DALLAS – Incubator STARTech, which manages seed and early-stage venture funds with a maximum deal size of $7 million, recently cultivated an informal co-investment relationship with the Dallas Angels, a group of 85 high-net-worth investors.
“The Dallas Angels fills a gap where they can contribute between $500,000 and $2 million to our investments,” said STARTech Vice President Rob Carruthers. “We provide the mentors and the organization, and they come in with complementary funding.”
The role of angel investors and incubators has broadened as early-stage venture funds grow in size, making it more difficult for venture firms to commit less than $5 million to individual deals.
Since forming in 1997, STARTech has incubated eight companies in the telecommunications, software and information technology industries. The incubator, a $4 million seed fund and The STARTech Venture Capital Network, which invests between $2 million and $7 million throughout the life of a company, are all funded by the same consortium of 11 venture capital firms.
While the arrangement with the Dallas Angels is not binding, both parties want to benefit from increased deal flow and due diligence.
“STARTech is more formulaic, with a staffed organization in place with mentors and money,” said intellectual property attorney Jerry Mills, who leads the angel network. “But because they are so procedurally oriented, they can’t take care of everyone who comes and needs mentoring.”
Out of the 40 business plans the Dallas Angels receive each month, approximately three are viable investment opportunities. Individual members have the opportunity to combine investments of between $500,000 and $2 million per deal.
“We all see slightly different deal flow,” Mills said. “The arrangement allows us to get into more high-tech investments in the Texas area.”