Angel investors help businesses grow to next level
BYLINE: Carlos Gieseken
Central Wisconsin Sunday
Ten years ago, Amherst resident Dale Niggemann began developing a type of cross-country ski that can be used year-round on grass, dirt, sand, pavement or other surfaces.
For the past four years, he has sold the Classic All Terrain ski, or CAT ski, to cross-country skiing enthusiasts and competitive skiers, including a few Olympians, for their warm-weather training through his Web site, www.Catskier.com.
His company, SISU, produces the skis at its Wisconsin Rapids facility. Now he's ready to take the product, with sales of between 150 and 200 pairs a year, to the next level.
"The last four years we've been refining everything and essentially testing the product, making sure people don't get hurt," he said. "Now our next step is take the product and design it so we can mass market it to anybody for fitness-type exercise."
Niggemann has worked with Leon Ostrowski, coordinator of the Central Wisconsin Business Angels, on refining his business plan during the last year. The group, made up of between 10 and 20 investors from central Wisconsin, has committed to invest in the CAT ski.
"This could be an alternative to other methods of staying in shape," said Ostrowski, pointing out the hundreds of millions of dollars of potential in school physical education classes and with regular people looking for another way to exercise.
In the last two years, Ostrowski's business angels have invested in about 10 companies. Another company, Amherst-based Dimensional Technology International Inc., has developed quality control technology that can tell car manufacturers if their parts are meeting design specifications moments after their manufacture, potentially saving millions in time and money. A Volkswagen plant in Mexico is currently using the technology.
The angel investment usually occurs after the business owner has exhausted his or her own resources, including bank loans and friend or family contributions.
"With growth, there are a lot more expenses," Niggemann said. "You need more inventory, more people to man it. You've got to worry about warehousing and distribution."
The angel investment provides the capital needed to expand the business. Once it gets further established, a venture capital firm might invest in it.
The group of investors put their money into several ventures at once, spreading out their risk and reward, much like a mutual fund. Each will invest anywhere from $10,000 to $100,000 or more in a business.
For every 10 companies, on average, one or two will be "home runs," three or four will be losses, and the rest will break even, Ostrowski said. They do extensive research on the companies, and Ostrowski will help them with their business plans and other aspects before they even make a pitch to investors.
"(The investors) have worked pretty hard to earn their money and they want return on their investment," he said.