Nebraska Angels’ Steph Luebbe on Investing in Entrepreneurs

Nebraska Angels Executive Director Steph Luebbe discusses the growth of angel investing in Nebraska and the resources available for firm founders and aspiring entrepreneurs.

You can watch the video on YouTube or listen to the podcast episode on Apple Podcasts or Spotify. A transcript of the interview is available below.

Mentioned on this episode:

Nebraska Angels
Invest Nebraska

Jim Vokal: Our policy team at the Platte Institute works to remove legislative obstacles, but those are not the only barriers entrepreneurial Nebraskans face. Nebraskans still need to be informed about the opportunities available in the state and to know how to access resources that can take their ideas to the next level.

So today, our guest will share a way for Nebraska entrepreneurs to make the case for funding and also how those of you who are investors, or are thinking about investing, can help grow the marketplace in Nebraska.

My guest today is Steph Luebbe, Executive Director of Nebraska Angels. They’re a Nebraska-based network of 92 angel investors that so far have invested more than $39 million in a growing portfolio of startups. Steph, thanks for joining us on Nebraskanomics.

Steph Luebbe: Great, thanks so much, Jim. I appreciate being here.

Jim Vokal: Let’s just start by you telling us a little bit more about Nebraska Angels.

Steph Luebbe: So, Nebraska Angels is a network of accredited investors, just like you previously mentioned, our investors are passionate about supporting local economic development and building the entrepreneurial ecosystem, and they do this through angel investing which is essentially putting funds into startup companies our members want to aid in job creation, attracting and retaining talent, and increasing wages.

Numerous studies have been done and indicate that, you know, over 80% of net new job growth comes from startups, which is one reason why our members want to make sure that we have a strong support system for building and growing more startups in Nebraska.

This is also why the landing page of our own website tracks these specific metrics, based on the impact that our portfolio companies have made over the years. Angel investing does and can occur outside of an angel group, however, having an organized process gives structure for both sides. So, for example, entrepreneurs who are looking for funding can come to one place, with one pitch, reach almost 100 investors relating specifically to our own group.

On the other hand, for investors, if you want to or are investing in startups, but it’s not your full-time role—maybe it’s a side-kind of a hobby or something you’re doing in the off hours—you can come to one place, and we offer a source of deal flow, a collection of knowledge, and sharing of experience amongst other members. And also having a match to your own investment. So many angels might, you know, do angel investing solo on their own. But they aren’t for sure if their check is going to go to work with somebody else’s investment, and in doing so through an organized group, essentially fulfills that.

Jim Vokal: Steph, can you tell us the difference between angel investing and other types of investing?

Steph Luebbe: Yeah. The flow for funding a startup or a new business typically starts with bootstrapping, which is typically where a founder is going to put their own their own cash, their own sweat equity, into a company to get it going. Usually what follows that is what we call funding from friends and family, so it’s finding those in your network who are willing to also back you and support you, and do so through some, you know, a cash infusion. Other sources would be accelerator programs that offer some sort of capital in exchange for ownership—company ownership—the next kind of phase, I would say that the resources that are available would be grants, both state and federal funding, that’s non-diluted funding for the company. Great resources to take advantage of.

I would say the next kind of bucket of funding that entrepreneurs would seek would be angel investments, which is where our group falls into, and then we also get lumped into venture capital. But there’s a pretty different strong difference between angel investing and venture capital.

So angel investors will input their own money into a company. They’re going to invest it independently and they make their own decisions. Venture capital, which typically follows after angel investing, is essentially going to be funds from that are pooled together from a large group of investors, so you could be looking at individuals, you could be looking at corporations, and then there’s a team of individuals that will make investment decisions on behalf of those investors, so that’s the big difference between angel investing and venture capital.

Jim Vokal: Nebraska Angels has been in operation since 2006, and has a number of successful case studies in its portfolio. So I want you to look back now—where are your entrepreneurs and investors coming from, and looking ahead, what are your thoughts on educating more entrepreneurs and investors who aren’t currently familiar with angel investing?

Steph Luebbe: Yeah, building the portfolio and seeing it take shape over the years is really fun. Relatively speaking, we still have a pretty young portfolio, as two-thirds of our investments have occurred in the last five years, and on average, it takes companies seven to ten years to reach an exit. But we are—you know, success stories are building in our in our ecosystem. Dusty Davidson and Rick Knudtson with Flywheel, we had Vishal Singh with Quantified Ag, Cory Scott with LiveBy, and you know, the impact that Blake Lawrence and his team at Opendorse are making right now. These are fun stories to tell, to be told, and what’s really exciting is we’re getting those entrepreneurs who have been successful to be involved with the Nebraska Angels group. As well, these founders are solving problems that customers face right here in our own home base, and we will continue to support local entrepreneurs, and believe that additional educational programs, whether it’s through universities, accelerator programs, et cetera, that can help educate the process of becoming an entrepreneur—what it takes to be one and how you can be successful—are critical to building out this ecosystem.

On the investor front, most of our members are local as well, and if they’re not, they have ties to Nebraska. Our investors are business professionals, we have C-level executives, many entrepreneurs and business owners themselves. We continue to expand and bring in new members through our existing network, however, we do have lots of upside by continuing to drive awareness of our own organization, what angel investing is, and the role that it plays in the broader ecosystem.

Jim Vokal: So if you look at the landscape, especially in Omaha, we tend to have this perception of ourselves as a monied community of savvy investors that grew alongside Warren Buffett and Berkshire Hathaway, but then anytime I0 read a business ranking, Steph, comparing Nebraska to other states, we seem to be mid-to-low tiers when it comes to access to capital or the financial ecosystem for startups. In your opinion, why do you think that’s the case?

Steph Luebbe: Yeah, without making a direct comparison to other states, I’ll share a few of my perspectives on where capital resources stand today in Nebraska. Funding company creation cannot fall solely on private funds. The state needs to play a role specifically as it relates to very early stages of development. We are lucky to have Dan Hoffman and his team at Invest Nebraska, that are strong partners for funding early-stage companies, and you know, I would say nine out of ten times, if our investors are making an investment in a Nebraska-based company, so is Invest Nebraska, and we’re also very appreciative and excited about the Legislature’s recent increased investments in the prototype grants, as well as the seed fund. Those are both going to go a really long way to adding more companies, hopefully to the pipeline of what our group can invest in.

Our angel network is one of the best across the Midwest, however, I’m confident we are still just scratching the surface at what’s available within our own state. There are a lot of private funding that’s available, I think it’s just going to take time, continued education, and awareness to make more headway in making this network that we have even stronger. In my opinion, the biggest area of opportunity is more funding for the really early-stage companies that would typically be too early for our process. Feeding the funnel is critical and it would take substantial funding from the state to do that.

Jim Vokal: So let’s say someone is early in their journey as a founder an entrepreneur, what are some of the other resources in Nebraska Angels’ network that you would recommend so they can prepare to make the pitch to your members sometime in the future?

Steph Luebbe: Yeah, we encourage engagement with entrepreneurs from an early stage. I love having conversations with them, being able to follow along the process, give guidance and hopefully make connections for them too, that can help improve and guide them to where they need to be.

But locally, some resources that we would recommend would be accelerator or incubator programs, many of which serve different founders and different needs. So for example we have NMotion, and the generator programs based in Lincoln. They don’t just serve Lincoln, but there’s two different types of programs that they offer, meeting entrepreneurs where they’re at. The Startup Collaborative is another great example. The Combine, which is an ag focused incubator based at Innovation Campus in Lincoln is another great resource. Resources available at UNO and UNL both offer entrepreneurial programs, classes, clubs, and now both of them are offering funds—venture funds where students can learn firsthand about venture capital and pitching investors. And then, I would say lastly, pitch competitions are another great avenue. LaunchLNK and IO Summit are ones that come to mind, where you can get some immediate feedback from others on how it is to pitch investors.

Jim Vokal: So as you look at your past entrepreneurs and founders that you’ve worked with, is there some commonality that exists among those founders or startups that have overcome the initial headwinds and have been successful in their space?

Steph Luebbe: Yeah, there’s kind of that old saying of, you know, “bet on the jockey not on a horse,” when it comes to angel investing. You know, I think it’d be a fun exercise to actually go back through our portfolio and look at all of the active companies that are still out there, and say who is still, you know, solving the same problem, for the same customers that they originally sought out to do, and I would say the answer is probably close to none, right?

Startups have to continuously pivot and strong founders need to be able to help lead their companies through that. I would say from what I’ve seen, the founders who have been most successful are the ones that are able to identify their biggest challenges or weaknesses, ask for help in combating those, and fully utilizing the resources that are available to them, are the ones that often succeed.

Jim Vokal: All right, I’m going to ask you to get philosophical now with me. Certainly, your work is connecting entrepreneurs and investors so they can do business. But there’s a segment of the public that may not understand your realm. Can you explain the larger reasons people outside of your process should care about whether people want to launch and invest in firms in Nebraska?

Steph Luebbe: That’s a great question, Jim, and I think it’s been on my mind a lot lately, as well as our boards’. Our group of members, nearly 100 members, now convenes on a monthly basis to hear from entrepreneurs who are seeking funding. We help make connections to investors and facilitate investments if it makes sense. That activity drives the reason why our members get together.

But the component of what Nebraska Angels plays is a much bigger role in supporting of economic development, and anyone in Nebraska that has a role in job creation, building and retaining talent, should want to understand how Nebraska Angels play a role in that ecosystem. Our group works very closely with Invest Nebraska, playing a pivotal role to their efforts, as they need to have a private match in every investment that they make. So without the state funds, you know our group wouldn’t be able to put as much into a company, and vice versa, they need a private match. We support the efforts that Nebraska Tech Collaborative is making and developing, attracting, retaining talent, as our portfolio companies need talented individuals to be successful.

We also work closely with and support the local accelerator programs. These programs will be a source of new investment opportunities for our angel investors that they can invest in in the future, and we want to make sure that there’s enough programming out there that can reach as many entrepreneurs as possible. There are a lot of groups and organizations that make an impact to Nebraska’s entrepreneurial ecosystem and the Nebraska Angels play a role in that. Our part is to not only facilitate connecting investors to founders, but to help engage and encourage more individuals and corporations to have a seat at the table.

Jim Vokal: You’ve given us some great thoughts so far, Steph. How can people learn more about Nebraska Angels?

Steph Luebbe: Yeah, we have a website, nebraskaangels.org, that either both entrepreneurs and potential angel investors can check out—happy to connect as well on LinkedIn—we oftentimes encourage investors who are considering joining angel investing or doing angel investing to come check out one of our meetings as a guest, and we’d be happy to have a conversation afterwards.

Jim Vokal: You’ve been listening to Steph Luebbe, she’s the Executive Director of Nebraska Angels. Steph, thanks for joining us today and all you do for promoting the entrepreneurial spirit here in Nebraska.

Steph Luebbe: Great, thanks so much, Jim.