by Mike Eckert
The Angel Investment “layer” in the early stage investment strata is the layer between the “Friends and Family” money/early grant capital layer and the Venture Capital layer Unlike Venture Capital Funds which manage and invest other people’s money (OPM) in early stage companies, angel investors are high net-worth individuals who write personal checks as they invest in high risk, early stage/start-up companies. In the mid 1990’s, individual angel investors began to form formal angel groups for the purposes of sharing due diligence, mutual learning and aggregating capital, while maintaining investor independence. Today, there are over 300 angel groups in North America. Approximately 220 groups are members of the Angel Capital Association, a trade group comprised of the more sophisticated angel investing groups.
Angel investors are becoming increasingly important to local economic development because their investment dollars enable companies in which they invest to create jobs. A very high percentage of jobs created in America since 1995 have been created by small and startup businesses, with angel investors serving as the primary funding source. Without angel investors and their willingness to take personal high financial risk, many companies in Atlanta and in Georgia would not/could not have been started.
In Georgia and in Atlanta, the state of angel investing is very positive and very strong. In fact, a renaissance in angel investing is occurring in the Atlanta market. In the past year and a half or so, the Atlanta Technology Angels (ATA) has seen its member/sponsor base increase from 25 to 120. This growth puts the ATA in the company of the larger angel groups in the country; a development that strengthens Atlanta’s profile among angels in other parts of the country.
This large aggregation of accredited individual investors is attracting record-breaking deal flow in the number of startup companies seeking investments from the ATA. Members of the ATA have responded well to this deal flow. Twenty-five investments have been made by members of the organization since early 2011. This deal activity is among the highest nationally and helps improve Atlanta’s brand image as a center for early stage capital. The ATA invests only in Georgia-based companies. Among the Georgia-based companies that ATA members have recently supported are: Apparity, BrightWhistle, CodeGuard, CollectorDASH, HireIQ Solutions, Mowgli, Pindrop Security, Pretty in My Pocket, TripLingo and Verdeeco.
Additionally, ATA members are stepping up with follow-on financing to their initial investments in order to enable further growth of these companies, or to sustain these companies and give them the opportunity to remediate if they get into trouble. The ATA also syndicates certain investments to angel groups outside of Georgia, bringing an influx of out of state capital into Georgia.
One variable that has catalyzed angel investing in Atlanta and in Georgia is the passage of the Angel Investor Tax Credit. Two years ago Georgia became the 25th State to pass this legislation. This enlightened piece of legislation has brought many angel investors from the sidelines to invest and to participate in private sector job creation, at a time when job growth is a key state-wide and nation-wide problem. This tax credit was a three year experiment by the State of Georgia. An experiment that has worked. Its extension will enhance continued company and job creation in Georgia, but it is important to note that extension of the Angel Tax Credit will be considered in the forthcoming Legislative Session of the Georgia General Assembly and industry support will be required for the extension to gain passage
The net today is that the state of angel investing in Atlanta is very strong and we see it only improving.
Mike Eckert is currently the Chairman of the Atlanta Technology Angels, the largest angel investment group in the Southeast and is an active member in the Atlanta early-stage/entrepreneur eco-system. Mike has extensive start up experiences as a member of the launch team of The Weather Channel/Weather.com where he served as its CEO. He also served as CEO of Pathfire, a digital media infrastructure business, both Georgia based companies.