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By: Steve Hendershot February 27, 2012

Tech entrepreneur-turned-investor Shawn Riegsecker understands the value of an angel investor firsthand because his own company relied on one.

That was in 2005, when Mr. Riegsecker’s Centro LLC was looking to develop its technology platform. (Chicago-based Centro helps ad agencies purchase digital display advertising.) Mr. Riegsecker had used his own money and credit to build the business to that point but then raised $1.8 million from 20 angels, mostly based in Texas and New York.

The capital infusion enabled Centro to weather the recession and grow. The 250-employee company is on pace to earn $200 million this year. When Mr. Riegsecker, 39, raised $22.5 million from San Francisco-based FTV Capital last year, he used some of the money to pay back his investors—including himself—and immediately began looking to make an angel investment of his own. His motivation was less about returning the favor than about his belief in the profit potential of local tech startups.

“Most technology entrepreneurs believe that there are disruption opportunities all over the place. And by definition, we are risk-takers. For those reasons, we would much rather invest our hard-earned wealth into (startups) than in a blue chip, slow-growth stock, especially if we can add strategic value to a young company,” Mr. Riegsecker says.

That value-added component is critical for entrepreneurs-turned-investors such as Mr. Riegsecker. The idea is that their experience in growing a tech business will benefit their portfolio companies.

When entrepreneur investors “aren’t just providing money, but also expertise and access to their networks, it helps (startups) gain traction faster,” says Kapil Chaudhary, co-founder of the I2A Fund, a Chicago-based venture-capital fund focused on early- and seed-stage investments.

Mr. Riegsecker has made three angel investments totaling about $400,000. He’s also trying to recruit fellow angels to contribute a combined $1 million to one of his portfolio companies, Chicago-based YouTopia. He approached the founders, Simeon Schnapper and Brett Singer, because he was a fan of a 2002 movie the pair had made lampooning Internet startups in the era of the original dot-com boom. They started talking business, and Mr. Riegsecker loved their idea for a website that would help businesses track and reward community service performed by employees.

Mr. Schnapper, not surprisingly, was thrilled. “Our team has been through startups before, and sometimes (the value of an angel investor) is the money, sometimes their network, and sometimes it’s their insight. (Mr. Riegsecker) brings all of that. Plus, there’s this sincere, authentic quality about him that matches what we’re trying to do around the brand.”

Messrs. Schnapper and Singer get together with Mr. Riegsecker every other week, and Mr. Schnapper credits those meetings with helping focus YouTopia’s business model. Now Centro is one of YouTopia’s beta customers.

Mr. Riegsecker says the only trouble with his plans to assist YouTopia is that he’s too busy to help as often as he would like—after all, he still has Centro to run. But Mr. Schnapper isn’t buying the idea that there’s any sort of deficit associated with Mr. Riegsecker’s involvement: “He really is an angel, not just as an investor.”

© 2012 by Crain Communications Inc.
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