GRAND RAPIDS — Grand Angels’ formation of an affiliate investment group in Detroit brings more capital and investors into the field to support startup companies in Michigan.
Woodward Angels seeks to launch this spring with about 20 founding members, adding to a network that Grand Angels is building by forming affiliates in markets throughout Michigan.
“We expect it’s going to be a real solid sized group that will bring a lot more capital to deals, especially that are happening in Detroit,” said Grand Angels President Tim Parker.
Woodward Angels could close its first investment deal this spring.
The group’s creation continues the growth of angel investing and investors in Michigan, a trend that’s been occurring for more than a decade, Parker said. The new group also helps further bridge investors on either side of the state.
“For us to scale from an investment standpoint and to compete with the coasts, our whole state has to band together, and we’re finding more and more people interested in that,” Parker said. “It’s actually pretty natural.”
Named after the thoroughfare that runs more than 20 miles north and south through metro Detroit, from downtown to Pontiac, Woodward Angels held a kickoff meeting two weeks ago that attracted about 75 prospective members.
Woodward Angels intends to limit initial membership and is “going for quality over quantity,” said Director Lauren Hoffman.
“We anticipate the group will grow, but are interested in quality and getting a really strong group off the ground,” Hoffman said. “We’re really looking for members who are truly interested in deploying capital and supporting early-stage startups, and who are interested in mentoring and getting their hands dirty a little bit and being there as mentors and advisers for the companies that we invest in.”
Woodward Angels is the second affiliate formed by Grand Rapids-based Grand Angels, which set up a similar group in Kalamazoo in September 2017. Ka-Zoo Angels today has 15 members who last year invested $330,000 in eight deals involving seven startup companies, Parker said.
The 52 members of Grand Angels in 2018 invested $1.14 million through a dozen deals involving 10 startups. A venture capital fund Grand Angels operates put another $1.18 million into eight deals for seven companies.
Grand Angels looks to form more affiliates to increase the flow of capital and streamline the process for startup entrepreneurs raising money.
A network of angel groups across Michigan can share deals and investment opportunities while leveraging the administrative structure of Grand Angels to vet prospects, negotiate deals, manage an investment portfolio and streamline the process for entrepreneurs behind startups seeking capital, Parker said.
“We can continue to become tighter from West Michigan to Southeast Michigan, from Southwest Michigan to the U.P.,” he said. “We have a fairly small state. We have, however, a fairly large number of accredited investors who are looking to have a more organized method to invest. We know that companies in Michigan, and actually across the country, are saying it’s very difficult when you’re starting up to find capital. My goal is to try to make that easier for the entrepreneurs.”
In setting up the Detroit affiliate, Grand Angels has been “somewhat selective” in how it offers membership, Parker said. Grand Angels wants to make sure it has a group of members who can invest not just their money but their time and talents into startups.
“Our goal is not necessarily to have the largest group that we can create. Our goal is to have the most productive group that we can create,” he said. “We really want to have people that are taking this seriously, that are committed to their region and are going to invest in these companies and help mentor them or help them with whatever challenges each startup may have.”
The angel group, for instance, could connect a startup experiencing sales problems to a member who’s an expert in the area, Parker said. Likewise, the group could pair an entrepreneur who needs to develop more as a leader with a seasoned CEO.
Parker credits the success of Grand Angels over the years to members’ willingness to get involved with and advise the companies in which they invest.
Woodward Angels is the 12th angel investment group in Michigan. In 2017, the most recent year for which data are available, the 11 existing angel investment groups in Michigan invested $41 million in 37 startup companies, according to an annual research report by the Michigan Venture Capital Association. There were 797 active angel investors in Michigan in 2017, an increase of 229 percent from five years earlier.
The formation of Woodward Angels comes as the Detroit area experiences an economic resurgence.
Having an angel group focused on the region can help to continue to the progress that’s been made, Hoffman said.
“A strong, robust angel community is a pretty important piece of infrastructure of any startup community,” said Hoffman, the venture community liaison in downtown Detroit for Rock Ventures LLC. “Detroit is very quickly building momentum as a tech hub and as a hub for high-growth businesses, but it’s still missing some of those pieces and foundational infrastructure that enable that to accelerate.”
To that end, the region and the state could could see more angel groups.
Skip Simms, director of entrepreneurial services at the economic development group Ann Arbor SPARK, said he’s aware of two other potential new angel groups forming in Southeast Michigan, one for local alumni of the Harvard Business School.
Simms, also the managing partner of the Michigan Angel Fund in Ann Arbor, believes there are many more high net worth individuals in Michigan who meet federal guidelines and could become angel investors. He’d like to see the number of angel investors in the state double from the nearly 800 now.
The launch of Woodward Angels and talk about other groups furthers the continued growth of angel investing in the state.
“I think we’re in a movement,” said Simms, who notes as well the collaboration that occurs between the angel groups in the state.
“We’re all beginning to realize we’re all in this together,” he said.