San Diego’s Startups Benefit From Aerie of Angels

10/28/08Follow @bvbigelow

After seeing two San Diego startups get crucial, early stage funding this month from members of Southern California’s Tech Coast Angels, I arranged to have coffee with their archangel, Michael Elconin.

Elconin, who is about halfway through his two-year term as president, was among the 30 or 40 members of San Diego’s erstwhile “Band of Angels” who combined in 2000 with the Tech Coast Angels of Orange County and Los Angeles.

What began for Elconin as “dabbling in high tech investments” has gradually become a nearly full-time occupation, or it would be if Elconin didn’t have a restless curiosity in just about everything.

“I don’t see angel investing as a career,” he says. “But as long as I’m learning new things, I’m happy.”

Elconin, who is 55, has followed his eclectic interests through politics and public policy to software, corporate governance, finance, and angel investing. These days, he says he’s also interested in physics, cleantech, and emerging aerospace technologies, a burgeoning entrepreneurial market.

“I’m a techno-geek,” he says. “I fall in love with cool technology, which happens to be one of the warning signs in the 1,001 ways a business can fail.” Elconin says it’s better to fall in love with a management team, or with a business.

While there are large groups of angel investors in San Francisco, Boston, and New York, Elconin says the Tech Coast Angels, or TCA, has become the country’s largest group of angel investors. It has expanded to more than 280 members in five Southern California Counties, including Santa Barbara and Riverside, who have collectively invested more than $100 million in over 100 ventures.

Elconin says those companies went on to raise more than $1 billion in secondary funding from venture capital firms and others. He estimates that 60 percent have survived.

“In terms of the number of deals and the size of our deals, we’re huge,” Elconin says. The group discourages uncommitted investors and groupies from professional service firms by requiring its members to pay dues that range from $1,600 to $1,800 a year.

While each startup is unique, Elconin says the San Diego companies that recently got funding from the Tech Coast Angels were more or less typical. AgileNano has been developing composite materials made of nano particles that absorb energy and therefore would be useful in helmets and body armor in helping to minimize blunt-force trauma injuries. MicroPower Appliance is developing Web-based networks of ultra low-power wireless video cameras for use in surveillance.

Angels traditionally have been the largest source of seed funding for startups in the United States. The Tech Coast Angels meet and listen to presentations as a group, but members make individual investments with their own money and often get involved as consultants.

“I’ve found it a fascinating group,” Elconin says. “We’re mostly CEOs, with a smattering of other C-level executives. Most have made their money and are in it to do interesting things.”

One reason the Tech Coast Angels has so many members is because so many successful entrepreneurs and executives come out of Southern California’s business community, Elconin says.

He came to San Diego in 1999, after selling his Milwaukee-based software company, Software Banc, to a publicly held rival that was later acquired. Software Bank developed business management software for doctors and lawyers. Elconin says it had about 800 clients throughout the upper Midwest by the time it was sold.

Elconin also was elected three times to the Wisconsin legislature, beginning in 1972 when he was just 19. He later served as chief of staff for Wisconsin Gov. Marty Schreiber from 1977 to 1978 and on a number of public, private and non-profit boards, including the Milwaukee School Board.

Elconin says venture capital investments in San Diego have weakened in recent years, partly because many Bay Area VC firms have withdrawn the outposts they once established here during more expansive times.

Because of the meltdown on Wall Street, Elconin expects the Tech Coast Angels will see more deals from more mature companies in search of capital.

“We’re going to see much better opportunities,” Elconin says. “But angels are like everyone else—their investment portfolios are down too.”

Bruce V. Bigelow is the editor of Xconomy San Diego. You can e-mail him at bbigelow@xconomy.com or call (619) 669-8788 Follow @bvbigelow

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