Providing an Investment Boost to a Select Few Who Need Funding
By Mike McKenzie
In business, to state the obvious, money talks. And it talks the most and the loudest in any conversation about how to keep a business going. It drowns out talk of a quality product, the customer experience, and the Big Dream. No business survives in a vacuum of no dough to begin with, or an in-the-red bottom line or a no-way-to-meet-expenses mode.
Lack of money crushes dreams and schemes.
One of the biggest questions facing any business, at any stage of its operation—and especially at startup—is how will it get financed? Bootstrap, life savings, bank loan, SBA loan, and a highly popular source these days, crowdfunding? All of these means of financing and sustaining a business are common today.
And there’s another important one: an investor. Enter the guardian angels, stage center.
Many companies in Whatcom County have started or been boosted by means of a group that formed about 15 years ago, the Bellingham Angel Investors (BAI). With 40 participants and several heavyweight corporate sponsors, BAI accepts and screens applications for investment funds, listens to pitches, and selects promising businesses to back financially.
There’s more, as revealed in a conversation with Mark Knittle, President of BAI and a longtime businessman in the field of information technology. “We’re there to support people beyond just funding them,” he said. “We’ll coach them on how to make effective presentations and help them find other resources available in the community that offer services. And individually, we provide hands-on help with how to identify the market and make a company successful. With 40 members, we have a lot of experience to share.”
Knittle spends most of his semi-retirement activity consulting with companies and dabbling in a few entrepreneurial adventures of his own, traveling widely overseas, and advising a nonprofit he started to assist education in Africa. He’s a Midwest transplant—Kansas City, Minnesota, University of Chicago graduate—who’s lived in this area and owned businesses over the last 12 years. (“We moved here for three reasons—weather, hiking, and skiing.”)
Now, largely through the BAI, he exercises his strong interest in the health and welfare of businesses in Whatcom County. The BAI provides a strong vehicle for that. “Everybody in the group is a local resident of the county—some with dual residences—and we look primarily for local companies that are attractive to us to see if we can make them work.”
The BAI provides an application format on its website and invites a few in bi monthly to make a presentation. If promising applications dwindle, the organization works in concert with the Seattle Alliance of Angels and others along the I-5 corridor from Portland to Vancouver, B.C., to find investment opportunities.
Making the cut with BAI requires much preparedness from a prospect. “When you come to present, you have 10 minutes to articulate what you’re doing and why we should back you,” Knittle said. “It takes more than just promise and energy. That’s why we offer to coach before a presentation. We can tap a lot of resources and hands-on help, not just networking.”
The BAI invests in a wide variety of businesses, which shows in their extensive portfolio, rather than specializing in a sector like technology. “In this region, we’ve leaned toward technology, but we’ve also invested in food, marine, energy, biomedical, and other sectors.”
He said that the group “sees a lot of fascinating, amazing, creative, and ingenious ideas” and they hear from a large number of individuals. The BAI funds its chosen few either from a pool it has formed through membership (“all in,” Knittle said), or angels can take on an investment with one or two others, or individually.
Knittle’s best advice to a person or group in approaching the angel investors is to know when you’re ready. “We get too many who are way too early in their startup process,” he said. “We also get too many where the model doesn’t work. Great idea, maybe, but not investable.”
To avoid those situations, the investors look for proof of concept. “We look at whether a company has tested the market for validation,” he said. “Not necessarily that they’ve turned a profit yet, but that they have demonstrated they can get customers. They might be three or four years away from a good revenue stream, but they’ve shown that their product is buyable, and that’s worth a lot.”
The BAI deals mostly in startups, but doesn’t exclude existing companies. “We’ll look at any great idea in the Pacific Northwest with a solid market and growth potential,” Knittle said.
An important distinction for an applicant to understand about the angel investors is that they only look to help a business get started. Knittle emphasized, “These are not long-term loans. We’re actually looking mostly for an exit plan, such as acquisition of the business. We’re not in it forever.”