- 632 West 6th Avenue
- Anchorage, Alaska 99501
- © 2012 Municipality of Anchorage
Frequently Asked Questions (FAQs)
1. What is the 49th State Angel Fund?
Funded by a federal allocation of $13.2 million from the State Small Business Credit Initiative (SSBCI), the 49th State Angel Fund was created when the Municipality Of Anchorage successfully applied for federal treasury’s Venture Capital program under SSBCI, which was designed to provide “investment capital to create and grow start-up and early-stage businesses.”
2. What does the 49th State Angel Fund do?
Provide investments to early-stage high-growth businesses showing significant economic potential. As of 2015, 49SAF only operates as a "fund of fund:" This means we work with the private sector in order to set up a local investment fund, which is run by private managers. Our equity interest in that fund then means we have an indirect equity interest in the operating company.
3. Does the 49th State Angel Fund offer grants?
Currently we only invest, and with each public dollar matched by a minimum of a private dollar in the investment, we invest largely for return on investment in tandem with goals of growing business in Anchorage. We believe the business model of angel investment is the best method of deploying early-stage capital for Anchorage startups. It keeps the bar high, ensuring that we invest in the most promising early stage businesses. Having an investment at stake and expecting a return also helps entrepreneur performance, making the firm stronger and more prepared when it enters the competitive marketplace.
4. What’s the mission of the 49th State Angel Fund?
It is to:
•Provide a source of capital to high-growth businesses. This promotes entrepreneurship and fosters innovation, creating jobs and economic benefit for Anchorage.
•Help strengthen the local angel investment network and attract additional venture capital to the city.
•Assist early-stage and disadvantaged businesses.
5. Who should I contact for help applying or with questions?
Many questions can be answered as our website continues developing. Please also carefully review this list of frequently asked questions. Otherwise, please contact us by e-mail with additional questions at firstname.lastname@example.org.
6. What is angel investment?
It’s a form of early stage equity or equity-like investment that typically involves an individual investor providing money to help get a business off the ground or through an initial phase. Seed money is invested into what the angel hopes are high-growth business startups. Because there is considerable risk involved in this type of investment, a higher than average return is expected. This is a multiple of the original investment, not a percentage.
7. How much risk is involved with angel investment?
It’s volatile, since newer businesses frequently fail. Recent studies showed that among angel-funded ventures, approximately:
• 30% fail completely;
• 50% return less than the initial investment;
(Source: Federal Reserve Bank, Atlanta)
• 7% of the ventures create 75% of the gains in a portfolio.
(Source: Kauffman Foundation)
This means that while making one individual angel investment is high-risk, building a portfolio is a best practice. It also means that successful, high-return ventures are a way for angel investors to counterbalance losses. This will be true of the 49th State Angel Fund as well: Failure will occur when investing at the seed stage in unproven startups.
8. How does the 49SAF invest?
Like an angel investor, the 49SAF provides money for high-growth start-up businesses. 49SAF taking a partnership interest in third-party angel or venture capital funds requires at least a 1:1 match and which demonstrate the ability to reach 10:1 over time.
9. Why the matching funds requirement?
1. The 1:1 match is a requirement per the conditions of the SSBCI allocation (i.e., the money that 49SAF received) from federal treasury.
2. It’s also a best practice to invest with others. This helps ensure that more than one party keep an eye on the venture to help ensure its success.
3. It’s tied to the overall performance metric of 49SAF: Per federal treasury, 49SAF’s goal is to leverage the funds it provides to businesses 10 times within five years.
10. But I have a small business, and want to apply for these funds--how can I do this?
Head over to our partner fund page and review the different investment funds which are available to you; reach out to the managers you feel are a best fit by e-mail. Alternatively, if you have more questions and need guidance, e-mail our office at email@example.com and we'll set up an appointment to talk and guide you.
11. How much money can my business receive through one of the 49th State Angel Fund's "partner funds?"
Most financing needs of an Alaska small business could be met if the partner fund investment managers find merit. A minimum floor (as a guide--not necessarily) would be $100,000.
12. Why is 49SAF doing indirect investment?
Indirect investment is the most efficient way to deploy early-stage capital into the Anchorage market. 49SAF did run a direct investment program for over two years; we found, however, that while we upheld best practices in venture capital, we also had a low rate providing direct financing to the market (note that venture-backed businesses are typically only succesful in securing any financing 1-5% of the time)
14. What’s the application process then? Who makes the decisions regarding investment?
If you have a small business and are seeking financing, head over to the partner fund page and reach out to an appropriate fund manager or e-mail us
If you are an angel investor, venture capitalist, other investment professional or economic developer, please e-mail us and we'll set up a meeting in order to better explain our five-step process for proposing a 49SAF partner fund. Proposals will be vetted by our five-step process on a rolling basis.
15. What is the full process for applying to 49SAF as a partner fund?
Applications and proposals are accepted on a rolling basis, and all will be reviewed. There is a five step process.
First, Apply: We recommend you first speak with 49SAF staff or an advisory committee member first prior to putting forth a proposal. Our goal is to have successful applications! Then 49SAF staff and consultants will take you through the best practices of putting a proposal together, which includes offering you a proposal guide, etc.
Second, Initial Review will occur by program staff and the Anchorage Economic Development Corporation. This review determines whether your investment fund will be in compliance with the program and whether the application passes a quality baseline;
Third, the Advisory Committee will review your proposal (if it passed initial review), and recommend it for financing. You will make an in-person presentation to the committee. Should they recommend you for financing, you will continue in the process.
Fourth, due diligence on your fund will occur, likely taking no less than 90 days. Note that it typically takes between 12 and 24 months to raise a VC or angel fund; thus a timeline will be established and a cutoff in order for our investments to proceed. ;
Applicants passing due diligence will then be put forward to the Mayor and Chief Financial Officer for funding and final approval. Both must approve the investment, along with the committee recommendation, for it to proceed.
16. What type of business is a strong applicant to receive this money, from one of the 49SAF partner funds?
Any high-growth business that shows significant economic potential for Anchorage is a good candidate. Some of the most popular sectors for angel investment are software, healthcare, industrial/energy, biotech, IT services and media (Source: Centure for Venture Research, PDF link). We should all recognize, however, Alaska is different from much of the US economically and that diversion from these sectors is likely.
17. What does high growth mean?
It means that from the initial investment provided by the angel fund, it’s likely your business can take on additional debt or equity financing of 10-to-1 in five years (10x leverage). For a more extensive explanation of this, please visit this link about the financing ratio.
18. Will these funds be available to businesses located outside the boundaries of the Municipality of Anchorage?
Exceptions do exist, but they are more rare and can only be granted if there's significant resulting economic benefit for Anchorage. 49SAF is intended to create jobs and promote economic development within Anchorage. That is part of our agreement with US Treasury to run this program; as a result, businesses will typically have their headquarters located here.
19. How much funding is available?
The 49th State Angel Fund has been awarded $13,168,350 by Federal Treasury. Of these funds, $481,960 has been dedicated toward financing program adminsitration. Thus $12,686,390 is for investment in small businesses, per statute.
20. Is the funding primarily debt or equity?
The 49SAF primarily makes its investments by achieving in return for its investment some type of equity interest. At times, debt financing may be used depending on the interests of the applicant, co-investors and the 49SAF.
21. Where do I apply for the 49th State Angel Fund?
Applications will be available online from May 14 to August 5 2012 at www.49saf.com. Two more application periods will occur in 2013. Please note that the application is in two parts for direct applicants (businesses), and in one part for indirect applicants (third party angel/venture capital funds). All questions must be fully answered and required documents posted. For assistance, contact the 49SAF program manager.
22. What do I have to do to apply?
- Requirements for direct investment include answering a series of questions, uploading a business plan (under 20 pages, please), financial plan and three years of financial forecasts.
- Requirements for indirect investment include answering a series of questions and uploading a cover letter
23. Are there fees involved?
Only one: The 49th State Angel Fund charges a $100 application fee.
24. What are the eligibility requirements?
Direct: Businesses or prospective businesses applying for 49th State Angel Fund investment must—
• Be physically located within the Municipality of Anchorage.
• Fully complete the online application (includes a $100 fee)
• Within their application, demonstrate a likelihood of growing their balance sheet by 10x leverage.
• Comply with the Investee Certification for Use of Proceeds
• Have fewer than 750 employees
• Not be delinquent in paying any nonprotested local, state or federal US taxes
• Agree to report back to 49SAF quarterly regarding key activities and financial activity. Also complete the Annual Reporting Requirements.
• Have all principal owners agree to a standard background check
• Have no principal owners who are convicted sex offenders.
• Understand that 49SAF investment means it’s likely that:
o The Municipality of Anchorage will take an ownership interest in your business.
o Additional information or control rights may be required, per the terms of the investment. All such details will be outlined in the term sheet of successful applicants.
Best fit businesses for 49th State Angel Fund investment are those which:
• Can demonstrate 10x leverage within five years,
• Create significant economic impact within Anchorage
(jobs being a key component)
• Scale quickly and communicate an exit strategy
Indirect: 3rd Party Funds 49SAF Partnership Must—
• Invest only in businesses which meet the above requirements
• Fully complete the online application.
• Be a partnership, limited partnership, corporation, limited liability company, limited liability partnership, trust, or estate.
• Be organized for the purpose of investing in a portfolio of nonpublicly traded that meet program objectives.
• Consist of at least three accredited or qualified investors as defined by Securities and Exchange Commission regulation D, rule 501.
• Be in compliance with the securities laws of this state
• Have no principal owners who are convicted sex offenders
25. What financial options or packages are available to businesses?
The 49SAF primarily offers equity funding (an investment in a business in return for an ownership interest), though some types of debt financing may be offered depending on the individual opportunity. While exceptions exist, direct investments typically fall into one of three categories:
• PreSeed: The earliest stages of a business (49SAF invests $30,000-$100,000)
• Seed: The second stage, often to gain initial customers or launch into the marketplace (49SAF invests $100,000-$500,000)
• Expansion: Businesses ready to expand at scale or which, through a capital injection, are capable of increased performance (49SAF invests $500,000 – $3,000,000)
Indirect investments in a fund of funds will not exceed $5 million, and will take the form of a partnership interest in the fund.
26. Are the funds available to any type of business?
49SAF investment is not permitted for purposes of passive real estate investment, in speculative activities which earn revenue from price fluctuation, gambling establishments, pyramid sales plans, a business that earns more than half its revenue from lending activities (with CDFI exceptions), public utilities and administration. Businesses involved in illegal activities of any kind are also ineligible.
27. My business isn’t likely to grow its balance sheet 10 times in five years. What should I do?
Not all businesses are the right fit for 49SAF: Our program was designed to provide a missing source of early-stage capital for businesses which often have difficulty finding more traditional means of funding. That said, many funding opportunities exist through Alaska banks, credit unions, individual equity investors as well as arms of government. Contact Alaska’s Small Business Development Center (http://aksbdc.org/) or a financial advisor for further guidance.
28. What criteria does 49SAF consider in making investments?
All 49SAF staff, advisory committee members, and municipal officials involved in making decisions regarding funding consider the seven following factors when evaluating any opportunity: business strategy, team, economic impact to Anchorage, market, product/services, project budget and finance plan.
29. What does the 49SAF require of successful applicants?
The 49SAF will expect quarterly unaudited financial and key activity reports from your business or fund to monitor its investment. A more extensive annual report is also required. Other terms (such as additional information, board or observation rights) may be required per the terms of an individual offer. Consider also that the 49SAF made an investment, and is seeking for an “exit” or a way to achieve its return.
30. If I qualify, when would I receive funding?
For the first investment round, applicants who pass the advisory committee and initially selected as strong candidates for funding will know on or before September 30, 2012. From then, a 90-day due diligence period will occur. If successful in passing due diligence and obtaining final approval, your business will receive investment by year end.
31. I'm the owner of a new restaurant or retail store. Can I apply?
Yes, but keep in mind these businesses are typically less likely to receive 49SAF financing, since they often do not exhibit the growth that the 49th State Angel Fund is targeting (10-to-1 leverage on the balance sheet within five years). In addition, these forms of businesses are often capable of securing more traditional means of financing which is currently available within Anchorage.
32. What is the State Small Business Credit Initiative (SSBCI)?
The SSBCI is a Federal program administered by the Department of the Treasury (Treasury), which was funded with $1.5 billion to strengthen state programs that support private financing to small businesses and small manufacturers. In conjunction with leveraged private financing, the SSBCI is expected to help spur up to $15 billion in lending to small businesses and manufacturers that are not getting the loans or investments they need to expand and create jobs. The SSBCI allows states, territories and eligible municipalities the opportunity to build upon or create successful models for state small business programs, including Capital Access Programs (CAPs), and Other Credit Support Programs (OCSPs) such as collateral support programs, loan participation programs, loan guarantee programs, and venture capital programs.
33. How long will the SSBCI operate?
The SSBCI is a one-time program of limited duration. The authorities and duties of the Secretary of Treasury to implement and administer the program terminate on September 27, 2017. The obligations of participating states and territories to perform and report on progress will expire as outlined in the terms of the Allocation Agreement. Allocation Agreements between the Treasury and the participating states, territories and municipalities will expire on March 31, 2017.
34. May states, territories, or eligible municipalities contract for the administration of their CAP or OCSP?
Yes. The Act allows a participating state to enter contracts in which its SSBCI-supported program (CAP or OCSP) is administered by another state or by an authorized agent of, or entity supervised by, the state, territory or municipality. This option allows states, territories or eligible municipalities that are launching new programs to obtain the advantages of using an experienced public or private administrator. Using an experienced administrator may facilitate the launch of a new program and save expenses.
35. Are funds transferred under SSBCI considered a grant or other type of federal assistance?
No. Section 3003(c)(5) of the Act specifically states that funds transferred to states, territories, and eligible municipalities under the SSBCI program are not considered federal assistance for the purposes of subtitle V of title 31 of the United States Code. Because SSBCI funds are not considered federal assistance or a grant, many federal assistance or federal grant reporting requirements do not apply.