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DOT-COM DEALMAKERS



Angelstreet Will Screen, Post Info on Companies Seeking Venture Funding

Starting out on a wing and a prayer,and about a million dollars augmented by the technical expertise of a gaggle of former E*Offering employees,Angelstreet.com is up and running with plans to offer its first venture capital deal over the Internet within the month.

Scott Hutchinson, former director of corporate finance for E*Offering, and Louis Lichtenfeld, a long-time investment banker, co-founded Angelstreet.com in September with close to $1 million in funding from Lichtenfeld, two individual investors and Centennial Venture Partners, a Raleigh N.C.-based VC firm.

Angelstreet established its web site in November and, according to company officials, it presently is closing in on an additional $5 million to $10 million in venture capital for its own operations.

With dual headquarters in Chicago and Newport Beach, Angelstreet researches venture deals and posts them on its web site for members, who have the option to invest in any of the deals available, with a minimum investment of $25,000 per deal. In theory, this gives the venture deals access to the billions of dollars sitting in the angel investor realm.

According to Lichtenfeld, within the next month the firm will be posting its first deal and it will have engagement agreements in place for 13 more.

Angelstreet requires that 20% to 40% of the funding a deal receives come from a single institutional investor, with the rest of the capital coming from Angelstreet members.

It has about 40 “very responsive” venture capital firms in its stable, according to Lichtenfeld.

“We’re ready to go from that standpoint,” Lichtenfeld said, adding that about half of the deals already come with an institutional investor. “We need members.”

Angelstreet is looking for deals in the $5 million to $10 million range, though it has pushed its limits to work on a $20 million deal.

Aiming High

“Our game plan as we get going, is to do one a month,” Lichtenfeld said. In time, he said he expects to fund one deal a week.

The type of companies Angelstreet is looking to fund run the gamut, from technology and traditional manufacturers to life-science and healthcare companies. The deals it is looking to complete are for seed and early-stage companies, later-stage transactions, management buy-outs, recapitalizations, mezzanine financing and small-cap companies needing advisory, M & A; and capital-raising services.

Angelstreet charges membership fees,deferred until the member makes an initial investment,and it will take shares and warrants from the firms it features on the web site. Lichtenfeld declined to give revenue projections.

Lichtenfeld and Hutchinson first hooked up after E*Offering moved its operations to the Bay Area last fall. Hutchinson, who wanted to stay in Orange County, was shopping for new opportunities when an acquaintance, Glenn Kline, the founder and managing director at Centennial Venture Partners, told him that Lichtenfeld was starting the Angelstreet project.

“I told Glenn I would love to meet Lou,” Hutchinson said. The match made, Lichtenfeld, who has been in investment banking for more than 22 years with firms such as Dean Witter Reynolds (now Morgan Stanley Dean Witter) and Kemper Securities (now Everen), concentrated on gathering the management team and capital for the project. Meanwhile, Hutchinson established an office in the old E*Offering building in Newport Beach and began to develop the company’s web site.

Hutchinson turned to another E*Offering connection to supply the technology: Newport Beach-based NetChemistry, a company formed by a splinter group of E*Offering employees who had developed that company’s online operations. Like Hutchinson, the group had been reluctant to move north, and so, with E*Offering founder Walter Cruttenden’s son, Chris, at the helm, set up shop as NetChemistry. Leasing space in the same Newport Beach building from which Angelstreet operates, the new company’s first client was Angelstreet.

Angelstreet also recruited Geoffrey Van Der Ahe from E*Offering, where he had been responsible for preparing technology companies for private placements and IPOs.

Today Hutchinson is Angelstreet’s executive vice president and manages the Newport Beach office, which employs Van Der Ahe and another associate, Brian Sognefest, who was an investment banker at Friedman Billings Ramsey. Before E*Offering, Hutchinson had been in the investment banking business for 30 years and was involved in the founding of MJT Holdings (now OptiMark) and was a managing director at Ventana Global. Lichtenfeld is Angelstreet’s president and CEO and runs the Chicago office, while Kline is chairman and operates out of his Raleigh office. The firm also has an office in New York.

Angelstreet has about 20 employees, a few more affiliates and is looking to hire more people.

“Private placements are very time consuming. We are restrained by the capacity of the people we have,’ Hutchinson said.

Lichtenfeld and Hutchinson both agree that Angelstreet is not the first of its kind, with web sites like Garage.com and OffroadCapital.com already operational.

Palo Alto-based Garage.com launched its web site in May of 1998 and has already completed 38 transactions. It is not an investment firm though. It is only a posting service to match entrepreneurs with venture capital. It filed its S-1 in February to go public, with a last round valuation in excess of $300 million.

San Francisco-based OffroadCapital.com, however, is another web site and investment firm like Angelstreet. It launched in June and has completed six deals to date.

“They are doing a wonderful job,” Hutchinson said.

Angelstreet encourages its members to become members of Garage and Offroad, so they can get a better scope on private placements.

Angelstreet is trying to organize angel investors and give them the opportunity to invest in several venture deals, instead of only the few that most angels are exposed to. Explained Lichtenfeld: “There is a real need for organized capital.” There is also a need, he said, “to provide an orderly way to see good deals, professionally.” n

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