Dozens of investors will collectively make a quarter-million-dollar decision Wednesday, choosing from among a handful of Portland-area startups competing for their money.
But this year’s lineup of Angel Oregonentrepreneurs has a distinctly non-tech vibe to it, in an investment climate that typically clamors for app makers and the next social media darling. Instead, the lineup at the annual investors conference is weighted by such consumer brands as veggie burgers produced in Wilsonville and peanut butter made by a pair of University of Oregon undergrads.
Three of the five finalist companies are Portland-area manufacturers. Another six earlier-stage startups competing for a smaller cash prize hail heavily from consumer-facing industries in the food and retail sectors. Just one is an online technology.
Shelley Gunton, chairwoman of this year’s investors conference, called the event “sector agnostic.”
But its heavy focus on up-and-coming consumer products is a promising sign for early-stage manufacturers, which are often viewed as too risky for traditional lenders. Upfront costs tend to be higher than most startups as they establish distribution chains, buy special equipment and ramp up production. Finalists say the added money could extend their reach outside the Northwest.
The portfolio is a clear contrast to other high-profile accelerators and incubators, which are betting on Portland’s mobile development and software scene to spot the next successful startup.
The Portland Incubator Experiment selected mobile technology startups almost exclusively for its first class, which graduated in January. And the city-backed Portland Seed Fund selected just one non-tech company in March for its latest group of eight companies.
“We do not have any dedicated resources that support consumer products,” Gunton said. “No incubators, no funds that are specific to Oregon.”
For Marie Osmunson, winning would give her a chance to build up the management team for Wilsonville-based Chez Gourmet from Marie. The veggie burger brand has already secured clients in Burgerville, Shari’s and McMenamins. Now it’s time to rebrand and expand into retailers along the West Coast.
“It doesn’t matter what sector they’re in,” Gunton said. “Once they get funded, they create jobs.”
Gunton has emerged as one of the consumer product industry’s most vocal champions in Portland. The Clackamas pet food company she launched with her husband won the Angel Oregon event in 2005. They exited Castor & Pollux Pet Works three years later, raising $21 million from a private equity firm in Boston. It remains one of the fund’s largest successes.
In all, 41 companies have presented at Angel Oregon since 2003, according to Rob Wiltbank, a Willamette University professor who tracks the investments. Seven have since exited, including three alone in the past year. Thirteen no longer operate.
Angel investors make a $5,000 minimum investment in the fund and vote annually on which company to seed. This year, they plan to invest in two, awarding $250,000 to the top startup, and the balance raised, now $86,000, to the second. Similar competitions exist throughout the state, all tied to nonprofits that offer startup resources.
The Governor Hotel in downtown Portland
Tualatin, specialty nut butters
Tigard, collapsible blanket lift
Bend, snow chain alternative
Entrepreneurs must pay an application fee and compete in a series of early rounds to advance to the presentation day. The lengthy process of the so-called “pay-to-play” model dissuades some from applying, but Gunton compared it with a trip to Silicon Valley.
“If you fly down to the Bay Area,” she said, “you’re making a choice to spend money to get in front of investors.”
Angel Oregon is “right in your own backyard.”
The competition gives entrepreneurs the chance to hone their business plans and network with investors, said Sam Pardue, who started North Portland’s Indow Windows, which makes thermal window inserts. The company already carries a unique distinction: it’s the lone manufacturer in the Portland Seed Fund’s current class.
Pardue has spent more than a year navigating investment circles, a new scene for the veteran entrepreneur.
Tech companies attracted most of the early-stage funding in Oregon in 2011, with clean tech firms Agilyx and ClearEdge Power leading the way. The national group that tracks venture capital investment plans to release its first quarter 2012 data Friday.
“For tech investors, it feels very natural for them to be angel investors, it’s part of the culture,” Pardue said. “But it’s going to take continued leadership to make it happen,” for consumer products.
He helped launch specialty camera lens maker Lensbaby eight years ago. That company started with $5,000, and financed its expansion with sales. It now employs more than 40 people.
But Indow Windows has required more upfront capital and is now embarking on a campaign to distribute nationwide. He’s pitched the company at four investment conferences, including last year’s Angel Oregon. He’s finished second three of the four times.
“Last year, we were telling investors all the things that we were planning to do,” Pardue said. “What we’re really excited to do is be able to explain to investors how much progress we made.”
The funding would help Indow Windows expand and hire a sales director to lead the charge.
Tellagence, too, would hire more workers if it landed the Angel Oregon investment. The nine-month-old company finds audiences on social networks for its business customers to tap.
It will be one of the few tech companies presenting during the conference. The five companies competing for investment emerged from a group of 22 semifinalists. Just six of those were online or mobile technologies.
Tellagence had nothing to lose by applying, co-founder Matt Hixson said, surprised that more tech entrepreneurs hadn’t applied or advanced to the final round of competition.
Eventually, he sees Tellagence as a Portland company making a change on a national scale. And that takes money.
“I would like to say that we are backed by Oregon investors,” Hixson said. “We would like to be an Oregon success story.”
Wild Squirrel Nut Butter’sstory has already spread across the U.S., thanks in part to coverage this month in Glamour and O magazines. Keeley Tillotson and Erika Welsh founded the brand in their shared apartment near the U of O last year. Inspired by initial interest, they moved back to their parents’ Portland area homes to pursue the brand full-time. Keeley’s father joined the company as its chief executive.
Thirty stores now sell the specialty peanut butter. Within months, they plan to distribute to 300 shops spread along the West Coast. Winning Angel Oregon would help fund its expansion, Tillotson said. “It would really help jumpstart growth,” she said.