Angels group invested $5.8 million in '06

A group of Seattle-area angel investors plans to announce today that it funded more fledgling companies last year than in any other period in the organization's 10-year history.

The Alliance of Angels said that in 2006 the organization invested $5.8 million in 31 companies. Of those startups, 11 received a follow-on investment, meaning they had received money from the membership in the past.

In 2005, fewer companies received a record-breaking $7 million. The 2005 numbers were skewed by two of the 21 companies receiving about half of the total invested.

The Alliance of Angels was started in 1997 by the state's Technology Alliance to help promote a high-tech economy.

Today, the 100-member organization is made up of wealthy individuals and professional venture capitalists who gather monthly to listen to companies make a pitch and decide whether to invest individually.

"No deal dominated [in 2006]," said Dan Rosen, an individual investor and alliance chairman. "We tended to put measured amounts of money in each company."

The figures represent only investments made by the alliance's membership, but it can be used as a gauge to assess the broader early-stage investment market. Other investment groups in town include Puget Sound Venture Club and Seraph Capital Forum, but many angels act independently.

The companies that received funding from the alliance in 2006 were picked from a pool of about 200 applicants.

The process includes an initial application, a two-hour interview, and a presentation in front of a screening committee, which chooses three or four companies that make presentations before the membership each month.

Some of the companies that received funding in 2006 include Pritest, a Redmond company developing a test for tuberculosis; Pluggd, a Seattle company creating a way for Internet users to find video and audio; Modumetal, a Seattle-based nanotech company; Dry Soda, a Seattle beverage maker; and Zero Crossing, a Redmond company integrating technology into traditional musical instruments.

About three-fourths of the presenters are technology companies, while the rest are mostly consumer or retail goods companies, said Rebecca Lowell, the alliance's program manager.

Lowell; Geoff Entress, a principal at Madrona Venture Group and alliance volunteer; and Rosen said 2006 could be characterized by several trends: Of companies that submitted plans, more involved wireless technology, and companies that considered themselves Web 2.0 enterprises budgeted zero dollars for marketing because they said word about them would be passed along virally.

They also noticed companies consistently said they were worth more than startups typically are at that stage.

Lowell said those kinks are usually worked out; the alliance offers a "Pitch Clinic" every other month to help companies refine their message.

Still, the rigorous screening process has served the alliance well, Lowell said.

Of the companies funded by the alliance in the past three years, all are still in business today and half have received more funding -- either from alliance members or venture capitalists.

Tricia Duryee: 206-464-3283 or tduryee@seattletimes.com