Recent investments from the 701 angel fund, a statewide angel fund launched last year in North Dakota, show they are placing bets on biotechnoloy and precision agriculture.
The fund, launched out of the University of North Dakota Center for Innovation Foundation, hopes to raise $3-$5 million. They have invested around $165,000 in four companies thus far: StemoniX, AgriSync, B-Mo Gen, and as of this week, Fargo-based company c2sensor. Each company was chosen by the 701 angel fund committee: general partner Greg Syrup and partners James Buus, James Burgum, Bruce Gjovig, and Kevin Moug.
“We like companies in our neck of the woods,” Syrup said. “They [portfolio companies] won’t be too far outside of the region.”
The fund has specified that they are looking to invest in unmanned aerial system technologies, healthcare and medical devices, business to business software, cyber and data security, ag solutions, biotechnology and manufacturing. While they do focus on regional companies, they are looking nationally as well, Syrup said.
The appeal of life science
StemoniX was 701 angel fund’s first investment, in January of this year. They are a Minneapolis-based company that prints organ cells from skin cells in a way that makes them biologically accurate, according to the website. Yes, print. Printing cells.
“Our technology includes the ability to create a variety of organ cells that can mimic diseases to help accelerate the discovery of new cures in the areas of heart disease, dementia and neuromuscular diseases,” they write on the website.
The angel investors invested again in the biomedical field in May, with B-Mo Gen Biotechnologies Inc., a startup launched out of the University of Minnesota that focuses on gene editing. It’s a young startup, launched in February and led by CEO Jeff Liter and U Medical School researchers Branden Moriarity, Ph.D., and David Largaespada, Ph.D.
These scientists are developing a “processor” for gene editing, with a goal of enabling more complex genome engineering techniques. 701 angel fund is one of a few investors jumping at B-Mo Gen; the company also recently received a major seed investment from Bio-Techne Corporation, with a partial match from the University of $350,000.
The work StemoniX and B-Mo Gen are doing, and the realm of “life science” in general, is a hot bed for investors, Syrup said.
“Life science investing, those are some of the better deals in terms of return and opportunity,” he said, stating that at a recent conference around investing, many investors said that life science companies “tend to have shorter return periods, high return, and higher growth.”
Ag tech and drones on the horizon
More recently, the angels dabbled in agriculture technology as well. In June they invested in AgriSync, a virtual help desk platform that allows farmers and their service providers to troubleshoot and solve problems in real-time. Based in Waukee, Iowa, the company is run by a former Microsoft techie and a farm kid turned business solutions provider.
As of this week, the fund will add a fourth company to their portfolio, one that also falls into the ag tech sector. c2sensor was launched out of North Dakota State University and is currently headquartered in the Research and Technology Park. Lead by Chad Ulven and Corey Kratcha, the company is centered around their product: a biodegradable sensor that farmers can use to read real-time data from the soil.
Down the road, Syrup said they are looking to put money towards more software and unmanned aircraft systems. In fact, they are currently talking with Dronesmith, a Las Vegas company with ties to Fargo that Syrup met at Drone Focus Conference 2016.
Right now, however, they’re jumping on regional companies with rapid growth.
“We’re looking to make impact with our dollars in a short amount of time,” Syrup said.
Angel investing in North Dakota
The 701 angel fund is the most active angel fund in North Dakota. The nine previous angel funds organized in 2006 to 2008 resulted in $27 million investment in 41 companies, according to the Center for Innovation. However, “none of them have that much money left,” Syrup said.
As resources dwindled, there was a push to reactivate a new fund. This is because the angel investor plays an important role in a startup community, Syrup said; particularly because they bring more than money to the table.
“Angel investors get heavily involved in the venture they invest in,” he said. “It provides capital, obviously important, but the additional value comes from the knowledge of the industry expertise they can provide…A lot of these entrepreneurs need accountability and help with execution.”
Burgeoning startups may also seek capital from venture capitalists (VCs), such as with Fargo-based venture capital firm Arthur Ventures. There is a difference, however, between a venture capitalist and an angel investor; whereas a venture capital firm uses other people’s money to buy shares in a private company, an angel investor is an individual investing their own personal funds into a potentially rewarding business opportunity.
Recently, there has been criticism of North Dakota’s angel fund policy that allowed investors to invest in out-of-state companies while still utilizing tax breaks and subsidies. A rising critique was that, if tax payer dollars are being used to sustain these funds, then those investments should go towards North Dakota companies.
Syrup, however, said that often the type of companies people like the angel investors are looking to invest in simply don’t exist in North Dakota. Particularly in the field of biotechnology, he said.
“There’s not that type of ecosystem in North Dakota for medical technology,” he said. “My job as an angel fund manager is to find high growth opportunities for my investors, so they maintain an interest in angel investing.”
While those high growth opportunities can sometimes be found in North Dakota, it is not enough to be sustainable for investors, Syrup said; without looking elsewhere, investment opportunities in North Dakota would fizzle.
Instead, by building a network of regional investments, Syrup believes the overall investment in the region will improve.
“If you can create an ecosystem of regional entrepreneurial investments, you can facilitate continued investment,” he said.
Feature photo: (left to right) Greg Syrup, managing director and general partner; Jacob Greenwood, business development associate and director of marketing; and Kevin Lunke, managing associate and entrepreneur coach.