RENO, Nev. — Northern Nevada is at a watershed moment for angel and startup investing.
Homegrown tech companies such as Clickbio, NevadaNano, Filament and Breadware, along with larger newcomers such as New Deantronics, Figure and Elemental LED, are transforming the entrepreneurial development scene in Northern Nevada.
And of course, there's Blockchains LLC and its sweeping plans to create a blockchain-based smart city at Innovation Park at Tahoe Reno Industrial Center, which could bring about rapid advances in the application of blockchain technology to myriad businesses.
Something's definitely happening, says Gene Wong, managing general partner of the Reno Seed Fund. Wong has been involved with early-stage companies and angel investing for more than four decades. In the next five or 10 years, Wong says, the entrepreneurial ecosystem of Northern Nevada will see unprecedented advances.
Case in point: Medical device maker New Deantronics is investing $40 million to build a new research, development and manufacturing facility at Spanish Springs Business Center that will include a business incubator for startups in the medical device space. While these types of incubators are commonplace in Silicon Valley and New England, Wong says, they are integral pieces of creating a larger network of local angel investors in Northern Nevada.
“You need to bring in established entrepreneurial companies that know how to create an ecosystem,” Wong says. “There are no local venture capitalists in Southern or Northern Nevada, and that's going to change. Reno is getting an influx of entrepreneurs who are moving here because they've been successful elsewhere, and they identify that there is a local ecosystem here to do it again.”
Wong also is a member of Sierra Angels, but most of their activity is in California, he says. The Reno Seed Fund, meanwhile, is composed of nearly 40 limited investment partners. It was born of a federal Office of Innovation and Entrepreneurship grant designed to spur the seed capital ecosystem in Northern Nevada.
The Economic Development Authority of Western Nevada received $300,000 over three years to help create the fund and its supporting programming, says Doug Erwin, vice president of entrepreneurial development at EDAWN. All monies in the Reno Seed Fund, however, are contributed by private investors.
Reno Seed Fund serves as a bellwether for homegrown entrepreneurial growth, Wong says. Over the next 10 years, much of the growth that's not coming from Silicon Valley or the East Coast will be centered in mid-tier cities such as Reno and Boise, he says.
Seed and angel funding networks are crucial to local entrepreneurial development, Wong adds, because they help companies bridge the “Valley of Death” between initial friends and family funding to the much larger investments made by institutional venture capitalists.
“If a young company cannot bridge the gap between $50,000 and $5 million, they go out of business,” Wong says.
Angels normally invest between $500,000 and $1 million, funding that can help companies raise an additional round of angel funding before they reach the VC stage. Seed investments in the U.S. run around $20 billion annually compared to $60 billion for venture cap funding, Wong says.
Reno Seed Fund's investments in Clickbio, Breadware and BlocWatch are all examples of the investment conversion that's underway in Northern Nevada, and over the next five years there should be many more, Wong says.
EDAWN's Erwin says the creation of a deeper seed/angel ecosystem is important to land more early-stage growth companies to Northern Nevada.
“We have to put in place more avenues for seed capital,” he says. “With most seed-stage funding, so much of what (investors) look for is in the founders and in the teams, and that kind of has to be in your backyard. The people doing seed and angel funding really have to know the company intimately, and that's why that portion (of funding) is so critical that it comes from your community.
“Obviously we want to see more venture capital, but that capital looks at later-stage deals that can be valued much more effectively than seed-stage deals. The asset class of seed capital is very much community-driven funding.”
The development of the local angel ecosystem requires a bit of education for both investors and entrepreneurs, Erwin adds. New angels and seed investors are learning how to navigate early-stage deals, while entrepreneurs are learning how to obtain and use capital. The result is an increase of deal flow the likes of which the region has never before seen, Erwin says.
“Every entrepreneur needs capital to grow,” he says. “The creation (of the Reno Seed Fund) has boosted awareness and availability and really brought a lot of these deals out of the shadows. There is more activity in the market.
“In a healthy ecosystem you are going to have lots of diverse sources of capital and a lot of deal flow. Even though this is a regional fund, it really can only focus on certain areas. But we are bringing that together and there's a real active marketplace and a lot of activity in that space.”
The hope is that Reno Seed Fund is the first of many such funds that make investments in companies that will define the future of Reno, Erwin says.
Another defining moment in the regional angel investing ecosystem, Erwin adds, was the Reno Venture Conference, which was held over two days in mid-May. The inaugural event at the Nevada Museum of Art included angel education workshops, pitches from pre-seed and seed businesses and investments in a select group of startups.
“We have a long way to go, but the Reno Venture Conference was truly a watershed moment for this community,” Erwin says.
Rob Sabo is a Reno-based freelance writer and a former reporter for the Northern Nevada Business View.
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