As originally asked by William (Bill) Hulbig.

William (Bill) Hulbig
50+ Years; Serial Entrepreneur, Founder, CEO and Former Super Angel Creating Quality Deal Flow
JOe, Paul and Jerett, thanks for your terrific comments. I’ve got this post on several other groups as well and private replies have been steady and chock full of great questions and ideas so here’s the updated 2013 model as recommended.

‘Private-Sector Funding Clubs would have between 20-25 members and $1MM – $10MM of pooled capital on-hand. Clubs offer individual investors a lower risk than angel groups or going it alone by building balanced private sector portfolios that fits the unique criteria of the membership.

Funding options could include lending, leasing, mortgages, credit lines, credit insurance, purchase order advances, project financing, AR loans, credit lines, factoring, hard money, quasi-equity financing, Revenue Participation Agreements (RPA), goodwill, hybrids, mezzanine, unregulated investments, asset purchases, angel and small business M&A’.

Note that angel was second to last! More thoughts guys?

Jerett Creed
CEO at Oligo Medic
Interesting hybrid model concept. Could attract higher quality deal flow as well as allow some angels to passively take equity stakes in projects they otherwise wouldn’t touch due to lack of specific knowledge or experience but may otherwise like what they hear. I think it’s success would require a diverse group of angels to make sense but could engender higher member participation which next to quality deal flow seems most important. Of course depending on the size of the pool versus the number of members, it may get difficult to not have an oversight or screening committee. To me it has to come down to attracting higher deal flow and getting members excited and engaged though.

William (Bill) Hulbig
50+ Years; Serial Entrepreneur, Founder, CEO and Former Super Angel Creating Quality Deal Flow
How about 100 clubs at $10 million each?

Paul Zalesky
Medical Specialty Consultant
This sounds like a solid idea. My two cents about charter: there’s a huge gap in financing for early stage / emerging device companies. The VC’s have become incredibly selective and no longer like the risk of clinical studies not completed before they invest. $ 500 K investments in early stage companies can often enable at least FIM or feasibility studies that then attracts the strategics.

William (Bill) Hulbig
50+ Years; Serial Entrepreneur, Founder, CEO and Former Super Angel Creating Quality Deal Flow
Bruce, great comments. In my old model, generated pre-crash, was 20 ‘investors’ put in $500k each to equal the $10 million. This provided sufficient cash to park with a wealth manager, get a decent return, 20 members was about the right number, and they’d all be serious player with ‘good mix of backgrounds’ to present and champion deals ‘they’ understood.

As for ‘$10M readily at hand would be too tempting for the group to put to work’, can’t happen as group has a Charter that sets limits/deal and the %members it takes to authorize. The recommended maximum for a single deal was $500k.

Today, I’d concentrate on Revenue Participation Agreements (RPAs) / Quasi-equity Financing for companies with revenue.

Bruce Gibbins
Owner at Bruce Gibbins Consulting
I am familiar with two organizations that operate in the space about half way between your Club and Group concept. Both organizations require members to make annual deposits into the kitty to generate sums somewhat less than your $10M figure. Start-up’s campaign for the opportunity to present to the membership but can only do so if their initial presentation is picked up by a champion. After a presentation members of the membership can invest individually but also the champion can be instructed to dive deeper and present to the investment committee for an investment out of the kitty. Both organizations have had some exits and some failures. Just like VC’s. In my opinion, $10M readily at hand would be too tempting for the group to put to work. If we are talking about true Angels then it is probably better to have a large membership (good mix of backgrounds) and a smaller pool of organization risk money available. That would still leave ope the opportunity for individuals to do their own championing yet let the organizational structure be more discriminatory in funding decisions.

William (Bill) Hulbig
50+ Years; Serial Entrepreneur, Founder, CEO and Former Super Angel Creating Quality Deal Flow
Joe and Paul, I presented the question in an overly broad sense to get this discussion going with the word ‘Club’ being used to define a group with funds on deposit that votes where the pooled money is invested within established rules as opposed to a traditional angel groups that are composed of individuals investing and making decision independently.

The $10 million figure is the minimum amount that supports the club model.

Paul Zalesky
Medical Specialty Consultant
Same question. How does a club differ from a group?

Joe Hage
🔥 Find me at MedicalDevicesGroup.net 🔥
Tell us more, Bill. What exactly does this mean?