Utah’s economy is one of the healthiest in the country, and its strength depends in part on its diversity – the more industries that thrive here, the better protected the overall economy is if one falters or fails.
In recent years, Utah’s business-friendly policies, lifestyle benefits, and growing entrepreneurial vibe have produced not just Silicon Slopes but a robust startup ecosystem across the state. What comes before all that success? Ideas, dreams, ambition, hard work. Trial and error. Shoestring budgets and loans from family and friends.
That’s where the Park City Angels come in. The local angel investing group formed 12 years ago with the goal of supporting primarily Utah-based entrepreneurs ready to take their ideas to a level that required cash – for beta trials, for manufacturing, for all sorts of costly aspects of launching a new company or product.
“It’s very early-stage investing,” said PCA Chairman Doug Wells. “Typically it’s the first money in, right after friends and family.”
Early means risky. Wells said a typical rule of thumb is that about half of the investments an angel investor makes in a year will “go to zero,” meaning they will not return any money. A few will break even, a few will generate modest returns, and one might return so much that it “pays for” all the others.
Wells offered two examples of such lightning strikes that PCA took part in: High West Distillery, which PCA was among the first to invest in, and Teem, a business-to-business tech startup that improved how companies utilize meeting space in their offices.
With High West, Wells said it was a rough road for founder Dave Perkins, who survived costlier-than-planned building renovations ad some lean years before selling the wildly popular whiskey label to Constellation Brands for $160 million. Similarly Teem was purchased by WeWork; a lucrative outcome for investors.
Around the country, Angel investing groups vary in size, structure, participation requirements, types of companies focused on, and other aspects of membership. But they’re all governed by federal rules that require members to self-certify their financial accreditation. To be accredited, investors must have $1 million of investable assets not including their homes, or meet annual income requirements.
Once those criteria are met, PCA, which has about 50 members now, is fairly low-key, Wells said.
“If people are not interested in investing, this is probably not the right group for them,” he said. “But we don’t want anyone to make a deal that they’re comfortable making.”
He said a typical annual investment commitment for members is around $25,000.
Wells, who has been a member of the Angels for a decade and took over as chairman last October, said the group is focused on five key pillars that he sees as foundational to the group’s future:
- Valuing a supportive, fun culture.
- Providing a strong, quality ‘deal flow’ – offering members multiple good options for investable deals each year.
- Developing a system to pool money so all members can participate in deals at levels they’re comfortable with: for example in a situation with a company that one member wants to invest $50,000 in and another member wants to invest $5,ooo in, pooling would enable entrepreneurs to accept the total investment from all the interested Angels.
- Education for members – the angel investing journey takes place in steps, and historically each step costs around $25,000 in terms of learning through doing; education can be critical to avoiding costly mistakes
- Increasing membership and diversity in the group
By nature of its function, and due to rules set by the federal Securities and Exchange Commission, an investment group can’t build much socioeconomic diversity. So PCA is focused on gender and nationality diversity, Wells said. Toward that goal PCA is working to build awareness within the community of its existence and function, in hopes of attracting new members.
“It’s important to us to be broader than just a group of white males,” he said. “It’s something that we’re working on. We’re doing what we can. One of the most powerful things we do is help each other make good decisions. Having viewpoints from different vantage points is valuable in that.”
For more information visit www.parkcityangels.com.