Crowd funding could be new avenue for angel investing

ACROSS THE SPECTRUM: Jennifer Schwall, executive director of Cherrystone Angel Group, said that the group’s “members have as diverse a background as you could think.” / COURTESY CHERRYSTONE
ACROSS THE SPECTRUM: Jennifer Schwall, executive director of Cherrystone Angel Group, said that the group’s “members have as diverse a background as you could think.” / COURTESY CHERRYSTONE

Startups are a spark on Rhode Island’s business landscape, and angel capital is critical in getting these often innovative ventures launched.
Jennifer Schwall is in the thick of the startup ecosystem in the Ocean State, as well as the broader New England region.
As the new executive director of Cherrystone Angel Group, she succeeds Peter Dorsey, who co-founded the group in 2004 and said he will now focus more time on his role as president of the Business Development Company of Rhode Island. Dorsey said Schwall “is well-suited to perpetuate Cherrystone’s positive momentum in the angel-investing markets.”
Schwall manages operations for the angel group, working on screening deals, determining valuation models and conducting market research.
She serves as a representative of Cherrystone in Rhode Island, as well as in the Boston and New York markets.

PBN: What is the most critical issue facing the angel-investment segment now?
SCHWALL: I think the most critical issue is the emergence of the crowd funding platforms and the new regulations associated with those changes in the marketplace. I’m excited about the new opportunities that crowd funding will bring to the larger private-investment industry. We’re watching it very closely to see how, as a Rhode Island angel group, we can leverage those trends for our group. We’re evaluating crowd funding platforms right now as way to possibly collaborate, syndicate and access deal flow. The SEC closed the comment period and they’re evaluating how they’re going to regulate the crowd funding investment model. We’re not sure how we’re going to be leveraging those trends until we know what the SEC regulations are.

PBN: What’s the landscape for angel investors in Rhode Island now?
SCHWALL: We have seen an uptick in deal flow and member activity as the economy has begun to recover. During the recession our members kind of slowed their investing. As the market has begun to recover, they’re becoming more and more active and we’re seeing tremendous deal flow coming out the New England ecosystem. We’ve seen a large uptick in the amount of applications coming through Cherrystone and the quality of applicants is very high.
PBN: Are those applications mostly from Rhode Island or all over New England?
SCHWALL: They’re from all over the New England area. About 30 percent of the deals we see are coming from Rhode Island and the other 70 percent are coming from Connecticut, Massachusetts and New York.

PBN: How many companies has Cherrystone invested in since it was founded in 2004? How many of those are still in existence? What’s your participation, as far as the companies?
SCHWALL: Cherrystone has invested in 20 companies across 57 investment rounds. Of those companies, we’ve had two successful exits, four write-offs where we’ve received little to no money returned to the investor, and 14 are still in operation. I participate in screening the initial application, coordinating the due diligence, negotiation of the terms and tracking the companies once they’re in our portfolio.

PBN: Has membership in Cherrystone increased?
SCHWALL: Our membership has doubled in the last four years. We’re now at 65 members.

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PBN: How does the membership increase?
SCHWALL: A lot of the members refer new members to us. We’re at a point right now where we’re evaluating just how big we want to get. There’s a lot of interest from the community in accredited investors joining Cherrystone. Sometimes people are interested in joining and excited about angel investing, but it might not work for them because of a time commitment. We meet monthly and if they can’t attend the meetings, they’ll lose a lot of the value Cherrystone can provide. There’s no minimum attendance or minimum investment level. But we present all of the deals at our monthly meetings, so not being able to be part of that dialogue and that discussion makes it more difficult to decide if you want to participate in the rounds being offered.

PBN: Are you seeing any differences in the type of angel investors in Cherrystone?
SCHWALL: Our members have as diverse a background as you could think of with 65 members and that’s very helpful in evaluating deals from different industries. Some of our members are entrepreneurs who built and sold their businesses. There are lawyers and accountants. About 90 percent of our members live and work in Rhode Island, so it’s a very Rhode Island group.

PBN: Marianne Hudson, executive director of the Angel Capital Association, thinks there are more women who are angel investors today than in the past. Do you think this is changing the angel-investment landscape in any noticeable way?
SCHWALL: I think the trend in more women actively participating in the angel-investing landscape is a great thing. Anytime you can have more diversity around the table, whether that be gender, ethnicity, industry focus or geographic location, it really helps when analyzing a deal. •

INTERVIEW
Jennifer Schwall
POSITION: Executive director of Cherrystone Angel Group
BACKGROUND: Schwall did an internship with both the Business Development Co. and Cherrystone Angel Group during the summer of 2010, between her junior and senior year in college. Her internship with Cherrystone continued while she completed her last year of college. After graduation in 2011, she was named manager of the angel group. At the same time, she took on the role of startup operations manager for Betaspring. She continued working with both firms until she began as Cherrystone’s executive director on March 17. She continues to be a mentor in the Betaspring community.
EDUCATION: Bachelor’s degree in finance with a minor in legal studies from Bryant University, 2011
FIRST JOB: Babysitting during middle and high school
RESIDENCE: Rehoboth
AGE: 25

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