Startup Investor Spotlight: Southwest Angel Network

Southwest Angel Network

Southwest Angel Network is stage agnostic and considers companies from pre-seed to series B.

Name of Angel Group / VC Fund: Southwest Angel Network

Location: Austin, TXSouthwest Angel Network

Website: www.swanimpact.org

Executive DirectorBob Bridge

This article is part of our Startup Investor Spotlight Series featuring Angel Networks / Funds and VC Funds. We hope these spotlights will inform and inspire the entrepreneur concerning funding options and opportunities.

There are numerous operating models being pursued by angel networks/funds and VC funds. How does yours work? How does it differentiate you?

The Southwest Angel Network focuses on supporting early-stage companies which are addressing significant challenges facing society. The network has two important goals, making the world a better place and making a return for our investors.

In what industries and sectors do you invest? Are there specific industries, sectors or types of opportunities in which you don’t invest?

Our network of investors looks for for-profit enterprises that are solving significant societal challenges. What do we mean by a societal challenge? Here is one clue. If you were to explain your company’s primary business mission to a social worker, would she or he get a big smile on their face and say “That is so cool!”?

We most often see companies focused on health care, education, and the environment.

You might assume that social-impact investors will be satisfied with a lessor financial return than investors can earn in other angel networks. After all, social impact is sort of like philanthropy. We believe that in order to have the biggest social impact the network needs to attract the largest possible number of angels. How do we do that? By combining significant social-impact and strong business results. That’s the same expectation that we have for your company!

We normally do not invest in:

  • Medical device companies
  • Investment funds
  • Companies whose only social-impact is sharing a portion of their revenues with charities (which is a great thing to do!)
  • Socially responsible companies that do not address a societal challenge as their primary business mission.

Interested in learning how to prepare for your pitch to an Angel Group?

Does your organization have any geographic preferences upon which you build your portfolio?

We mainly see Texas companies but will consider companies outside of Texas that have a term sheet from a sophisticated lead investor in their home region who will have a board seat.

What key attributes do you look for when selecting companies for investment?

Our investors strongly prefer:

  1. A primary business mission of social-impact. A simple test is the following. Does the home page for your business clearly articulate that your primary business mission is to address a significant societal challenge? If yes, then your company will likely meet our social-impact criteria. If your product or service has broad application, including both social-impact and non-social-impact, then your company likely will not meet our network’s social-impact criteria.
  2. Companies with a strong management team which has significant experience in the market segment that they are attacking. This is a critically important requirement.
  3. Companies that have gone to market and achieved some degree of traction or revenue. This is an important criteria since most of the other angel networks that we will work with to syndicate funding for your company will require early traction/revenue. If your company is pre-revenue, you are expected to have completed world-class market validation.
  4. Companies that expect to achieve $5 million in annual revenues within the next five years. Note that product or technology social-impact companies can typically scale revenue more quickly than can service companies.
  5. Companies that plan to scale and ultimately pursue an exit strategy. If an acquisition or IPO is not a likely outcome, the network may consider investing in your company using a royalty –based-financing investment instrument.
  6. Strong IP protection (if applicable)

At what stage(s) of the startups’ development do you prefer to invest?

Southwest Angel Network is stage agnostic and considers companies from pre-seed to series B.

Tell us more about your team. Do you work with companies beyond the provision of funding? If so, how do you support them?

Our team members are recognized leaders in the vibrant and diverse Austin social-entrepreneurship community, and support the numerous Austin social-good accelerators. The team provides education to social-impact start-up teams, provides mentoring support and takes board seats on some of the companies that we invest in.

Want to know more about Austin’s vibrant social-entrepreneurship community?

Are there key startups that serve as examples of the types of investments you like to pursue? What specifically differentiates them?

In 2016, our first year of operation, the Southwest Angel Network invested in four social-impact companies:
Southwest Angel Network
Brobe is a women-led business that improves the lives of post-surgical breast-cancer patients. Our funding allows the company to increase inventory, which then allows a rapid increase in sales.

Flow Below reduces the ecological impact of tractor-trailer trucks by improving fuel efficiency and reducing their CO2 footprint. Our funding helps the company to expand their customer base to include truck manufacturers.

OneSeventeen Media is a women-led business that supports the emotional well-being of junior high and high school students by providing a mobile app, MyMobileMentor. Our funding allows the company to finish development of their initial product.

Querium furthers the education of students who lack the math skills needed to succeed in today’s technological society. Our funding helps the company to enhance their product technology.

<see related:  8 Ingredients for a Business Secret Sauce >

What trends in the startup world are you most excited about?

We see a strong interest in social impact activities and companies. We are considering the possibility of integrating crowd funding into our platform to further support the companies that our angels invest in.

Are you familiar with other Angel Networks/Funds or VC Funds that you believe should be spotlighted?  If so, we would like to hear from you.  Tell us about them, sharing your comments below.

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Pam Goforth

Pam Goforth is Research Manager for FundingSage, which provides valuable information, tools and resources to entrepreneurs seeking to start, grow and fund a business.