By Laura Cutland - September 1, 2006 - Silicon Valley/San Jose Business Journal

Looking to provide a more hands-on approach to early stage investing, a former executive from Keiretsu Forum is starting a new angel group in Silicon Valley.

John Dilts, who presided over two Keiretsu chapters in Southern California until this spring, says he is launching a chapter of his new investment group, Maverick Angels, in San Mateo this September with the goal of having 15 investors on board by the end of the year.

The organization opened its first three chapters this spring in Westlake Village, Santa Barbara and Los Angeles, but will be consolidating them in to one office in Westlake later this month. Maverick counts 12 members from the Los Angeles area so far.

Mr. Dilts, who was managing director of Keiretsu's Los Angeles and Westlake chapters from 2004 to early 2006, says he is expanding to fill a big hole in the angel investment community.

As a three-year member of Keiretsu - one of Northern California's largest angel groups with three chapters in the Bay Area - he says he was frustrated by the lack of the guidance for entrepreneurs seeking first funding.

"Keiretsu wants to find deals where they can make nice returns. They're one dimensional," he says. "We want to support entrepreneurs in a more formalized way."

Maverick plans to do that, he says, by only admitting investors who are willing to serve as mentors to start-up companies. The organization also offers entrepreneurs the chance to participate in a one-day "boot camp," taught by Mr. Dilts, which teaches them how to pitch before investors and avoid red flags, for $495.

The group also plans to fund companies both inside and outside of the traditional areas of technology and life sciences, he says, such as those targeting the consumer products, retail, healthcare, and entertainment industries.

Maverick has made two investments through its Los Angeles chapters, he notes, in a mobile content start-up and an entertainment venture fund. That second deal is in the process of closing, he says, while 15 more are in due diligence right now. He says interest in the Southern California chapters in strong, with 40 applications from investors waiting to be screened, including a number from former Amgen employees.

He hopes to duplicate that response in the valley and is looking for both angels and entrepreneurs to kick start Maverick's inaugural meeting in San Mateo on Sept. 29 at the office of Franklin Templeton. A division of the company, Fiduciary Trust Company International, is the first sponsor of Maverick's Silicon Valley chapter. The goal is to have between three and five companies selected by the end of September to pitch before a group of investors, he says, and members will work "virtually" until the organization finds an office n the Peninsula.

The ultimate objective is to have 50 members in each chapter, says Mr. Dilts, Maverick's founder and president.

To become a Maverick angel, an investor must be accredited, have a minimum net worth of $1 million, or an annual income of $250,000 or $350,000 in annual income in combination with a spouse. In addition, they have to pony up $3,000 a year in membership dues.

To pitch before the group, entrepreneurs must submit an application. If chosen to present before the entire membership, he or she must pay $250.

While investors are expected to fund companies individually, they will invest "as a block when it makes sense to do that," Mr. Dilts says. The investments are expected to range from $25,000 to more than $100,000.

The entry of Maverick comes as angel investing is growing and becoming more sophisticated. According to a study by the Angel Capital Education Foundation and the Ewing Marion Kauffman Foundation, the number of angel groups being formed around the nation increased nearly 60 percent over the past three years, from about 150 in 2002 to 250 last year. And increasingly, they are syndicating more deals with other angel groups and co-investing more often with venture capitalists, the survey found.

Marianne Hudson, Angel Capital Association's executive director, attributes the trend to a rebounding economy and a recent emphasis by venture capitalists - angels' bigger cousins - on later stage deals. This creates a gap in seed funding and an opportunity for angels, she says.

In the Bay Area, there are nearly a dozen angel groups, including Band of Angels and Life Science Angels.

Despite the heavy concentration, Mr. Dilts says there's always room for more investors. "In my experience, I believe there are more deals looking for money that what's being offered," he says. "We feel that [the valley] is still under-serving the companies that come through."

Jennifer McFarlane, CEO of the Women's Technology Cluster, doesn't disagree.

While there are some angel groups in the Bay Area that provide what WTC does on a smaller scale, she says, their entrepreneur workshops tend to be just a couple hours long, making more vigorous coaching a needed service.

"Although there are a number of well established angel groups in the Bay Area, any group that combines support with [funding] for entrepreneurs adds value," she says.

There's also plenty of deal flow to go around, says several angel investors, including Randy Williams, founder and CEO of Keiretsu.

"We absolutely welcome all angel funds to the valley and Northern California," Mr. Williams says. "We look forward to collaborating with [Maverick] in the future."

As a new group, the trick for Maverick will be accessing good deals and avoiding being so structured that it puts off angel investors, notes Jaleh Daie, a Band of Angels member.

"There's enough deals to support that many groups," she says. "But when you're a new fund coming into the area, you need to have a good network."