The Spokane Angel Alliance, a nonprofit entity set up to help fund promising companies here and a bulked-up successor to the Delta Angel Group, has gotten off to an encouraging start in its first year, says Tom Simpson, who spearheaded its creation.

The organization already has grown to more than 75 members, substantially larger than its predecessor, and its members already have provided around $1 million—to six of the 10 companies from which they heard presentations, Simpson says.

"We have really increased the impact on Spokane in terms of finding emerging businesses," he says. He adds that he had an initial goal of just building the group up to about 50 members, and was surprised when it easily surpassed that number.

"It's come together very nicely," he says. "I'm pleased at the way the community has come together to nurture its own."

Simpson says he thinks Spokane "has a ton of potential" to generate new companies and support existing ones in a way that can have a big beneficial economic impact here, "but we've got to have an active angel group."

Simpson is board chairman of Connect Northwest, a separate nonprofit organization here that supports entrepreneurs and early-stage companies in the Inland Northwest, and the Spokane Angel Alliance is a Connect Northwest program.

Modeled after the Seattle-based Alliance of Angels, through which investors last year injected $9.1 million into Northwest start up companies, setting a new group record, the Spokane Angel Alliance holds luncheon meetings six times a year at the Davenport Hotel downtown. Two companies seeking angel funding make presentations at each meeting.

Among the companies that have received funding from the group so far are Green Cupboards, a Spokane-based online retailer of eco-friendly products, and Ecowell Inc., a Pullman, Wash.-based company that has developed and is marketing waste-free, healthy-beverage vending kiosks. Gonzaga University students were involved in setting up Green Cupboards, in which Simpson also was a co-founder, and Washington State University students were involved in founding Ecowell, Simpson says. He declines to identify the other companies that have received funding thus far.

Angel investors are wealthy people who provide capital, typically for startups and 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 they're still too immature to seek financing from venture capital firms or financial institutions.

Beyond the obvious financial goals, though, most angel investors here also share a common desire to use the business expertise they've accumulated to help startup companies that are going through the same struggles they once did and to have a positive impact on the communities where they live, angel group representatives say.

Delta Angel Group was formed here in February 2003 to bring together early-stage, mostly technology-oriented companies with private investors, and was led for a time by Norm Leatha, of Gonzaga's Hogan Entrepreneurial Leadership Program.

It, too, was affiliated with Connect Northwest, and Simpson, who also is the managing partner for a venture capital fund here named Northwest Venture Associates LLC, says, "I got involved about a year ago, and I saw real potential in trying to strengthen the angel group. I proposed merging it into Connect Northwest and making it more formal."

Connect Northwest offers mentoring and consulting services and holds seminars and networking events that can benefit entrepreneurs and investors, and Simpson says it made sense to bring the angel group more tightly into that mix.

The Spokane Angel Alliance has two sponsors—the LeMaster Daniels PLLC accounting firm and the Witherspoon, Kelley, Davenport & Toole PS law firm—that are covering administrative and miscellaneous operating costs.

A third leg of the entrepreneurial-business support stool that Simpson says he now is exploring, to help round out the services of that type offered through Connect Northwest, is the creation of a business incubator. He says he is in the early stages of evaluating potential sites for such an incubator.

As with Delta, the Spokane Angel Alliance is limited to accredited investors as defined by the U.S. Securities and Exchange Commission. For individuals, that means they must have a net worth of at least $1 million at the time they made 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 spouse. Accredited investors, though, also can include certain businesses, banks, insurance companies, employee benefit plans, charitable organizations, and trusts, so long as they meet a couple of conditions.

Unlike Delta, though, the Spokane Angel Alliance isn't confining itself to early-stage, technology-oriented companies, Simpson says.

"What we're trying to do is put together a pool of capital that will help companies in all industries and all stages of growth. Frankly, that's good for Spokane," he says. Once the full array of services are fully in place, "We can provide coaching and guidance and capital—soup to nuts, whatever a company might need."

Separate from the Spokane Angel Alliance, Simpson says he has set up an entity called Kick-Start to analyze companies that go through the angel-funding application process and to serve as a supplemental funding source for worthy candidates.

Meanwhile, the Spokane Angel Alliance also is working closely with other angel groups in the Northwest, through monthly gatherings, to try to develop syndicates of investors interested in pursuing opportunities regionally, he says.

Simpson says he foresees the Spokane Angel Alliance potentially growing further, to around 100 members, and injecting $2 million to $5 million a year into companies here with strong growth potential.

Although the recession has caused capital resources to wither over the last year or two, Simpson says, "I tend to believe that a recessionary environment is an absolutely terrific time to start a new company," partly because many of the costs—such as for real estate and labor—are less than they would be in a thriving economy.

One of the questions, nationally at least, is to what extent angel investors would be there to help those start ups. Market analysis data released last week by the Center for Venture Research at the University of New Hampshire show that angel investors committed fewer dollars in more deals in the first half of 2010, with seed and start up stage investing declining to its lowest level in several years.

It showed that total angel investments during that six-month period were $8.5 billion, down 6.5 percent from the first half of 2009, and that the number of active individual investors fell 11 percent to 125,100, compared with the year-earlier period.

However, the number of entrepreneurial ventures receiving angel funding rose 3 percent, to 25,200. The decline in total dollars, coupled with the small increase in investments, resulted in a 9 percent drop in deal size.

"These data indicate that while angels remain committed to this investment class, they do so with a cautious approach to investing," said Jeffrey Sohl, director of the venture research center.

Citing a downward trend that began two years ago, Sohl said, "Historically angels have been the major source of seed and start-up capital for entrepreneurs, and this declining interest in seed and start-up capital represents a significant change in the angel market."

He said, "Without a reversal of this trend in the near future, the dearth of seed and start-up capital may approach a critical stage, deepening the capital gap and impeding both new venture formation and job creation."