This article first appeared in the St. Louis Beacon, May 30, 2013: For most people, turning 30 isn’t a cause for festivities.
But for the Arch Angels, hitting $30 million in investment seems as good a reason for a party as any.
“It’s primarily to say, ‘Hey, we’ve been very successful over this eight-year period,’” said Bob Calcaterra, president of the group. “We want to celebrate it.”
That celebration took place at the Donald Danforth Plant Science Center Wednesday night when the Arch Angels welcomed dozens of guests to listen to entrepreneur presentations and engage in networking as part of a special event to mark its continued growth.
The group has been on a roll of late. Its partnership with the FinServe Tech Angels late last year swelled its ranks to 64 investors. Since then, Calcaterra said the organization has expanded to roughly 75 members. Total dealflow since the Arch Angels' founding in 2005 has now cracked $34 million in 44 companies, he said.
Calcaterra said that a lot of that expansion has come in just the last two years as the pall of the recession has lifted.
“We went through a period in 2008-2009 when we were a little less willing, with the group of people involved, to make sizable investments,” said Calcaterra, a founding member of the Arch Angels, who has invested in 16 deals himself. “Since 2011-2012, people are opening up a lot more so I think they are feeling very good about the economy and their assets.”
He noted that the Arch Angels have had four exits and four failures over the years, but the profits from the exits have outstripped the losses from those that didn’t pan out.
“In all cases, we put very little in them,” Calcaterra said of the failures. “Some of the ones that exited we put in a lot more.”
Yet it is the Arch Angels' level of commitment to deals that makes them so unique.
“Just think of the numbers: $34 million in 44 deals,” he said. “If you divide that out, that’s $700,000 or $800,000 per deal -- which is two to three times what typical angel deals are. Most average around $250,000 to $300,000.”
Jim Brasunas, executive director of the Information Technology Entrepreneurial Network (ITEN), said the group has long played a valuable role.
“Arch Angels has been here since before startups were cool,” he said. “They were one of the early pioneers and they’ve been steadfast supporters of the entrepreneurial community.”
He said the Arch Angels are showing increased interest in IT investments, augmenting an already strong presence in the life sciences.
“They’ve been looking at tech deals for quite a while, but I think the emphasis is becoming more and more on the tech space because they are just seeing so many good deals coming through,” he said.
Yet the biotech community is equally praiseworthy. Sam Fiorello, chief operating officer of Danforth, said the Arch Angels form an important link in the research chain.
“It’s vitally important,” said Fiorello, who is also president of BRDGPark. “Without this piece of funding, this early stage risky funding, we wouldn’t advance a company to a place far enough along so a big venture capital firm will come in. Without a robust angel network in the community in a place like St. Louis, it won’t happen.”
Attendee Jay DeLong, vice president for capital formation and new ventures at the St. Louis Regional Chamber, said that without that piece of the puzzle, the Gateway City would be a very different place.
“Thirty million dollars is a big number, particularly in St. Louis where there is not a lot of other sources of risk capital,” he said.
Without access to a base of cash at an early stage, it is tough to construct a cutting-edge company from traditional lenders.
“All these deals are too risky for the bank,” he said. “They represent high-growth potential, wealth creation, jobs, all those things but the banks won’t touch them because their projections accelerate too fast or their technology has too many risks.”
DeLong said angel investors’ belief in an idea can generate confidence from others.
“That’s a big deal in a community like ours because this is a first stage,” he said. “We build on this. These are accredited investors, value-added investors. What they are working on with the entrepreneur is de-risking the deal as much as possible to get to the next round of investor, the venture investor or corporate investor, where they put in much more money and have a real economic impact.”
The end result is something that can benefit everyone.
“These entrepreneurs represent a lot of potential economic impact, a lot of jobs or, in medical and life science companies, perhaps therapies to cure people,” he said.
“It all starts with the entrepreneurs getting capital and convincing these investors that their business proposition is worthwhile.”