ARC Announces Support for the Creation of Five New Appalachian Angel Investment Funds
Five applicants have been selected by the Appalachian Regional Commission (ARC) to receive funding and technical assistance to create new angel investment funds that will invest in small businesses in the Appalachian Region.
ARC is providing $235,000 in grants to stimulate capital formation by the selected applicants, which, along with the technical assistance underwritten by ARC, is projected to result in $5 million in new angel fund capital available for business investment.
The selected applicants were formally announced by ARC Federal Co-Chair Earl F. Gohl at the Ohio State University South Centers, in Piketon, Ohio, on September 27. “This is an opportunity for folks who have ‘made it’ to capitalize on the opportunity to invest in their own communities, in their own region, to ultimately help their own children and grandchildren as well as others,” said Gohl.
The selected applicants include:
- Queen City Angels (Cincinnati, Ohio), which will receive a direct ARC grant for the formation of an angel fund in Appalachian Ohio.
- Kentucky Science and Technology Corporation (Lexington, Kentucky), which will receive a direct grant for angel fund formation in east Kentucky, as well as technical assistance to be provided by RAIN Source Capital through an ARC grant.
- Technology 2020 (Oak Ridge, Tennessee), which will receive technical assistance from RAIN Source Capital, through an ARC grant, to form an angel fund in east-central Tennessee.
- Virginia Community Capital (Christiansburg, Virginia), which will receive technical assistance from RAIN Source Capital, through an ARC grant, to form an angel fund.
- West Virginia Angel Investor Network (Bramwell, West Virginia), which will receive technical assistance from RAIN Source Capital, through an ARC grant, to form an angel fund.
In welcoming the grant to Queen City Angels, chairman and founder Tony Shipley said, “Beyond the initial three F’s—friends, family, and founders—this group can help fill the next level of investment needed to really help get great businesses going.”
ARC has determined that access to capital and credit is one of the major factors limiting business creation, expansion, and growth in the Appalachian Region. This has been an historic problem in the Region relative to many other parts of the country.
Angel funds represent one antidote to this problem. Angel investors are an important source of capital for growing firms: The Center for Venture Research at the University of New Hampshire estimates that in 2011, U.S. angel investors provided $22.5 billion to more than 66,000 ventures. Many of the investments were in start-up or very-early-stage companies. The number of active investors in 2011 was estimated to be 318,480 individuals. Many more people could become angel investors; the potential number of “angels” is 4 million, based on a net worth of $1 million or more.
Between 10,000 and 15,000 angels are believed to belong to angel groups in the United States. The average angel group has 42 investor members and invested a total of $1.9 million in seven deals in 2007. According to the Angel Capital Association and the National Association of Seed and Venture Funds, the Appalachian Region has 15 angel funds, leaving significant areas underserved by this important source of capital.
The funding and assistance announced by ARC on September 27 represent an important step in addressing the needs of these underserved areas. These activities are part of ARC’s Appalachian Capital Policy Initiative, which has four objectives:
- To expand bank lending for business expansion and growth;
- To attract new sources of equity investment into the Region from private corporations, pension funds, national financial institutions, philanthropic institutions, and intermediaries;
- To build the capacity of development loan funds (community development financial institutions, or CDFIs) and other providers of capital to expand into underserved communities; and
- To increase the volume and quality of deal flow and financeable transactions by strengthening the entrepreneurial ecosystem.
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