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Five years ago, Jim Tindal and his business partner were seeking investors for their small chain of gourmet butcher shops.
They had bought the New York Butcher Shoppe brand three years earlier from an entrepreneur in Mount Pleasant and moved its base of operations to Greenville.
As they searched for funding to expand the business, they discovered the Upstate Carolina Angel Network, a group of affluent individuals, mostly from Greenville, willing to put money into fledgling companies in exchange for equity.
UCAN’s 55 members are among nearly 300,000 so-called “angel” investors around the country who last year invested $24.8 billion in more than 70,000 entrepreneurial ventures, according to the Center for Venture Research at the University of New Hampshire.
Support from angel investors can help a startup survive long enough to prove its business model without having to leave town in search of funding.
After a vetting process, Greenville’s UCAN provided a cash infusion of an undisclosed amount to Butcher Shoppes International LLC.
Three UCAN members joined the Butcher Shoppes board and have provided valuable guidance over the years, according to Tindal.
The chain, which sells high-quality beef and other meats through seven stores in four states, has enjoyed a doubling of sales volume since UCAN invested in 2009, he said.
UCAN hopes to find other investment opportunities — and do its part to boost the South Carolina economy – by working with a new statewide network of angel investor groups.
The South Carolina Angel Network includes new angel investor groups in Columbia and Asheville in addition to the six-year-old UCAN. A fourth group is ready to form in Spartanburg, and a fifth meets virtually to help entrepeneurs who are Clemson University alumni.
The alliance of investor groups was launched this year by Matt Dunbar, UCAN’s managing director, and Paul Clark and Charlie Banks, two former CertusBank executives who joined UCAN when they were with the bank.
The various groups plan to pool capital and share information as they invest using processes developed by Dunbar during six years of running UCAN.
Dunbar said he hopes the network will help boost startup activity in South Carolina beyond what the state would otherwise have.
“If we scale up, and have investors across the state, we don’t have to have a full-time, separate staff at each place to run the activity,” he said. “We can leverage one central back office, so to speak.”
The result will be “more capital-efficient and sustainable for everybody in the network,” he said.
To join one of the angel groups, individuals must have a net worth of $1 million, not counting their primary residences, or an annual income of $200,000 for at least three years.
Dunbar said a 2010 study by accounting giant Deloitte shows there are at least 100,000 people in South Carolina who meet those criteria.
“If we can just get a fraction of those people to put some money into this asset class, that could be a significant amount of capital to help some of these companies and give us all a chance to succeed,” he said.
Dunbar, Clark and Banks have also launched the Palmetto Angel Fund.
It’s for people who want to help South Carolina startups — or at least make money investing in them — but don’t want to attend angel group meetings or get involved with investment decisions.
The fund will put money in all deals struck by the various angel groups involving at least $100,000 and five investors, automatically spreading the risk like an index fund.
Clark, who’s administering the fund from Greenville, said he hopes it will have $1.5 million by the end of this month.
SUCCESS OF UCAN
Organizers of the angel groups in Columbia, Asheville and Spartanburg are hoping to duplicate the success of UCAN, which this year was ranked the nation’s No. 8 angel investor group out of 370 examined by CB Insights, a New York City firm that tracks investments in private companies.
The ranking came after UCAN members sold their stakes in two companies for a profit: Selah Genomics and Verdeeco.
Dunbar wouldn’t release UCAN’s financials but said its members overall are “in a position” where a 20 percent rate of return across their portfolio is “doable.”
UCAN has put money into 36 companies over the years, 22 of them in South Carolina and 17 of those in the Upstate, Dunbar said.
Five of the firms it funded no longer exist, underscoring the high risk involved in angel investing.
UCAN’s members include Greenville businessman Joe Swann, who was president of Rockwell Automation’s Power Systems division until selling it eight years ago in a $1.8 billion deal.
OUTSIDE OF GREENVILLE
In Columbia, the new angel investor group is called Capital Angels.
It’s managed by Banks, a 32-year-old Camden native with a business degree from Newberry College and experience as an entrepreneur.
Members began meeting regularly in the summer and now number 35, he said.
They include Lee Bussell, chairman of Chernoff Newman, a well-known marketing communications firm, and Marty Brown, chief executive of Colite International, a signage company.
At least one previous effort at launching an angel investor group in Columbia failed, but Banks said Midlands business leaders who understand the importance of entrepreneurship have watched the success of UCAN.
“I think the timing is right now,” he said.
Banks said Capital Angels has invested in three companies so far: Pandoodle of Columbia; Baebies of Durham; and PharmRight of Charleston.
In Asheville, the Asheville Angels launched in October with 25 investors, said Josh Dorfman, the group’s managing director.
He works for the Asheville Area Chamber of Commerce, leading its initiatives for high-growth entrepreneurs.
As Asheville business leaders thought about organizing angel investors, Dorfman said, they looked to UCAN as a model.
“We felt UCAN, in a relatively short period of time, is developing an excellent track record, is very well managed, has great screening processes in place,” he said.
“And we feel strongly there’s great potential and synergies to be had between Asheville and Greenville in tying our communities and economies together.”
Dorfman said he wasn’t at liberty to disclose the one Asheville venture that the Asheville Angels has funded so far.
He said three other Asheville companies are scheduled to make presentations to members of the group in January.
“We have very optimistic expectations for 2015,” Dorfman said.
The group forming in Spartanburg will be called the Spartanburg Angel Network and will be owned by the Spartanburg Area Chamber of Commerce, said John Bauknight, one of the organizers.
Bauknight and his partner in Longleaf Holdings own five businesses, including R.J. Rockers Brewing Co.
He said organizers of the Spartanburg Angel Network hope to recruit 40 investors. Information sessions have been scheduled for three dates in January.
“We’re hoping that our first true member meeting will be in February,” Bauknight said.
He said a previous effort to organize an angel investor group in Spartanburg didn’t work but “everybody seems to be paddling in the right direction now.”
Also part of the statewide network is an angel investor group that’s focused on helping entrepreneurs who are Clemson University alumni.
The Tiger Angel Network, formed last year, includes 17 experienced investors who live around the country and meet virtually, said Matthew Klein, manager of the group.
Participants include Spiro board members such as Michelle Higdon, a former Nestle executive who runs a pet food company in Greenville.
Klein, interim director of Clemson’s Spiro Institute of Entrepreneurial Leadership, said the Tiger Angel Network doesn’t originate deals but joins deals arranged by other groups.
“The purpose is to help entrepreneurs that have an affiliation or an affinity for Clemson,” he said.
Joining a network of other angel groups in South Carolina “only adds to the opportunity to see deals across the state,” where many Clemson alumni live, Klein said.
He said the Tiger Angel Network has put money into one venture so far, but that he couldn’t share details because the deal hadn’t closed.
Article source: http://www.greenvilleonline.com/story/money/business/2014/12/19/investors-band-together-fund-startup-companies/20639347/