyone invest $50,000? Is that the way it was designed?

Tim: Yes. An individual unit was $50,000, and according to our fund document, no individual could purchase more than two units so that we weren’t weighted toward any one angel. We have 29 investors in the fund, initially, with everyone at $50,000. One investor did purchase two units.

Irina: What is your current source of deal flow?

Tim: We get deals from our angel investors, which is part of the logic behind an angel fund. When I go out and talk to groups and explain angel investing, I often mention that angel investing is better done as a team sport, as opposed to an individual approach.

When you get into a structured investment vehicle like a fund, you’ve got that team environment, but you also have a disciplined and usually more rational decision framework, as opposed to the normal way an angel investment is made, which is usually an emotional decision, an individual decision.

It’s either just a gut reaction, or there’s some sort of emotional pull or tie to it because there’s a relative, former co-worker, or former business partner who’s made the introduction or is part of the management team or something, and there’s a personal request that an individual invest.

So, what’s worked well with the angel fund is talking to those angel investors and saying, A good way to approach angel investing is to say that you have an investment policy for early stage through expansion stage companies that are seeking money. This investment policy is that you’ve invested in the Tamiami Angel Fund, so you can direct all of that deal flow to the angel fund and go through a disciplined vetting process.

The answer to the person who’s asking you to review the business plan is, “Please submit your business plan to the Tamiami Angel Fund, which I have an investment in. If you are selected to present, I will make sure that I will attend that meeting. Should the angel fund invest, I will consider an additional add-on investment. If the business plan fails to be selected for presentation or investment, the likelihood of my investment is very, very small.”

It gives people a nice way to handle that early stage deal flow. Of course, accredited and high net worth individuals see a lot of deal flow. People figure out who’s wealthy in their families, who’s wealthy in their business networks, and they get deal flow.

That’s a long answer to what are our current sources of deal flow. But to get back to that question, it’s not only our angels but professional service providers who will send us deal flow.

By this I mean economic development agencies; as I mentioned, we cooperated closely with a number of them in southwest Florida when we did the assessments, so we’ve got good relationships there.

Again, we have good relationships from the assessment project with the universities, from which we get deal flow.

Another source is  other angel groups throughout the state of Florida. Entrepreneurs. Actually, entrepreneurs themselves know about other entrepreneurs, so sometimes we pull deal flow from other entrepreneurs.

And then, I would say one source of deal flow that might be overlooked – and this is more of a tip for other angel fund administrators or angel fund managers – is to go back through your rejected deal flow that may be 24 to 36 months old.

There may have been a company that you rejected for certain reasons but really liked the industry. Sometimes, we’ll go back through our deal flow and call a company and find out that they were able to raise capital, that they’re successful, and they’re out looking more capital. You can bring them back into your deal flow. They may have achieved certain milestones that they hadn’t before and now qualify to present.

This segment is part 2 in the series : Seed Capital From Angel Investors: Tim Cartwright, Chairman, Tamiami Angel Fund – Naples, Florida
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