EDA Newsletter June 2009

Volume 2; Issue 6 

SIGN UP NOW TO RECEIVE EDA AMERICA QUARTERLY!

In this Issue:

● The Seed-Stage Equity Gap: Local Solutions 

● The Better Angels of Our Nature Equity Capital in Sustainable Investments 

● Maine's Coastal Enterprises: Bringing Equity Investments to Rural Communities 

● EDA's Excellence in Economic Development 2009 Award Winners Announced 

The Seed-Stage Equity Gap: Local Solutions 

The current economic downturn has hit everyone hard, but it's been especially tough for small 

business owners and entrepreneurs seeking early stage financing. Finding these funds is tough 

even in a healthy economy. It's nearly impossible when credit markets are severely challenged.

In response, local, state and federal policy makers are searching for ways to open up new 

investment opportunities for new businesses. As part of the wider Federal economic stimulus 

efforts, the U.S. Small Business Administration has made it easier and cheaper to access its 

popular 7(a) and 504 loan programs. It has also introduced a new effort, the America's 

Recovery Capital Loan program, to help eligible firms with pressing working capital needs.

While these improvements are helpful, many see a market gap remaining for firms seeking 

equity capital in the range of $500,000 to $2 million. These types of firms are often on a rapid 

growth trajectory that cannot be financed via traditional methods. These companies are often 

too new or too risky to be eligible for traditional bank loans. Yet, at the same time, their capital 

needs are too small to interest many venture capitalists, who are often searching for deals in 

the $8-12 million range. The result is what some call "the valley of death," the period before a 

firm is profitable, yet it still needs funding to help seed growth and the development of new 

products, services and technologies.

Policy makers have been grappling with this issue for years, and are considering a host of 

solutions. Many states and localities operate their own seed venture funds. Other regions have 

embraced the development of angel capital networks, which are and will continue to be a 

primary source of seed capital for new entrepreneurs.

While individual angel investors — wealthy individuals who invest in new or growing ventures —

have always backed businesses, the development of organized investor groups is a relatively 

new phenomenon. Today, it's common to find organized angel groups in most major cities. 

Meanwhile, smaller communities and rural areas are working to develop their own home-grown 

angel networks. The recently-formed Angel Capital Association (ACA) now lists 187 groups as 

members or affiliates.

While each individual angel investment can be relatively small, the collective of angel investing 

is relatively large. According to the University of New Hampshire's Center for Venture Research, 

organized angel groups invested $19.2 billion in more than 55,000 ventures in 2008. 

Nationwide, more than 260,000 were active as angel investors.

Unlike venture capitalists, who tend to focus on few high technology sectors, angels invest in all 

types of businesses. More importantly, they invest in the critical early stages. In 2008, 45 

percent of all angel investments were for firms in the start-up or seed stage. In contrast, 19 

percent of 2008 venture capital investments were in this early stage.

Because angel groups fill an important capital gap, many states and localities are trying to 

support these efforts through the use of tax credits or sponsorship of networks. If your 

WE WANT TO HEAR FROM YOU

Do you have a story idea, case study or 

topic that you would like to see covered 

in this newsletter? Do you want to 

comment on something you read here? 

Email us and your comment or idea could 

be featured in the next EDA Update!

APA's Tools-of-the-Trade Part 

Five: Strategy 4 — Development 

Incentives and Financing

State, regional and local governments 

recognize financing and tax incentives as 

dual engines for economic and —

consequently — workforce development. 

APA's Tools-of-the-Trade (Website) 

highlights two popular development 

incentives-tax-increment financing and 

private activity bonds that reduce the 

costs for the private sector for the public 

benefit.

Federal Funding Opportunity 

Notice Available for EDA's 

American Recovery Program

EDA is soliciting applications under its 

$150 million American Recovery Act 

Program, to create jobs and boost 

development in parts of the country hit 

hard by the recession. The deadline for 

receipt of applications under the Recovery 

Act Program is June 30, 2010. All other 

information and requirements for the EDA 

American Recovery Act Program may be 

found in the March 10, 2009, Federal 

Register notice (74 FR 10232) and the 

companion federal funding opportunity 

announcement on EDA's Website.

COMING SOON!

June 29-August 1, 2009

American Chamber of Commerce 

Executives (ACCE) Annual Conference, 

Raleigh, NC 

[Website]

August 29-September 1, 2009

NADO's 2009 Annual Training Conference, 

Chicago, IL 

[Website]

September 14-26, 2009

National Association of Seed and Venture 

Funds (NASVF) 16th Annual Convention, 

Oklahoma City, OK [Website]

http://www.planning.org/eda/newsletter/2009/jun.htm (1 of 5) [6/29/2009 1:17:38 PM]
EDA Newsletter June 2009

community is considering this approach, experts such as the ACA offer several tips:

● Do Your Homework: Ensure that there is a clear local need for angel investors and 

that potential investors already reside in your region.

● Sweat the Small Stuff: Creating angel networks involves many legal complications 

related to investor accreditation, partnerships and the like. Reach out to experts to 

ensure that these issues are properly executed.

● Train the Angels: Most potential investors need to be educated about why it can be 

profitable and fun to be an angel investor. Tap into the many angel training and 

support programs now available across the country.

● Spread the Word: Successful angel groups need deal flow, i.e., a sufficient number 

of potential deals in which they can invest. Generating deal flow requires that 

communities market the angel groups and build partnerships with various business 

support organizations who can refer entrepreneurs to the network.

To learn more:

● Angel Capital Association (www.angelcapitalassociation.org)

● National Governors Association Issue Brief, "State Strategies to Promote Angel 

Investment for Economic Growth," February 14, 2008. Available at www.nga.org.

● University of New Hampshire Center for Venture Research (http://wsbe.unh.edu/

cvr)

The Better Angels of Our Nature 

Equity Capital in Sustainable Investments

It's often said that money is the fuel that drives a company's growth, and, when companies 

grow, communities can grow too. Yet, finding money to fuel new businesses, especially early 

stage equity capital, can be a challenge. Many regions and communities are now embracing 

angel investor networks as one tool for building local sources of business finance.

The number of angel networks in the U.S. is growing rapidly. Most of these groups invest in a 

variety of business sectors, but, more recently, some regions have become home to angel 

networks that target specific clusters or industries. For example, the Northwest Energy Angels 

investment group has embraced an untraditional strategy of investing in environmental 

sustainability and renewable energy technologies, key elements of the emerging green economy 

in the United States.

The Northwest Energy Angel Group is a program of the Northwest Energy Technology 

Collaborative (NWETC), a joint effort of industry and government, working together to 

accelerate the emergence and growth of the energy technology industry in the Pacific 

Northwest. NWETC was launched in 2002 by the Washington Technology Center (WTC), a 

statewide economic development organization focused on technology and innovation.

The Northwest Energy Angels is a multi-state regional membership organization comprised of 

successful entrepreneurs, retired business executives and other business leaders that trace 

their origins back to several economic development efforts in the state of Washington. The 

demand for industry-specific angel groups was present among investors, and the Northwest 

Energy Technology Collaborative energy entrepreneurs needed another easily accessible 

investment network. The like minded nature of the programs made the beginnings of the 

Northwest Energy Angels timely and advantageous for energy start-ups and investors alike.

The Northwest Energy Angels has invested in companies that strive to achieve market 

leadership and fuel positive changes in local and regional economies. Through mentorship, 

strategic advice and substantial financial backing from investors, start-ups have opportunities to 

mature and cultivate talent for higher-skill, higher-wage jobs.

Northwest Energy Angels launched in 2006 with the primary goal of assisting clean-energy startups in becoming sustainable, highly profitable, competitive entities that positively impact a 

region's economic viability. Energy efficiency and finding new, renewable sources of power are 

keeping researchers and scientists in the region busy. An industry-specific angel investing group 

was a natural fit for the Northwest. Investors provide a stable basis for expansion, broadening 

the entrepreneur's adaptability and reach within the market.

Six annual meetings in Seattle serve as the forum where group leaders scout out the start-ups 

that not only meet the criteria investors are seeking, but also those exhibiting the forwardSeptember 14-17, 2009

America's Small Business Development 

Center (ASBDC) Annual Conference, 

Orlando, FL [Website]

October 4-7, 2009

IEDC 2009 Annual Conference, 

Renewable Communities, Reno, NV 

[Website]

October 11-13, 2009

University Economic Development 

Association Annual Summit, San Antonio, 

TX [Website]

http://www.planning.org/eda/newsletter/2009/jun.htm (2 of 5) [6/29/2009 1:17:38 PM]
EDA Newsletter June 2009

thinking and competitive edge that will propel energy industry sectors in our transitioning 

economy. For example, a 2006 investment of $150,000 from a member of the Northwest 

Energy Angels directly funded a Ridgeline Energy wind project near Idaho Falls, which was later 

sold to and operated by Invenergy Wind, LLC. Ridgeline successfully developed Idaho's first 

large-scale wind farm, providing electricity to nearly 12,000 homes, and developed several 

large-scale wind projects. Moreover, the company is committed to engaging community 

residents and raising awareness for energy conservation.

The Northwest Energy Angels envision angel investments bolstering regional economic capacity 

and improving quality of life. The renewable energy industry is helping invigorate depressed 

communities far-flung from metro areas. For instance, wind farms — built primarily in rural 

locations — are adding jobs and new businesses, while adding to the region's tax-base. 

Additionally, wind farm development often compensates farmers and ranchers who own land 

where the turbines are installed. Through strategic investments, networks like the Northwest 

Energy Angels foster more productive and beneficial economic development for communities 

and regions by maximizing innovative job creation and industry stability.

The Northwest Energy Angels uniquely demonstrate how communities and regions can thrive 

from sustainable angel investments. The following lessons-learned will encourage economic 

development practitioners to recognize the links between equity capital investments and 

economic development:

● promoting the sustainable use of a region's natural resources can drive economic 

development;

● angel investing integrates community input and leadership to achieve economic 

development outcomes;

● angel investing calls for mentorship from experienced entrepreneurs to nurture 

start-ups and ignite economic development efforts; and 

● sustainable angel investing encourages environmentally-friendly job creation and 

industry stability. 

Employing this triple-bottom-line (socially, economically, and environmentally focused) 

strategy, angel networks have proven their worth through successful return on investment and 

positive economic and environmental benefits in the companies and communities they invest in.

For more information about the Northwest Energy Angels visit: http://nwenergyangels.net/

index.php

Maine's Coastal Enterprises: 

Bringing Equity Investments to Rural Communities 

It's a tough market for growing businesses that are seeking equity investments from venture or 

angel investors. It's especially tough if the firm is located in a rural area or in regions that 

venture capitalists (VC) pejoratively refer to as the "fly-over" states. While the term has no 

exact definition, it basically refers to any state or locality not located in traditional VC hotspots 

on the East and West Coasts.

Because of these challenges, smaller communities have had to get creative and help nurture 

their own home-grown sources of equity finance. Some regions have supported the creation of 

angel networks, while others have opted to build community development venture capital 

(CDVC) funds. These funds operate with a double bottom line; they hope to make money for 

their investors while also helping to stimulate economic development. CDVCs are growing in 

both sophistication and importance — the national Community Development Venture Capital 

Alliance estimates that the U.S. is now home to 69 CDVC funds with approximately $1.2 billion 

under management.

Maine's Coastal Enterprises, Inc. (CEI) created a subsidiary that manages one of the more 

established CDVC initiatives in the nation. CEI has been in operation since the 1970s, originally 

focusing its services on coastal Maine. Today, CEI programs operate throughout northern New 

England. In 1995, CEI set up its first business investment subsidiary, CEI Ventures Inc.

CEI Ventures Inc. (CVI) presently manages two venture capital funds that can invest in Maine, 

New England and New York state. CEI also manages two other subsidiaries that invest funds 

related to the New Markets Tax Credit program as well as several SBA-sponsored loan 

programs. Like all equity investors, CVI is looking for firms that exhibit rapid growth and that 

are led by passionate and expert management teams. Firms that work with CVI must also sign 

http://www.planning.org/eda/newsletter/2009/jun.htm (3 of 5) [6/29/2009 1:17:38 PM]
EDA Newsletter June 2009

a "social agreement" that requires them to commit to various measures of corporate citizenship 

and environmental stewardship. Managing Director Nat Henshaw notes that CVI is looking for 

firms that can deliver on the "three Es:" equity, environment and economic performance.

CVI manages two investment funds and is raising investments for a third $50 million fund. The 

two earlier funds have invested $18— 19 million in 37 different deals. Because of its 

commitment to the double bottom line, CVI does not focus on a few sectors — the typical 

practice among venture funds. It has invested in a diverse set of companies ranging from 

medical diagnostic testing firm to a designer of women's outdoor apparel to a provider of rural 

broadband services. CV Finer Foods, now operating as World Harbors, Inc. is one of the more 

interesting and successful firms in the CVI portfolio. The company produces all-natural food 

sauces and marinades. Based in Winthrop, Maine, the firm had eight employees when it first 

came to CVI's attention and currently employs about 25. With CVI's investment and consulting 

support, the firm rapidly grew and was ultimately purchased by Angostura International in 

2000. The firm continues to sell products under the Angostura and Acadia Naturals labels.

Another portfolio company, Look's Gourmet Foods of Whiting, Maine, is also in the food sector. 

Look's produces authentic chowders, soups and other products under the Bar Harbor Foods 

label. Look's exemplifies the Henshaw's concept of "the 3E's." In addition to being a successful 

business (it's on the current Inc. 500 list), the firm is committed to sustainable fishing practices 

and using the products from local lobstermen and other merchants.

When asked to offer some lessons-learned from more than a decade of rural venture investing, 

Henshaw encourages others to be in it for the long haul. As he notes, "This is an extremely longterm business. It takes commitment, staying power and perseverance." He's also optimistic 

about the future: "Even though now is a tough time to raise funds, it's actually a good time to 

invest. There are lots of opportunities now and in the future."

For more information: Community Development Venture Capital Alliance: www.cdvca.org. 

Coastal Ventures Inc. Enterprises: www.ceiventures.com

EDA's Excellence in Economic Development 2009 Award Winners 

Announced 

On Friday, June 5, 2009, U.S. Commerce Secretary Gary Locke announced the seven winners of 

the Economic Development Administration's (EDA) Excellence in Economic Development Awards 

2009. "Excellence Award winners exemplify the importance of supporting regional strategies to 

ensure American communities succeed in the global marketplace and create higher-skill, higherwage jobs," Locke said.

The winners are provided below by category. 

Excellence in Urban or Suburban Economic Development

JumpStart, Inc., Cleveland, Ohio

Excellence in Rural Economic Development

Louisiana Business and Technology Center, Louisiana State University 

Specific Program: Mobile Classroom "Driving Louisiana's Economy" 

Baton Rouge, Louisiana

Excellence in Environmental or Energy Economic Development

Saginaw Future, Inc.; Michigan Economic Development Corporation; Saginaw County Chamber 

of Commerce, Saginaw, Michigan

Excellence in University-Led Strategies 

Rochester Institute of Technology Center for Integrated Manufacturing Studies 

Rochester, New York

Excellence in Economic Diversification Strategies

City of Kannapolis, North Carolina 

Kannapolis, North Carolina

Excellence in Community and Faith-Based Social Entrepreneurship

Center for Employment Training 

San Jose, California

http://www.planning.org/eda/newsletter/2009/jun.htm (4 of 5) [6/29/2009 1:17:38 PM]
EDA Newsletter June 2009

Excellence in Historic Preservation-Led Strategies

City of Dubuque, Iowa 

Dubuque, Iowa

http://www.planning.org/eda/newsletter/2009/jun.htm (5 of 5) [6/29/2009 1:17:38 PM]