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Tech Coast Angels Pray Early Stage Investments Will Be Heavenly

The name Tech Coast Angels might be reminiscent of a certain motorcycle gang. But these angels aren’t raising Cain at rock concerts.

They are a 270-member-strong group of early stage “angel” investors at the ready with their checkbook for good investments.

“We’re the people who can help people who have a new idea,” said Ralph Mayer, president of the San Diego chapter of TCA, which has 74 members. “If it’s something that’s good, we’ve got a lot of folks who have the right connections to make that happen.”

Recently, they took their expertise to the judging floor at the annual “Quick-Pitch” contest, where 15 finalists gave two-minute pitches on why the angels should invest in them.

Typically, pitching sessions among entrepreneurs and angels or venture capitalists are done in private, so the April 17 event offered the public a rare glimpse to see some chief executives sweat.

While venture capitalists invest other people’s money and typically invest larger amounts in midstage to late stage startups, angel investors spend their own money, and typically put in between $400,000 and $2 million in early stage startups.


A New Face In The Crowd

The overall winner of last week’s Quick Pitch competition, where companies are judged on style and content, was FaceFX.

FaceFX has created a software program used to touch up digital photography.

UC San Diego Computer Science & Engineering professor David Kriegman and recent graduate Satya Mallick co-developed the program, which touts being user-friendly.

“We take the pain out of photo enhancement,” Mallick said the day following the competition. “We are in the business of making people beautiful.”

With successful use of one-liners like that during their “elevator pitch” to the angels, along with a solid plan to market the product within six months, Mallick and Kriegman scored a slot at an upcoming angel round-table.

The slot will offer them an opportunity to give an in-depth presentation about their company and product to angel investors and a chance at getting some real money.

Startups can approach the angels year-round by filling out a four-page application on the TCA Web site.

Putting money on biotech can be riskier than gambling in Vegas, however, so investors often put their money on management teams with track records.


Newcomers Welcome

The angels offer newcomers an opportunity to get their foot in the door in a tightly knit life sciences and technology investment community.

“Investors are most comfortable, particularly with the life sciences community, with CEOs who have been there, done that and been successful,” said Camille Sobrian, chief operating officer at Connect, which helps entrepreneurs in the technology and life sciences industries.

The Tech Coast Angels, Sobrian said, work closely with Connect to identify newcomers with promising ideas, especially through Connect’s Springboard program, which mentors startups and helps them with business plans.

TCA President Mayer said the angels fund 3 percent of entrepreneurs who approach them, while venture capitalists fund just 0.5 percent to 1 percent.

“There are more venture capitalists than angels,” Mayer said, adding that there are 100 angel groups nationwide, and TCA is the largest. “People have a lot of experience here , yeah, they like the people they know, but they’re always looking for better ideas.”

Mayer said the angels’ role in biotech is fuzzy because of the high cost of developing drugs.

“$600,000 doesn’t do them much good,” he said, so many of their investments end up on the technology side.

The face of TCA is changing as many more members hold full-time jobs , mostly at startups , than even just four years ago. Mayer doubles as CEO of an Irvine-based software firm called Multistat Inc.


Giving Something Back

So why would members of the invite-only group want to spend their own money on someone else’s early stage idea?

“You’re giving something back,” Mayer said. “For some members, it’s about staying involved, making contacts for a company , or simply just making money.”

The angels’ role becomes increasingly important to the future of innovation as venture capitalists opt for less risk by focusing on later stage companies, said Eric Otterson, vice president of business development at law firm Cooley Godward. Otterson recruits potential clients and helps them find investors.

“We need that early stage funding,” Otterson said. “Otherwise, the only other options are friends and family.”

The two other winners from the Quick Pitch competition were Hadronex, which won in the style category, and OncoFluor Inc., which won in the content category.

Hadronex’s technology addresses septic sewer overflows using alarm and data logging. The company says it has prevented 25 sewer spills in the past year.

OncoFluor’s product uses fluorescent light to highlight tumors during removal procedures.

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