Seed Capital From Angel Investors: Eric Pozzo, Fund Manager, Oregon Angel Fund (Part 1)

By guest authors Irina Patterson and Candice Arnold

This is the thirty-sixth interview in our series on financing for entrepreneurs. I am talking to Eric Pozzo, fund manager at the Oregon Angel Fund. It is a professionally managed, investor-driven angel organization that launches a new $3 million fund each spring and invests in companies in Oregon and southwest Washington.

Irina: Hi, Eric. Why don’t you start with your background and how you got to this point?

Eric: I’ve been an entrepreneur for close to 30 years, and I came out to the West Coast to work for Intel in 1980. In 1982, I started a business with a couple engineers to move instrumentation over to the personal computer from minicomputers. I’ve been involved in startups ever since. Probably about 10 to 15 years ago, I started to do some angel investing along with being personally involved in startups. Eventually it evolved into a unique position as one of the fund managers here at Oregon Angel Fund.

Irina: When did Oregon Angel Fund get started?

Eric: The fund was started in 2007 by a couple of my colleagues here. Basically, it evolved from something I started in 2005, which was an investment competition as part of an annual event called Angel Oregon.

I went out and raised $5,000 each from 23 investors, and we had a $115,000 investment award. [We] invited a number of companies to compete for that award, and we ended up having three present. The award went into one of them but a number of us invested in the other two as well. It was very successful and from that, some colleagues of mine figured out a way to do this year-round.

Irina: What is the structure of this fund?

Eric: It’s a very formal organization. Basically, it is for profit. But there’s not a lot of profit here. Most of the compensation of fund managers will come out of interest carry. There is a 10% interest carry on the fund.

We go out every year renewing the fund, and we raise $1.5 million from private investors, $25,000 per investor. My partner and I both put our $25,000 in and if we reach $1.5 million, the state of Oregon also invests $1.5 million. They do it through one of their groups that invests in venture funds with a commitment from the venture fund to invest here locally. Just like our investors, they’re looking for a return on investment. So, every year, we start out with a $3 million fund and we hope to invest each year in about five companies. We invest between and $400,000 and $750,000 in each of those companies.

Investors can put in additional money [to their $25,000], and a handful do, but it goes into a different class of investment units that does not have a vote. So, any one investor can have only one vote, but if she chooses to put more money in the fund, she can.

Irina: When does your year start?

Eric: Our year is a little staggered from the calendar year. Our meetings start in March. The first couple months of the year we are finishing our fundraising efforts. We just initiated fundraising for next year. About two-thirds of our investors re-up every year, and that leaves us with the goal of getting 20 new investors every year.

We have a large LLC that’s named for the year. So, this year we still have two investments to make from the 2010 Oregon Angel Fund, LLC. We are an investor driven organization. I have a vote like our other voting members, but it’s not my decision. I facilitate a due diligence process and a screening process that results in these investments.

Irina: What is your geographical focus?

Eric: Oregon and southwest Washington.

Irina: Where is your fund located?

Eric: We have investors from around the state. Most of our investors are within 30 miles of Portland, but we have some that come from a little farther away. As a matter of fact, we have a couple of investors from Florida. One is very active and he comes up for the meetings, and the other is passive; he looks at it as a passive investment. But most of our investors are from fairly close to Portland.

This segment is part 1 in the series : Seed Capital From Angel Investors: Eric Pozzo, Fund Manager, Oregon Angel Fund
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