Centennial Investors funding its first startup: Equinosis

Building Columbia’s early-stage investment infrastructure has been a top priority of the local business community since the 1980s. Today, as mid-Missouri moves toward a technology-led economic development strategy, the capital and formalized financial structures may be finally coming together.

Members of Centennial Investors are preparing to fund their first company since the Columbia Chamber of Commerce formed the group in 2005. As a result, a University of Missouri researcher will be able to bring his high-technology product to the market.

Business leaders point out that investing in early-stage companies is different from most other forms of investing because of the inherent risks — essentially, betting on new companies and, often, entrepreneurs that have not been tested by the market.

For mid-Missouri, Centennial Investors is the most visible example of organized, early-stage investing. The 45 members are referred to as angel investors because these high-net-worth individuals are often viewed as heaven-sent, providing essential early funds to start-up companies.

Centennial Investors started as part of the celebration of the local chamber’s 100-year anniversary.

Mike Vangel, who helped develop Centennial Investors.

“We wanted to do more than just have a party,” said Mike Vangel, a member of chamber leadership at the time. “We were looking for a way to make a significant and ongoing contribution to the community.”

A year of research and extensive discussion with community leaders led Vangel and others to conclude that a missing component in Columbia’s economic development infrastructure was an active angel network. To fill the gap, the Chamber invested the first $10,000 and provided staff support to help the fledgling organization get off the ground.

The company that Centennial is preparing to fund is called Equinosis, and it provides a suitable case study of the technology-led economic development strategy. Equinosis — seeking to commercialize a technology for objectively evaluating lameness in horses — is largely the creation of University of Missouri associate Professor Kevin Keegan. It grew with the support of the university system, relied heavily on business development services provided by the Missouri Innovation Center and will soon receive its first major funding from Columbia’s only angel group.

Kevin G. Keagen uses technology to evaluate lameness in horses

Equinosis is in the final stages of selling 32.8 percent of its equity for $327,000 to 22 members of Centennial Investors.

“Originally we asked for $300,000,” Keegan said. “I guess they had more interest than they expected from individual investors. We actually adjusted their equity in Equinosis based on the amount they have committed. It was fortuitous because we later found out that we will need more money for software development than we originally thought.”

Kevin Keegen

Keegan said the cash infusion would allow Equinosis to complete development of its product and take it to market.

“Without it, we wouldn’t be able to further the development,” he said. “We tried to get funds from other sources – foundations, other grants, and even the University of Missouri – but they all came back saying that we had moved beyond research and needed to find someone to fund development. The research board from the university suggested that I try to get private funding.”

With the help of the Missouri Innovation Center and its executive director, Jake Halliday, Equinosis approached Centennial Investors. After months of presentations and discussions, Equinosis will soon have its first major investors, and Centennial will have its first completed deal.

Andrew Beverley, chair of Centennial Investors, has been with the group since its inception.

“We have about 45 members recruited from the community,” Beverley said. He pointed out that federal law requires investors in early-stage companies to be “accredited investors,” defined as someone having a net worth exeeding $1 million or annual income exceeding $200,000.

“Recruiting the members was a little easier than we expected,” Beverley said. “There are plenty of people who understand the importance of having financial resources available for new companies, and who recognize that these new companies can be good investments.”

A distinguishing characteristic of angel investors is that they often have more involvement with companies than just writing a check. Angels are typically successful business people — sometimes “serial entrepreneurs” who have helped start more than one business and know-how to share with start-up companies.

Beverley said each member of the group makes his or her own investment decisions — there isn’t a “majority rules” requirement. They work as a team to analyze companies, choose which ones some portion of the group wants to help and then provide whatever assistance each company needs to prosper.

“We follow a three-stage process to make our investment decisions and it gets pretty rigorous,” Beverley said. “The Missouri Innovation Center handles the pre-screening process, reviewing all applicants to whatever extent is needed. Then Centennial has a committee review the application and if they approve, the company makes a presentation to the group’s full membership. Investments like this always carry risk, so we do everything we can minimize it.”

Centennial does not have strict criteria for the companies it will consider, but Beverley says the group is tending to look for investment needs ranging from $300,000 to $500,000. As a rule of thumb, the hope is that an investment will pay off at a rate of 10 times within five to seven years after the initial investment.

Since its inception, Centennial has taken applications from tens of companies, and has had about a dozen go through the screening process. Beverley says a few of those companies have made it close to the final funding stage, but he said, “Even good deals dissipate for any number of reasons.”

Beverley said he is cautious about providing details related to companies that aren’t yet funded because such decisions don’t necessarily mean that a company isn’t worth consideration by other investors. In one case, a company was on the verge of being funded, but ended up “not working out for several reasons,” he said.

In another case, Centennial’s leadership actually suggested that the company was strong enough and would be better served by more traditional funding sources. “With that company, some of our members still ended up investing,” Beverley said.

With the funding of Equinosis, Centennial Investors is now completely up and running and looking to get even more active. “What we want people to know is that we are always looking for more investors and more companies,” Beverly said.

“We believer there are a pretty good percentage of deals from the university and the community that can be commercialized,” said Gene Gerke, a local business consultant and founding member of Centennial Investors. “This is a great opportunity for the community, but also for the rest of society, as we help develop technologies that might significantly enhance quality of life.”

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The Centennial Angel Network
The network provides its members a forum in which to
evaluate promising, early-stage investment opportunities.
Membership consists of active, accredited investors who
share the goal of making informed, collaborative investments
in promising, early-stage mid-Missouri companies. Network
members are assessed a $500 annual membership fee.
Centennial Angel Network members:
• Gain access to and invest in pre-screened, early-stage
companies in a variety of industrie
• Enjoy the benefits of investing with other angel investors,
sharing due diligence work and deal support
• Participate in a vibrant environment and share
business opportunities with other early-stage investors
Centennial Angel Network offers young companies:
• An opportunity to present their business plan
to a concentration of accredited angel investors
• Investment capital and strategic support from
eperienced investors with relevant operating experience.
• Mentoring and coaching, as well as validation of their
business concept
Purpose
The primary goal of the Centennial Angel Network is to
generate attractive returns for investors.
Source: www.centennialinvestors.com