In 2008, Ryan Wenk and Kyle Cleeton, two MU business students, came back to campus from a trip to Wall Street in New York City. Excited about what they had learned, they came up with an idea of starting an angel investment club.
One year later, after interning in the investment business, Wenk and Cleeton brought their idea to one of their professors, William Allen, an adjunct at MU’s Trulaske College of Business.
At first, Allen hesitated to take the project on. He was afraid that advising the club would take too much of his time. Wenk and Cleeton persuaded him by telling him that he didn’t need to do anything but sign a paper. Two weeks after the Allen Angel Capital Education Club officially launched, Allen was putting 25 hours a week into the fund.
“Their enthusiasm was contagious to me,” Allen said.
Contrary to what most people assume, he said, the fund wasn’t named after him but another Allen. The largest early donor to the fund was Allen’s sister, who gave money in their father’s name.
“The two primary things in my father’s life are education and finance,” Allen explained. “My sister thought her decision is the most appropriate thing ever done for our father.”
Allen now oversees the fund attached to the Allen Angel Capital Education Program as the coordinator and faculty adviser.
Angel investment isn’t for everybody, Allen acknowledged.
The term “angel investing” was born after the Great Depression, when the U.S. Securities and Exchange Commission introduced a series of legislative acts to regulate investment companies and advisers to secure the interest of the public. Companies that aren’t ready for a public offering need “angels” — investors willing to take on the investments personally — to raise money. Angel investors usually provide the backing for startups in hopes of getting a great return.
“Because you’re taking on this much risk, you expect an equivalent amount of return for that,” Allen said. “So if 80% of your investments fail, you expect 20% of your investments to pay you enough to make up for the 80% lost.”
One of the successful investments during the 10 years is Elemental Enzymes, an agrochemical research and production company with facilities in St. Louis and Columbia. All three founders are MU alumni, who formed the company based on their discovery in stabilizing enzymes for soil remediation. The initial $30,000 the fund invested in Elemental Enzymes was worth about $160,000 when the student angel group exited the business, which has continued to grow, Allen said.
Katie Thompson, the chief executive officer of Elemental Enzymes and an MU alumna, recalled that the company received funding from the Allen ACE Fund in 2012 as part of the angel investment fund round. The round helped it get the first commercial license and a research and development contract with Bayer CropScience in 2014.
Thompson said the funds directly supported the development and field testing of Elemental Enzymes’ initial product concepts.
Because angel investing is so risky, newbies in the finance business have few chances of getting involved. But during their four-semester course in the Allens’ program, students are able to put into practice the financing strategies they learn in books.
“You might learn big company strategies in a finance course,” said Aaron Kirsch, a co-director of the program, “but you don’t really learn how to think like an investor.
“Everything you learn in business school is really kind of thinking of how to position a company for investors,” Kirsch added. “Now we have to be on the actual investor side, which you usually don’t get the opportunity to do until you’re way older or moved up in your career.”
Cleeton said he and Wenk never expected that the club they handed over to the younger students in 2010 would grow into a six-figure investment fund spanning disciplines across the university. Among the $655,000 fund’s major donors: Ewing Marion Kauffman Foundation and Shelter Mutual Insurance Co. in Columbia.
Shelter Insurance, where Cleeton interned, was an early backer of the club, he said, along with the UM System’s Endowment Pool.
“We were overwhelmed with the support we received from donors across Missouri and from the university, who were investing into the aspirations of students,” Cleeton said in a phone interview. He is co-chief investment officer for Lepercq, de Neuflize, an investment firm in New York.
What started as a club has become a student program, integrated into classes. The 14- to 18-person team draws students of varying educational backgrounds, including finance, accounting, computer science, engineering, journalism and law, said Kate Gardner, the other program co-director.
The team benefits from the students’ diverse backgrounds. For instance, law school students will help look into patents.
Accelerators in Kansas City and St. Louis help introduce the MU angels to startups. Accelerators serve as professional communications between the startups and their potential investors.
“We don’t specialize in anything. We’ll take a look at anything,” Allen said. “We can leverage the resources of the university to investigate most anything.”
Looking back over the past 10 years, Allen said, he trusts that his father would be proud of what he and his sister have done.
If he could organize a 10th anniversary celebration, Allen’s plan would be humble.
“If going back to the original start, it will be Ryan, Kyle and I,” Allen said, “three of us meeting at the Heidelberg.”