Seattle Angel Conference: A New Idea for Drafting New Investors

12/21/11Follow @curtwoodward

It’s one of the most nagging questions for Seattle-area technology entrepreneurs: How do you get more of the region’s tech wealth invested in local startups? Business veteran John Sechrest sees a possible answer in Oregon, where investors have created a series of events that help get newbie angels into the game.

He’s hoping to replicate that model with an event called the Seattle Angel Conference.

The project is still in the very early stages—when I talked to Sechrest over coffee this week, he was heading to the first organizing meeting of 10 or so people interested in working on the project. But he’s no rookie with the idea, having already organized the Willamette Angel Conference when he worked in Corvallis, OR.

“If you listen closely to Seattle, Seattle has the opportunity to pop like the Bay Area popped. It really feels like something’s happening here,” says Sechrest, currently serving as an advisor and organizer for Startup Weekend. “Just a little more push on it, and maybe we can make it go.”

John Sechrest

The Puget Sound region does already have established groups for angel investors, such as the Alliance of Angels, the Keiretsu Forum, and Zino Society.

Sechrest, whose resume includes an early stint at Hewlett-Packard and the spin-out of an Internet service provider from Oregon State University, says those groups do a great job. His pitch is that adding a new initiative—particularly if it’s focused on recruiting new angels—can only help make the community more robust.

“If we’re going to double the number of successful exits in Seattle, what has to happen? Somebody has to put more money into the puzzle,” he says.

The Angel Conference model from Oregon is fairly straightforward: A group of investors each contribute a small stake—about $5,000. That serves as the “prize” pool for entrepreneurs, who enter the conference’s multi-month winnowing process for a chance to pitch as finalists. In the end, a winner gets the collective investment.

Like other competitions of this kind, the Angel Conference model runs competing startups through their paces with weeks of due diligence and preparation, to ensure the finalists are worth getting a chance at the investment.

Sechrest says the combination of a low dollar amount and weeks of engagement with entrepreneurs and other investors helps foster fledgling angels who might not know a whole lot about the system of selecting and backing early stage companies.

“In Corvallis, we were able to get a significant number of H-P middle managers to invest, and they did fine and now are active angel investors,” Sechrest says. There are similar Angel Conferences in several other cities in Oregon, where they’ve been running for several years.

The lack of early stage investors involved in the Seattle tech scene is a longstanding gripe in the region, especially given the amount of tech-based wealth. Economist Dick Conway once estimated that the number of “Microsoft millionaires” created in the region by 2000 might be around 10,000. But experienced investors and entrepreneurs say you wouldn’t necessarily know it by their impact on startups.

Chris DeVore of Founder’s Co-op recently wrote that if he could “wave a magic wand and change one thing about our local community, it would be to turn every Microsoft and Amazon alum who walked away with at least $5 million in personal net worth into an angel investor.”

“Paradoxically, because the vast entrepreneurial wealth Seattleites enjoy today was created by just a few massively successful companies, too little of that wealth is being recycled in the next generation of local entrepreneurs,” DeVore wrote. “And with fewer dollars flowing into the local innovation economy, the odds of the next Microsoft or Amazon emerging in the region are that much lower.”

After the recent TechStars Demo Day in Seattle, entrepreneur, investor, and former Microsoft executive Charlie Kindel wrote that “I personally can think of 30 or 40 people who I worked with at Microsoft who should have been there, but probably didn’t even know about it. They probably can’t even spell angel.”

“Early stage startups looking for seed money (e.g. $100-200k) are having to seek out angels in other cities,” Kindel wrote. “This makes no sense to me given Seattle’s economic base. I believe the population of people in the Seattle area who could be involved is much, much larger than those currently engaged.”

Kindel is among the Seattle investors who are interested in making a Seattle Angel Conference happen. Sechrest says if there’s enough interest to get a solid group of investors together in January, the goal is to have the pitch competition at the end of May.

“I’m now into the next phase to find out whether or not I can get to a reasonable number of investors,” he says. “I’ll run this if I have 20, but I’d like to have 40 because I’d like to have the prize be $200,000.”

If Sechrest is right about the Oregon approach enticing more wannabe angels off the sidelines, you’ll probably be reading about the newest Seattle-area pitch competition a few months from now. If not, one of Seattle’s biggest gripes about itself might get a little louder.

Curt Woodward is a senior editor for Xconomy based in Boston. Email: cwoodward@xconomy.com Follow @curtwoodward

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