The months-old Spokane branch of San Francisco-based investment concern Keiretsu Forum is trying to build momentum, with young companies here formally introducing their businesses to the organization's investor network in hopes of receiving funding.
Chhe Taing, president of Keiretsu's Inland Northwest region, says the for-profit, membership-based organization founded its chapter here last August. In April, it held its first deal screening, where Spokane-area start-ups introduce their businesses to a small group of investors who decide whether the company warrants consideration from the investor group as a whole.
Next, Taing says, "We hope to get a win. We have the structure in place for a win. It just takes time."
The Spokane office, which is moving late this month to the 10th floor of Paulsen Center, at 421 W. Riverside downtown, is one of 29 chapters worldwide operated by Keiretsu, which is a Japanese term for a group with power or a broad reach. More than 1,000 accredited investors are involved in the organization, and they can invest in young companies either as individuals or in a group with others. Keiretsu, as an organization, doesn't invest.
The Spokane chapter is part of Keiretsu Northwest, which also includes offices in Seattle; Kirkland, Wash.; Portland, Ore.; Boise; and Vancouver, British Columbia. Last year, members of the Northwest groups collectively invested $20.1 million in 34 companies.
At the Spokane chapter in April, four companies presented for the deal screening here, and another four are scheduled to participate in a July 18 presentation. The Spokane office holds monthly networking events and expects the deal screenings to occur quarterly.
Successful Keiretsu funding of a Spokane company might be imminent, though the funding likely won't come from investors here, says Jim Birch, co-owner of EventSmart LLC and one of the presenters at the April event.
EventSmart operates zPerfectGift.com, a group gifting website where people can contribute money to buy someone a gift card, and the gift recipient can put that money toward a gift card from a retailer of their choice. The service is free to users; EventSmart generates revenue by buying the gift cards at discounted prices and providing them at the listed value.
Birch says he pitched the company to the screening group here and then was invited to present the idea to four Keiretsu chapters in Southern California. Those meetings are scheduled for later this month, and Birch hopes to have some funding in hand as soon as the end of July.
Birch says the zPerfectGift website is operational and is generating traffic, but the company is seeking up to $400,000 in capital for marketing and advertisingultimately to generate more interest and revenue.
He says the company plans to seek $3 million to $5 million in venture capital toward the end of this year, but he wants to create more value in the company before seeking that level of investment. Each time a young company takes on an additional investor, Birch points out, it further dilutes the founder's ownership interest. He wants to create more value in the company before going after large sums of money so he hopefully can secure the capital with terms that are more favorable to him.
At $400,000, EventSmart's request falls slightly below the range in which Keiretsu typically funds. Generally, Taing says, Keiretsu investors are looking at companies that have received seed funding and are at what's called the A or B level of investing. Typically, he says, those companies are seeking $500,000 to $3 million.
Young Spokane companies pay $500 to become Keiretsu members and $7,500 to go through the entire investment process, Taing says. However, many of the organization's events, including all of its networking events, are open to nonmembers, he says.
In Spokane, accredited investors, which the U.S. Securities and Exchange Commission defines as people with a net worth of $1 million and consistent annual income of $200,000, pay $500 a year to be members, Taing says. In other areas, they pay as much as $3,000 in annual membership fees.
The Inland Northwest chapter has 26 members so far, Taing says, with membership weighted more toward entrepreneurs than investors. In addition, the organization has a handful of sponsors, including the Witherspoon Kelley law firm, McKinstry Corp., Spokane Public Libraries, and Washington State University, among others.
For all of Keiretsu, he says, the membership is equally weighted between certified investors and business owners, with some service providerslaw firms, marketing companies, and othersinvolved as well.
Aaron Rollins, co-founder and CEO of Business Texter Inc., also presented at the April meeting and is currently in talks with investors outside of the Keiretsu network.
Business Texter has developed an application for Android phones, called Business Texter, that enables companies and others to send text messages in bulk to consenting customers or members.
Business Texter has received seed funding, Rollins says, and is looking for about $400,000 so it can hire its first employees and start to market more actively.
Rollins says the Keiretsu event enabled Business Texter to get in front of people. He says, however, he is concerned that the Inland Northwest isn't large enough to support such a group.
"I just don't know if there are enough people with enough money to support the kind of investment they are looking for," Rollins says. "I'm happy he (Taing) is trying. I think it would be awesome if it works."
He adds that more businesses might have an experience similar to that of EventSmart, where they are referred to other chapters that have investors who might be interested.
Keiretsu Forum is the newest of a few groups here that work to connect accredited investors and start-up companies. Others include the Spokane Angel Alliance, led by longtime start-up investor Tom Simpson, and Inland TechStart Fund LLC, which started in 2011.
Taing says the groups work together to build the start-up community in Spokane.
"The success of this organization is dependent on the success of every other organization here," he says.
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