Alliance of Angels Director: 2010 Is “A Great Time To Be Starting Something”

3/12/10Follow @gthuang

Angels have been in the air lately—especially around the Northwest. Last month, Atlas Accelerator hosted what might have been the largest-ever gathering of active angel investors in Seattle, at its first investor open house. Wings, a new angel group to invest in medical devices and software, has gotten started. Last week, there were prominent angel investment forums organized by Zino Society (in Seattle) and the Oregon Entrepreneurs Network (in Portland). And just today, the Alliance of Angels is finishing up hosting the Angel Capital Association’s Northwest Regional Meeting in Seattle.

The various angel groups around town have different strengths. Alliance of Angels does traditional, locally-based investment deals, for instance, while Keiretsu Forum can use its national network to take startups to other parts of the country, and might help them raise a bit more money. (For example, Keiretsu put more money into Earth Class Mail than Alliance of Angels did.) All of the groups would say they’re doing well, of course, although they don’t publicly disclose hard data on returns.

Yet the recession is unquestionably taking its toll on individual investors and early-stage entrepreneurs alike. “We were fully expecting a down year in ’09,” says Greg Huey, program director for Seattle-based Alliance of Angels. “We were pretty shocked at the level of activity our investors had.”

He’s referring to the $9.1 million that the group invested in 29 companies last year—the most dollars Alliance of Angels has invested in any year since it started backing technology and other high-growth companies in 1997.

So I wanted to drill down a little more into what Huey is seeing out there—and what the real mood of investors and entrepreneurs is. He says he’s still meeting with a steady flow of four to five companies a week. Huey has seen a “big increase” in deals involving companies that Alliance of Angels classifies as cleantech—like Seattle-based Modumetal and MicroGreen Polymers, based in Arlington, WA. But, he says, “People are shying away from large, capital-intensive deals” that involve biofuels, say. Meanwhile, software-as-a-service and consumer/retail companies remain strong in the deal flow, but he’s seeing fewer Web 2.0 and Internet startups.

None of this is particularly surprising, but Huey is putting a hopeful spin on the current climate. “I think people are pretty positive,” he says. “For us, ’08 was a good year for investing and exits. In ’09, there was a lot of money put to work, but not a lot flowing back.” So exits for portfolio companies are clearly a concern for this year and next. But, like most investors, Huey is also thinking long-term, and he sees this challenging period as a real opportunity for companies to distinguish themselves.

“When investors look back, hopefully 2009 and 2010 will be years where they made some of their best investments,” he says. “It’s a great time to be starting something.”

Gregory T. Huang is Xconomy's Deputy Editor, National IT Editor, and the Editor of Xconomy Boston. You can e-mail him at gthuang@xconomy.com. Follow @gthuang

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  • http://www.seattleinnovators.org Joe Brewer

    It’s good to hear that investors are still taking creative risks and exploring the future, especially here in Seattle where a number of micro-trends I’ve been following seem to be in a convergence pattern (including civic software, open data systems in government, a shifting landscape of expectations among young people about the future of work, and several major groups organizing around a shared vision of a regional low-carbon economy).

    I wonder if investors are aware of arguments like this one by Alex Steffen of Worldchanging. Seattle and the greater Puget Sound region are poised to be a global export market for new social business models, social innovations for challenges in long-term energy markets, and regional governance.

    While these areas have traditionally been overlooked by venture capitalists (and poorly addressed by many philanthropic institutions), they are going to be central to the 21st Century global economy.

    Investors seeking to feed the innovation ecosystem would do well to consider how to increase the capacity for cross-sector collaboration around social innovation in order to make our region’s economy more vibrant and resilient in what are sure to be turbulent futures markets.

    Best,

    Joe Brewer
    Project Coordinator
    Seattle Innovators