SoCal Angel Investing on Sluggish Pace as Investors Rethink Process

5/24/10Follow @bvbigelow

[Corrected 5/24/10, 4:05 pm. See below.] Angel investing in Southern California remained sluggish during the first quarter of 2010, although individual investors’ overall mood seems to be improving, according to Tech Coast Angels chairman Richard Sudek.

“Last year was the worst year since our inception,” says Sudek, a Laguna Niguel, CA, resident who oversees the 300-member organization. This is saying something, since the angel investing group was founded in 1997, merged with the San Diego Band of Angels in 2000, and now comprises five chapters throughout Southern California.

The Tech Coast Angels made investments in five deals in the first quarter, and Sudek says, “I think we’re just slowly getting back to normal.”

As we reported in March, the Tech Coast Angels says its members made $4.7 million in direct investments in seven new deals and 17 follow-on deals in 2009, and helped to attract an additional $57 million from other sources. The capital invested was down from $75 million in direct and affiliated investments, according to the Tech Coast Angels.

During the first three months of 2010, Southern California’s angels invested about $1.6 million (out of a total $11.5 million) that went into funding five direct and follow-on rounds, according to Sudek. If this rate continues through the rest of the year, the Tech Coast Angels might not match the capital invested or the number of deals they did in 2009.

[Corrects reference to MicroPower Technologies of San Diego] But so far, it’s still too early to say. The Tech Coast Angels have been involved in three second-quarter deals that raised total funding of $2.9 million. One was for Amplyx Pharmaceuticals, a woman-owned biotech based in San Diego that Luke profiled last month. The angels also helped provide funding for Vokle, a live online video radio show based in the Los Angeles area, and MicroPower Technologies, a San Diego company creating very low power wireless camera technology.

“In general, there is definitely a mood shift on the process of angel investing,” Sudek says. Where angels used to think about “the path to exit, they now look at what’s the path to funding,” Sudek says. “We need to be a lot more thoughtful about [the process] we need to get the company to that VC round.”

The angels group, which is technically a nonprofit mutual benefit corporation, provided funding to two San Diego companies in the first quarter:

Benchmark Revenue Management develops financial management software to help hospitals become more efficient and more effective through administrative efficiency gains facilitated by its technologies.

Allylix has developed proprietary technology for producing a group of natural products called terpenes at low cost. In nature, terpenes are produced by plants in minute quantities and serve a variety of functions. Some act as flavors and fragrances, some are insect repellants, and others are anti-fungal, or anti-viral.

The Tech Coast Angels also provided funding for three other startups in Southern California: Cyber-Rain, an Agoura Hills, CA, maker of wireless irrigation and waterflow control technologies; Vigilistics, an Irvine, CA, developer of industrial plant monitoring software; and H2Scan, a Valencia, CA, startup developing sensor technology that can detect hydrogen gas at concentrations as low as 15 parts per million.

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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