When it comes to collaborative investing, Sierra Angels of Incline Village, NV is one of the most pro-active angel groups in the country. Recently the group transformed an underfunded bridge loan into an over-subscribed $4.5 million Series A involving eight angel groups.

“We work very closely with the Sacramento Angels,” says Bob Goff, founder and president of the Sierra Angels. “We’re like first cousins and even have members who are part of both groups. They introduced the deal to us.”

The company is Glue Networks, a cloud-based next generation networking-as-a-service company. Glue Networks delivers high performance networking capability by extending corporate networks to remote locations.

“Sierra Angels has a keen sense of the power of collaboration,” Goff says. “We’ve been pro-actively collaborating with other angels and groups for ten years or more. It was a natural for us to pick up and accelerate further collaboration on this deal.”

Glue is currently working with selected Fortune 500 customers and strategic partners. The concept, management team, timing, and strategic partners all made the deal attractive to Sierra Angels.

Guiding the company to reshape the funding strategy

Last year, Glue was seeking a typical $750,000 bridge loan to an anticipated $4 million VC Series A.

“Several of our members liked the space, model, and management, but strongly preferred a priced round,” says Goff. “We were also concerned that the initial funding level Glue was seeking was insufficient to maintain their development and roll-out leadership until acceptable VC funding was obtained.”

Located in Sacramento, Glue Networks is in the heart of Sierra Angels’ targeted geography, which includes Nevada and the I-80 corridor between the Bay Area and Salt Lake City, UT.

“Glue founders and the top management team have impeccable and very relevant experience,” says Goff. “They are working on the cutting edge of cloud computing with a very powerful productivity enhancement solution. There is a huge market. Their timing is outstanding, and the partners they are working with, both on the partnering side and on customer side, are really top level, recognizable names.”

Sierra Angels offered to lead a priced round, but the company declined, based on their optimism about timely VC funding. Discussions with the angels were put on the back burner until the fourth quarter of last year. Then as the bridge loan had been only partially funded and talks with the VCs were progressing more slowly than the company had anticipated, the angels reentered the deal.

Sierra Angels were able to gain the interest of a super angel whose timing was motivated by the federal government’s fourth quarter Qualified Small Business Stock (QSBS) tax incentives.

To meet the funding requirements and the (at the time) December 31 deadline for QSBS, Sierra Angels put on a full court press. The resulting investing collaboration included eight angel groups from California and Nevada, two super angels, plus some investment from family and friends.

The results

The oversubscribed round closed December 30, 2010. A Sierra angel serves on the Glue Networks board. There are several interesting and somewhat unusual characteristics of this deal.

“The angel groups really became enablers in helping make this company successful out of the shoot by virtue of the timing and amount of money they needed. We were able to move at a quicker pace to close this round than the VCs could move,” says Goff.

“A second phenomena,” he says, “is that it is virtually unique to do a collaboration with eight angel groups. Third, the super angels were highly important in enabling us to arrive at the number to hit the mark. There are very few deals during this economic era that are over-subscribed.”

Some takeaways:

• The deal had strong fundamental merit.
• Persistence by a team willing to make the deal happen did make it happen.
• Deal champions coordinated the parties, navigated the issues, and pushed things forward.
• Deal leaders led due diligence and negotiated final deal terms.
• There was trust and cooperation among a large and diverse group of entities and investors.
• An excellent legal team brought the deal to conclusion.
• The QSBS deadline of December 31, 2010 imposed the closing urgency. (Editor’s note: the QSBS deadline has since been extended to December 31, 2011.)

“When you really can be part of an enabling capability that advances things in a win-win, it’s pretty exciting,” says Goff.