(EDITOR’S NOTE: Phil Shmerling is the featured speaker at today’s monthly “Hot Topics” luncheon hosted by Tech 20/20. This article is the first in a series of stories that will describe initiatives to bring more angel investors and their dollars to the region.)
By Tom Ballard, Director of Innovation and Entrepreneurial Initiatives, Pershing Yoakley & Associates, P.C.
The name – InCrowd Capital – says a lot about the goal. It is to change the dynamics of angel capital so that new players can be brought to the table who have thus far been excluded.
We posted our first article about Nashvillian Phil Shmerling and his new initiative more than three months ago. During a recent trip to the state capital, we sat down with the Memphis native to secure an update on his progress.
Shmerling launched his new approach to angel investing in early October with an event attended by more than 125 people at The Entrepreneur Center.
“The buzz was great,” he said with eight companies making presentations to the attendees. Those companies were Gun.io, NewsBreak, InvisionHeart, dVisit, RocketRaise, Got You In, OurVinyl, and Utilize Health.
Shmerling’s approach differs significantly from more traditional angel models. His plan is to perfect the concept in Nashville before expanding it to Memphis next and Knoxville a little later.
The studious Shmerling has clearly analyzed the existing approaches and believes his model will bring accredited, but non-participating investors from the sidelines to the playing field.
“Our target is much broader” than traditional approaches, he explains, noting that about 8.7 million people in the U.S. qualify as accredited investors, but only 268,000 are actually active. This translates into a three percent participation rate.
Shmerling says that Nashville should have between 35,000 and 50,000 qualified investors which would translate into as many as 1,500 active angels. The actual number is much lower.
“We are actively seeking women who are largely neglected in most angel networks,” Shmerling says in noting one of his strategies to get more qualified investors in an active mode.
Another part of his strategy is to lower the traditional “ante” to be a member of an angel group. The cost of entry is typically $50,000, but it is only $4,000 at InCrowd Capital with an annual membership fee of $1,000.
“This allows every angel to own a diverse portfolio of start-ups,” Shmerling explained, adding that it is equivalent to “dipping a toe in the water.” Any InCrowd angel can invest additionally in companies as he or she desires.
A third unique differentiator of Shmerling’s model is a three-level, 13-item scoring system where both professionals in the sector and the angels themselves evaluate the presenting companies. The system gives added weight to peer-to-peer evaluations.
“You have a whole team picking winners,” Shmerling noted. “We also only rate companies that go through an accelerator.”
For now, that means the initial Nashville Micro-Angel Contribution Group I, LLC fund is limited to companies currently enrolled in or already graduated from the Jumpstart Foundry or Entrepreneur Center.
“Not every company that goes through an accelerator can list (on the InCrowd site), and not every company that is listed will get funding,” he added. “They need to score well. If not, they get delisted.”
Of the initial eight companies that pitched in early October, one – Gun.io – has been listed. Shmerling says he will be adding other companies.
“Going forward, we will have one or two pitches at our monthly meetings,” he explained.
As Shmerling told us in our initial interview months ago, his goal is to “get entrepreneurs funded.” He explained this time, “My customers are angels, and I’m building a platform for them.”
He’s doing all this even as he and his wife await their first child at the beginning of 2014.