Startup communities require a specific set of resources to grow. For example, they need infrastructure, such as Incubators and accelerators, to provide critical feedback loops and improve their product and business plans.
While there are several regional debt financing options in Eastern Kentucky (and that number is growing), we need to increase access to capital for non-bankable companies.
With a strong local investor community, startups can access the cash they need to launch their businesses.
At the recent 2022 SOAR Summit, we welcomed more founders and small business owners than ever. They attended the event to share their stories, gain access to resources, and connect with potential investors. We also saw 23-year-old Dakota Hoskins win the 2022 Startup Appalachia Pitch Competition with his business idea, Safari Solutions.
We need to take deliberate steps to harness this momentum, especially if we want to see more early-stage founders and youth entrepreneurs take a chance on small business ownership.
It’s up to us to help more EKY businesses launch and thrive — which is why we must form our own local angel fund to complete the startup ecosystem.
What is an angel fund?
An angel fund is a group of investors that support startups and small businesses with capital investments.
What distinguishes an angel fund from a venture capitalist fund (VCs)? They’re both investors who pool their funds together (or manage other people’s funds). These groups collaborate on which businesses to invest in and share the overall risks and benefits.
Angels and VCs provide expertise to the businesses they invest in and typically have specific industries/business category focus areas.
Their key differences lie with where and how they’re investing funds. VCs typically look for businesses with high to exponential growth potential. Their capital investments can reach tens to hundreds of millions of dollars, usually in mature startup markets.
Angel investors are different. They typically work with early-stage companies with more modest ambitions. They have more modest expectations of the size of their investment returns. As a result, they often demand less from the company owners than VCs in terms of equity share and tradeoffs.
Angels could be a company’s first investor, otherwise known as seed funding. They’ll often provide mentorship and guidance to first-time entrepreneurs.
Angel investors also often have a mission behind their work. Many are committed to supporting economic development in their region of focus.
Angel funds in Appalachia
Appalachia already has several angel investment groups. A few of them exclusively serve Kentucky:
- Tri-State Angel Investment Group (KY, WV, OH)
- Appalachian Investors Alliance (MS, AL, TN, NC, KY, VA, WV, OH, MD, PA, NY)
- Keyhorse Capital (KY)
- Kentucky Angels (KY)
- Bluegrass Angels (KY)
These groups all do great work. SOAR has partnered with several of them to offer guidance and resources to local entrepreneurs.
Since the startup community in our corner of the state is still in its earlier stages, we’re competing against startups in more mature regions, such as Louisville, Lexington, and Frankfort. These realities make it harder for our local founders to win funds.
We want to change this. Our goal is to help move capital from the sidelines and directly into growing companies in Eastern Kentucky.
Why we need an angel investment group based in Eastern Kentucky
What’s the key difference between an Appalachian angel fund and an EKY angel fund?
The success of Eastern Kentucky’s startup economy will be their bottom line.
Locally-based angel investors play 2 critical roles in enabling regions like ours to produce successful startups and small businesses.
- They provide much-needed seed funding, mentorship, and support to new founders.
- They make material investments in the region’s economy, which creates a virtuous cycle — spurring growth and opportunity for the next generation of founders.
A thriving local entrepreneurship community goes hand-in-hand with a robust local investment community. SOAR has created resources for entrepreneurs and strives to help more startups grow in our region. And now, we’re looking to complete our local startup ecosystem by forming an angel fund invested in EKY’s long-term success.
Creating Eastern Kentucky’s first angel fund
We must bring the right partners together to create Eastern Kentucky’s first angel fund. Each will need to demonstrate experience with entrepreneurship, investing, community outreach, or some combination of these competencies.
The initial partners involved with the project include:
- The Appalachian Investors Alliance (AIA) facilitates a network of 14 angel funds from Mississippi to southern New York. Two of these funds are located in Kentucky, so they have some local expertise on the ground already. The AIA provides the back office administrative support required to operate angel funds, which makes them an ideal partner to help Eastern Kentucky form one effectively from the ground floor.
- The Foundation for Appalachian Kentucky leverages crowdsourced philanthropy to support critical areas of need in Southeastern Kentucky. With their Appalachian Impact Fund, the foundation makes investments in social enterprises, nonprofits, and community projects.
- Invest 606 facilitates accelerator programs and pitch fest events for Eastern Kentucky entrepreneurs. The Foundation for Appalachian Kentucky is one of the organization’s founding partners.
- KY Innovation has helped over 3,000 startups, is responsible for 12,624 jobs created, and has seen over $1.5 billion in follow-on capital on $34 million in investment throughout the state.
- SOAR Innovation supports entrepreneurs of all ages and small businesses of all sizes throughout the ARC’s 54 counties in Kentucky. The team provides resources to help with launching, growing, and improving small businesses, from free downloadable guides to 6 complimentary direct services, and more.
Together, these partners bring the capacity, willpower, and mission alignment to launch an angel fund that supports Eastern Kentucky entrepreneurs. Do you want to get involved as a founding partner? Let us know.
Call for angel investors
Are you interested in becoming an angel investor? The benefits include:
- Supporting the local entrepreneurship community first-hand.
- Empowering under-resourced communities through economic development.
- Giving Eastern Kentucky a fighting chance to reclaim our future by investing in our best and brightest minds.
As we prepare to develop and launch Eastern Kentucky’s first angel fund, we want to connect with prospective fund members. If you’re interested in receiving more information and sharing your perspective to help shape this initiative, please contact SOAR Innovation.