When Dr. Frederick “Fritz” Oldenburg, a Bangor-based pulmonary critical care physician, retired in 2012, he decided to look for something new to fill his time: starting a group in Bangor that would invest in startups.

While he had been investing for decades, Oldenburg had never been involved in an angel group, which consists of people who invest their own money in an entrepreneurial company. Oldenburg was a key player in starting the Bangor angels fund, along with the help of two others — Bob Ziegelaar, the president of MainXPO, and Dr. Ben Zolper, the founder and medical director of Northeast Pain Management — who have managed the first two rounds of investing since the group formed in 2014.

Consisting of about 25 members today, the group has so far invested in about 15 companies. About 40 percent are in the Bangor region, and 40 percent are elsewhere in Maine, Oldenburg estimated, with the rest of the companies out of state. Some local investments include Cerahelix, an Orono-based company that manufactures filtration systems, and Acadia Harvest Inc., which runs an indoor marine fish farm based in Franklin.

The group’s priority is to invest in companies around Bangor, Oldenburg said, but there aren’t enough local companies that would likely produce a profit for the angels. That’s why the group has invested in companies elsewhere, such as Cognition Therapeutics in Pittsburgh, which is developing a potential Alzheimer’s drug, and Boston-based Siamab Therapeutics, which is developing treatments for cancer.

It’s difficult for angel investors to have a significant impact on a local economy since they have limited funds to contribute to startups, but they have been shown to increase the likelihood a business will succeed long-term, according to a 2011 study by Harvard University and Massachusetts Institute of Technology professors.

Since Oldenburg is somewhat new to angel investing, we asked him to share some lessons he’s learned over the last several years.

Results take time. When it comes to investing money, it takes years to see a profit.

The angel investors don’t see any of their money back until they “exit” the company they’ve invested in. That means they are no longer involved with the company: Ideally it’s sold.

The Bangor angels have not exited any of their companies yet.

“I can tell you that, at least on paper, the companies we’ve invested in have more worth now than they did when we invested,” Oldenburg said. “But … you haven’t made any money until they’re sold.”

There’s not enough mentoring. Oldenburg said that the angels would like to establish a mentoring group to help new entrepreneurs, but it’s been tough finding qualified mentors.

One potential source of mentors, he suggested, is alumni from local universities.

“If you could get 200 or 300 alumni with different specialties, it wouldn’t take much,” he said. “Hopefully someone has been there before and done that before. ‘Don’t do this, try this.’”

The problem is that with a changing market and new concepts, it’s harder to find people with expertise — especially for startups with never-before-seen products — and in a timely manner.

“Things happen very quickly,” Oldenburg said. “You’d like to think all these entrepreneurs know everything, but they don’t.”

Success stories could inspire more Maine entrepreneurs. There aren’t droves of success stories of startups emerging from the Bangor region, but a few successes could have a snowball effect.

“People see that, suddenly they go, ‘Wow, look at that. I can do something like that,’” Oldenburg said.

Failure is inevitable. Instead of investing the majority of funds into one company, angel investors spread out their funding to a number of different companies to improve their chances of success.

“To make money, you have to invest in at least 10 or 12 companies,” said Oldenburg.

The catch is that investors bank on one company doing well. “One of them you hope is going to shoot the moon. You’re going to get 20 times your investment on one company, and it’s going to pay for everything,” Oldenburg said.

As for the others, a handful will go out of business, a couple might stay in business, and a couple more might bring in a small profit, Oldenburg said.

It’s tough to explain this concept to people, he said. “If I told you that I was going for one out of 10, or one out of 12, you’d say I was crazy,” he said. “That’s not very good odds.”

But that’s how the process works.

Maine could use a big ticket investor. While Bangor angels help provide capital to get startups off the ground, their contribution can only go so far.

The Bangor angels tend to invest $100,000 per company, Oldenburg said. With the help of other organizations, such as Maine Technical institute, Maine Venture Fund and Coastal Enterprises Inc., the angels might be able to raise “up to $2 million or $3 million, but that’s about as far as the angel community really goes,” he said.

That is when companies often reach what is called “the valley of death,” he said, because while they can get a few million dollars for initial costs such as payroll, a building lease and setting up a website, it’s difficult to get more.

“Unless you’re truly unique and every angel in the country wants to have a part of you, you have trouble getting the next $2 to 10 million if you need it,” Oldenburg said.

Not just anyone can become an angel investor. To be a big investor, you need big money.

The federal government has passed rules restricting the general public from participating in the majority of investment opportunities, with the idea that most people don’t have the funds or experience to invest. Only “accredited investors” face fewer restrictions on where they can invest, with the idea that they can afford risks if their investments go bad.

To become an accredited investor in the eyes of the federal government, someone must have an income of more than $200,000 (or $300,000 with a spouse) for the past two years or a net worth of over $1 million, after registering with the U.S. Securities and Exchange Commission.

To join the Bangor angel fund, an investor must be accredited and buy at least one share priced at $10,000, said Oldenburg.

It’s all a gamble. While angel investors hear pitches from startups and go through financial information to make an informed decision about whether to invest, there are still unforeseen risks that can’t be predicted.

“Some of the companies that I thought were fliers and risky turned out to be on paper my best investments, and others have crashed and burned,” Oldenburg said.

Given that the group doesn’t have an official name or website, startups often find it by word of mouth, Oldenburg said. There were more startup ideas three years ago than today; he hasn’t been approached by local startups for funding recently.

“Bangor is not the hot spot of industry or creative thought,” he said. “I think everyone is waiting with bated breath. Bangor has some things going for it, but it’s certainly not going on all cylinders.”

Maine Focus is a journalism and community engagement initiative at the Bangor Daily News. Questions? Write to mainefocus@bangordailynews.com.

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