Being a Home-Town “Angel Investor” With Your Self-Directed IRA
There was a terrific article in Forbes earlier this year describing how a diverse community of ‘angel’ investors is finding profitable angel-level and venture capital-type opportunities right here in North Carolina and across the country.
While most of us are used to thinking of ‘angel investors’ as wealthy individuals and hedge funds in Manhattan, Boston and Silicon Valley, the fact is that there are promising start-ups sprouting all over the country. And your self-directed IRA may make it possible for you to join them and participate.
This isn’t just good for your portfolio – it’s good for your community, as well.
The article specifically mentions Greenville, South Carolina – a fast-growing mountain community with a lot going for it. But there are awesome investment stories all over the Southeast, which is benefitting from these trends:
- Increased demand for housing.
- Strong tourism in many areas, thanks to the incredible natural beauty all around us, world-class fishing and top-shelf golf courses
- A favorable climate that attracts ‘snowbirds’ from the North and retirees.
- ‘Half-backs:’ Retirees from up north who moved to Florida but are now moving ‘halfway-back’ to the Carolinas to spend their golden years.
- A number of world-class universities
- Massive tech investment in the Research Triangle of North Carolina.
- Strong economic growth
- A boon in ‘green construction’
Here’s some news: General Electric is considering moving its headquarters. And North Carolina’s ‘research triangle’ is on the short list.
If GE moves to North Carolina, that could create opportunities for thousands of small businesses in the area looking to fulfill subcontracting opportunities. GE is, of course, a major federal contractor. As such, they have to subcontract out a percentage of their work to small, minority-owned, veteran-owned, disabled-veteran owned or other disadvantaged businesses.
But the Carolinas are a compelling investment story even without GE in town.
Back to the Forbes article – the author mentions some very successful angel investors who are focusing their efforts on ‘underserved’ areas. Yes, there are some difficulties the small-town angel has to face:
- More limited deal flow (but less competition from other investors, as well!)
- Your investor partners may need more education.
- Exit planning is tougher – there’s frequently no bigger VC or private equity bigger fish in town to buy out your investment in a few years.
- Not much of a system of mutual support. Areas like Silicon Valley have created a number of ‘incubators,’ boot camps and workshops for more experienced hands to coach managers of startups. These things may not exist locally.
It may be more difficult, then, for you to fund the next grand slam home run. But there is no reason you can’t be hitting doubles on a regular basis! According to Forbes, the Upstate Carolina Angel Network (UCAN), operating out of Greenville, South Carolina, has had ‘multiple successful exits’ since it was created in 2008, with 80 percent of its capital in South Carolina startups.
Your IRA or 401(k) can be a ready source of funds for this kind of investing. You don’t even have to take a distribution; you can be an angel investor using this source of capital while still taking advantage of tax deferral, or in the case of Roth accounts, tax-free growth.
In fact, because growth in a Roth IRA or self-directed Roth 401(k) account is tax-free (as long as you keep the money in the Roth for at least five years), it’s possibly an ideal home for high-risk, high-reward angel investing strategies like this.
If you are interested in being a hometown angel investor, we are interested in working with you. American IRA, LLC, based in Asheville and Charlotte, North Carolina, is a nationally recognized expert in the administration of self-directed IRAs. Please call us today for a no-obligation consultation, at 866-7500-IRA (472), or peruse our extensive library of educational resources and articles at www.americanira.com.
We look forward to serving you.