New angel fund called 'a win-win'
Aspiring entrepreneurs now have a new potential source for the essential fuel for any successful project — money.
The Rochester Area Economic Development Inc. rolled out its new Southeast Minnesota Capital Fund on Tuesday morning at Mayo Clinic Business Accelerator.
After being conceived by the Journey to Growth's Entrepreneurship Committee in 2015, the fund has raised $875,000 for 26 investors. J2G is a five-year regional economic development initiative spearheaded by RAEDI, which was the first to back the project with a $50,000 investment.
David Herbert, president and CEO of Rochester's 46 North LLC, introduced the fund as its new chair.
"There is a tremendous opportunity to invest in startup companies in this area," he told a small crowd gathered for the announcement. "I'm excited to make money, but also to help companies grow in this area. It's a win-win."
The goal of the fund is to support young, start-up companies with "angel" investment in exchange for equity in the project. Herbert said the fund is open to investing in any kind of company, though they expect to mostly focus on medical and/or technology firms.
Al Berning, the CEO of Ambient Clinical Analytics in Rochester, said having worked with several startups that angel investment is the "lifeblood" for fledgling companies.
"From a funding standpoint, every piece is important. Every piece you add is a building block that allows companies to have multiple funding sources," he said. "It's perfect time for this with DMC (Destination Medical Center) and Mayo Clinic Ventures working to get a lot of technology on the street."
Berning, along with Mayo Clinic's Jim Rogers, helped conceive the idea, while working with J2G. Gary Smith and Xavier Frigola of RAEDI took the idea and turned it into a reality.
Frigola says the goal is to invest about $50,000 in each company. The fund has already looked at two potential candidates, but they didn't fit in the end, Herbert said.
The fund is still accepting new investors through the end of the year. However, additional investors must be accredited as defined federal securities rules. The investor must have an income of more than $200,000 or a net worth of more than $1 million.
Herbert described the fund as working similar to a cooperative with the 26 investors all having a say. He was elected as chair by his fellow investors. Leigh Johnson, the founder of Custom Alarm, is serving as vice chair.
The hope is to invest in about 15 companies in the next three to five years and then watch as seven to 10 of them gain traction to grow income and jobs in southeastern Minnesota, Herbert said.