Montana angel fund looks to change state policy to benefit investors, tech startups

Montana has fallen behind other states in the region in its support for technology startups, though one group of angel investors is looking to grow its network in hopes of influencing state policy to close the gap.

Pat LaPointe, managing director of Frontier Angels, said the organization and its members have already emerged as a major investor, capable of directing large sums of seed capital to upstart tech companies to help accelerate their growth.

But while Frontier Angels has its eyes on Montana's upstart tech scene, the state's policies, or lack there of, has made it difficult for state-based companies to access capital, while also deterring investors who might otherwise be interested in providing startup funding.

“There's little to no public policy that directly supports the growth of early stage tech companies in Montana, and that basically makes us the hole in the bagel,” LaPointe said. “Everybody around us, from a state and province perspective, has very aggressive policies to help support the growth of early stage technology.”

LaPointe joined members of the Missoula Economic Partnership early Tuesday for a pitch session involving three national companies now in the process of raising capital for launch.

In other states, he said, money from the public sector is often used in combination with funding from the private sector to help tech companies grow through various stages of development. But that's not the case in Montana.

“Having testified several times at committees in Helena, I can tell you one of the reasons we don't have it here is because our Legislature just doesn't understand the economics of it,” he said. “We need to help them better understand the economics of it.”

To help bridge the divide, Frontier Angels is working to grow its Montana membership. While it currently claims around 65 members, it's adding five new members each month with plans to reach 100 by the summer.

While many of those members are found in the state's technology hubs, including Missoula and Bozeman, they also represent the state's rural communities, or as LaPointe said, “from Miles City to Kalispell and every place in between.”

“That's really important because one of our key goals is to have an influence on public policy in Montana,” he said. “When we have influential members located throughout the state, we'll have a much bigger and clearer voice in terms of having better hearings in the Legislature.”

LaPointe said North Dakota offers tax incentives to investors who fund startups. Other states in the region also offer incentives to entrepreneurs, offering matching funds when the emerging business raises a set amount of independent capital.

“There are a number of different models that work,” LaPointe said. “We don't have a particular dog in the hunt about which model we'd like to see, we just want a fundamental policy that impacts the acceleration of our tech sector.”

Frontier Angels has invested in several upstart companies, including CurvaFix – a Seattle-based medical device manufacturer – and PowerGrow, a company based in Phoenix that manufactures solar-powered greenhouses.

Despite the success of its investment portfolio, LaPointe said Frontier Angels would like to invest more in Montana’s own tech industry.

“I wish I could tell you there's enough of them,” he said. “Even when we invest in tech companies based in the Northwest or Rocky Mountain region, never have we seen a year where we run out of money. I'd love to see more Montana opportunities, but in the meantime, we'll continue to look for terrific, strong opportunities coming to us from elsewhere in the region.”

Jeff Fee, the interim president of Missoula Economic Partnership, said growing the city's tech sector remains high on the organization's list of priorities. Providing upstart tech companies with reliable capital will increase their chances of success, he said.

“We need to have an entrepreneurial ecosystem that's truly competitive on a national scale, not just competitive in our communities,” said Fee. “But I'm not convinced that the state has a coherent, well thought out economic development plan. One of the things (LaPointe) is trying to do by increasing the pride and influence of the angel investment network is to increase our influence on statewide policy.”

At the same time, LaPointe said, Frontier Angels is also working to attract more female investors. Nationally, he said, roughly 10 percent of angel investors are women. Frontier Angels is roughly 19 percent women.

Diversifying the gender composition could help boost the economy, he said.

“If we're going to grow our tech sector and grow it faster, we're going to need more women starting tech companies,” he said. “This may or may not surprise you, but it turns out that women are a lot more likely to start tech companies when they think they'll be pitching to women investors.

“We're very actively out trying to create a dialogue in communities to attract more women as angel investors.”