With Startup Maryland’s eye-catching yellow recreational vehicle again about ready to roll down the state’s highways, Founder/CEO Mike Binko prepared for this year’s main event by adding an additional element before he takes the wheel for this year’s tour on Sept. 14 on the Lower Eastern Shore.
That addition is the workshop to be presented at iJet International headquarters, in Annapolis, on Aug. 18–19, by Startup Maryland and its new Washington, D.C.-based partner, Startup Angels. It will be held to explain to potential investors how they, too, can become angel investors, and Binko is banking that the grassroots-type move will pay off for the state.
He’s the first to tell you that finding angel investors in Maryland hasn’t been easy, but changes in the state law that became official at the end of the 2016 legislative session are just the first step in ramping up that market.
“We have a couple hundred of angels who are active in Maryland. We need to get that number up to a couple of thousand,” he said. “We’re a wealthy state by any independent definition, but much of that money has remained on the sidelines.”
The timeline for the positive news began a few years back.
“As a part of the national group Startup America (now the Startup Champions Network), Startup Maryland has been intimately involved with U.S. federal legislation known as the JOBS Act (Jumpstart Our Business Startups),” Binko said. “During the past three years, the Securities and Exchange Commission has worked with industry and ecosystems to develop pathways through which more individuals are able to legally consider before becoming early stage equity angel investors.”
Until this past March, the bottom line for accredited investors was having more than $1 million net worth (not counting an individual’s primary residence). That threshold has been lowered to $200,000 for an individual and $300,000 for a couple.
“From our perspective, that opened early-stage equity investing to a new community of qualified angels,” Binko said. “Though there are barriers on how much a given investor can contribute, the good news is that this avenue is now available to more potential investors and their wealth advisers. For instance, an investor with $200,000 in liquid assets will probably only be able to invest a few thousand dollars.”
He added that the state should also offer an angel investor tax credit.
“There are many investors in our universe, and now, due to the new federal legislation, we could have even more,” Binko said. “More than 30 other states have tax incentive programs for early-stage investors, but Maryland runs the risk of losing many of these dollars because these individuals see the more favorable tax environments elsewhere.”
As for the Chesapeake region’s standing among startup hubs, Leslie Jump, CEO of Startup Angels, feels it could be kicked up a few notches.
“There are many great startup hubs around the world, but when you get outside the places like Silicon Valley, New York City or Tel Aviv, entrepreneurs have a hard time raising capital,” she said. “When you look at Silicon Valley’s profile, including the number of, and diversity of, companies, along with its wealth, you have to wonder why the D.C. area isn’t equally prominent.”
That’s partially because, while the U.S. government provides a strong backbone for the region’s economy, “We have [challenges] getting entrepreneurs from the government and from contractors to start their own businesses, based on their own new products,” said Jump. “They can get comfortable [with] their lives and income level, and often don’t want to rock their boats.”
When contemplating the game plan of the region that emanates from the nation’s capital, Jump made three basic points.
“I’ve worked with [AOL Co-Founder and former CEO] Steve Case on boards. He’s pointed out that we developed the pipeline in the D.C. area that opened the Internet to the masses. That’s a big deal,” she said. “Second, we need to heighten the promotion of our area; third, we also need to promote the legacy businesses of the Chesapeake Crescent in various fields, including educational technology, health care, e-government, etc., since that’s where the mid-Atlantic really shines.
“We have all of that here,” Jump said, “and we need to capitalize on it.”
Allowing that there are faster ways of making money, she said what Startup Angels hopes to accomplish is about more than just making money. “We want investors to be involved in the building of the tech community; [to be] a part of something bigger than themselves and maybe even something massive, like AOL turned out to be; and to demystify startup investing for a large pool of people.”
And know that the pool is vast: Jump said, that, according to the Kansas City, Mo.-based Angel Capital Association, there are 300,000 active angels in the U.S.
“Using our research at Startup Angels, we’ve found that approximately 38 million people qualify to be angel investors,” she said, “so we’re trying to get them to interact with each other.”
If that happens, there’s still that other well-known hurdle to address: “The biggest challenge is keeping the investors in Maryland,” said Bruce McIndoe, CEO for iJet.
“A number of [investors] have already started ventures in places like Florida, Texas and other states that have more favorable tax incentives, but there is still so much going in our favor here,” McIndoe said. “The government and the businesses just have to get everything lined up, so it’s more attractive for these people to stay here.”
That said, it’s onwards for Binko and company. That yellow RV is the focal point of what has been rebranded as the Start1Up Roadshow (which was slated to run through Howard and Anne Arundel counties on Oct. 5, on Cyber Day, at press time).
“We acknowledge that only one in 10 investments may be a home run,” he said. “Angel investing is often a risky way to make money, but we will demystify the process for the investors who attend our workshop … while also introducing them to ventures right here in their backyard.
“Celebration, coaching, curation and capital,” said Binko. “That’s how we’ll distill the deal flow and find the innovative companies that will be investable and create jobs. That’s what Startup Maryland is about.”
Speakers for the Event
- Michael Binko, CEO/Founder, Startup Maryland
- Frank Bonsal III, Director of Entrepreneurship, Towson University
- Tami Howie, Executive Director, Chesapeake Regional Tech Council
- Leslie Jump, CEO/Founder, Startup Angels
- Bruce McIndoe, CEO, iJet International
- Jason Tagler, Baltimore Angels and Partner, Camden Partners