Angel Food: Northern Michigan Angels eyes new investments, membership growth

Northern Michigan Angels (NMA) is driving Traverse City’s evolution as an epicenter for technology, innovation and entrepreneurship.

The angel investing group formed in 2012, with the mission of helping to “grow the economic base of the northern Michigan region through investment in scalable early stage companies, and to provide members a compelling financial return on their time commitment and invested capital.” The group brought together a network of business leaders and successful entrepreneurs, each with capital to invest and applicable knowledge in a range of different industries.

Ever since, NMA has been growing – and northern Michigan’s business community has been growing with it. What started out as a group with just four members has expanded to include 43 investors and a portfolio of 30 companies. 2018 was an especially big year for NMA: the group brought in 15 new members and invested more than $1 million.

Now, NMA is one of the three largest angel investing groups in Michigan based on membership size. Since 2012, the group has invested $4.13 million and counting in northern Michigan businesses.

According to John Zaloudek, a member of the NMA board of directors, each of these companies met the criteria that NMA looks for in startups. Specifically, the group wants to invest in Michigan companies – preferably companies in northern Michigan – that have national or international opportunities for market capitalization and growth. NMA looks for companies with “compelling, well-articulated strategies for capturing significant market share,” with proprietary technologies or other valuable intellectual property to offer, and with strong management and leadership. Finally, NMA wants a “rational risk/reward calculation,” with a clear exit strategy for its investors.

While NMA acts as a unit in many ways, Zaloudek says that each member still retains a high degree of independence with investing. For instance, each member decides 1) whether to invest in each startup business brought before the group, and 2) what dollar amount to invest. From there, NMA appoints a “deal lead” to work closely with the startup – both to help the business toward growth and to keep the rest of NMA updated about the company’s progress.

The entire process is cyclical. Angel investing is usually the third stage of funding in a company’s lifecycle. The founder of a startup typically lays a foundation with his or her own capital, then seeks out investments from friends and family. The final approach is angel investors, with venture capital (VC) funding occuring later. Angel investors like the ones in NMA are looking to grow the companies they invest in to a point where an “exit” can occur – whether in the form of a VC investment, an acquisition, or an IPO. It is at the exit stage that angel investors see a return on their investment.

True to the cyclical nature of angel investing, NMA recently saw both an exit (from GoSili) and a new investment (in Naveego). NMA officially invested in Naveego starting in December, with member Curtis Kuttnauer – co-founder, senior partner, and Business Certified Appraiser (BCA) with Traverse City’s Golden Circle Advisors – taking the “deal lead” role. Kuttnauer worked extensively with Naveego to prepare a pitch for NMA and is now acting as the go-between between the business and the angel group. The aim, Kuttnauer says, is to take Naveego to the next level – both as a business and as a possible investment target.

“With our investment, our goal is that Naveego now has enough funds to get the business to perform and to get sales up there so that the VC community will make a significant investment in them,” Kuttnaur said.

While helping individual investment companies grow and thrive is an ever-present mission for NMA, Zaloudek says the organization is also thinking long-term about its own growth. Specifically, the group is hoping to keep its strong growth trend from 2018 going in 2019. Indeed, NMA has added two new members this year. This consistent membership growth is paramount to the group’s ability to support the burgeoning business community of northern Michigan.

“An investor who has been with NMA since 2012 may have exhausted the portion of their portfolio that they had allocated for these types of so-called high-risk investments,” Zaloudek said. “If someone gets to that point, they are probably going to stop making new investments until they get a payout from a company they had already invested in. For that reason, we need to keep growth in our membership, so that we have new money available to make investments with.”

Zaloudek says there is one other benefit to expanding the NMA membership: additional knowledge and expertise. Adding new people to the group grows the brain trust, potentially opening doors to new industries of investment or expanding NMA’s ability to provide valuable mentorship and guidance to the companies it helps fund.

For Naveego CEO Kate Horvath, that base of knowledge and expertise is one of the biggest advantages of working with a group like NMA.

“We have so much talent in northern Michigan,” Horvath said. “Folks who have had amazing professional careers elsewhere have chosen to relocate to this area, and there is just this wealth and depth of knowledge to tap into. All that knowledge makes Northern Michigan Angels a huge asset to this region. If you look at other parts of the state, there are different angel groups in different places. Without NMA, Traverse City would be pretty far behind.”

Seven of the companies Northern Michigan Angels has invested in so far have headquarters or branches in the Traverse City area. This local portfolio includes:

  • Altus Brands, LLC: Launched in 2008, Altus Brands is an outdoor sporting equipment company. Over the years, Altus has acquired several acclaimed sporting brands under its umbrella, including ProEars, which manufactures hearing protection for hunters and gun enthusiasts; Kwikee Kwiver, an archery solutions brand; and more.
  • ATLAS Space Operations: ATLAS Space Operations uses a groundbreaking software as a service (SAAS) platform, as well as a network of distinctive antenna technology, to deliver affordable satellite communications solutions.
  • GeoTix: GeoTix is an SAAS provider that offers a platform for event promotion and ticketing. The goal of this company is to eliminate middlemen like Ticketmaster and Live Nation by enabling event organizers to sell tickets through branded local portals.
  • GoSili: GoSili specializes in manufacturing safe, non-toxic silicone-based tableware, including straws, cups, bowls, and more – especially for children. The company pitches these products as safer alternatives to using plastics in the kitchen.
  • Inphastos: Inphastos focuses on robotic manufacturing of structural building components, enabling efficient jobsite construction.
  • Naveego: Naveego is a cloud-based platform that helps businesses manage their data across the entire enterprise. The Naveego platform detects and eliminates data inaccuracies and ensures data consistency and accessibility across the organization, thereby driving better business decisions.
  • Promethient: Promethient is a leader in personal heating and cooling technology for transportation, furniture, garments and medical applications. The company’s innovations are driven by its proprietary Thermavance technology.