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OPINION: Bringing Alaska up to speed in business investment

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The Alaska Angel Conference will hold its fourth annual Angel Conference event on May 18, after three months of preparation and training of angel investors. Surprisingly, the impact and role of angel investors in Alaska, as well as the impact of our early-stage venture ecosystem, are not well known around Alaska. More surprising to me was to study the impact of these investors and how vital they are to a healthy economic development ecosystem. While publicly funded new venture programs are typically encouraging to new founders and sometimes the focus of political exuberance, without the crucible of early-stage private investors working with founders, there can be a gap in the needed mentorship and advice, including the tough love that an idea is great, but the business isn’t yet investable.

That feedback is essential to the pivots and improvements that create a pipeline of scalable and successful startups as well as efficient use of capital. Alaska needs its angel investors as much as it needs its startup founders and their new ventures, and dare I suggest, needs both even more now as we look down the emptying barrel of our legacy resource development economy. Advocates can say otherwise, but its hard to image any scenario where there is some future boom in the legacy economy we’ve all enjoyed and depended on, that fuels the aspirations and economy of our next generation.

This week, I met with a fellow ecosystem builders in Calgary, who shared their story of economic transformation and similar wakeup call after losing 15% of their jobs due to restructuring, efficiencies and maturing of their oil, gas and mining industries. The pivotal change in their community happened with the realization that “Calgary is not what you think it is.” That was the reaction from a deep look at what was really happening in their community, who they were and what opportunities existed in the future. This comment resonated with me as I reflected on the many conversations I’ve had in Alaska about our innovation ecosystem and startup community. As I’ve asked the question, ‘What’s next, Alaska?” it is become clear that keeping our pipeline 25% full is not an answer our next generation needs and it doesn’t reflect even what we are today.

It’s not unusual for people to assume the work of our established industries and a few high-profile projects are the engine our future economy, but data from the UAA Center for Economic Development’s study on the impact of entrepreneurship turned up results consistent with national data. According to the 2018 study, “State of Entrepreneurship”:

“Over the last decade, startups in Alaska consistently added 4,000 to 6,000 jobs to the economy each year. Firms that are aged five years or younger accounted for 89% of Alaska’s net employment growth in the private sector.”

The Angel Conference is one of the ways we help these startups. It is modeled after a national approach for bringing together qualified individuals, based on income or net worth, with various levels of experience who want to learn more about making direct investments in new ventures. Generally, people do not even know they are qualified — $1 million net worth excluding a home, or more than $200,000 individual or $300,000 joint annual income. The Alaska program has a lower more accessible threshold for participation following the Alaska intrastate crowdfunding regulations.

Participants each invest about $5,000 and spend three months learning about early-stage investing, meet new venture founders, watch and evaluate their pitches; and learn to evaluate the investment opportunities, forms of investment, and due diligence. At the end of the process, wrapping up now in Alaska for the fourth time, the main event is held to select which startup company and founder will receive the group’s single check of about $100,000. In fact, the real magic is in the mentoring and connections that are made and other side investments that that can double the total impact of the program, as well as the future increased capacity and participation of Alaskans in early stage venture creation in Alaska.

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It would be no surprise to many that Alaska ranks nearly last in the country in most measures of early-stage investing. While we have one of the highest rates of residents who quality to participate in early state angel investing, along with immense private wealth saved up, we have the country’s lowest rate of participation. It may be a surprise to many that investing in your community by supporting new ventures has many of the the same or better tax benefits as other community philanthropic investments with preferential tax laws for qualified small-business investments, losses and gains. I don’t want to shortchange your investment in the arts or community social programs, but entrepreneurship is just another form of art in a different medium, and creating jobs and opportunity for our next generation has many of the same social benefits.

When I last surveyed the angels before the pandemic, 65% of them were making investments in Alaska and almost 50% of them were also making investments outside of Alaska — typically the Seattle, Portland and San Diego startup areas. Most investments were less than $75,000, but others ranged from $225,000 to $1.2 million. These numbers reflect the type of activity in other active angel communities in the country.

The Alaska Angel Network meets monthly to bring together Alaska’s early-stage investment fund managers and independent SEC criteria accredited investors to share news and potential investment opportunities. Thanks to the outgoing President Gary Klopfer and Secretary Randy Moore, the group has been supporting many of the communities’ efforts to grow and accelerate the impact of new ventures in Alaska.

Thanks to volunteers like Gary, Randy and many others in the community, existing statewide angel investors and, with support from the Municipality of Anchorage’s 49th State Angel Fund, the Angel Conference will again meet to award about $100,000. The event will be open to the public on the May 18 with information and resources at https://akangelconference.com.

H. “Ky” Holland is a founding member of Alaska Version 3 engaging Alaskans in the creation of our “Next Alaska” economy; and a partner of Alyeska Venture Management that created Alaska’s first seed fund for startup ventures, the Alaska Accelerator Fund.

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