My focus as an angel investor has been about where can I help create employment, opportunities for personal development that lead to more broadly-spread financial security, and opportunities for self-determination. Small business is that intersection in my mind. Businesses small enough that employees are an important part of the business, and that relationships with customers and vendors can be as much about the persons as the positions. I am interested in businesses that grow at a measured pace, such that they can do team building and culture building at the same pace they grow their revenue. There’s plenty of need for investment at that level – especially as we become an increasingly hourglass economy and fewer and fewer people can raise 50K among their own friends and family.
A movement of such businesses started a couple years ago in Portland, Oregon and called themselves Zebras, to distinguish their measured growth plans from Unicorns – the current buzzword for that one-in-a-how-many-ever company that will grow to a billion dollars or more, quickly. Leading Zebras were recently featured in a New York Times article about growing companies that don’t want Venture Capital or those style deals. There’s a great quote in the article from a VC who says he sells jet fuel, and it’s fine that not everyone wants to build a jet. The trouble is, investors who get professional advice get directed to jet-fuel returns, and investors without advice or willing to take more measured returns, don’t know where to go.
Traditionally angel investing has been Venture Capital style -more about placing bets where the chance for payoff is large, so the chips come back and more bets can get placed, on a short enough cycle that it can be an ongoing activity. Main Street Investing requires more patience and less ambition. Traditionally it’s more about debt, but most companies can still grow more quickly with equity. That matters because on the growth curve for a product business it often needs to be step-wise rather than smoothly linear. Equity helps climb the next step.
That more patient-return equity from investors seems to need a broad swath of folks who have done well for themselves to pay it forward once or twice. They should be looking for opportunities that are sustainable enough to return that initial investment and more, as well as being a desirable part of the local or regional economy. For that to really happen, folks need on-ramps. We can’t all become experts for something we’re only going to do once or twice. The smaller return expectations mean there’s not margin for intermediaries to guide us, either.
Just in the last month two long-time small-business advisors I respect have launched opportunities to help average people begin main-street investing in an organized way.
One is the new Fledge Angel Accelerator. It combines the successful-at-training-investors Seattle Angel Conference model of bringing new investors together to make group investments and be self-managed, with the successful smaller-business-friendly Fledge model of structuring those investments as revenue-based-financing. Revenue-based financing returns capital along the way at pace businesses can afford. I’ve been aware of both models for years and combining them seems like such an obviously good idea I’m a little embarrassed I didn’t think of it myself! This first Fledge program will run locally in Seattle starting in March, but Luni has done an excellent job of allowing the spread of the original Fledge model so likely you’ll have a chance to bring it to your own city.
The next program is Main Street Angels, launched by Jenny Kassan. Jenny has literally decades of experience helping small businesses raise local capital, going back to when it was done by Direct Public Offering. Jenny helped create the JOBS act. At some point she decided to add a professional coaching certification in addition to her law degree because she realized small business owners, especially women, need more than just straight legal advice as they grow their businesses. Growing businesses it quickly becomes apparent that we need to be growing the investor pool as well, and Main Street Angels, launched this year, is her answer. This is a national program with monthly webinar/calls that just started this February. I’ve joined and I’m interested to see where we go!
2/12 UPDATE: Jenny Kassan will be in Seattle at the end of March and I’m hosting an evening with her. You can sign up via EventBrite here.
Shaulablog 