ACA Blog

Angel Insights Blog

Serving as the voice of the North American angel community, the Angel Capital Association is pleased to bring you our Angel Insights Blog, featuring commentary on startup investment trends, the latest on public policy affecting entrepreneurial investment, and other topics top of mind to active accredited investors.

We encourage you to participate in the discussion.

In recognition of the importance of innovative startups, several Congressmen and Senators have established Startup Day Across America, as a way to celebrate and meet with startup companies while they are in their home states and districts. This is a great time for ACA members to contact their Congressmen and suggest they visit a portfolio company or attend an angel roundtable. The official day is August 5th, but any day in August will work.

More and more Congressmen and Senators understand the importance of innovative startups to America’s economy, and some are also noting how angel investors support these job creators. I believe it is important to grow that understanding in our legislators and encourage ACA members to reach out to your US Representatives and Senators to meet with you and your portfolio companies during their August recess – many of them really enjoy talking with their constituent entrepreneurs and investors! Such a meeting can also bring local media attention to your angel group and portfolio companies, if you choose to promote it.

By: Eric Liu, PHD/MD student at the University of Oxford

Editor's Note: Eric Liu is a DPhil student in Medical Oncology at the University of Oxford. Last year he served an internship at ACA member Life Science Angels, where he had a front seat in medical entrepreneurship and also provided valuable work for the angel group. Since his angel internship he has taken an internship with the Head of Global Strategy and Regulation of Bayer Healthcare. He highly recommends internships for young healthcare entrepreneurs, as you can see from his enthusiastic story.

Entrepreneurs that successfully utilize innovations shape much of our society today, making our lives a better place in an ever more challenging environment. With an aging population and skyrocketing healthcare bills globally, many healthcare entrepreneurs are using their brilliant minds to help address some of the most unmet medical needs.

By: Michael Cope, Founder of Cope Ventures 

Editor’s note: Michael Cope is a Dallas-based angel investor, mentor, and serial entrepreneur. He recently shared with ACA his letter to the SEC on potential changes to the accredited investor definition. He has compelling thoughts, and wanted others in the startup ecosystem to consider it as an example of letters they could write on this important topic.

The Honorable Mary Jo White, Chairman

US Securities and Exchange Commission
100 F St. NE
Washington, DC 20549

RE: Accredited Investor Definition

Dear Chairman White:

I am an independent Angel Investor and have been so for nearly 20 years, with multiple good exits under my belt. I earned the money that I invest by founding a business in 1974, operating it for 20 years including taking it public as a NASDAQ company in 1984. Since “retiring” in 1994 I have been involved in numerous early stage companies and helped many start ups get off the ground and on to success. I think I can be viewed as someone that the SEC, and the country in general, WANTS to see as an active Angel investor. Since my net worth is well above any threshold the SEC might set as a minimum to qualify as an Accredited Investor, I am not writing to protect myself, but rather to protect my numerous colleagues who are qualified based on their skill sets to judge the risks in early stage investments, and who have amassed more than $1M in net assets (not counting residential holdings) but may not have the $2.5M mark yet.

By: Alan S. Knitowski, Chairman, CEO & Co-Founder at Phunware, Inc.

Alan S. Knitowski is well versed in the world of entrepreneurship. Beyond experience as an angel investor and fund manager, Alan is a successful serial entrepreneur with multiple exits to companies such as Cisco Systems, Level 3 Communications and Internet Security Systems (now IBM). Currently Chairman and CEO of Phunware, which helps brands to engage, manage and monetize their customers across any connected device using its pioneering multiscreen as a service (MaaS) platform, Alan shared his perspective regarding the importance of accredited angel investors to his entrepreneurial success.

What role has angel capital played at Phunware?
Phunware was established in February 2009 and over the first five years we raised approximately $17.5M in angel money. In fact, this was the only type of external capital that we raised during our formative years as we purposefully chose not to take funding from any corporate, venture or institutional investors.

Because of the angel capital that we raised, we were able to achieve tremendous early success and literally exponential growth. The angel money enabled us to hire the people to build our platform and sustain our operations while we built out our sales organizations and filed patents vital to protecting the intellectual property of our business. The bigger balance sheet that we created with angel investment allowed us to grow both organically through our own efforts and inorganically through acquisitions as well. We now employ 230 people and were recently recognized as the fastest growing company in Central Texas (Austin Business Journal Fast50), the fourth fastest growing software company in the United States and the fortieth fastest growing company of any type in the United States (Inc. 500, 2013).

By: Ken Kousky, angel investor, Executive Director of BlueWater Angels (Midland, MI), and member of ACA’s public policy committee. We invite you to get to know Ken and other ACA members via this periodic feature. If you have a great idea for a member profile, please contact Sarah Dickey.

How and when did you get involved in angel investing?
I have been making angel investments since the 1980s before we called it angel investing. My company, Cache Data Products, was acquired by Novell when they went public. While I continued to work for Novell, I had the opportunity to meet and support startups that were in our networking infrastructure space. Most needed seed capital.

By: Elizabeth Hess, CFO at TRX Systems, an ACA member portfolio company that provides algorithms and products that deliver location indoors and underground, in areas where GPS is unreliable or unavailable. Elizabeth shares her thoughts about the potential change to the accredited angel definition based on her experience with angel funding at TRX and other entrepreneurial companies.  

The potential re-definition of Accredited Investors would drastically reduce the number of angel investors, barring many from participating in backing new ventures. This is of great concern to those early stage investors, and an even greater concern to the entrepreneurs who rely on them.

Early stage financing is the most difficult to obtain but it is the basis for everything. Entrepreneurs may do technical research, talk to customers, validate the market, and flesh out key elements of a business plan- but to progress beyond the “slideware” phase, they must hire employees and start the actual development work. Employees reasonably look for some indication of viability before signing on, both from a financial standpoint and a technical standpoint. Angels are willing to invest at this stage, before there are any real proof points, because of their background and experience, their ability to dive deep during due diligence, and to make an informed decision to invest. The angel investor provides both the funds to bring people on and the assurance that there has been some validation of the business concept.

By: Marianne Hudson, ACA Executive Director

Last week, Scott Shane wrote a column in, Would a Higher Accredited Investor Threshold Clip Angels’ Wings? While the answer to that question to me is obviously “yes”, Scott concluded “data on the angel capital market’s response to the 2010 increase in the (accredited investor) threshold doesn’t support that view.”

I’ve read his column and traded an email or two with him since, and I have to say, Pardon Me?

By: Angela Jackson, Portland Seed Fund

The largest ever ACA Regional Meeting took place June 3-5 in Portland, OR. Angels from Nevada to Alaska discussed emerging data and deal flow trends for angels, syndication, helping portfolio companies in crises, and celebrating exits, among other topics. In addition to interactive sessions, 20 companies from throughout the region presented investment opportunities. Event host Angela Jackson, Managing Director of the Portland Seed Fund, provides insights into the fun work of creating and hosting this important regional event - by angels for angels.

It was a crazy notion, that we could entice 100 people to travel to Portland, Oregon on short notice for an ACA regional angel meeting.

Yet, with enticements like a beautiful, walkable, transit-friendly city, a foodie's dilemma on every corner (Food cart or farm-to-table? Craft brew or Willamette Valley Pinot?) we thought we had a shot.

An Interview with: Michael Bolick, Selah Genomics CEO

It is fair to say Selah Genomics CEO, Michael Bolick, knows a thing or two about angel investment. As a serial entrepreneur with 25 years of experience in the life science and healthcare industries, Bolick
most recently sold Selah Genomics to EKF Diagnostics, fifteen months after leading a management buyout of Lab21 Ltd’s US-based operations. Prior to co-founding Selah Genomics, Michael served as President of Lab21 Inc., which was formed following Lab21 Ltd’s acquisition of his prior company, Selah Technologies LLC in 2009. Bolick founded Selah Technologies LLC in 2006 to commercialize healthcare focused nanotechnologies licensed from Clemson University.  Investors include ACA member Upstate Caolina Angel Network.

How did angel investment affect Selah Genomics?
Angel investment was instrumental to our success. We completed a management buyout in December 2012 and our angels invested in the summer of 2013. We were blessed with the opportunity to leverage those funds and rapidly move our business into fast growth mode and profitability, which led to the acquisition.

By: Bill Payne, Vegas Valley Angels and Frontier Angels

This blog post originally appeared on

The sale of equity in private companies is regulated by the Securities Act of 1933, which requires that the company either register with the SEC or meet one of several exemptions (Regulation D). A Private Placement Memorandum (PPM) is a special business plan defined to meet an SEC exemption. In most cases, those entrepreneurs choosing to raise capital using PPMs retain specialists (many of whom are lawyers) to write their PPMs – a rather expensive undertaking. I don’t fund new companies that have prepared PPMs for investment. I am an angel investor, that is, an accredited investor who is assumed by the SEC and others to be sufficiently wealthy to afford to lose the investment and supposedly experienced enough to make good choices on fundable companies. Angels, as group of accredited investors funding startup companies, are assumed to meet a Regulation D exemption for purchasing equity in private companies.

Like most angel investors, I have preferences for the terms and conditions of investment and intend to negotiate with entrepreneurs on those terms, such as valuation, company structure, the makeup of the board of directors, liquidation preferences and others. I have yet to read a PPM written for a startup company that meets the parameters we angels generally establish for funding new ventures.

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