Scott Ball / Rivard Report
When Chris Burney graduated from Alamo Heights High School in 2002 and went off to college at Duke University, to jobs in New York, and to business school, he didn’t look back. But a homegrown tech company – Rackspace – caught his eye in 2012, and four years later, he’s embarking on a new role to help grow other San Antonio and South Texas startups.
As the newly named executive director of the San Antonio Angel Network – a startup to help startups – Burney has spent his first two weeks on the job working from his offices at Geekdom to build a network as strong as those in other parts of the state.
The Angel Network already has a solid foundation. Founding members of the network include the Geekdom Fund’s Michael Girdley, former Rackspace President, TechBloc Founder, and venture capitalist Lew Moorman, Filestack’s Pat Matthews, Intrinsic Imaging’s Amit Mehta, former San Antonio Spur Brent Barry, and FlashSCan3D engineer Cole Wollak. The group holds memberships in the national-level Angel Capital Association and the Alliance of Texas Angel Networks, which is made up of 13 groups across the state.
Individual angels tend to invest in high-growth companies that are seeking less than $1 million in investment, Burney said. Until now, San Antonio startups had to rely on individual venture capitalists, programs like the Geekdom Fund, or look elsewhere for funds.
The Rivard Report spoke with Burney to learn more about the San Antonio Angel Network, and how the group hopes to identify potential startups and facilitate future investment deals in the Alamo City.
Rivard Report: How do you get a network like this going?
Chris Burney: We’re currently trying to move as quickly as possible to scale up and become active. The first thing I’m doing is working on building up a network of investors. We’ve got a great base so far – with five now and a handful of others coming in. We want to build on that.
The organization needs to be self-sustaining. We haven’t organized yet, but typically a network is organized as a nonprofit whereby we fund all our activities through dues from the members. There will also be corporate sponsors and we’re working on a target list right now.
We want to find people who want to be actively involved in investing as opposed to a fund where you are kind of passive. As an angel, you will be an owner of the company you invest in personally.
RR: How does an angel network work?
CB: It’s our job to help screen startups to put a good deal in front of our angels. A lot of angels get inundated with too many requests, so we see our value added in a couple of different ways. First, an angel only sees an investment when we’ve already screened it and we think it’s good.
Second, we’re going to invest across industries. Even though a lot of high-growth companies are tech-based, San Antonio does a lot of things well – health care and biomedical, energy, hospitality and leisure, and consumer products.
This will allow angels to invest in industries that they may not be as familiar with. But they can manage their risk by investing alongside somebody who does know it well. So it allows them to gain some exposure in their personal investments without having to do all the learning themselves. We want to leverage the expertise of all the different angels in order to get better investments.
RR: Why is this the right time for an angel network in San Antonio?
CB: Though there’s a significant amount of money and people here willing to invest – unlike Austin, Houston, or Dallas – we were just not very organized. The growth startup scene in San Antonio hasn’t been a good source of investment until now.
Also, San Antonio is very spread out. There’s a ton of innovation going on in the Medical Center, a ton of startups downtown. One of our goals is to unite the investing community here and organize the money so when startups comes along, they don't have to look outside the city for money. If there are great startups here, they can come directly to us and we can help try to find them a way to be funded by local people.
But even though we are based out of San Antonio, the angel network will not just invest in San Antonio companies. We’ll have a focus here and that’s who we want to support. But if there’s a good deal from Austin or the Bay Area, for example, we would absolutely look at that. And that’s a good way for San Antonio to get on the map because it just shows that San Antonio is out-reaching as well.
RR: What do startups looking for angel investors need to know?
CB: Angel investing should be one of first types of capital that a startup needs. But if you’re still in the idea phase, it’s too early to raise money. We want to find people who have done a lot of legwork, who have the product or company in place, and are ready to grow in scale. This is an investment, and people will want a return on their investment.
We’re already starting to get submissions to our website forms. I’ve talked to a couple of entrepreneurs. Anyone who is interested can email me. We plan to have our first pitch session within a few months. But first, we need a core group of investors.
RR: What do potential investors need to know?
CB: To join the network, investors must be accredited according to Securities and Exchange Commission rules. That means he or she makes at least $200,000 a year, $300,000 as a couple, or have a net worth of $1 million. Members pay an annual fee of about $1,500-$2,000, and we will also ask angels to invest a certain amount per year, typically a minimum of $15,000-$25,000.
There will be a funding cycle, perhaps quarterly, when you must be available to attend pitches, and then stay involved with the companies to help them move to next stage.
When angels make an investment, they are an owner of that company. They don’t usually serve on the board, but they do have a stake in the company. The angel network itself, however, does not.
Disclosure: Lew Moorman is a member of the Rivard Report's board.
CORRECTION: A previous version of this article stated that angels are asked to invest about $300,000-$400,000 a year when they're only asked to invest a minimum of $15,000-$25,000 a year.
Top image: Members of Geekdom startup Centrair Electric have a meeting in the Weinkrantz conference room Photo by Scott Ball.