IT WAS THE BEST OF ECONOMIC TIMES; IT was the worst of economic times. In 2010, a pool of retired and working executives who live in Southwest Florida decided to get into the business of investing in other, generally younger versions of themselves.
Since then, the Tamiami Angel Fund I LLC has examined almost 700 business proposals — 15 percent of them Internet-based ventures — and made seven investments in four companies. After initial investments last year, the fund in April fed $920,000 more into three of those businesses as they continue to grow.
“(TAFI) is comprised of a lot of very successful people who want to help other businesses be successful,” said fund member and Naples resident Jim Lozelle, a retired executive of Tower Automotive, a public auto parts manufacturing company.
TAFI is the seedling of such investorschool entrepreneur networks that power fully mature hubs in places such as Silicon Valley and Boston. It has yet to make a profit; members say they expect that to happen with its initial investments, even though the angels are in a high-risk business. Most start-up companies fail. But TAFI’s chairman, Tim Cartwright, points out that angel investors are very selective — usually picking only about one in a hundred deals they are presented with — and that success is generated by failure. He uses a baseball analogy: If you can hit a major league pitch just three out of 10 at-bats, you too can be a player. It’s still pretty hard to do.
71 pounds ... and growing
One of the businesses TAFI invested in is 71 lbs., a technology-based company from Fort Lauderdale that helps small-to-medium size companies collect the money-back guarantees offered by FedEx and UPS. If they are even a few minutes late, says 71 lbs. CEO Jose Li, the delivery companies owe a full refund to their customers.
CARTWRIGHT “That catch is that UPS and FedEx will not give you the money automatically so you have to claim it,” Mr. Li said.“TwobilliondollarswithaBare left on the table every year.”
He developed software that allows 71 lbs. to automatically track and generate the refunds efficiently — a key aspect of his proposal to TAFI, Mr. Li says. He takes a percentage of the refund for his profit, only getting paid if he collects.
Mr. Li, who is 41, left FedEx a few years ago, where he ran a department dedicated to retail and e-commerce shipments. In October he had no employees, but with help from angel investors in Chicago and the fund in Naples, he’s grown.
“Now I’m looking at six, seven families that we feed,” he said. “I’m actually pretty proud of that.” He adds, “It’s not Fortune 500 salaries, but we’re adding jobs to the economy and I think we’re on a good mission to prove this company can be much better than where we are today.”
71 lbs. recently surpassed 300 customers, TAFI said. The fund has also invested in Gainesville-based Fracture Inc., which creates mountable glass prints of photos on the Internet; Plus One, an Orlando-based service for training independent contractors; and Wasabi Sushi Co., a Washington, D.C.-based branded chain of kaiten (conveyor belt) sushi restaurants.
Entrepreneurs such as Mr. Li may submit a business plan to TAFI via its website, www.tamiamiangels.com. A small handful of those are invited to present their plans at a monthly meeting. Beyond that step, TAFI will scour the plan for defects and, if members invest, generally ask for 20 to 40 percent equity in the company. Mr. Cartwright described TAFI’s top three criteria.
“Our number one important factor in investing is the management team,” he said. “Another way to say that is we bet on the jockey, not on the horse, but I tell you the horse is important.”
Third in this hierarchy is a large addressable market representing a “scalable business opportunity with early commercial success.”
TAFI members and the businesses it invests in have a similar goal: to expand. A Naples-based wealth manager and TAFI’s chairman, Mr. Cartwright, was behind creating the fund.
Each member of an initial group of almost 30 “angel” investors, an SEC accredited individual who invests in early-stage companies, put $50,000 into TAFI. Their typical member profile, Mr. Cartwright says, is a former executive who has had a full career in a “C” role, whether CEO or COO.
The fund grew to $2.4 million, about half of which has been invested. Further, Mr. Cartwright says there are plans to create a Fund II and III, and keep this unique group as a fixture in the economic landscape of Southwest Florida.
TAFI and the separate Gulf Coast Venture Forum (a nonprofit arm of local angels also run by Mr. Cartwright) form a “key piece” of the region’s economy, says Debrah Forester, redevelopment manager for the Charlotte County Economic Development Office. The investors attract top entrepreneurial talent and can help diversify a regional economy dependent on the agriculture-tourismconstruction trifecta.
TAFI’s growth depends in no small part on Florida Gulf Coast University, which in theory could provide an everflowing pool of profitable entrepreneurs. The school is merely 15 years old, a far cry from centuries-old Ivy League institutions near other venture capital groups.
“That’s a significant advantage to have degreed programs and a reputation in engineering, law, mathematics, computer science, you name it,” Mr. Cartwright said. “So we believe as FGCU matures, our region will mature: more entrepreneurs, greater ideas, more significant research will come out of that university … Given enough years, say 10, 15 years, you could have one of the largest angel funds in the country in Southwest Florida.”
FGCU’s shark tank
At least the beginnings of such a network are being sketched. FGCU juniors and seniors in the semester that just ended tried to sell business proposals they came up with in class to three TAFI members. It was just for practice — the angels want companies that have developed some already — but also realistic, said Suzanne Specht, an adjunct professor who teaches entrepreneurship and creativity. (Ms. Specht is better known as assistant director of the FGCU Small Business Development Center).
It was something like the “reality” television program “Shark Tank,” Ms. Specht agreed, in which investors tear apart an entrepreneur’s plans sometimes to devastating effect; but more civil. The angel judges asked pointed questions and offered advice.
One of the judges was Naples resident Mr. Lozelle. He pointed out that all the student groups underestimated how much capital it takes to start a business; that it’s a common reason for business failure. He was also impressed by the students, who came up with ideas such as a pregnancy test for the iPhone and ShamWow! brand headbands for tennis players.
“Frankly, the students did better than some of the businesses we’ve seen present,” he said.
TAFI member David G. Pendell was also a judge. Each business the fund considers, whether it gets a yes or no, he points out, is stirring the pot of capitalism. And he adds, the angels are investing not just with their money but also with the executive experience they bring to the table, their “intellectual capital.”
“It’s definitely one of the arms of economic growth that’s needed in every area,” Mr. Pendell said. “Look at what Silicon Valley has done with the entrepreneurial world; and that’s a focus Tim (Cartwright) provides Southwest Florida that no one else is addressing right now.” ¦
TAFI Top 6 deal submissionsby industry through 2012 >> Total: 608 >> Internet/Web Services: 91 >> Consumer Products and Services: 39 >> Health Services: 37 >> Biotechnology: 31 >> Clean Technology: 23 >> Financial Services: 12 >> Other: 375