Page 149 - 1-Entrepreneurship and Local Economic Development by Norman Walzer (z-lib.org)

138 Deborah M. Markley

that person in touch with an entrepreneur whose idea or business might be
of interest. This process, especially in rural communities, was relatively in-
efficient and depended on angel investors making their interests known in
the community. Consequently, transaction costs were high.
Angel investor networks started in recent years help to formalize the
matchmaking process between private investor and entrepreneur. Networks
allow individual angels to pool their capital and provide a more formal
structure for introducing entrepreneurs to investors. Some networks have
managers who screen business plans and then invite entrepreneurs to make
presentations to investors. The angels may decide to invest as a group or
choose to invest as individuals. Networks have appeared even in relatively
small rural regions, using a model set up first in Minnesota as Regional An-
gel Investment Networks (RAIN) (see www.rainsourcecapital.com/).
Wisconsin has taken the concept to a statewide level with the creation of
the Wisconsin Angel Network (WAN), an effort to create new and support
existing networks throughout the state. WAN is designed to provide infor-
mation and resources to encourage the creation of angel networks and to
increase deal flow by connecting networks to each other and to more tradi-
tional venture funds in the state.
In 2005, Wisconsin instituted a tax credit program to encourage invest-
ments in entrepreneurial ventures, providing a state income tax credit of 25
percent of investments made by individuals in qualified businesses over
two years. This tax credit has, in turn, increased angel investing in the state,
with the entire initial $3 million allocation of tax credits being claimed in
2005. Many of the angel investor networks created in the state serve rural or
underserved populations, including those focused on making investments
to women (Batog 2006).
In summary, rural entrepreneurs especially face challenges meeting their
capital needs throughout the business development process. Unlike their
urban counterparts, rural entrepreneurs often have limited options in terms
of the financial market institutions available to meet their needs. Com-
pounding these capital access challenges is more limited availability of the
support services needed by entrepreneurs to make the most effective use of
capital and other resources. For too many rural entrepreneurs, capital is just
one of the support needs they face. Yet models do exist, even in rural re-
gions, for providing access to the type of capital needed by entrepreneurs
from start-up through growth and for creating the support systems to meet
their other business assistance needs. As community leaders and economic
development professionals develop strategies to address the capital needs
of entrepreneurs, it is critically important to take a systems approach—
viewing capital access as one part of a larger and more comprehensive sys-
tem of support for entrepreneurs in rural and urban communities.