Although real estate often comes to mind for investors considering Florida, they are discovering a new source of potential profit: the state's abundance of startup companies.

While the region has a number of angel investors who give the manna of money to early-stage companies, New World Angels is the first structured investment group. It has doubled to 32 members since the end of 2006.

The group chooses a select number of Florida companies to get off the ground with funding, then seeks an exit strategy that could provide large returns. This typically comes from an acquisition or an IPO, which is how New World Angels would profit from its investment in Sunrise-based medical device company Bioheart.

Of course, they also accept more risk. Sometimes, companies go out of business or never become valuable. That hasn't happened yet to New World Angels, which was formed in 2004 and has made five investments.

There's plenty of opportunity for it in Florida, which had 157,310 domestic profit businesses and 130,251 limited liability corporations created in 2006, according to the state Division of Corporations. That leads to hundreds of pitches a year.

New World Angels President Rhys Williams said the best opportunities in Florida are with companies in business process software, e-commerce, medical devices and consumer goods.

The board of New World Angels evaluates three main components each company:

§ The experience of the management. "You're betting the jockey, not the horse," Williams said.

§ An extremely well thought out business plan with an emphasis on how to compete. It's important that entrepreneurs target a niche and do it well, rather than try to tackle a whole industry, Williams said.

§ The quality of the technology or product. You should have people with expertise in that area in your investment group to evaluate this, he said.

Advantage: Assistance

One advantage of doing this in a group like New World Angels - as opposed to individually - is the back-office operation being handled by the Enterprise Development Corp. (EDC). It houses its office, fields its calls and receives the applications from companies.

"Our mission is to assist early-stage science and technology companies, so anything we can do to link funding to companies is a good thing," EDC Executive Director Jane Teague said.

Each New World Angel member pays $1,000 annually for the EDC's services. Williams isn't compensated, but he contributes to the investments with the other members.

Membership is only open to accredited investors - those with a net worth of more than $1 million and annual income of more than $200,000.

Starting this year, New World Angels has committed to making at least three deals a year. Each member must invest a minimum of $10,000 into each deal for a total of $30,000 invested annually. A new corporation is formed for each investment and the members are given an ownership stake in proportion to their contribution.

The group screens 20 to 40 potential investments a month and selects two companies to make presentations at its monthly meetings. The 10-member investment committee must approve a deal by majority decision.

Because the process with New World Angels is so intense, more venture capital often follows when it chooses a company, Williams said. For instance, it committed $320,000 to Deerfield Beach-based mobile device content software company mVisible this year and the funding round reached $2.7 million.

"Angel groups perform an important gatekeeping function for other investors," Williams said.

THE CHALLENGES:

§ Selecting a good early-stage company to invest in.

§ Facilitating a large enough investment to allow the company to succeed.

§ Companies seeking capital are often bombarded with pitches for professional services by potential investors.

LESSONS LEARNED:

§ Get industry experts to join the company and put their dollars into the deal.

§ Get enough influential members in your group and other venture capital firms are sure to take notice.

§ Make a policy against your members pitching their professional services to companies seeking funds.

NEW WORLD ANGELS

President: Rhys Williams
Web site: www.newworldangels.com
Address: 3701 FAU Blvd., Suite 210, Boca Raton 33431
Phone: (561) 542-1380
E-mail: rhyswilliams@newworldangels.com

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