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The Muskegon Angels LLC have changed their business model this year, focusing much more intently on funding businesses in Muskegon County after having branched out over the years to invest across Michigan.
"We had got away from our mission and had started investing all over Michigan, and our members wanted to refocus on western Michigan and Muskegon," said Eric Seifert, the group's administrator.
Seifert said one new focus for the angels is helping local businessmen and women buy local companies for sale, instead of letting them be sold to companies, private-equity funds or individuals based elsewhere.
"Private equity comes in and they want to cut employment," he said. "Local owners are more supportive of the community. They sponsor softball teams and events, they want to buy from local companies. We have three of those deals in the hopper right now. One is helping a guy buy a $50 million revenue company that he can't afford on his own. And the MEDC [Michigan Economic Development Corp.] called on one deal and asked for our support."
The Muskegon Angels were founded in 2013 and now have 25 members. Seifert said the new focus also will target areas his members are more familiar with, such as manufacturing, machining and distribution, rather than high-tech business such as software that they had grown to be a focus, a trend in angel investing elsewhere that perhaps his group wasn't as suited for.
He said investing in older industries may have a smaller financial return and not have some of the home runs that investing in tech startups can have, but there is a social return in helping local companies keep local ownership.
Seifert's background aligns with the revised investment focus. A former community banker, for 10 years he was an advisor with the Michigan Small Business Development Center, which is affiliated with Grand Valley State University in Grand Rapids. His specialty was helping the owners of second-stage companies plan their exit strategies. He now runs his own Muskegon-based firm, Left Coast Capital Resources LLC, which helps companies plan their exits and find buyers.
Seifert said the group has invested about $3 million in its 14 portfolio companies, typically taking less than a 10 percent ownership stake in a company.
It had one big exit in 2017 when Grand River Aseptic Manufacturing Inc. of Grand Rapids was sold to Chevy Chase, Md.-based private equity firm Arlington Capital Partners, a deal that Seifert said brought a 3X return to the angel group.
Seifert said the Muskegon Angels basically took 2018 off as they decided on their investment pivot. Their return to investing coincides with a recent growth in angel investing statewide.
According to a report by Ann Arbor Spark, which is active in angel investing through its Michigan Angel Fund, there were 859 angel investors who invested $52 million in 84 companies last year, compared to 797 angels who invested $41.8 million in 70 companies ion 2017.
Two new angel groups have formed this year, the Detroit-based Woodward Angels, in cooperation with the Grand Angels, and the Birmingham Angels.
Here are some of the Muskegon Angels' portfolio companies:
American Glass Mosaics of Norton Shores, a company launched in 2013 to make mosaic glass tiles such as those used in back splashes from recycled glass
Ablative Solutions Inc., a medical-device company in Kalamazoo that in January raised $77 million in what was then the largest venture-capital round ever raised in Michigan. In June, Detroit-based StockX broke that record when it raised $110 million.
Micro-LAM of Kalamazoo, a maker of laser-based cutting tools for the machine industry
Tetra Discovery Partners Inc. of Grand Rapids, a pharmaceutical company targeting Alzheimer's
UV Partners Inc. of Holland, which has developed a device that uses ultra violet light to reduce the number of infections acquired in the hospital
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