Better Angels: Local angel investment group bounces back from pandemic disruptions

Like just about everything else, the world of angel investing got turned upside down by COVID-19.

Nineteen months into the pandemic, though, Traverse City’s own Northern Michigan Angels (NMA) has quietly found its groove. The organization has not only bounced back from a down year of investing in 2020, but is also seeking new members and sponsors, retooling its digital presence, and even searching for a new leader.

The TCBN touched base with NMA to learn more about what’s been going on – and what’s coming next – for one of northern Michigan’s biggest sources of startup capital.

Zaloudek

According to John Zaloudek, a board member and sponsorship committee co-chair for NMA, the pandemic caused “a (nationwide) reduction in the number of investment opportunities” by approximately 20%. Fewer people were starting businesses, more fledgling ventures were folding due to uncertainty or insufficiency of funds, and angel investors were cut off from the networking events and face-to-face pitch events that they typically count on to generate investment leads.

The result was a slower year for NMA: In 2020, the organization invested $800,000 across six companies – compared to $1.1 million in investments across nine businesses in 2019.

The good news is that 2021 has been closer to business as usual. As of August 15, NMA had already invested $632,000 in five companies, with roughly 30% of the year still to go.

One factor, NMA Executive Director Deanna Cannon says, is that everyone has more or less settled into COVID-era operating protocol. Pitch meetings done via video conference – once a no-go in the angel investing world – are now something everyone is used to. Similarly, other pre-COVID traditions – such as touring a startup’s office or facility as part of the pitch process – have fallen out of favor now that many businesses (startups included) are operating 100% remotely.

Cannon

“We had a pullback, for a pretty short period of time, from the angel investing and venture capital communities,” Cannon said when asked how the early days of the pandemic affected startup investing. “I attended a couple conferences in 2020, where there were many people saying, ‘We will not invest in companies without the ability to shake their hand, look the entrepreneur in the eye, kick the tires, maybe visit the facility.’ That was the protocol leading into 2020. And so, there was a pullback among investors … and I think that sent the message to the entrepreneurs that there was no money available.”

But there is money up for grabs – especially, Zaloudek says, for businesses with value propositions “that could be beneficial in some way to mitigate the impact of the COVID-19 virus.”

Across 2020 and the first half of 2021, some $722,500 of NMA’s investments went toward a quartet of companies “that may have direct or indirect impact to deal with the coronaviruses.”

Those businesses include:

  • Akadeum Life Sciences, an Ann Arbor-based company that develops microbubble cell separation technology aimed at improving the processes behind cell therapy manufacturing, clinical diagnostics, and cell and molecular research.
  • Archimedes Innovations, PBC – also based in Ann Arbor – created a technology called HALO. The product is a circular UVC germicidal light that could revolutionize hand-washing in workspaces or public places, such as airports, restaurants, or retail stores. Archimedes claims its technology is “four times faster and 40 times more effective than washing (hands) with soap.”
  • BlueWillow Biologics, another Ann Arbor business, which is developing and enabling a new generation of safe and effective nasal vaccines to protect global populations from respiratory infections, sexually transmitted diseases, and food allergies. The company’s innovation, a “novel intranasal” platform called NanoVax, is intended to activate mucosal immunity, the body’s first line of defense, while also inducing systemic immunity. BlueWillow is currently in the clinical testing stage for multiple variations of this type of vaccine, including for COVID-19, anthrax and peanut allergies.
  • Esperovax, based in Plymouth, a biotechnology startup that, like BlueWillow, is focused on innovations in the world of vaccines. Specifically, the company develops a robust, proprietary oral mRNA vaccine platform, which it claims is better, safer, and more cost-effective than injectables. Esperovax’s platform uses bioengineered probiotic yeast to deliver continuous, highly concentrated vaccine antigens to the gut. The antigens then take the form of enveloped virus-like particles directed to the lymphoid tissue of the gut mucosa, inducing strong immune protection. These vaccines don’t require the costly purification and cold storage that some injectable mRNA vaccines do (including some variations of the COVID-19 vaccine) and utilize something that most people already trust as their core ingredient: common baker’s yeast.

Also on NMA’s ledger of recent investments are a pair of Traverse City-based businesses: ATLAS Space Operations, a satellite communications innovator; and Promethient, a local manufacturer working to bring personal heating and cooling solutions to powersports equipment, boats, public transit and more. Both of those companies have now received five consecutive years of investment support from NMA members, totaling over $1 million for ATLAS and over $750,000 for Promethient.

These types of hyper-local investments are a vision realized for NMA. When the investment organization first formed in January 2012, Cannon says “there was a very strong interest in only investing in northern Michigan.” At the time, though, much of the infrastructure aimed at building a tech hub and startup community in Traverse City wasn’t here yet. Neither, as a result, were the entrepreneurs.

“Ten years ago, 20Fathoms wasn’t here, TC NewTech wasn’t here, and Boomerang Catapult wasn’t here,” Cannon explained. “There was nothing to help us to assess how large the entrepreneur community was. So we evolved, and by just having opportunities brought to us from downstate, we started investing in companies out of Grand Rapids or southeast Michigan. It wasn’t until probably three or four years in that we really started seeing a lot of deals coming from northern Michigan.”

These days, Cannon says northern Michigan companies account for more than half – approximately 55% – of NMA’s investments. It’s proof that local efforts to drive more entrepreneurial activity in the area are working. It’s also a sign that the region’s business scene is likely only going to need more investors and more investment dollars in the future.

The NMA team is cognizant of that growth. Zaloudek says NMA is having ongoing collaboration discussions with other local entities – including 20Fathoms, TCNewTech, and Traverse Connect – “to identify opportunities to continue building the entrepreneurial ecosystem.”

The organization is also actively seeking new members and sponsorships, and even recently launched a new website (NorthernMichiganAngels.com) aimed at providing a more user-friendly experience for both current and prospective members or sponsors.

Perhaps the biggest shift on the horizon for NMA is Cannon handing off the executive director role. The Board of Directors for NMA recently announced the hiring of Jody Trietch as the organization’s new executive director. Trietch is currently the CFO for Boomerang Catapult, a Traverse City-based venture capital firm.

“I will move into the role of chairman of the board,” Cannon said. “Then I’ll be able to provide more connections, and vision, and all of those things that are difficult to do when you do a lot of the heavy lifting in the organization.”

Ideally, Cannon continues, the new executive director will help usher in a new chapter for NMA – one focused on branching out into new communities, investing more dollars, and supporting more early-stage businesses. Already, those growth initiatives are underway. Throughout the second half of 2021, NMA is working through a schedule of presentations to some 20 organizations in largely untapped local communities – including Cadillac, Charlevoix, Harbor Springs, Manistee, and Petoskey – with the goal of raising awareness and finding new members.

“Growth is our focus,” Cannon said. “And not just growth for growth’s sake. Growing our membership, we’ll be able to provide more capital that way, we’ll have an easier time supporting our back office, and we’ll have more expertise to draw from within our members, in evaluating deals.”

Cannon says she believes that NMA is an underutilized asset in the community.

“We’re not just the check-writing organization that many may see us as,” she said. “We’re really here to provide coaching, and expertise, and help with exiting companies, and all of that. The expertise that we have in this areas, with the retirees that live here and the active business people here, is wonderful and diverse.”

How to get involved with Northern Michigan Angels

Want to join Northern Michigan Angels and start investing in local and Michigan-based startups? Here’s what you need to know to get started.

  • Angel investors need to meet a few different criteria. NMA’s ideal members, according to the organization, “are successful business leaders and entrepreneurs in Northern Michigan who have an amazing range of industry and functional expertise.” An angel investor, NMA says, is typically “a high-net worth, SEC-accredited investor” who can provide not just investment capital, but also advice and assistance to help startup companies grow and succeed. Note that an SEC-accredited investor is typically defined as a person whose annual income for the past two years exceeds $200,000 (if single) or $300,000 (if joint income); and/or a person whose net worth exceeds $1 million in total investable assets.
  • There are investment minimums. Investors who meet the criteria required to be an angel investor should also be aware that NMA has minimum investment requirements. In addition to annual dues of $2,000 (which NMA says help “defray the costs of the organization”), NMA members are expected to make a minimum $5,000 investment in any deal that is of interest to them. The organization does not require its members to make an investment in every startup that pitches NMA, which means members can decided whether to invest and the amount to invest for every prospective deal. However, NMA’s rules say the organization must achieve a membership total of at least $100,000 to prompt an investment in a company – a total that the $5,000 minimum helps make more achievable.
  • There is a learning process. Upon payment of annual dues, each new member of NMA is provided information and an orientation by Bradley Matson, the organization’s administrative director. This process includes an outline of future event dates, a primer of ways for NMA members to engage (including as part of multiple committees) and more. Different members may choose to be involved in investment pre-screening and due diligence, active deal lead engagement with the leadership of companies seeking investments, member or sponsor recruiting, and promotion or publicity.
  • There is a time commitment. NMA is seeking engaged members that will not only contribute dollars, but also insight, expertise and ongoing time investment. Pitch meetings with prospective companies occur nearly every month and last roughly two hours. In addition to this part of the process, members are also expected to serve committee roles and to engage with the companies with which they have invested.

Learn more at northernmichiganangels.com/membership.

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