Originally created 09/23/04

Startups could get backing of group



Area business startups may soon be getting some heavenly help.

A local investor is trying to form a venture capital group to provide funding to up-and-coming biotechnology, information technology and electronics companies.

Phil McElhaney, an accountant and investor, is working to create an Augusta chapter of Angel Capital Association, a Kansas City-based syndicate of investor partnerships that find and invest in small businesses.

"We're looking for companies that can grow to $30 to $50 million in revenue in three to five years, and return eight to 10 times the investment amount," said Mr. McElhaney, adding that the Augusta group would be called CSRA Angel Partners. He is targeting people whose net worth exceeds $1 million.

Angel Capital groups - there are about 200 nationally - usually invest about $300,000 in companies they believe will have high growth potential over a relatively short time period. In many cases, several groups will invest, bringing the total investment into the low millions.

So-called "angel investors," wealthy individuals who invest in startup companies, provide fledgling companies with enough funding to attract larger investments from venture capital firms.

Angel investors are the largest provider of corporate seed and startup money, reports Jeffrey Sohl, the director of the Center for Venture Research at the University of New Hampshire. He calculated that the average return for angel investors has been about 10 percent, though many investments return more than 20 percent.

But such high returns aren't without their risk. Mr. McElhaney said that on average, only 20 percent of businesses invested in will succeed.

Alveolus, a Charlotte, N.C., medical device company, received a $250,000 investment from the Charleston, S.C., Angel Partners franchise in August 2003. Within a year, the company received more than $20 million more in venture capital funding.

"The initial commitment to some funding allowed us to take the product to the next level," said Eric Mangiardi, the company's president and CEO. "It fully prepared us to take on the institutional money that we raised."

He said the company plans to expand its payroll from 15 employees to 20 by the end of the year.

Tech giants such as Microsoft, Dell and Amazon.com all received funding from angel investors during their startup stages.

"I think anything we can do to provide avenues of investment, venture capital or otherwise, will help," said Ed Presnell, the president of the Augusta Metro Chamber of Commerce.

Mr. McElhaney said he expects the local angel investor group will focus on bio-tech companies that will occupy the Medical College of Georgia's Life Sciences Business Development Center.

He said the franchise would be able to invest in companies throughout Georgia and South Carolina.

Rick Fenwick, the director of Charleston's Angel Partners, said his group invests in businesses within 300 miles of Charleston or those willing to move within the territory.

He said his franchise is speaking with three companies outside the Southeast about relocating to the area.

"As investors, we want to stay close to the companies and help them with their growth plans," he said. "We aren't doing this for economic development reasons. We're doing this to make money. We're investors."

Reach James Gallagher at (706) 823-3227 or james.gallagher@augustachronicle.com.

Phil McElhaney will have the first CSRA Angel Partners meeting at 6 tonight at the Radisson Riverfront Hotel Augusta.