Tucson’s Desert Angels, an early-stage investor group that provides funds for local startups in the tech sector, received important national recognition last week. The group was ranked the 3rd most active angel group in the nation by the The Halo Report after having made 32 investments totaling $6.8 million in 2014.
The ranking put Tucson group ahead of others in recognized startup hubs like Austin, Seattle, and Boulder According to the group’s chairman, Curtis Gunn, the Desert Angels have invested nearly $25 million during his five years with the organization.
I spoke with Gunn to discuss the future of the Desert Angels and what it takes to become to become a member of Desert Angels or obtain investment from the group.
Q: What are the Desert Angel’s plans for 2015? 2014 was by far the busiest year for the Desert Angels. Will this year be even busier?
A: There already are 13 investments in the first quarter of the year. Last year the Desert Angel’s had 32 investments, which is such a big number for a group in Tucson. I honestly do not believe that we will rise higher than third on the Halo Report, but it is amazing for an angel group in Tucson to be above relative peers such as Boston, Silicon Valley and New York.
Q: The Desert Angels are primarily focused on funding technology companies; do you see expanding to other areas? And what advice would you give to local entrepreneurs who want to become associated with the Desert Angel investors?
A: Over the last 5 years 94% of the money has stayed in Arizona with a strong preference towards local companies within Tucson. There is a misconception that the Desert Angels are only technology related. We would review any opportunity as long as it is scalable in a capital efficient manner. Desert Angels are open to all investments but there are requirements before our members will invest. The most important aspect for us is the startup team; we require that the team is professional, courageous and ready for helpful change. It is also a plus for the startup to already gain numbers on the size of the market interested in their product as well as additional social testing to determine market valuation. I would advise that a startup have done these two tasks before contacting the Desert Angels. Also having sales before the process is another additional benefit and if there is not already a prototype you will not make it through. You cannot simply come in with an idea, there has to be a usable product that is already completed. So please establish yourself and your product professionally beforehand.
Q: What advice would you give to upcoming investors who are interested in joining the Desert Angels? What are the requirements? What are the benefits of becoming one?
A: You must be an accredited investor with a net worth of over a million dollars, not including properties, or an income of over $200,000 a year. Yearly investment is required so please come with the expectation of investing your money. Everyone invests as individuals and we made 32 total investments in 2014. The benefit of an angel group is that you are in a room of investors from a really broad range of corporate experiences; any company that comes to present will have domain expertise from a member who knows that specific market. We can introduce future investors to many people who will help them in the long run from knowledge and past experience.
Q: Obviously there is risk when one wants to invest. How do the Desert Angels ensure that investors’ money is used strategically and appropriately? There is a rigorous process of gaining investors from Desert Angels, could you briefly explain the beginning of process?
A: The risk will always be there, there is a 50% chance that the company you invest in will fail. But to combat these chances, we have created a way to help investors make decisions within the startup being invested in. Often, investors will take a board position for the startup, which gives them a level of insight into the company and its management. The board is what will review the company’s strategies as well as hiring and spending.
A note from the author, Andrew Sorensen:
The Desert Angels process has recently transitioned into a new platform called ProSeeder, which serves as the deal from management platform. The first step is to create your application on ProSeeder, which will then be reviewed by the Desert Angel’s board members. Last year, 2014, the funnel was about 200 applications where 55 were screened and only 17 presented, only 8.5%. So obviously the entry process is very competitive. Like said in the previous question, your best shot at getting investments is by doing your homework and coming in prepared with resources and experience at hand.
To submit your business plan to the Desert Angels click here.
To apply to become a member of the Desert Angels click here.
To review the Desert Angels portfolio of funded companies click here.