UP FRONT – Send me an angel – New North investing group gets its wings

Posted on Apr 1, 2012 :: Up Front
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Posted by , Insight on Business Staff Writer

For the past 20 years, Al Hartman has watched the region’s economic development scene and noticed a huge gap – a shortage

of capital for start-

up entrepreneurs.

“We just have a single angel investment fund in the New North – NEW Capital Management in Appleton – and I thought we need to have more,” he says.

So Hartman began spreading the word he was interested in starting up an angel investment group based in Oshkosh. Called Angels on the Water, the new fund hopes to raise $2.5 million to fund entrepreneurs and start-up businesses across the region. So far, Hartman has received interest from investors willing to give up to $1 million to help those businesses starting out.

“Angel investing is critical for entrepreneurs, especially now that it’s more difficult to borrow money,” Hartman says.

But getting those angel dollars is getting more difficult.

Wisconsin companies raised $72 million in venture capital in 2011, a 40 percent drop from a year earlier, according to figures released in January by the MoneyTree Report by PricewaterhouseCoopers LLP and the National Venture Capital Association. The decline in Wisconsin contrasts to the national average, where venture investing rose 22 percent to $28.4 billion. The reasons for the difference may be the kind of tax credits offered in Wisconsin to invest in start-ups.

Just as Angels on the Water gets off the ground, NEW Capital Management recently launched its NEW Capital Fund II Limited Partnership, with committed capital of more than $25 million. The fund focuses on Wisconsin and Great Lakes region-based early and growth stage investment opportunities in the areas of advanced manufacturing, information technology and life and material science technologies, says general partner Charlie Goff.

Led by Goff, Bob DeBruin, Dave Gitter and Steve Predayna. Fund II’s investment size will range between $500,000 and $3 million. The fund expects to invest in 12 to 15 companies.

Angels on the Water, Hartman says, will focus primarily on early-stage companies and smaller investments – a different focus than NEW Capital Group’s goals. “We will complement each other well,” Hartman says.

Looking at the New North, he admits he was startled to learn there was one single venture fund in the region. Overall, there are 20 in Wisconsin, most of them centered in the Milwaukee and Madison markets.

“We’re the third most populated part of the state and home to some very big industries. I thought we should do better than having just one angel fund,” Hartman says.

Putting the fund together has been a lot of work. There’s an investment committee that will look at proposals and make funding decisions. Hartman says he hopes the fund will soon be able to make its first investment.

Oshkosh entrepreneur Paul Jones, who has experience managing funds in the Silicon Valley and Research Triangle in North Carolina, is serving as the fund’s manager. He provides advice and counsel to the investment committee about the various projects. Hartman’s daughter – Elizabeth Hartman, an attorney for Dempsey Law Firm and CEO of Chamco in Oshkosh – is the fund administrator.

“The fund’s goal is to create wealth for investors, companies and our region by investing the money, time, expertise and relationships of its members in businesses with high growth and high return potential,” says Al Hartman.

Angels on the Water plans to work closely with companies, providing them with management assistance. “We’ll be a hands-on investor. We simply won’t give money to a business and walk away. We’ll work with the entrepreneur and provide guidance to help them continue to grow,” he says.

As to what kind of companies Angels on the Water is looking to help, Hartman says at least 50 percent of all funds invested will go to businesses within 60 miles of Oshkosh.

“In the end, we want to help create successful companies that will create jobs,” Hartman says.

As for the remaining funds, Angels on the Water will use those to partner with other investment groups in Wisconsin to help projects in those areas succeed. Hartman says that’s needed since “we’ll likely be turning to them to get additional capital for our projects. It’s a very collaborative process,” he says.