The Boise Angel Fund in conjunction with the new Treasure Valley Angel Fund recently led a successful round of seed-stage investment in a local company, Social Good Network. Disclosure: I have an investment in both funds, and therefore an investment in SGN.
SGN has created an innovative website (www.socialgoodnetwork.com) through which you can shop at hundreds of online merchants, including all of the big ones, such as Macys, Nordstrom, Gap, Amazon and REI.
Why would you want to shop through Social Good Networks site rather than go direct? SGN partners with online retailers to turn shopping into donations. Through SGN, shoppers are able to direct a portion of the purchase price to the nonprofit of their choice, at no extra cost. Its free and easy to use.
Estimates are that more than $300 billion is spent on online shopping each year, with growth that exceeds the traditional retail sector. The business issue is how to get those buyers to purchase through the SGN website. The SGN answer is to work with nonprofits to engage their supporters to promote shopping through the website. A number of local charities are using the service now, including the Boise Rotary Club and the Treasure Valley Family YMCA.
The funds found the business proposition interesting. They also found the valuation fair, the terms to their liking and superb, coachable management. All created a compelling investment package.
SGN first approached the local angels in March. It was about seven months from first inquiry to close. Angels and the Idaho Small Business Development Center worked with the company to help them sharpen their pitch. The membership of both local funds approved conducting a formal study of the company (called due diligence) in June. A team of volunteer angels worked on the due diligence throughout the summer and made a formal recommendation to the funds in early September. The members voted to make the investment, and it was closed in early October.
Here are some specifics of the deal:
As lead investor, the Boise Angel Fund worked with company management to structure the deal.
The offering was for $250,000 of convertible preferred stock.
The Boise Angel Fund invested $100,000. Treasure Valley Angel Fund invested $50,000, and the Frontier Angel Fund of Kalispell, Mont., invested $25,000.
Individuals, including members of the funds and others, invested an additional $115,000 side-by-side with the funds. This means they invested with the funds under the same terms.
Note that this totals $290,000, compared with the plan to raise $250,000. The round was oversubscribed. The entrepreneurs wisely increased the offering to take advantage of the opportunity to raise additional cash at little additional cost or effort.
The deal was structured using the Series Seed documents I wrote about in my last article (Why angels are abandoning venture-capital documents, Nov. 14-26).
Its rare that an offering is oversubscribed. It is a testament to SGN management that this one was. They were willing to take the time to work closely with the angels. Management, with the encouragement, advice and support of the angels, developed a clear and effective strategy for taking their concept to the marketplace. They not only got the capital they needed but received valuable coaching, which continues post investment.
Kevin Learned is on special assignment with the Division of Research and Economic Development at Boise State and past president of the Boise Angel Alliance and an investor in its funds, the Boise Angel Fund and the Treasure Valley Angel Fund. firstname.lastname@example.org, kevinlearned.blogspot.com. 426-3573