Someone always has to go first.
Pat Sandone, a successful entrepreneur who built one of the most recognizable tech companies in downtown Scranton and a self-described risk-taker, knows that.
He doesn’t mind going first.
That’s why he quickly jumped in with a new angel investor project, now being spearheaded by the Northeastern Pennsylvania Alliance called StartUP NEPA.
The fund is recruiting high-net worth individuals to invest, with an end goal of growing the region’s economy and improving prosperity for everyone who lives here.
The framework for the fund started coming together last year, but in light of the pandemic and the recession it tipped off, a new fuel source for the region’s economic engines couldn’t be more timely.
In 2015, Sandone sold the firm he started eight years earlier, the web solutions provider Net Driven, to Los Angeles-based new media giant Internet Brands. He found a holy grail that many entrepreneurs yearn for – build something that catches a major corporation’s attention.
Up until that point, he had created a ballpark 100 jobs, with most annual salaries over $50,000 and some exceeding six figures, he said.
Employees lived downtown, within walking distance of headquarters at SLIBCO’s Scranton Enterprise Center. They shopped and dined at local spots. They proved a concept – the region, and Scranton in particular, can support a cutting edge tech industry.
Fund organizers at NEPA Alliance say the region has plenty of Net Driven stories, reaching up from the margins, just waiting for the right angel to lift them out.
The Alliance is one of seven sister agencies representing local development districts in the state. About a year and half ago, its counterpart headquartered in Altoona, the Southern Alleghenies Planning and Development Commission (SAP&DC), began Startup Alleghenies and the Alleghenies Angel Fund.
SAP&DC spokesman Benjamin Mazur said the program has been very successful, and he’s noticed other development districts modeling similar programs after theirs.
It also caught the Alliance’s attention, said Kurt Bauman, vice president of community and economic development.
Out of 74 local development districts from Alabama to New York, the Appalachian Investors Alliance, which consulted for the Alleghenies Angel Fund, picked the NEPA Alliance to move on next.
“We’re honored that they chose us out of the whole network,” Bauman said.
The Alliance is contributing about $15,000 to cover legal and startup costs. The Appalachian Investors Alliance received about $35,000 from the Appalachian Regional Commission to start discussions with investors and businesses.
The Alliance wants investors to steer the ship, and won’t fully define its priorities, namely the kinds of startups it invests in, until it reaches a $1 million launch threshold.
“We will not set the complete vision for the angel fund until the investors are committed,” Bauman said. “Anything we do, obviously, we hope will complement Ben Franklin (Technology Partners of Northeastern Pennsylvania) and all the economic development programs in the region and the state.”
This kind of angel fund is unique for the region, but certainly not the first investment platform geared toward startups.
Ben Franklin Technology Partners, which was created by the state government, started nearly 40 years ago and has pumped billions into the state’s economy through technology companies, including startups.
Ben Franklin was among like-minded workforce and business development agencies to sign memoranda of understanding with the Alliance, expressing their support for StartUP.
Other organizations include the Greater Scranton Chamber of Commerce and the Small Business Development Center at the University of Scranton, Bauman said.
“The heartbeat of a technology company is cash flow,” said Ken Okrepkie, regional manager for Ben Franklin’s northeast division, adding that such a fund strengthens the local entrepreneurial ecosystem.
“More importantly, it gives the entrepreneurs the fuel they need to get those initial products to market, find their target customers and that repeatable sales model,” he said. “Cash and capital are what drives that.”
Net Driven did for Scranton what Pepperjam and Luzerne County entrepreneur Kristopher Jones did for Wilkes-Barre.
Now, SLIBCO has its own incubator dedicated to tech startups, TekRidge Center, just outside the city, and a host of other companies have planted roots in the region.
While Bauman and the Alliance don’t want to tell their angels how to pick startups, Sandone sees tech companies as an obvious priority.
After selling Net Driven, he started two other companies, My Digital Balance, which provides web solutions for wellness and healing practitioners, and the Guide App, a mobile tool that helps people achieve goals and connect with like-minded thinkers.
When building the company with help through the business development scene, he said investing in an angel fund is one way he can give back.
“It’s the future of our economy,” he said of the local tech sector. “Despite COVID, the NASDAQ’s at a high, and a lot of that is because so much of what’s happening in the world today is moving online … I see the potential for our area to really capitalize on that.”
He’s not the only one thinking that way.
At least a few times a year, entrepreneurs with great ideas contact the Alliance on their hunt for capital, said Stephen Ursich, vice president of business services development.
“We did keep running into what I would describe as the ideal angel investment opportunities,” he said.
A StartUP NEPA FAQ sheet says the average return on investment is 14%, but notes that: “every investment comes with risk.”
Bauman and Ursich have no hard deadline to hit their $1 million launch goal; however, they plan to assemble at least 90% of investors by the end of the year and start seriously looking at candidates in 2021.
“Investing in this fund makes sense,” Sandone said. “If we could make this work, the benefits of this will be far reaching for everyone in the area.”