Seed Capital From Angel Investors: Tim Cartwright, Chairman, Tamiami Angel Fund – Naples, Florida (Part 6)
Seed Capital From Angel Investors: Tim Cartwright, Chairman, Tamiami Angel Fund – Naples, Florida (Part 4)
Sunday, February 27, 2011 Comments (0)
By guest authors Irina Patterson and Candice Arnold
Tim: We [the Tamiami fund members]
typically go through a more robust question and answer period inside of the fund
structure [than the Gulf Coast Venture Forum]. When we’re done with our question
and answer period, we ask the entrepreneur to leave the meeting.
have a discussion among the members, and then I call for a vote on whether the
company should be approved to enter a due diligence cycle so that I can give
immediate feedback to the entrepreneur after her presentation on whether our
fund is interested in her offering and, if so, enter into a due diligence cycle
we go through a structured due diligence, term sheet negotiation process and
final investment authorization from another vote from membership. It’s a much
more disciplined, organized process intended to invest capital, whereas the
angel investment network is a bit more spontaneous and ad hoc and takes more
perseverance from the entrepreneur and the angel.
Irina: Do you think in terms of valuation
when you are looking for companies to invest in?
Tim: I would say we’re typically going to
be looking at investing in companies that have a valuation of under $5 million.
There can be exceptions to this. But on average, we’re looking for companies
with fairly attractive valuations, not inflated valuations.
Irina: Do you have in mind how much equity
you will usually seek?
Tim: Yes. I think that each deal is going
to vary, but typically, for whatever round we’re investing in, it would probably
be between 20% and 40% equity in the company. Not every round is a $1 million,
series A round. Sometimes they may be looking for $2 million, sometimes $1.5
million. But that round is typically going to be between 20% and 40% of the
Irina: Do you have in mind what kind of
return you would like and over what period?
Tim: Our fund is organized as a five-year
fund. That means we need to be invested and will distribute any profits we have
during that five-year period. At the end of that period, if an investment hasn’t
been liquidated or bankrupted, we will re-title the shares on the individuals’
names and the fund’ll be done after five years.
investments will, we hope, have some success within five years’ time. We also
project for the fund an IRR of 25%. Now, I can tell you, and you probably have
heard this a number of times, this type of early stage investing in private
companies with unknown management teams, unknown products and unknown prospects
is highly risky. So, there’s definitely the potential that all of our investment
capital is lost.
Irina: In what stage of a company’s
development would you prefer to invest?
Tim: Well, because we are fortunate in
southwest Florida to have two angel organizations that are very cooperative and
collaborative, what we’ve done with our deal flow is, where both organizations
are working together effectively, we typically direct the pre-revenue companies
to the Gulf Coast Venture Forum and the revenue producing companies to the angel
if a company distinguishes itself at either meeting, we refer that company over
to the other angel organization. From a fund perspective, we are looking for
revenue-producing companies, which would put us in the stage that you’ve defined
as validated with customers, because customers means
Irina: Do you look at the size of the
Tim: Again, it varies by deal. Certainly,
with most business plans that we’re looking for, you need to have a substantial
addressable market so that if your market penetration is in the single digits,
you still have a fairly attractive and large company for M&A, which is the
most likely exit strategy.
will be looking at those marketplaces that have large addressable markets, I
would guess north of $500 million. Probably more likely, we’d be looking at a $1
billion total addressable market so that you can, again, a fraction or a small
amount of the marketplace and still have a profitable, successful company.
Seed Capital From Angel Investors: Tim Cartwright, Chairman, Tamiami Angel Fund – Naples, Florida (Part 3)
Friday, February 25, 2011 Comments (0)
By guest authors Irina Patterson and Candice Arnold
Irina: What is your geographical focus?
Tim: The state of Florida. As stipulated in our fund document, we are not allowed to invest in companies outside the state of Florida.
Irina: Can entrepreneurs pitch you directly, or do they have to get a referral from someone in your angel group?
Tim: They can submit their business plans to us without a referral. We take all of our business plans through our website: www.tamiamiangels.com
We use Angelsoft [online management platform] extensively as our website and our back-end deal flow management tool.
In fact, according to our policy at the fund, I’m not allowed to talk to an entrepreneur until he or she submits a plan on the website.
That does a couple of good things. It forces discipline, so that we record everything that comes in automatically, as long as we adhere to that policy of taking everything through the Internet. Also, it provides good transparency to our members so that conflicts don’t develop.
You could get in a situation where there’s a certain segment of business plans that may be mailed to you and a certain segment that go through the Internet. If you’ve got multiple channels like that, some members of the fund might think there are business plans that are being held back or that they don’t have full visibility on every deal that comes in. We eliminated that concern right from the start by requiring that each deal must go through our website. Then we open up our deal flow management system to all of our investors, so they track everything that’s going on through Angelsoft.
Irina: Approximately how many deals do you receive a month?
Tim: We receive, on average, between 20 and 40 deals a month.
Again, remember that even though we’re a new fund, we did have a bit of tailwind to the establishment of the angel fund because we had previously been operating as the Gulf Coast Venture Forum. The Gulf Coast Venture Forum was founded in 2001, so it’s celebrating its tenth year. That organization is still operational.
In southwest Florida, we’re trying to build our entrepreneurial ecosystem. We’re fortunate to have two angel organizations in southwest Florida.
One is the Tamiami Angel Fund, which is an angel fund, an investment structure, with committed capital. The second organization is the Gulf Coast Venture Forum, which is an angel investment network. They do differ. I don’t know if anybody’s gone into the difference between a fund and a network, but I could do that for you.
An angel investment network typically charges membership dues. The organization is closed to the public; that is, it’s only open to accredited investors. [At the Gulf Coast Venture Forum], we have membership qualifications and make each of our members pay annual dues and certify that they are an accredited investor, according the U.S. Securities and Exchange Commission’s (SEC) definition of an accredited investor.
Then we solicit deal flow. We select the best companies from that deal flow, hold our monthly meetings, allow the entrepreneurs to present, and then the Gulf Coast Venture Forum is pretty much done with its duties. Whether an entrepreneur gets investment at the Gulf Coast Venture Forum is really up to the entrepreneur and the angel talking with each other, developing a relationship, and holding whatever meetings they need to in order to progress toward an investment in the company.
The Gulf Coast Venture Forum is not a broker-dealer, it is not a matchmaking service, and it does not collect a sales commission. It’s just a not-for-profit organization that brings forth the best deal flow and puts that deal flow in front of our members, who are accredited investors.
Now, on the fund side of it, you’ve got a closed group of individuals who have already committed capital up front. We go through a similar process where we attract deal flow, select that deal flow, allow them to present. At that point the differences between the two organizations start to show.
Seed Capital From Angel Investors: Tim Cartwright, Chairman, Tamiami Angel Fund – Naples, Florida (Part 2)
Thursday, February 24, 2011 Comments (0)
By guest authors Irina Patterson and Candice Arnold
Irina: Who are the people who invested in the fund?
Tim: They are all angel investors, all private individuals. We don’t have any venture funds or other institutions in the fund right now.
Irina: Where is the fund located? Does it have a physical address?
Tim: Yes. The angel fund is located in my office. I’m an investor in the fund, so I have my own $50,000 in the fund – but then my company, Fifth Avenue Advisors, has a subsidiary called Peninsula Fund Administrators, which acts as the third-party administrator for the Tamiami Angel Fund. We do have a physical address. It’s 350 Fifth Avenue South, Suite 203, Naples, Florida 34102.
Irina: Did everyone invest $50,000? Is that the way it was designed?
Tim: Yes. An individual unit was $50,000, and according to our fund document, no individual could purchase more than two units so that we weren’t weighted toward any one angel. We have 29 investors in the fund, initially, with everyone at $50,000. One investor did purchase two units.
Irina: What is your current source of deal flow?
Tim: We get deals from our angel investors, which is part of the logic behind an angel fund. When I go out and talk to groups and explain angel investing, I often mention that angel investing is better done as a team sport, as opposed to an individual approach.
When you get into a structured investment vehicle like a fund, you’ve got that team environment, but you also have a disciplined and usually more rational decision framework, as opposed to the normal way an angel investment is made, which is usually an emotional decision, an individual decision.
It’s either just a gut reaction, or there’s some sort of emotional pull or tie to it because there’s a relative, former co-worker, or former business partner who’s made the introduction or is part of the management team or something, and there’s a personal request that an individual invest.
So, what’s worked well with the angel fund is talking to those angel investors and saying, A good way to approach angel investing is to say that you have an investment policy for early stage through expansion stage companies that are seeking money. This investment policy is that you’ve invested in the Tamiami Angel Fund, so you can direct all of that deal flow to the angel fund and go through a disciplined vetting process.
The answer to the person who’s asking you to review the business plan is, “Please submit your business plan to the Tamiami Angel Fund, which I have an investment in. If you are selected to present, I will make sure that I will attend that meeting. Should the angel fund invest, I will consider an additional add-on investment. If the business plan fails to be selected for presentation or investment, the likelihood of my investment is very, very small.”
It gives people a nice way to handle that early stage deal flow. Of course, accredited and high net worth individuals see a lot of deal flow. People figure out who’s wealthy in their families, who’s wealthy in their business networks, and they get deal flow.
That’s a long answer to what are our current sources of deal flow. But to get back to that question, it’s not only our angels but professional service providers who will send us deal flow.
By this I mean economic development agencies; as I mentioned, we cooperated closely with a number of them in southwest Florida when we did the assessments, so we’ve got good relationships there.
Again, we have good relationships from the assessment project with the universities, from which we get deal flow.
Another source is other angel groups throughout the state of Florida. Entrepreneurs. Actually, entrepreneurs themselves know about other entrepreneurs, so sometimes we pull deal flow from other entrepreneurs.
And then, I would say one source of deal flow that might be overlooked – and this is more of a tip for other angel fund administrators or angel fund managers – is to go back through your rejected deal flow that may be 24 to 36 months old.
There may have been a company that you rejected for certain reasons but really liked the industry. Sometimes, we’ll go back through our deal flow and call a company and find out that they were able to raise capital, that they’re successful, and they’re out looking more capital. You can bring them back into your deal flow. They may have achieved certain milestones that they hadn’t before and now qualify to present.
Seed Capital From Angel Investors: Tim Cartwright, Chairman, Tamiami Angel Fund – Naples, Florida (Part 1)
Wednesday, February 23, 2011 Comments (1)
By guest authors Irina Patterson and Candice Arnold
I am talking to Tim Cartwright, chairman of the Tamiami Angel Fund. Created in October 2010 in Naples, Florida, this member-owned and -operated fund, offers early-stage capital in the range of $250,000–$750,000 to high-growth companies located anywhere in the state of Florida. There are 30 investors in the fund, who each put in $50,000. Tamiami Fund is the first angel fund for southwest Florida.
Irina: Hi, Tim. Why don’t you briefly start with your background?
Tim: I’ll take you back to college. I started at the University of Wisconsin. I graduated from there with an economics degree. I was recruited to Arthur Andersen in Chicago, spent a of couple years with them, and left and went off and started my own company, a supply chain consulting company called Benchmark Solutions.
I grew that company to about 30 consultants in four different cities: Minneapolis, Chicago, Cleveland, and Detroit. I sold it in 1999.
I should probably mention that, along the way, when I was in Chicago with my consulting company, I picked up my MBA from J. L. Kellogg School of Management at Northwestern University. I graduated in 1997. I did that part time on the downtown Chicago campus.
Then, I was co-founder of another company called By-Products Interactive, which is an electronic publishing and price reporting service for agricultural commodities, primarily agricultural by-products.
I raised angel and venture capital for that endeavor. I went up and down with the Internet boom and bust. That company is still actively going, and my business partner it. We’re an Internet publishing company now in that particular industry vertical.
I moved down to Florida, looked at buying a business, and investigated investment banking and merger and acquisition, private equity venture capital jobs.
I ended up going to Naples and started my own firm that specializes in middle market mergers and acquisitions. Then I joined an organization in Naples called the Gulf Coast Venture Forum, which was an angel and entrepreneurial networking group.
I became the leader of that organization, and out of it grew the Tamiami Angel Fund.
Irina: How exactly did the Tamiami Fund come about?
Tim: I was the president of the Gulf Coast Venture Forum, which is a 501(c)6 not-for-profit organization. We operate with two different chapters, one in Naples and one in Sarasota.
In 2007, the Florida legislature passed an economic development act that included the establishment of the Florida Opportunity Fund.
I was approached by a number of community leaders and asked whether the Gulf Coast Venture Forum was going to participate in the Florida Opportunity Fund. The Florida Opportunity Fund was a fund of funds approach in which the state established a $30 million fund that would invest in venture capital funds or angel funds that promised to invest in early stage Florida-based companies.
So, we looked at that economic development act, studied it, and thought that it might be a good time, a good impetus or catalyst, to rally around and create an angel fund.
Before we decided to dive headfirst into creating the angel fund, we wanted to understand the strengths and weaknesses of our region and assess the probability of being successful.
So, I knitted together the Southwest Florida Regional Angel Fund assessment team, which included economic development officials from six counties in southwest Florida – Sarasota, Charlotte, Lee, Collier, Glades, and Hendry counties – and higher education officials from Ave Maria, Florida Gulf Coast University, Edison State College, and Hodges University, along with the Gulf Coast Venture Forum and an organization called the Regional Business Alliance.
Those 12 organizations conducted an assessment of our region based upon a Ewing-Kauffman Foundation Community Assessment template that was published by Susan Preston and talked about what was the right angel organization for our region.
We conducted an assessment over a 12-month period, and the conclusion was that we had a need for and means to establish an angel fund in southwest Florida. That collective group charged the leadership of the Gulf Coast Venture Forum to go out and establish the fund.
At that time, we named the fund the Tamiami Angel Fund. I went about the business of organizing and creating the fund, and we were successful in raising $1.5 million, initially.
I went out on a fundraising tour in probably one of the worst economic times to go raise funds. Fortunately, it was successful enough that in October 2010, we did a closing of the Tamiami Angel Fund for [again] $1.5 million. We’re actively reviewing business plans and holding company presentations and have a couple of companies in to do due diligence right now. But we have yet to make our first investment.
Mergers & Acquisitions July 27, 2012, 9:16 am
Apple to Acquire AuthenTec for $356 Million
By EVELYN M. RUSLI
Apple has found one way to shrink its huge pile of cash.
The iPhone maker has agreed to acquire AuthenTec, a mobile security company, for $356 million in cash, according to a filing. Apple will pay AuthenTec’s shareholders $8 per share, a 60 percent premium above Thursday’s closing price.
The deal will put a small dent in Apple’s cash supply, which stood at more than $117 billion at last count. But AuthenTec, which designs fingerprint sensors and other security products for mobile devices, could help Apple bolster the security of its products, which have been major targets for criminals and malicious software attacks. Years ago, Apple computers were once known for their lack of viruses, but the incredible popularity of its devices has been a siren for bad agents, seeking to extract private financial information or merely wreak havoc on the digital lives of consumers.
Security is also becoming a critical issue for Apple, as the company plays a bigger role in the workplace. As more businesses buy iPhones and iPads for their employees, more are also seeking solutions to protect their devices.
Founded in 1998, AuthenTec specializes in fingerprint scanning technology. Its broad range of sensors, which can be embedded into computers, can read the image of a fingerprint and can also detect motion and patterns. For businesses, it offers standalone fingerprint readers that can be attached to computers to enhance log-in security. According to its Web site, AuthenTec’s has shipped more than 100 million sensors to date. Its clients include several major smartphone makers, such as Motorola, Nokia and Samsung, which is currently embroiled in a bitter patent fight with Apple.
Indeed, the purchase of AuthenTec and its patents may give the iPhone maker an extra edge against its rival. Earlier this month, Samsung and AuthenTec announced that handset maker would use an AuthenTec product in its upcoming line of Android smartphones and tablets.
Under the acquisition, Apple will pay $20 million for the right to buy non-exclusive licenses and “certain other rights with respect to hardware technology, software technology and patents,” according to the filing. Apple will have 270 days to decide to license certain technology and patents on a “non-exclusive basis for an aggregate sum of up to $115.0 million.”
The acquisition is Apple’s second biggest, after the $400 million purchase of Anobit Technologies last year, according to Standard & Poor’s Capital IQ.
According to Friday’s filling, if AuthenTec opts for a superior bid from a rival company, it will pay Apple $10.95 million. However, if the deal does not close because of antitrust issues, Apple will pay AuthenTec $20 million.
AuthenTec hired Piper Jaffray to serve as its financial adviser and Alston & Bird to be its legal adviser.
Naples Daily News May 2, 2008
"SW Florida needs to invest in economic innovation"
Waiter! New Menu Please An Innovation Invitation: Répondez S'il Vous Plaît
By Timothy J. Cartwright
President of Gulf Coast Venture Forum
If “Necessity … the mother of invention” as Plato said, then it is high time for Southwest Florida to invent a new economy!
For too long our region has gorged itself on real estate development as if it were the only item on the menu in a restaurant serving economic development. This addiction has resulted in our region becoming obese, - on residential housing inventory, and soon commercial inventory - with no appetite to scan further down the menu. This obesity has created lethargic regional economic performance and taken the shine out of our sunshine state as indicated by a statewide reversal in migration trends.
In order for our region to get in shape, we must seek out a “balanced diet” and train our collective regional eye to look for other entrées on the economic development menu, in particular, those under the heading of business development.
Only now, since the real estate steak has been eliminated as the blue plate special, have people started to ask whether we as a region should sample some of the other selections on the business development portion of the menu. We, as a region, may claim to our waiter that in the past, in order to appear concerned about our soft under belly, we have ordered appetizer portions of relocation and recruitment. However, our real regional wait-ers, the voters of this region, will astutely point out that it is portion size that influences diet and, therefore, contributes most to our obese condition.
What then, should our region do to get into shape? As Plato told us, invent something.
Listening to the ancient sage, who is considered to have built the philosophical foundations of Western culture; our region must invest, support and promote an Innovation Economy. Not as the new main course served on a silver platter for our economic woes, but as part of a complete economic development program within a portfolio approach in which our region’s political officials include innovation on their economic development menu (agenda).
The dilemma with innovation is that it does not happen by itself. There are two important aspects about innovation; first, one usually fails a number of times before they succeed, and second, it does not happen by itself. While the first point is quintessential Abraham Lincoln, it is worth mentioning and learning from a man who actually built a life of accomplishments out of defeats. To address the second aspect, Southwest Florida’s political, economic, financial, real estate, education, judicial, business, charitable and media leaders must cooperate and collaborate on seeding an Innovation Economy.
Our tendency as Americans, with our focus on freedom and individual liberty, is to believe that entrepreneurs are solely responsible for innovation. To the contrary, in 2002 the Edward Lowe Foundation discovered in their study entitled Building Entrepreneurial Communities, the mythical image of “entrepreneurs is depicted as rugged individuals who single-handedly built great companies, however, the reality is that consummate entrepreneurs are networkers, who thrive in communities”. The study further explains, “Networks are essential because they link entrepreneurs to potential sources of capital, new employees, strategic alliances, and service providers”.
Think of the greatest entrepreneurial region in the world, Silicon Valley; it is not just the entrepreneurs with the ideas, but the ability to recruit a management team, find investment capital, hire expert service providers and go public - all in one day and usually before 10:30 am while finishing your latté at Starbucks. That is what distinguishes this region from the rest of the world.
Consequently, what is the recipe for an Innovation Economy? A talented and focused entrepreneur can succeed at some level in almost any region, but taking lessons from Silicon Valley, he or she is more likely, and the region with them, to prosper in a region that has the following characteristics: i) access to seed and early stage capital, ii) a university with scale or a history of specialized research, iii) an enabling regional culture, iv) professional networks of all types, v) an entrepreneurial support infrastructure, vi) “entrepreneur-friendly” government and vii) a regional brand or specialization. Therefore, our regional leaders (economic, political, real estate, educational, judicial, commercial, charitable and media) must cooperate to encourage and invest in the development of these elements. Ultimately, we, the people, must prevail upon our regional leaders to recognize the importance of an Innovation Economy as part of a long-term commitment to develop a sustainable and diverse regional economy. Everyone’s home values may depend on it, irrespective of homestead portability.
In an effort to better organize seed capital in Southwest Florida, the Gulf Coast Venture Forum, a Southwest Florida based non-profit Angel Investment network, in cooperation with the Regional Business Alliance, Florida Gulf Coast University, Hodges University, Ave Maria University, Edison College and each of the Economic Development Councils/Offices in the six county Southwest Florida Region (Sarasota, Charlotte, Lee, Collier, Glades and Hendry), have launched an initiative to establish a SWFL Regional Angel Fund. The goal is to activate some of our regional wealth and direct it towards innovation within our region and our state.
While venture capital is crucial to entrepreneurial success, it is not immediately available to start-up companies, those who are most innovative. Most venture capitalists fund companies that have survived their earliest stages and are rapidly expanding firms, or “gazelles”, as MIT economist David Burch calls them. Typically, venture capital is not readily available in the smaller amounts that might be appropriate for a very young or early stage company. Therefore, venture capitalists leave a funding gap as to time – during the earliest stages of a start-ups life, which lasts at least a year – and as to capital – for amounts under $2 million.
Angel investors, defined by the U.S. Securities Exchange Commission as accredited investors, are commonly identified as those sophisticated enough to fill the funding gap. Jeffrey Sohl from The Center for Venture Research (CVR) at the University of New Hampshire, estimates that Angel Investors provided two times the amount of the seed/early stage capital to start-ups in 2006 than did Venture Capital firm. Andrew Wong’s empirical study of Angel Investors supports this important class of investors discovering that when angels invested in early rounds, 73% of the time they did so without venture capitalist as co-investors. Therefore, Angels Investors fill the time gap by investing when venture capitalist will not and are mostly complimentary rather than competitive to venture capitalist.
Innovation Works, a State of Pennsylvania funded entrepreneurial accelerator, estimates 150-200 new technology companies are formed in the Pittsburgh Region each year. Of these, almost all will need significant seed-stage funding. Just like Honest Abe, failure will occur with over eighty percent of these, however, of the ones that do not fail, 12 – 18 could reach an enterprise value of $20 million or more and about 6 could reach a size of $50-$100 million or more. However, without an adequate supply of seed-stage investment for that number of firms, the majority of potentially successful firms may die for lack of capital.[i]
Our region, with an embarrassment of riches for this type of investor, must figure out how to activate and engage this latent natural resource into our regional economy. Early stage capital is the lifeblood of entrepreneurs and innovation. The GCVF and the supporting regional organization mentioned earlier are taking the first step; establishing a Regional Angel Fund. The State of Florida has taken the second step; establishing the $30 MM Florida Opportunity Fund (Florida HB83, which promise to invest with private funds on a dollar for dollar basis for qualified Florida based Early Stage/Angel Funds). The region’s litmus test will be the response from our local high net worth individuals.
Southwest Florida must capitalize on this opportunity to incubate a new, to our region, aspect of Economic Development. As previous described by the Edward Lowe Foundation, it is not just one entrepreneur or one angel investor acting independently but the entire Southwest Florida region acting collectively to invest, support and promote an Innovation Economy. As you consider the arguments above, remember Charles Darwin’s observation “It is not the strongest of the species that survive, nor the most intelligent, but the ones most responsive to change”.
To learn more, or to download the SWFL Regional Angel Fund Executive Summary please visit http://www.gcvf.com/.
To link to this article please visit http://www.naplesnews.com/news/2008/may/02/sw-florida-needs-invest-economic-innovation/