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Angel Investor Group Puts the “Work” in Network

Northland Angel Investor Network Director David Palmstein recently celebrated the organization's initial successes helping launch businesses and create jobs.

The recognition of two cutting-edge companies by the Northland Angel Investor Network (NAIN) may have overshadowed an important development: the network itself.

Mycroft AI and LendingStandard were both recognized during the Midwest Small Business Finance (MSBF) Annual Meeting earlier this year. Both NAIN and MSBF are affiliates of the Clay County Economic Development Council and formed with the goal of improving the area’s economy and quality of life by helping small businesses grow.

“Small businesses account for a majority of the nation’s new job creation,” explained Jim Hampton, director of MSBF. “It’s great when we can bring in a new company, but startups and small businesses are very important because they tend to stay here and grow jobs. That’s a win for everyone.”

But entrepreneurs and small business have little, if any, history, sometimes just an idea. That makes traditional loans difficult. NAIN was founded to fill that gap.

“That’s why angel investors are so important,” Hampton explained. “Capital is critical for businesses of all kinds, but small businesses can’t always access it. We wanted to create a way to make that happen, and now we’re starting to see results.”

But much like starting a company, creating an angel organization is difficult. Potential businesses with realistic chances of success are not easy to identify, and finding qualified investors can be even more of a challenge.

David Palmstein has been the NAIN director since the organization was launched in 2014. He noted that the first two years were largely spent creating what the name implies: a network of investors willing to help local businesses grow. Although the qualifications include a minimum of $1 million in assets, one word Palmstein seldom uses is “risk.”

“If done correctly, you can mitigate the risks,” he said. “It can be risky, but we reduce those risks dramatically.”

Since 2016, the tempo of NAIN activity has accelerated. To date, the network has made five investments totaling approximately $1.5 million. Not surprisingly, the competition for those funds was intense.

“We reviewed 500 business plans,” Palmstein noted. “The candidates present in a fashion similar to television’s ‘Shark Tank,’ but before they present, there is a lot of research and other work that goes on behind the scenes.”

Some of those efforts include contact after a business is selected. The businesses are closely monitored and mentored if necessary.

“That is a major reason we expect huge investment return,” Palmstein said. “We follow them and increase their chances of success and the organization’s return on investment.”

NAIN’s first five companies are diverse. For example, one is developing an artificial intelligence voice system similar to Apple’s Siri or Amazon’s Echo, but with an open-source platform that could be used in automobiles, for example. Another NAIN company has developed a digital loan management system now being used by the federal government. A third business developed a digital tracking system for school busses, while another created a high-tech medication bottle. This smart bottle monitors medication use and phones the provider or doctor if it is not taken as directed.

Clay County and the Northland may be the biggest winners of the efforts. NAIN estimates that over the next few years, as many as 200 new jobs will be created by these investments and more are expected. “This is going to help businesses, and it’s going to help our communities,” Hampton concluded.

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