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Despite the chaos of the pandemic, deal flow has remained fairly steady for existing angel groups in the area, with several new funds emerging, too. Angel funding is funding provided by wealthy individuals into a company directly, as opposed to funding coming from institutional investors.
In 2019, there were 1,322 individuals who invested a combined $73.6 million in 106 early stage tech startups here in the region, as Crain’s Detroit Business reported in May. Combined the funds are roughly on pace to do the same level of deals and investment in 2020 as they did last year.
Tune in to this morning’s WJR Business Beat to hear more on the state of angel funding in Michigan:
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Good morning, Paul.
Having a vibrant startup ecosystem in a region requires several key ingredients. You have to have exciting innovations and creative thinking. You have to have great people to lead these startups and you have to have funding to catalyze the nascent company and ignite its growth.
And speaking of funding, angel funding in particular is critical because it’s the type of funding commonly used in the earliest funding rounds, without which you never get to the later growth stages and to venture capital investing into the company.
For those who may not know, angel funding is funding provided by wealthy individuals into a company directly, as opposed to funding coming from institutional investors.
As many of you may know, I lead a startup studio in Birmingham, which depends on funding from angels. And I have to admit, when we saw angel funding activity pause during the first few months of the pandemic, I was really concerned. But amazingly, we are now seeing angel funding re-emerging and doing so with a strong appetite to do deals.
To put the importance of angel funding in context, in 2019, there were 1,322 individuals who invested a combined $73.6 million in 106 early stage tech startups here in the region, as Crain’s Detroit Business reported in May. Recently the emergence of two new funds in the region comes as deal flow has remained fairly steady for existing angel groups, such as the Birmingham Angels, the Michigan Angel Fund and the Michigan Capital Network, which operates a variety of venture funds and angel groups around the state.
As reported in this week’s Crain’s, first, we’re seeing new angel groups forming in the state with recent announcements of the launch of the Arch Angel Fund, consisting of members from the Farmington Hills-based Chaldean American Chamber of Commerce. And that fund will be led by Martin Manna and the launch of the Detroit-based Commune Angels, a group funded by five Black professionals who seek to be the largest angel group in the state within the coming year or so said, Terrence Reeves, one of the Commune Angels co-founders.
Skip Simms, senior vice president and Ann Arbor Spark and managing partner of the Michigan Angel Funds, says having a wide variety of groups to pitch allows founders to have “more shots on goal” as Skip put it to their quest in finding funding.
He continued by saying, “I think angel groups are working more closely than ever in terms of sharing deal flow because one thing that hasn’t changed and probably won’t is the need to syndicate,” Simm said.
An entrepreneur isn’t going to get a hundred percent of their funding from just one of these groups, rather, they’ll get it from a variety of groups.
Crain’s further reports that Birmingham Angels has grown to a membership of between 15 and 20 members, as David Weaver, one of the co-managers of the group reports, and Tim Parker, president of the Grand Rapids-based Michigan Capital Network reports good activity from his group, as well.
Combined the funds are roughly on pace to do the same level of deals and investment as they did in 2019. Last year, Parker’s Venture Funds invested $1.1 million, while Angel Funds did $2.8 million, he said. This year, so far, VC investment has reached $1.8 million while angel investments stand at $1.3 million, Parker told Crain’s.
So, new groups being formed, investments being made at a pace that is relatively on par with last year’s investment pace. This is all really good news. So, if you’re a startup company looking to get angel funding to get your company off the ground, chin up! Money is flowing again. Now get out there and get your startup a piece of the action.
I’m Jeff Sloan, founder and CEO of StartupNation.com, and that’s today’s Business Beat on the Great Voice of the Great Lakes, WJR.