Luis Villalobos, a tech entrepreneur with a penchant for grooming companies for success, launched a small Southern California investment group called the Tech Coast Angels (TCA) in 1997.
He'd been told that starting an angel group in Orange County was a waste of time, as there were few entrepreneurs and even fewer angel investors in the region. The prevailing thought was that Orange County was all about real estate, not technology.
He followed his gut anyway, which turned out to be right. In 2001, when the market and tech industry took a dive, TCA members actually made some money, a testament to the group's experience, knowledge, passion, and investment vigor.
The TCA now has 270 members – mostly former entrepreneurs with CEO experience, and some business leaders and venture capitalists – who have invested more than $60 million of their personal capital, coupled with another $607 million from venture capital firms and other co-investors, in more than 95 Southern California high-tech and life science companies.
TCA ranked number 7 (tied with four other firms) in the top 100 U.S. venture capital firms based on number of early-stage deals made in 2004, according to a MoneyTreeTM Survey from PricewaterhouseCoopers, Thomson Venture Economics, and the National Venture Capital Association.
Supporting and fueling innovations and the entrepreneurs behind them suits Mr. Villalobos and his angel group well. "The last couple of years have probably been the best time for the Tech Coast Angels," says Mr. Villalobos, who has invested in 56 early-stage tech ventures, with 12 exits and 25 companies remaining active. "We have learned a lot, we're attracting terrific people, and we're starting to see [that] a lot of our deals have successful follow-on funding rounds. I'm sure within a year or so we'll start seeing some very nice exits."
Unique Investing and Mentoring Approach
One factor driving TCA's success is its unique approach to investing in and mentoring innovative Southern California entrepreneurs.
TCA members provide $250,000 to $1 million in early-stage and seed capital, an investment range that traditional venture capitalists typically don't deal with. Then, members work closely with companies they invest in through mentoring and coaching, serving on the board, providing contacts, and assisting with team building, strategic planning, and fundraising.
TCA members, who usually invest in one to two deals a month, help get early-stage companies ready for venture capital raising at a higher valuation, and facilitate introductions to venture capitalists. TCA even has a group of venture capitalist affiliate members – 25 of the leading venture capital firms, most of which have offices in Southern California.
TCA's investment process is simple, starting with an application submitted directly to the firm's Web site (www.techcoastangels .com). Though most companies that apply don't make it through the first TCA round, some are mentored by TCA members and come back a few months or a year later in a better position to obtain funding.
Growing, Shifting Role for Angels
Overall, angels are playing an increasingly important role in the "capital food chain" for the tech and life science industries, says Mr. Villalobos, a Newport Beach, California, resident who holds degrees from Harvard Business School and MIT.
"If you look at the companies that we have funded that have received over $600 million in capital, that's a staggering number," he points out, adding that he helped launch two other angel groups: East Coast Angels in Sydney, Australia and Camino Real Angels in Texas.
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