By Tom Ballard, Director of Innovation and Entrepreneurial Initiatives, Pershing Yoakley & Associates, P.C.
We’ve known Eric Dobson from our days at Oak Ridge National Laboratory, but we had no idea how much he had studied the history of investment capital in this country until we sat down with him recently for an update.
Dobson, a local serial entrepreneur, recently assumed the role of Chief Executive Officer (CEO) at Angel Capital Group in addition to his continuing position as the organization’s Knoxville Chapter President. The seven-chapter organization bills itself as the “only Angel network that invests beyond geographical boundaries.”
As noted in a previous teknovation.biz article, Dobson joined Angel Capital more than a year ago to head its East Tennessee activities. One of his roles was to help launch a due diligence model called Venture 360. That goal was achieved in June of this year.
“We now have 60 beta clients with little or no sales effort,” Dobson said. The Angel Capital Group (AGC) decided to spinout Venture 360, and Rachel Qualls, AGC’s Founder and former CEO, has assumed leadership for the new venture.
“My priorities are customer service, growth and community engagement,” Dobson told us. AGC has chapters in Charleston, SC; Denver; Jackson, MS; Kansas City; Knoxville, Lake Keowee (near Greenville, SC); and Nashville.
“We will soon have an eighth chapter, and my goal is to be at 25 within five years,” he said, adding that about five more active discussions are underway. “I’m pretty happy about that model.”
Early in our discussion, Dobson gave us a short lesson in the history of investment capital, noting that “start-ups and private equity play pivotal roles in any recovery.” His understanding of history is particularly important as he positions AGC for success in a rapidly changing environment.
Dobson noted the impact that fraudulent equity played in the ultimate stock market crash in 1929 and the restrictions that were imposed, relaxed and re-imposed over the next several years.
In 1933, Congress approved new rules under the Securities Act of 1933. Specifically, any offer to sell securities must either be registered with the Securities and Exchange Commission or meet certain qualifications to exempt them from such registration. A key component of the new rules included a concept called accredited investor.
“From 1934 until 2008, the numbers did not change,” Dobson said in referring to requirements that accredited investors have either $1 million in net worth or $200,000 in annual income. A change in 2008 removed the value of a person’s home from the $1 million requirement.
“The economy stagnates and start-ups decline when they are strangled for capital,” Dobson observed.
To address the need for more investment capital, Congress passed the “Jumpstart Our Business Startups Act” (JOBS Act) in 2012. It has significantly changed the landscape, birthing a new tool called crowdfunding.
“Angel funds now perform the due diligence that only venture capital used to do,” Dobson says. “Venture funds have moved upstream, and angels have backfilled. The speed of capital is going to increase, and you’re going to have to invest across the broad spectrum of sectors and regions.”
In this dynamic environment, Dobson believes AGC’s Venture 360 tool will play a key role. It incorporates a scoring process to assess the quality and stage of development of the business. It can also serve as a tool for the entrepreneurs who are seeking angel capital, letting them know how others assess them.
Dobson describes AGC’s Knoxville Chapter as “one of the more activity communities” in the network. He is particularly proud of the model that has been underway for several months. Three companies present at each of these meetings.
“We’ve septupled deal flow,” he proudly notes.
As we noted in our previous article, Dobson has seen the investment capital conundrum from both sides. It is clear that he is excited about the new leadership role that he has to make a difference for angel investors and those who need their monies.