Turning a good idea into a profitable venture takes a lot of hard work, knowledge of sound business practices and a viable business plan.
And, in almost every case, it takes money. A new investment fund is working to overcome that last barrier by matching local investors, and their capital, with budding entrepreneurs.
Tom Evans, manager of Encompass Financial Services Inc., opened Private Partners Opportunity Fund LLC last month to recruit and match local investors with local entrepreneurs.
The new fund, which still is in the capitalization phase, will act as an “angel fund,” whereby individual or corporate investors put up the capital for a start-up business with an expectation of a profitable return.
Evans said the fund will help fill a need for investment capital in local small business ventures, and also will offer sound returns for investors.
“We think of ourselves as being in an agriculture and an industry area, but there is a tremendous potential for entrepreneurs in this area,” Evans said. “In this area, people are open to being self-employed, to working hard and owning their own business ... people out here just really have that entrepreneurial mindset.”
What has been lacking, Evans said, is not entrepreneurial spirit or work ethic, but rather the capital needed to get good business ideas off the ground.
“We find in the entrepreneur business if something is intellectual or conceptual, it often is hard to find capital,” Evans said. “Someone starting a business will often start by going to their local bank, to friends and family. After they’ve exhausted those resources, they reach a point where they need extra capital to continue with their venture to make it to the next level.”
And, Evans said, entrepreneurs with little to collateralize beyond a good business plan often have trouble obtaining funding from banks.
“If you’ve got a venture that your local bank can fund, that’s awesome, that should be your first step,” Evans said. “But, a lot of times, what we’re funding are going to be business ventures that wouldn’t fit with traditional lending.”
Venture capital funds have sprung up in metropolitan centers across the country, but remain scarce in Oklahoma markets outside of Oklahoma City and Tulsa. According to the Oklahoma Capital Investment Board, there are 24 venture capital funds in Oklahoma, aside from Private Partners Opportunity Fund. Seven of those funds are run by state agencies and the remainder, with the exception of one fund in Durant, are located in the Oklahoma City and Tulsa metropolitan areas.
And, Evans said, good business ideas follow the availability of investment capital.
“I found we were missing out on investment opportunities I was seeing in other areas,” he said. “Deals were leaving here and going to Tulsa and Oklahoma City because we didn’t have a funding mechanism here, and after a while you just think, ‘Why not here?’ People out here just think outside the box, and it struck me that someone needed to put the platform in place so local investors could invest in local growth.”
Evans hopes Private Partners Opportunity Fund will serve as an engine to capitalize local small business growth and to provide profitable returns for investors.
Investors buy into the fund with a minimum investment of $50,000, and are matched with entrepreneurs who have submitted business plans to the fund. Individual business plans are vetted to evaluate viability before being presented to investors.
“You hear people say all the time, ‘Why doesn’t someone do X?’ or ‘It would be great if someone did Y,’ and one of those ideas might be the genesis of the next big thing,” Evans said. “With the experience of our investor pool and our due diligence and management, we can identify that idea that has the best potential for success and profit.”
Evans said all parties involved will be committed to the entrepreneurs’ success because the fund and its investors will “have skin in the game.”
“We want to help our entrepreneurs succeed, and if we can lend our talents, our expertise, our encouragement and help them alleviate some of the major pitfalls, that can go a long way to them succeeding. And, of course, if they succeed, we succeed and the investors succeed.”
Cara Jane Carson, deal flow manager for Private Partners Opportunity Fund, said the fund’s “only limit on investment opportunities is our imagination.”
“Diversity is going to be the key,” Carson said. “We’re not looking for a specific type of business, but rather a diverse background of businesses to spread the risk in the fund.”
Entrepreneurs seeking funding will submit their information to the fund through www.gust.com, an industry software platform that allows investors to review business plans before putting up their money.
“An entrepreneur or an existing business wanting to expand can apply online with a business plan, financial information, a video pitch, and all of that information really gives us the data we need to do our due diligence and to have transparency for the investors,” Carson said.
She said the ability to match capital investment with sound business plans will add up to positive returns not only for investors and entrepreneurs, but also for the community as a whole.
“If the entrepreneurs win, our investors win, we win and the whole region wins ... economic development is really the byproduct of all of this,” Carson said.
Brent Kisling, executive director of Enid Regional Development Alliance, said the new angel fund will fill a void in funding opportunities for local entrepreneurs.
“There is a significant need for capital investment in this area of the country,” Kisling said. “Most of the venture capital and angel funds are focused on the east and west coasts, and Private Partners Opportunity Fund is a way to get more capital into some of our new and growing companies in this area. It’s fairly easy here to get funding for a brick-and-mortar business or things you can collateralize, but the ability to fund a venture from the table top to a full scale business is what we haven’t had a lot of in the past.”
He said the ability to provide capital investment for start-up and expanding businesses will pay dividends for the local economy.
“Most of our major employers are businesses that started right here in town,” Kisling said. “Imagine what could happen if we could match even more capital with that entrepreneurial spirit that we have here.”
Kisling said having a local angel fund will help keep companies, their jobs and their money here in the local economy.
“One of our goals in economic development is to create wealth in the area and to keep that wealth here as long as possible,” Kisling said. “With this fund, local investors will be able to invest in local companies, and they will be able to invest with an expectation for a return on their investment. It keeps those investors’ money and their profits here locally, and that has a tremendous social benefit for the community.”
Bert Mackie, vice chairman of Security National Bank, was one of the first to invest his money in Private Partners Opportunity Fund, and he expects his investment to have good returns, both for himself and the community.
“When you put your money into a small business, there is more risk than in the average bond or stock, but I believe in the ability to profit from local growth and local entrepreneurs, and this is a good way to do that,” Mackie said. “I think the potential for entrepreneurial growth in this area is very, very strong.”
Mackie said he does not expect the angel fund to compete with local banks, because the fund will cater to businesses that may not qualify for traditional bank loans.
“Sometimes it’s very difficult for a start-up business or a very small business to qualify for a bank loan, and the reality is there are a lot of good ideas and good businesses out there that have a hard time getting a loan,” Mackie said. “We’ve needed a fund like this for a long time, and this will go a long way in helping local businesses get started.”
He said providing investment capital for local entrepreneurs is essential to the community’s future success.
“What excites me about this fund is there will be more locally grown businesses, and they will usually dig their roots in deep and stay here if we give them adequate finances,” Mackie said. “Enid’s in good shape right now, and this will help put the icing on the cake as far as helping some of our bright people build their good ideas into successful businesses.”
Jim Strate, superintendent and CEO of Autry Technology Center, said the angel fund will help build good ideas into good businesses.
Autry Technology Center’s Center for Business Development offers classes and seminars on small business planning, development and expansion.
“One of the main reasons for small business failure is they go into it undercapitalized,” Strate said. “We get a lot of people in here with great ideas and great business plans, but start-up capital is critical and banks aren’t always excited about funding a new business because it can be risky.”
He said the angel fund “will be a big boost for entrepreneurs in our area.”
“I’m excited about it,” Strate said. “I think the potential for growth is tremendous, and with all the economic development going on in Enid and northwest Oklahoma, the timing couldn’t be better.”
For more information on Private Partners Opportunity Fund, contact Evans or Carson at (580) 242-3838.