‘Angel’ sets lofty new goal: $5 million
When last we left Richard Frederick, the former health care executive-turned-entrepreneur was beating the bushes for “angels” interested in offering their money and expertise to promising local start-ups.
Two years later, he’s still “doing a lot of begging, cajoling,” Frederick said this week, with an eye on a new goal for the “seed” fund he co-founded: $5 million.
Frederick and retired banker Joseph Richardson began laying the groundwork for their Eastern New York Angels in 2010, hoping to launch with $1 million as 2011 dawned. They envisioned directing money from local investors to early-stage companies needing help in getting their products or services to market, resulting in new jobs, a growing Capital Region economy and a solid return for the angels.
Angels — typically successful professionals with a six-figure income and a net worth of at least $1 million — are “historically … the major source of seed and start-up capital for entrepreneurs,” says Jeffrey Sohl, director of the Center for Venture Research at the University of New Hampshire.
The center has been tracking and researching the angel market since 1980 and reports quarterly on trends. Earlier this month, it said angel investments in the first two quarters of 2012 showed continuing improvement from the Great Recession contraction in the key measures of overall investments, start-ups being funded and number of active investors. “When compared to the market correction that occurred in 2008, these data indicate that the angel market has demonstrated a steady recovery,” Sohl reported.
That could bode well for Frederick.
He’s looking to add to the 25 original members in the Eastern New York Angels — 50 seems like a “perfect” size for the network, Frederick says — in order to take the $800,000 raised in last year’s launch to $5 million. That was a goal of the fund from inception so that investments of $50,000 to $250,000 could be made annually in four to six companies.
Frederick wants to get to $5 million by Dec. 31; verbal commitments to date total $2 million to $2.5 million, he said.
But Frederick isn’t looking to members alone to do the heavy lifting. He’s talking, too, to banks and big local companies about ponying up $250,000 in the name of economic development. (Eastern New York Angels was unsuccessful in the spring in getting a share of the new $25 million Innovate NY Fund, which is channeling federal money to investment funds targeting early-stage companies.) Frederick’s fund already has made two investments and two more are expected by year’s end.
Last fall, it put $150,000 into Ener-G-Rotors of Rotterdam, which is developing a device to capture waste heat from industrial processes and turn it into electricity; another $150,000 is promised when the product is ready for market, which will likely be late next year. In January, the fund invested $200,000 in two phases in Paper Battery Co. of Troy, which is working on an ultra-thin capacitor for power storage.
Frederick admits that pledges to the $5 million goal have been slow in coming. But he points to Ener-G-Rotors and the $1.5 million it received last month from Bright Capital Seed Fund, a division of a Russian venture capital firm, as affirmation.
“The $5 million is doable because we have experience and a little bit of a track record,” he said. “The fact that Ener-G-Rotors got a follow-on investment gives us credibility. … The banks are interested because we have established ourselves.”
Marlene Kennedy is a freelance columnist. Opinions expressed in her column are her own and not necessarily the newspaper’s. Reach her at firstname.lastname@example.org.