Funding and Small Biz Funding and Banking & Finance and Angel Investors and Startup and Venture Capital and Small Business

Angel investment group off to flying start

HALO Capital injects $8 million into startups in first year of operation despite recession and membership turnover

May 11, 2009
Founders of HALO Capital Group would have been satisfied in their first year to invest $2 million in promising Indiana companies. They instead quadrupled the amount—even while dealing in a sour economic climate.

The network of angel investors organized in the summer of 2007 but didn't begin investing until the following May. Its members last month committed $1.2 million to BidPal, an Indianapolis developer of wireless remote bidding technology for silent auctions.

Other local ventures receiving funding include Cine-tal, Compendium Blogware, EndGenitor Therapeutics Inc., Oxygen Education and WebLink International Inc.

To be so prolific in a teetering economy speaks volumes about the investing clout HALO has amassed, said David Millard, chairman of Barnes & Thornburg LLP's business department. Millard helped create an angel network called AngelNet nearly a decade ago that's no longer active.

"It's a big all-star group with a lot of marquee names," he said of HALO.

Indeed, HALO's roster of 20 investors is stocked with former or current executives with the battle scars to merit their mentor status. Besides providing capital, they bring a wealth of entrepreneurial experience.

Scott Webber has dirtied his hands in several startups and is BidPal's CEO, for instance. Other notable HALO members include IT veterans Mark Hill and David Becker. Both sold their own banking software firms, Baker-Hill Inc. and re: Member Data Services, respectively.

HALO members are not obligated to invest in every prospect, but instead choose on an individual basis which companies they want to support.

"These are people who are building businesses," Hill said of the HALO members. "They're not professional investors."

HALO stands for Hoosier Angels Looking for Opportunities. It and other angel investors typically bridge the gap between initial funding from friends and family and venture capital funding obtained later. Because most of the companies are in their infancies, the investments are considered particularly risky.

Nationally, angels last year invested $19.2 billion in 55,480 companies, down 26 percent from 2007, according to the Center for Venture Research at the University of New Hampshire.

Early-stage infusions typically take at least a few years to bear fruit, so the jury is still out on investments made by HALO members. But Hill said he is satisfied with their decisions and noted that none of the six companies have folded.

Compendium Blogware, in particular, has been on a tear. The 2-year-old tech startup that helps companies start blogs has launched its first out-of-state sales force and signed on 70 new customers in the fourth quarter of last year. The company has 40 employees.

CEO Chris Baggott appreciates the additional advice he's received from investors, although he's no novice entrepreneur. Baggott co-founded the local e-mail marketing firm ExactTarget in 2000. Its annual revenue is now estimated at more than $48 million.

"I've been down this road before," Baggott said, "but it's always nice to bounce something off of somebody."

To become an angel investor, an individual simply must show the Securities and Exchange Commission he or she has a net worth of at least $1 million, or compensation of at least $200,000 annually for the last two years.

Angels increasingly are banding together, though, to pool investment funds and mitigate risk. More than 300 active angel networks are registered with the Lexena, Kan.-based Angel Capital Association.

Locally, a group of 30-something professionals recently formed Gravity Ventures LLC. And three entrepreneurs from the medical and software sectors founded membership-based Stepstone Angels.

High profiles can be drawbacks for HALO members, or any angel investor for that matter, Millard said. "Once that happens, their voice mail and e-mail fills up, and every dog and cat is banging on their door."

That may be why many HALO members choose to remain anonymous. Local technology initiative TechPoint manages the group and serves as the first point of contact for the public.

The state's technology initiative fields roughly 15 to 20 applications every few months. Two companies are invited to pitch their business plans at HALO meetings held six times a year.

The six companies receiving investments were winnowed from 12 that presented plans. Those investments ranged from $250,000 to $2 million. For BidPal, the $1.2 million investment it received in April was the startup's second infusion from HALO.

"While the money is important, we believe that the talent that comes with the money is even more important," TechPoint CEO Jim Jay said.

HALO has endured a bit of turnover. A few founding members have exited the group, but other investors have stepped in to take their places. The aim is to keep membership at about 20, and to provide that critical hands-on training.

"Oftentimes, entrepreneurs think about the money," Hill said. "The important ingredient that HALO adds is experience. That has lots of value." 
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