The Impact of Angel Investors
What kind of difference can angel investors make? Alcoa, for example, is here in Pittsburgh because 118 years ago, Pittsburgh had angel investors willing to invest in an entrepreneur with a new technology, and Ohio didn't. A story on Alcoa's history in the March 5 Pittsburgh Tribune-Review describes how Charles Martin Hall, who invented an inexpensive method of smelting aluminum, came to Pittsburgh from his home in Oberlin, Ohio because he was unable to find investors in his home state. Alfred E. Hunt and a small group of investors provided the $20,000 in seed capital that gave the Pittsburgh Reduction Company, later renamed Alcoa, its start. T. Mellon & Sons provided another $25,000 investment two years later. Note that Hall didn't take the capital back to Oberlin to start his company, he stayed where the capital was, in Pittsburgh.
Unfortunately, the early angels and entrepreneurs in Pittsburgh may have been a little too successful. Pittsburgh was transformed from an entrepreneurial region to a big company town, and that broke the cycle of risk-based finance. The community's wealth -- whether individual or institutional -- was no longer in the hands of people who had made their money through entrepreneurship or financing entrepreneurs, and so it became harder for entrepreneurs to find angel investors here than in regions where recently successful entrepreneurs were looking for new ventures in which to invest their money.
Both Innovation Works and Blue Tree Allied Angels are currently working on getting more angel investors and angel investment in the Pittsburgh Region. But they will only be successful if more people here are willing to become angels or to invest in an angel fund.
If you'd like to know more about angel investing and to meet some of the kinds of entrepreneurs who need angel investment to grow, the MIT Enterprise Forum is sponsoring a program on angel investing this Wednesday, June 7, at 6 p.m. at Seagate Technologies in the Strip District.