HindSight: November 2011

Wednesday, November 23, 2011

Next-gen funding: Startup pioneers form angel investment fund

Next-gen funding: Startup pioneers form angel investment fund

By: Lynne Marek November 23, 2011

(Crain's) — Some of Chicago's best-known technology entrepreneurs, including Viewpoints Network LLC CEO Matt Moog and ShopLocal LLC founder Brian Hand, are coming together to form a new angel investing group called the Founders Fund.

Although details haven't been finalized, the group is targeting some 30 members, who are being asked to contribute a minimum of $100,000 each to the effort, according to people familiar with the plans. The entrepreneurs have been meeting monthly on an informal basis for some time and have decided to set up a channel for investing together, they said.

The emergence of the group here is a sign that Chicago's venture-capital ecosystem is expanding beyond the doctors, lawyers and other wealthy individuals who typically back a community's initial startups. Now, entrepreneurs who have made money on their endeavors, mainly technology-related companies, are in a position to funnel investments into the next generation of business leaders.

Mr. Moog and Mr. Hand are spearheading the effort, the people familiar with the plans said. Generally, angel investment groups review entrepreneurs' business ideas and then decide whether to invest either as a group or as a subset of the individuals in the group. The Founders Fund isn't expected to have a staff or expenses per se, but rather will simply be a means of putting deals on the table to be considered by the group, the people said.

Mr. Moog, who was also previously CEO of online coupon company CoolSavings Inc., declined to comment. Mr. Hand, chairman of photo-sharing application company Timelines Inc., couldn’t be immediately reached for comment.

People who have been approached for membership include SurePayroll Inc. co-founder Troy Henikoff; Tribeca Flashpoint Academy CEO Howard Tullman, who also founded Imagination Pilots Inc. and CCC Information Services Group Inc., among other firms; and Chicagoland Entrepreneurial Center CEO Kevin Willer, who co-founded Google Inc.'s Chicago office.

Mr. Tullman and Mr. Willer said they haven't made a decision yet on whether to join the group, and Mr. Henikoff said he wasn't ready to discuss the effort yet.

“For them to be organizing an angel effort, it's bound for success,” said George Deeb, managing partner of Northfield-based Red Rocket Partners LLC, a consulting firm for entrepreneurs. He wasn't familiar with the new investment group.

The name of the Chicago-based group plays off the fact that the members have generally founded their own companies. Similar groups, such as the Menlo Park, Calif.-based Band of Angels, exist in other parts of the country.

Even more important than the funding, veteran entrepreneurs can offer their experience and network of contacts.

“The most valuable thing they bring is mentorship,” said Jeff Carter, a member of Hyde Park Angels, another investment group in the city that invests mainly in Chicago-based companies. He hadn't heard of the new group.

Hyde Park Angels, which is affiliated with the University of Chicago, has local company, including the Wildcat Angels in Evanston and Northbrook-based Cornerstone Angels, led by Michael Gruber, co-founder of G4 Capital LLC.

While the groups probably review some of the same investment opportunities, they tend to carve out different niches, producing more collaboration in a network than competition, Mr. Deeb said. That benefits the entrepreneurial community.

“The more resources an entrepreneur has to attract venture capital from, the better,” he said.

(Reporters John Pletz and Shia Kapos contributed to this story.)