23 Feb Chippewa Valley angels invest in network hardware company
Eau Claire, Wis. — Small Tree Communications, a niche hardware company that makes networking products for Apple computers, has received a $445,000 funding round from Chippewa Valley Angel Investors Network.
“This [investment] is going to allow us to grow our business faster by getting our products to market sooner,” said Corky Seeber, president of Small Tree Communications. “It’ll allow us to get office space and equipment, and to develop additional products.”
“We’re looking at developing some proprietary solutions to use with the Apple computing systems,” he added.
The five founding members of Small Tree bring their skills with high-performance computer networks to the Apple computer platform. During 2004 alone, the company released software for Apple G4 and G5 servers to combine multiple Ethernet ports into a virtual port, Mac OS X drivers for Intel’s 10-gigabit Ethernet adapters and optical Ethernet cards, and software that works with InfiniBand hardware to allow customers to build supercomputer systems out of tightly networked Apple servers.
The company is a Minnesota LLC but has several offices in Chippewa Valley, Wisconsin, which is what attracted the angel investors network there.
“They’re in the business of working with networking of different types of computers, and making them very large and very fast,” said Claire Johnson, president of the network. “They of course have to develop their current roster of products, and they have to get it to the marketplace.”
The network, one of the four such angel investment networks in Wisconsin, is formed by area investors that have two goals: to help provide new companies in their regions with startup capital to create more employment in their communities, and to receive a return on their investments in the form of successful businesses. Though the branches have little communication, Governor Doyle’s office is trying to encourage more dialogue so that larger projects will be able to receive funds.
“Angel Investor Networks is trying to fill that niche of the very early funding of a startup company,” Johnson said. “Unfortunately, it’s also the area with the largest risk. You have a lot of people with a lot of great ideas, but there are some times that these ideas just can’t be made into successful businesses.”
The Chippewa Valley Angel Investors Network tries to make those successes. Individual investors in the network can vote on how much, if anything, they will invest in business proposals that are approved. The network then creates subgroups of involved investors for every company.
“We don’t want to make people feel that they’re automatically in,” Johnson said.
The Small Tree subgroup is relatively large, with roughly 13 investors involved in the project. Working together, Small Tree and the angel network have created a board and, as Small Tree takes investment funds and business planning help from the investors, they are both confident that they’ll be receiving a large return on their investment.
“The management team at Small Tree is one they have confidence in,” Seeber said. “We think that we’re a very sharp group of engineers, but we know we have a lot to learn about the business side of things, which we hope the Angel Investors will provide.”
“That is the way that all angel investor networks invest; they take a portion of the equity, and, of course, if the company does well, it looks like a very good investment,” Johnson said. “One of our members or maybe two actually work with the companies and actually stay with them to try to avoid some of the pitfalls that make new companies fail so often. We don’t just put our money in and go.”
Seeber was confident that as Apple computing continues to grow in market share, the risk involved in investing in the company is diminished.
“I think that we were able to demonstrate to the investors that we had uncovered a very high-potential marketing niche in high-performance computing by supporting the Apple platform, which we identified a year and a half ago as a great opportunity,” he said. “It’s my sincere desire that Small Tree will not need any additional rounds of funding, but if that were the case, we’d approach the angel investors first.”
Johnson said the company has a good portfolio of intellectual property and skills, but was more cautious about its ability to go without more funding.
“That’s simply every company’s goal that I have worked with,” he said. “It almost never happens.