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Angel Network Encourages Growth in Western Wisconsin

By Kari Johnson
UW-RF News Bureau

NOV. 24, 2004--After its first year of operation, the St. Croix Valley Angel Network continues to identify needs for venture capital in western Wisconsin.

The SCV Angel Network was established in September 2003 to serve St. Croix, Polk and Pierce counties. Housed in the Small Business Development Center (SBDC) at the University of Wisconsin-River Falls, this nonprofit network links high net-worth "angel" investors, corporate sponsors and individual investors with owners of development-stage, technology-based companies in need of capital to expand and succeed.

Western Wisconsin is a fast growing area, and there is a great need for investments here, said Barbara Nemecek, dean of the UW-RF College of Business and Economics and vice president of the volunteer board for the SCV Angel Network.

Angels invest in technology-based start-up and early-stage companies to provide the additional funding required to help businesses flourish. Examples of business fields invested in include biotechnology, medical, computer hardware and software and telecommunication companies.

Chris Bye, director of the SBDC and the SCV Angel Network, said that angel investment groups primarily invest in fast-growth companies. "These are fairly early-stage companies that are a step or two beyond the 'pure' start-up phase, but are not yet established within the market," he said.

Some of the businesses sought after by investors are high-risk investments that can yield high returns if the business succeeds. While angel networks do fund high-risk equity investments, their focus is on fast-growth companies that are not able to obtain loans from banks or alternative sponsorship.

"Because of a company's relative newness and lack of earnings history, they are not eligible for bank financing, so the only money they have access for growth is through equity partners," said Bye. "That is where the angel groups come into play."

Many of the businesses selected by network for consideration have exhausted the resources of their owners and are in need of financial assistance. Angels provide the needed financial relief by investing in the business in exchange for ownership shares in the company.

By investing in technology-based businesses, the SCV Angel Network hopes to create more jobs in western Wisconsin. "Technology-based companies generally create high-paying jobs, and that is what every community seeks to attract," says William Rubin, executive director of the St. Croix Economic Development Corp. "Their job creation potential will ultimately help the region's economy."

Equity investments are done on a case-by-case basis. Investment information on candidate companies is only distributed to the network's sponsors—the angels and/or corporate supporters—to ensure confidentiality on all matters involving the network. In addition, the SCV Angel Network provides a limited screening service so that prospective investors can avoid the need to preview a large number of requests.

In its first year, the SCV Angel Network has approached angels, but this is not always necessary. Interested investors, whether an individual or an interested group, often contact the network for additional information. Companies looking for investors can contact the network as well.

In recognition of its innovative practices, the SCV Angel Network received the Finance and Capital Development Award in at the Synergy 2004 conference held in September in Hudson, Wis.

For more information about the SCV Angel Network, contact Bye at 715/425-0620 or email Christopher.bye@uwrf.edu.

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