Boise Angel Fund invests, diversifies its holdings

Boise Angel Fund LLC is busy investing in early-stage growth companies.

The Fund’s umbrella organization, the nonprofit Boise Angel Alliance, formed about five years ago to help entrepreneurs and prospective angel investors learn more about this type of financing. About 35 people belong to the Alliance.
About 30 Alliance members belong to Boise Angel Fund, which started in April 2007. The Fund was set up with $1.35 million available to invest in entrepreneurial ventures.
Fund member Kevin Learned said the fund will invest $100,000 to $125,000 in business ventures, and also will allow “side-by-side investing” by people who joined the Alliance after the Boise Angel Fund was formed.
Boise Angel Fund also will invest and then take these deals to other angel groups around the country for consideration via a syndication approach, he said.
For example, Boise Angel Fund is investing in Ming Solar and is presenting that company to other angel funds. The Fund recently invested in Pacinian and Geodata after other angel groups presented these companies to the Boise group.
“We’re going to invest smaller amounts in other people’s deals,” Learned said. This diversifies the Boise portfolio and encourages other funds to consider companies in which the Boise Angel Fund invested.
Traditionally, angel funds found their own deals and kept them secret.
“What we’ve learned over time is that these deals, no matter how good they look,” are always high risk – and you’d better be diversified,” Learned said.
Boise Angel Fund exists mainly to support Idaho business, but a syndication approach helps it to find a sufficient number of deals and to diversify while also encouraging outside investment in Idaho ventures, he said.
Industries represented in the Fund’s portfolio range from high-tech to consumer staples.
Prosperity Organic Foods is owned by a Hailey-based scientist and entrepreneur who developed a healthy butter substitute, available in about 20 Whole Foods Markets in California, Learned said. Boise Angel Fund likes the product and a consumer base that is increasingly health conscious, he said. Fund investors believe demand is rising for a healthier butter substitute.
“Our investment has been to help her refine and position her product,” he said. “We’re as much about trying to help entrepreneurs as we are about investing.”
Former Albertsons CEO Gary Michael and former Ore-Ida Foods executive Meg Carlson are helping Prosperity with business aspects including packaging, branding, controlling ingredient costs and bringing the product to the larger market.
Learned said Boise Angel Fund is unlikely to invest in additional companies in the same industries. “We know we need to be diversified,” he said.
In an average angel portfolio of 10 investments, three or four will lose money – possibly everything – one to three will “make it big” and the others will generate a decent return, he said. Angels invest earlier, and in smaller amounts, than venture-capital funds.
Boise Angel Fund so far has invested $140,000 and has made commitments to invest an additional $125,000. Learned said the fund is closed; it will invest what it has and eventually will sell those investments.
The economic decline and tight credit market make Boise Angel Fund investors more cautious about the demand outlook for companies they are considering for investments, he said.
But entrepreneurs always find angel investments hard to come by. Boise Angel Fund has considered 82 applications. Learned said the Fund sent 29 to a steering committee, which in turn sent 13 to the whole membership for consideration. Of those, the group rejected one and sent the remaining 12 to a due-diligence team – which recommended seven for investment. Boise Angel Fund invested in five, is completing an investment in one, and could not invest in the other because of a legal issue.
Boise Angel Fund’s current track record of investing in 7 percent of companies that it initially considers compares to a U.S. average of about 1.5 percent, Learned said.
“We will continue to invest,” he said.
Southwest Idaho has two angel investor groups – the other is the Keiretsu Forum – and the Highway 12 venture capital fund. Learned said the area’s venture funding infrastructure is much better than when he and Gary Mahn found capital for the Learned-Mahn software company in the early 1970s by “knocking on one door at a time.” They sold that company in the early 1990s.