St. Paul-based Rain Source Capital said it plans to create 121 angel investment funds around the country over five years to provide money for early stage companies.
Rain Source, which develops networks of angel investors, said each fund would be worth at least $1 million. The firm would recruit groups of angel investors -- individuals who earn more than $200,000 a year or have a net worth of at least $1 million -- to establish such funds across the nation.
In return, Rain Source would provide legal templates, management expertise, investment tools and financing experience to the group.
David L. Welliver, president of St. Paul-based financial consulting firm WellAdvised, said he is leading the effort to raise two of those funds in the Twin Cities area in a year's time.
"We're seeing a long-term trend, where venture capital [firms] are funding later stage growth. So, there's a gap between very early seed stage investing and when VCs will even consider an early stage company," Welliver said. "This is one way of helping fill that gap."
Steven Mercil, Rain Source Capital's CEO, said Minnesota's recently passed angel investment tax credit could also be an incentive to investors joining the network.
"It's a terrific opportunity," Mercil said. "In past recessions, the greatest growth companies have come out."
Raising the money might be a challenge. There was $17.6 billion in angel investment in the United States last year, an 8.3 percent drop from 2008, according to the Center for Venture Research at the University of New Hampshire.