Early-stage investors are in demand in Southeast Michigan, says Lauren Hoffman, founder and director at Woodward Angels.
“There are a couple of early-stage funds and angel groups in the state that are active and doing amazing work,” Hoffman says. “It is a question of who is getting in front of those groups to some extent. But we can also say with confidence that there are just not enough [active investors].”
Through a special projects role at Rock Ventures, Hoffman is confident Detroit has high-net-worth individuals who are ready and willing to contribute the financial, social and intellectual capital needed to make early-stage companies go.
“They just weren't talking to each other,” Hoffman says. “A lot of accredited investors were not actually investing in local startups, or if they were, they were not doing so in an organized way or in a way that maximizes exposure and access and creates mutually beneficial connections on either side of the deal.”
Hoffman was tabbed to lead Woodward Angels, an early-stage, founder-friendly investment capital firm for high-growth startups in and around Detroit.
We spoke with Hoffman and Tim Parker, president of Grand Rapids-based Grand Angels and Michigan Capital Network, about their effort to make connections and spark more early-stage entrepreneurial growth in the region.
Woodward Angels is an outgrowth of Grand Angels, a group of more than 50 investors that does angel investing and runs three venture capital funds.
“We continue to look across the state to see how we can solve this dilemma for entrepreneurs, bring a return to our investors and create more jobs in Michigan,” Parker says. “If you're an accredited investor, you can help your friend or a business or two that you know from an angel standpoint. But your bandwidth is pretty limited. When you work with a group, it's an opportunity to help more companies and see more deals. And so we're able to bring more opportunities to investors and entrepreneurs.”
Hoffman is originally from New York and moved to Detroit a couple years ago. She witnessed some of the challenges that early-stage companies were encountering and resolved to do something that would give emerging entrepreneurs more visibility with those who have the capacity to invest in their efforts.
“It’s a matter of identifying what gaps there are in the market here and figuring out how we can leverage our corporate resources to fill in those gaps and make Detroit a more obvious and stronger place to start and scale a company,” Hoffman says.
Grand Angels has helped Grand Rapids-based Tetra Discovery Partners. The company seeks to develop drugs that can reverse the effects of Alzheimer’s and has raised $12.4 million through seven rounds of funding, according to Crunchbase.
“In the last several months, we've had three of our portfolio companies who've been able to raise over $100 million dollars in venture capital,” Parker says. “And so that's a signal of the success and the value that they've created, partly because of our involvement in helping them to be able to create value and grow their business.”
The goal for Parker and Hoffman is to strengthen the pool of angel investors and facilitate the growth of even more innovative businesses throughout Detroit and its surrounding communities.
To boost the odds of success when a potential investor and entrepreneur make contact, Parker looks for both talent and an executable business plan.
“I want someone who can very concisely summarize their business,” Parker says. “It's being able to step back and present that dream and business strategy in five minutes. We like to see businesses that are scalable, that are protected in some way with IP, trade secrets or brand development speed that can't be matched. So those are important aspects of a business that we look at. When you have both of those together, the entrepreneur and the business plan, it creates a fire that's exciting to watch and be part of.”
Hoffman believes there is an appetite for groups like Woodward Angels and the relationships they can facilitate.
“I would advise early-stage companies to get in touch with investors early and often and at a time when they're not actually seeking capital,” Hoffman says. “Relationship building goes a very long way. Then do the things you say you're going to do, as in any business relationship. Follow up and deliver on expectations with promises. Communicate to investors that they should want to get into business with you. Demonstrate that you understand your customers, how your company will find them and why those customers will pay for your product or service in a way that is grounded in market realities.”
Parker adds that there is always room for more partners in the cause.
“If there are organizations, businesses, universities and individuals interested in supporting what we're doing, we definitely want to keep building those relationships,” Parker says.