Green entrepreneurs drawing attention from startup investors

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A few days before Christmas, Ann DeLaVergne received the best present she could imagine. The Stillwater entrepreneur learned that an investor group called TC Angels had decided to make its largest-ever single investment, and that it was going to fund her fledgling startup company, ecoEnvelopes.

DeLaVergne was opening mail at her kitchen table a few years ago when she came up with a way to get twice the mileage out of envelopes by making them easy to reuse. She’s been trying to launch her company ever since, and now the $570,000 investment from TC Angels will help her hire employees, secure patents and eventually market her invention to customers around the world.

It’s the latest example of how angel investors these days are paying attention to green entrepreneurs. Another Minnesota angel investors network has invested significantly in a company developing energy-efficient windows. And a nationwide angel group that does nothing but socially and environmentally responsible investing has seen its members double in the last five years.

Angel investors are individuals who help fill in the gap for entrepreneurs who have exhausted loans from family and friends but still aren’t established enough to compete for venture capital dollars. They’re usually successfully entrepreneurs themselves who offer early-stage companies seed capital as well as guidance to help get the company off the ground.

“I would say that angels do tend to look more favorably on green products. There is a trend towards that, especially right now,” said Joan Wurzer, executive vice president of RAIN Source Capital, a network of Midwest investors. “Angels like to make investments in companies that, number one, they feel they’re going to make money, but they also like to feel good about the investments they make.”

John Alexander, co-founder and chairman of TC Angels, said green innovations are getting attention from investors lately because they represent a relatively new market. It doesn’t hurt that they address an issue that’s on many people’s minds. But in the end that wasn’t what closed the deal for ecoEnvelopes.

“For a lot of reasons green markets are attractive to people,” Alexander said. “We like (ecoEnvelopes) because A), you’re doing the right thing, and B), there’s an opportunity to make money on it. I think if it didn’t make economic sense, if it didn’t improve things, if it didn’t solve a need for customers, in and of itself, it would not succeed. … At the end of the day it’s got to be a good investment otherwise people won’t invest.”

DeLaVergne is traveling around the country, explaining to companies how her reusable envelopes can save them money by reducing the weight of mass mailings. Instead of using a return envelope, customers can flip over the original envelope and peel away a sticker to reveal the return address. The companies website has a series of movies that show how they work.

Wurzer, whose network is not affiliated with ecoEnvelopes or TC Angels, said it makes sense that angel investors would be interested in environmentally responsible companies. For many, though not all angels, their investments are more personal than larger loans from banks or venture capitalists.

“I think an angel has more of a double bottom line, which is sometimes an industry term used for this type of investing, where they want to see not only a financial return but a social return also,” Wurzer said. “I would say the majority of them do like to feel good about the companies they invest in.”

RAIN Source Capital network, which includes 12 angel funds in Minnesota, has invested close to $2 million in a Faribault company callled SAGE Electrochromics. It’s manufacturing windows that can be tinted on hot summer days to save energy.

Matt Lombardi, entrepreneur services director with the San Francisco-based angel group Investors Circle, said not all angel investors are looking beyond financial return, but the growth of its networks suggests more investors are. Investors Circle was founded in 1992 and only invests in socially responsible or environmentally focused companies.

Over the last five years, the number of investors who have joined the network has doubled to more than 225. The group’s marketing hasn’t changed drastically, so Lombardi said it’s logical to conclude that more investors are interested in their mission.