13 Dec Angel groups in Chicagoland beginning to sprout
In prior columns, I have addressed the incredible need for early (and I mean very early) stage funding in the Midwest as well as the emergence over the last few years of a number of early stage (including seed) venture groups and angel groups.
Last week, fellow ePrairie columnist Darrel Dvorak wrote about a linked national angel group called Keiretsu, which has set up shop in Chicagoland. Keiretsu is looking at a broad array of technologies and companies on a regular basis (including those in the life science space).
Yes, all of this is good news, but we could use a lot more. Help is on the way. With the emergence of yet another Chicago-headquartered angel group, Heartland Angels is adding a wee bit more depth to our financing panorama.
I recently spoke extensively with Ron Kirschner (or rather I plied him with questions and he patiently handled them), who is the founder and president of Heartland Angels. While the idea of Heartland Angels has been brewing in his mind for a while, he finally put wheels into motion earlier this year and got Heartland off the ground. It’s now gathering traction.
Heartland’s model is different from that of other angels (at least from what I can see). Its angel network has met about five times this year. By January (the one-year anniversary of its inception), it should have completed about $400,000 in investments into early stage companies. While this isn’t a prodigious sum, it is a good start and it is destined to get better.
Who is Kirschner and why is Heartland Angels different?
To start, Kirschner is a physician who has practiced medicine for 23 years (17 years of which as an anesthesiologist). He got his medical degree from St. Louis University and completed residencies at the University of Chicago (emergency medicine) and West Virginia University (anesthesia).
He did his undergraduate degree at Beloit College in Wisconsin (as some of you may remember, this is my alma mater). He taught at Illinois Masonic Medical Center and was an assistant professor at the Southern Illinois University School of Medicine. If that wasn’t enough, he also holds an M.B.A. from DePaul University.
Kirschner also has prior experience in venture investing as former vice president of technology development for China Development Industrial Bank (CDIB), which is a Midwest-headquartered biotechnology venture fund investing in the funding of early stage companies in the Midwest and Canada.
While at CDIB, he led investments into biotech companies such as Aegera Therapeutics, Immunicon and VitaGen (now Vital Therapeutics). He has also started and managed three health-care companies in his own right.
According to the Heartland Angels Web site, it will pursue investing and helping develop new companies in the following fields:
- Science-based innovations (this is a large category that includes nanotech, biotech, ag tech, medical devices, nutraceuticals, environmental and many more)
- Retail
- Manufacturing and distribution
- Telecommunications
- Information technology
- Real estate
Given his background and interests, it is doubtless that we will see a lot more happening in the “science-based innovations” category in the coming year.
Today, Heartland Angels is a small group of about 20 members who are all “accredited investors” (as defined by the SEC). Kirschner hopes that this will grow to about 50 or more during 2005. Though I don’t know the current numbers for Bio-Angels or Keiretsu, I would suspect that they are already approaching the 50-plus member level.
So how is Heartland different from the other angel groups in Illinois? Here are some of the differences:
- Each investor member pays $3,000 to join the organization in the first year and $2,000 per year after that.
- Companies that are vetted to present in front of the investor members are not charged anything to present in front of this group. Bio-Angels charges $250 per company and Keiretsu charges $3,000 per presenting company.
According to Kirschner, the reason behind the last two points is Kirschner’s strong belief that presenting companies are very early stage and don’t have money to spend to present at angel meetings and investors are the ones looking for interesting investment opportunities for their capital and should foot the bill for these presentations.
- Instead of monthly meetings featuring several presenting companies, each Heartland meeting features only one company. This allows that company the time it needs to get its message out and get its questions fully answered. In comparison, Bio-Angels and Keiretsu only allow about 20 minutes per company (including Q&A). If necessary, Heartland will hold several meetings per month if its “deal flow” of presentable companies is there.
- In advance of a meeting, Heartland helps the presenting company assemble its PowerPoint road show and business plan.
- In addition to its investor meetings, Heartland has set up educational forums for investors at different universities (including DePaul and the University of Illinois at Chicago). These forums focus on educating the investor about the due diligence process, risk management, valuation options, responsibilities and risks of board membership and intellectual property.
Other Heartland strategies include focusing only on companies within a 300-mile radius of Chicago.
Unlike Keiretsu and Bio-Angels, Heartland doesn’t yet have any sponsors. Keiretsu has the law firm of Seyfarth Shaw and Bio-Angels has Katten Muchin Zavis Rosenman. While Kirschner is seeking these kinds of sponsors, he’s also looking for other kinds of sponsors (i.e. not just the law firms).
Heartland’s Web site is chock full of good information for an aspiring start-up (including a checklist of what any company looking for serious investors should have prepared for in its due diligence book). Heartland is also seeking to build resident expertise in different industries by bringing on board a variety of advisors to help in the due diligence process as well as with guidance of companies in this difficult initial stage.
Heartland will also stay involved with the company after any funding by its individual investor and by further guiding them through the development maze. Heartland will also participate on a company’s board of directors.
It’s good to see that this drought of start-up capital in Illinois and the Midwest is finally coming to an end. The formation of more groups like Heartland, Keiretsu and Bio-Angels is good for the entrepreneurial scene of the Midwest. I will follow with great interest the development of all three groups and the emergence of more angel groups. I wish them all well!
Woody Guthrie and Hanukkah
Born on July 14, 1912 in Okemah, Okla., Woodrow (“Woody”) Wilson Guthrie was considered to be one of America’s greatest folk music artists of the first half of the 20th century.
He influenced a whole generation of folk singers from Pete Seeger to the Weavers to Peter, Paul & Mary to Ramblin’ Jack Elliot and Bob Dylan (not to mention Arlo Guthrie, his own son). More recently, a whole new generation of music artists has been influenced by his songs including Bruce Springsteen and Annie DiFranco.
Woody Guthrie came out of the “dust bowl” (the great dust storm and the Great Depression) era of the U.S. and brought with him the pain and blues of the people who survived those difficult times. He came to New York City and spent a good portion of his life there.
He finally died at age 55 on Oct. 3, 1967 at Creedmore State Hospital in Queens, N.Y. of Huntington’s Chorea (a debilitative disease he had been diagnosed with 13 years earlier). Early in his career, Bob Dylan traveled to New York City from his native Minnesota to meet Guthrie while in the hospital.
In an interesting article in the Chicago Tribune on Dec. 9, Guthrie also apparently relished Jewish culture and wrote a number of unpublished lyrics about Hanukkah and Jewish history. Hanukkah was the Jewish people’s first affirmation of their right to worship as they wished. They had a willingness to die for this right.
As we are in the heart of Hanukkah (an eight-day holiday period that began on Tuesday and is also known as the “Festival of Lights”), it’s fascinating that this aspect of one of America’s greatest folk singers comes to light.
A new CD has been just released based on the Guthrie lyrics called “Woody Guthrie’s Happy Joyous Hanukkah” and set to music by a group called the Klezmatics. Guthrie’s musician son, Arlo, is now touring with the Klezmatics to demonstrate that his father’s vision was far broader than just the Great Plains and trains.
It seems that Guthrie was in part stimulated by mother-in-law Aliza Greenblatt, a Yiddish poet who (like Guthrie) was passionate about social consciousness. Happy Hanukkah and see you next week!
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Michael S. Rosen is the chairman and CEO of Immune Cell Therapy, a new start-up out of the University of Illinois at Chicago developing cancer vaccines. Rosen is also a founder and board member at the Illinois Biotechnology Industry Organization (IBIO). He can be reached at rosenmichaels@aol.com.
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