Delta Angel Group, a nonprofit alliance formed here three years ago to bring together early-stage, mostly technology-oriented companies with private investors, is making gains in its efforts to stimulate business growth here, says Norm Leatha, its president.


There are not enough people who have the money doing this type of higher-risk, higher-return investing in the Spokane area yet, nor are there as many great investment opportunities bubbling to the surface yet as hed like to see, Leatha says.


On the other hand, he says, were not being starved for opportunities. Its amazing how many things are percolating in the community. Inland Northwest universities, in particular, have started to feed a lot more business-venture ideas into the seed-money pipeline, he says.


A major catalyst for Delta will be when we have a major successan angel-ignited business takeoff perhaps not on par with Microsoft or Starbucks, but substantial enough to create big economic impact here, Leatha says.


Since the group was founded, he says, proposals from 31 applicants have been presented to the groups member investors, or about 10 a year. Data just now are being gathered on how many of the companies that have sought angel funding through Delta eventually received moneyeither from the groups members or indirectly, such as from members friends, Leatha says. He estimates, though, that probably half of the companies that have applied got some amount of angel funding.


He declines for confidentiality reasons to name them, or identify most of Deltas members, but says some of the recipient companies are well-known emerging ventures here, and many of Deltas members are prominent businesspeople.


Its members backgrounds vary widely, he says, but they are almost always entrepreneurs who have been successful on their own and understand how the process works, and want to give back in a way that is meaningful to where they live.


Angel investors are wealthy people who provide capital for startups, usually in exchange for an equity stake, and look for a higher return than they would garner from more conventional investments. They often provide the first outside financing that early-stage companies receive beyond what they can raise from family members or friends while theyre still too immature to seek financing from venture firms or financial institutions.


The use of the term angel in this context comes, according to Web sources, from the practice in the early 1900s of affluent businesspeople investing in Broadway productions. These days, angels provide to the enterprises they help finance not only seed funding, but also business guidance, management expertise, and contacts.


Unlike venture capitalists, they normally dont pool money in professionally managed funds. However, they often organize themselves in angel networks or groups to learn more about how to invest, discover new investment opportunities, to share research, and to pool investment capital to varying degrees.


Volunteer matchmaker


Delta Angel Group isnt an investment fund, but rather an all-volunteer, nonprofit entity that serves as a matchmaker.


We have no money per se. We strictly make the connections, says Leatha, who also is assistant director of Gonzaga Universitys Hogan Entrepreneurial Leadership Program.


Delta is the only group of its type in the Spokane-Coeur dAlene area, to the best of Leathas knowledge, and one of only a handful in Washington. Its membership is limited to accredited investors as defined by the U.S. Securities and Exchange Commission.


The SEC says accredited investors can include not only individuals, but also certain businesses, banks, insurance companies, employee benefit plans, charitable organizations, and trusts. To quality as accredited investors, individuals must have net worth, or joint net worth with a spouse, of at least $1 million at the time they make an investment, or they must have had income of at least $200,000 in each of the two preceding years, or $300,000 if including a spouses income.


Leatha says Delta currently has about 30 members, most of them individuals, but hed like to see that number grow to 50 or more. He emphasizes, though, that, We want to have members who are serious about investing. Deltas members typically invest amounts ranging individually from $25,000 to $250,000, he says.


Members share a common desire to invest in early-stage businesses in Eastern Washington, Idaho, and Montana, and pay $300 a year to belong to the group. It also currently has three sponsorsAvista Corp., the Pacific Northwest National Laboratory, and the Spokane Intercollegiate Research and Technology Institutethat pay dues of $1,000 a year, and several in-kind contributors. One of those, Connect Northwest, a Spokane-based entrepreneurially focused organization, handles administrative tasks for Delta. On occasion, Delta also collaborates with three venture funds.


Leatha says he and two others founded the Delta Angel Group in February 2003 following a meeting with the Alliance of Angels group in Seattle at which the trio were seeking to help raise money for GenPrime Inc., a Spokane-based biotech company.


We realized angel investors like to be able to invest in things close to home. They want to be a part of it. There was just no angel structure on the east side of the mountains, he says.


The investors who now make up Delta, while expecting a generous return in exchange for the risk theyre willing to take, are not as cold a group as you might think. Theyre not there just for making money, Leatha says.


Theyre also interested in using the business expertise theyve accumulated to help startup companies that are going through the same struggles they once did and in having a positive economic impact on the Inland Northwest communities where they live, he says.


Though the focus is on technology companies, Our members really are pretty open to a lot of things, Leatha says. The catch normally is whether the proposals brought to the group, most of which are referred by members, meet its investment criteria, he says.


To be eligible for seed money, companies must be early-stage ventures based in the Inland Northwest or planning a major facility here, and must have significant growth potential and a competitive advantage they can defend, Deltas Web site says.


Showing the level of commitment expected from applicants, one of 20 investment-criteria questions listed on Deltas Web site is: Would you be willing to bet the equity in your home on the success or failure of this enterprise?


A vetting committee screens proposals for the angel groups members, who try to gather monthly. After a presentation, members discuss the investment opportunity. It then is up to them to decide, individually or perhaps in partnerships, whether and how theyd like to invest in the startups.


Typically, a couple of the angels will band together to provide the seed money for a particular venture, with one of themor separate angel funds to which they belongestablishing the terms and leading the initial round of investments, Leatha says. One such angel fund is Spokane-based WIN Partners LLC, which is managed by Delta Vice President John Pariseau. Sometimes, Leatha says, some of the Delta angels will join together to establish a limited-liability corporation to invest in a particular company.


Overall, Delta plays a role in helping people obtain financing, but only as part of a much larger, intertwined mosaic of investors, he says. For us to take credit is wrong, he adds, but we share in the credit.


Contact Kim Crompton at (509) 344-1263 or via e-mail at kimc@spokanejournal.com.