In his days as a business school professor in Brownsville, John Martin had a key piece of advice for his students.
“If you want to be a high salaried employee, leave the Valley, but if you want to be an entrepreneur, stay here,” Martin said.
Martin is a member of the Rio Grande Valley Angel Network. The investor group provides seed money for aspiring entrepreneurs in return for equity in their companies. The Angel investors also serve as mentors for the entrepreneurs working to make their mark while connecting them to additional resources and expertise.
There are 42 investors in the group. They include a cross-section of business and financial experts who have also been successful in their endeavors. Federal government rules require a group such as Angel to consist of individual investors who have a net worth of at least $1 million and/or have an annual income of exceeding $200,000. Since 2017, the group has invested almost $1 million in 13 startup companies.
Local Success Story
One of its success stories is Composite Access Products of McAllen. Angel invested $175,000 into the manhole cover manufacturer in return for just over a three percent company interest. Along with the much needed capital, CAP also receives business expertise and connections to other resources.
“The influx of capital really helped us at that moment,” said Chad Nunnery, the owner and chief executive at CAP. “They filled in that blank that we didn’t expect as we grew our business.”
Like many startups, Nunnery used his own resources as well as those of family and friends in CAP’s formative years. The time for additional capital then came and securing a bank loan at that point for the young company was unlikely. Nunnery then turned to the Angel Network, making his pitch for the group’s capital in return for equity.
Angel was suitably impressed in the company’s start and early successes, and made the investment in Nunnery’s enterprise.
“John and the group bring in a lot of expertise and connections,” Nunnery said. “We definitely got a lot of help and encouragement.”
It was the Angel group and Martin who introduced Nunnery to Ford Sasser, the president and chief executive officer of Rio Bank. Sasser was impressed by Nunnery’s ties to the investment group and the capital it provided to CAP. The banker then agreed to provide the young manufacturer with a loan. It was a hard-earned gain that would have not been possible without the Angel group’s involvement.
“If a person wants to start a manufacturing business, banks are not the first step,” Sasser said. “A group like the Angel investors are critical for startups. They provide valuable resources to a company with a good plan that’s having some success. From a banker’s perspective, we’re willing to take a risk and get a payback.”
Getting The Word Out
The success and story of CAP is one Martin and his network of investors would like to replicate with other Valley entrepreneurs. To this point, CAP is the only Valley company that Angel has invested in, but Martin hopes that will change. He wants to get the word out that Angel is willing to help other emerging local companies. The group also wants to listen to their presentations and possibilities.
“We’re hearing a lot of great ideas that have a lot of potential,” Martin said. “The biggest problem is that we need more entrepreneurs to bring out more investors and plant the seed for more entrepreneurship in the Valley.”
The group picks its spots carefully in making its investments, knowing that not all of their efforts will succeed.
“We don’t take one project and put all of our money into it because we know some of these companies are going to fail,” Martin said. “You hope to make lots of money with your other projects that do succeed.”
Nunnery’s company is one of those projects as it grows sales with its products throughout the United States. The Angel group hopes to plant the seed with other local, emerging companies in helping them to prosper while making a return on their investor capital.