New York
Angels
These angels are much more
Wharton than MIT -- they're management types, as opposed to techies.
Most of New York Angels' companies are further along than is typical for
angels, and as you would expect out of New York, the group's portfolio
has a lot of media businesses. The New York Angels prefer to see
innovative applications for existing technologies, as opposed to
brand-new technologies. A good example is Adapt Media, which pioneered
selling advertising on scrolling displays atop taxicabs. "It was a weird
medium that hadn't been tried before; would anybody actually buy it?"
says the group's director, Chris Saxman. The group's website has a
one-page submission form. (Don't forget the $150 filing fee.) Firms that
look promising to Saxman go to a monthly screening session; survivors
are invited to present at the full group's monthly breakfast meeting.
Investments are strictly the decision of individual members; a typical
deal will attract four to eight members, each kicking in $25,000 to
$100,000.
The Achievers'
Network
CommonAngels
Entrepreneurs who approach
CommonAngels can be assured that the group's members have been on the
other side of the table: They've founded 118 companies (mostly high
tech), sold 104 of them, been CEO of 93 of them, and taken 34 of them
public. To apply for funding, send managing director James Geshwiler an
executive summary. If the firm sounds promising, he'll have a group of
experts in the technology in question grill management; if the deal gets
past them it will go to a group of generalists. Firms that survive those
three cuts present at the CommonAngels' monthly meeting. In 2000, about
20 members came up with close to half of a $3.2 million A round for
Bitpipe, which distributes literature from IT companies over the Web;
many members continued with two subsequent rounds. When Bitpipe was sold
last December, members got from two to five times their money back.
The Old Hand
Bob Geras
Bob Geras opened his own
investment house in 1978 and has been Chicago's most active angel ever
since. He has invested in all kinds of tech companies -- software,
biotech, medical devices, nanotech, telecom -- as well as insurance
firms, banks, oil drillers, motels, and real estate. Geras is tough;
bring a business to him and you'll probably get a lower valuation than
you would elsewhere. The tradeoff, he says, is that you'll end up with a
working product that people are buying, and doors will open for you when
you're ready for follow-on investors. Last year Geras funded 11 deals,
and he says he looks at each of the seven or eight that cross his desk
every week. No website, but he doesn't mind us telling you he can be
reached at
bob@vcbob.com.
The
Professionals
The Angels'
Forum
This small group is composed of
successful former Silicon Valley executives who now do angel investing
full-time. They meet weekly, not monthly, and most of each meeting is
taken up with tracking the progress of firms the group has already
invested in. "We see, feel, touch our new portfolio companies about
every 48 hours," says Angels' Forum founder Carol Sands. "When you're
dealing with very early-stage start-ups, 48 hours is a really long
time." Entrepreneurs can approach Angels' Forum by filling out a
one-page "Snapshot" form downloadable from the website. The odds, of
course, are long: The group gives preference to firms referred by
members, and does four to six deals a year out of the 3,000 submissions
it gets. The group's tech focus draws it to cutting-edge developments,
including, for example, an intriguing new idea for fighting obesity.
Recent research suggests that one way fat people may differ from skinny
people is in the degree to which their stomach walls vibrate. Thin
folks' stomachs vibrate sufficiently to absorb the nutrients they need
and send the rest on to quick elimination; obese people's stomachs are
less efficient in that way. IntraPace, a recent addition to the Angels'
Forum portfolio, makes a pacemakerlike device that sends pulses to the
stomach to shake things up.
The Angel-like
VCs
Silicon Alley
Venture Partners
SAVP is a venture capital firm
that specializes in early-stage companies in the New York area; it will
put in anywhere from $250,000 to $1.5 million as a first round. Like New
York Angels, SAVP is interested in applied information technology rather
than new core technologies. Managing partner Steve Brotman says his
company tends to invest in "corporate dropouts from industry versus
university spinouts. It's not coming out of a lab, it's somebody coming
out of JPMorgan." Companies in the firm's portfolio include Critical
Mention, which searches and monitors TV broadcasts, and GameTrust, which
sets up tournaments for online games. Brotman says that 85% of SAVP's
A-round companies get to a B round of $5 million or more from a
later-stage VC in an average of 18 months. Part of the reason, he says,
is that those VCs like the institutional-quality full due diligence SAVP
conducts on the companies it backs. Executive summaries can be submitted
to
bplans@savp.com.
The VC-like
Angels
The Washington
Dinner Club
Like venture capital firms,
this group raises money in discrete funds. The Washington Dinner Club is
the name of the third LLC formed by John May; the fund is almost fully
invested, so the group is now starting its fourth fund, Dinner Club IV.
The Dinner Club tends to invest in the sectors that are thriving in the
Beltway area: information technology, defense, homeland security. May
calls the winnowing process "a hundred to ten to two" -- out of a
hundred business plans submitted via the website in a month, 10 merit a
meeting with a screening committee; from those, two are selected for
presentation at the group's monthly meetings. (Yes, dinner is served.)
Afterward, members vote on whether the fund will invest. Individuals
then have the option of putting in more of their own money. A club
member who had invested in an A round for Matrics, a maker of radio
frequency identification chips, introduced the Dinner Club to the firm
in 2001; it ended up being one of two angel groups in a $14 million
VC-led B round, and last fall got four and a half times its money back
when Matrics was sold to Symbol Technologies for $230 million.
The
Ringmasters
Keiretsu Forum
The largest angel network in
North America derives its name from the vast Japanese conglomerates that
emerged after World War II. Keiretsu Forum combines individual and
regional autonomy with the sharing of research and due diligence. All
members make investment decisions on an individual basis. Companies
apply online to the chapter nearest them. A company that earns a
commitment from one chapter may travel to other chapters to make pitches
for additional funding and will find that those chapters have already
pored over all the research Keiretsu has done so far. The group will
invest in anything; 30% of the portfolio is in real estate. At the San
Francisco chapter, the largest with 150 members, about 50 applications
each month go to an industry-specific prescreening committee. From
those, seven to 10 are selected for presentation before a 30-member
screening committee. Three to five are then selected to present before
the full members' meeting, which founder Randy Williams calls "the Big
Show." One thing big about it is the presentation fee companies must pay
at this point -- $3,000. Williams says the fee defers costs and serves
as a filter system: Most of the companies that present have revenue.
The
Commercializers
Technology
Tree Group
The Federal Government spends
billions of dollars a year on scientific research. Here's a group of
angels, organized as an investment firm, that is dedicated to turning
some of the thousands of concepts paid for by the government into
companies that make money. Last December, Technology Tree signed an
agreement with NASA to build companies to develop ideas cooked up in the
agency's labs. It has a similar deal with the U.S. Department of
Agriculture and is pursuing other federal agencies as well. The group
also invests with technologists who have received federal Small Business
Innovation Research grants. Mike Fitzgerald, CEO of Technology Tree,
says the group is starting to assemble management teams to run the
companies it is forming, so he's got a proposition unique to this list:
If you're an entrepreneur with a track record building businesses but
don't currently have a company or a new idea, send Technology Tree a
resume.
The
World-Changers
Investors'
Circle
The oldest organization on our
list has a funky combination of loose structure and social activism. The
website defines the group as a "national network of early-stage private
investors who seek financial, social, and environmental returns on their
investments." Though members are scattered across the country, "ethos
holds us together," says chairman and CEO Woody Tasch. Applicants submit
business summaries to the website; the up to 60 that are approved by the
staff each month can get circulated, for a fee of $350, to the members
nationwide. From there, any number of things can happen. Often the
member who has the best combination of proximity to the company and
experience in dealmaking will lead a group of members to invest. An
affiliated professionally managed fund, Commons Capital, serves members
who don't have the time or deal experience to invest individually.
Alternative energy is an important category for this group. Investors'
Circle also supports localizing the food supply chain; hence its support
of the Farmers Diner, a Vermont restaurant that gets most of its food
from nearby farms and is planning to expand to a national chain of
diners that do the same thing for their local agricultural communities.
Sidebar: Do
Not Say, "I Just Want the Money"
And other keys to
presenting yourself before potential investors.
Be able to describe your
business -- what it does and who it sells to -- in less than a minute.
Have a handle on who the
competition is, why your solution is better, and how you are going to
gain market share.
Avoid unrealistic
"hockey-stick" projections that show your product or service suddenly
rocketing. It won't.
Emphasize the likely exits for
investors.
Answer all questions honestly;
don't try to hide information that doesn't support your case.
Have respect for your
prospective investors. Understand that those who do invest are going to
be involved with your company for a long time. Often one or more of your
investors will take a seat on your board of directors. They know things
you don't. Don't tell them you "just want the money."
Prepare yourself. Many groups
offer free coaching to entrepreneurs who have passed their initial
screens and are about to present before the entire group.
Sidebar:
"Money Is Not Just Green"
What angel investors
know and entrepreneurs need to.
Some entrepreneurs out there
are extraordinarily independent. They want to do it all themselves.
Those people never come to angel groups, or if they do, they say, "My
way or the highway," and that usually means the highway.
What you really need is a good
CEO. You can find a CFO or a controller or whatever. And then you need a
good VP of sales with a hundred-day mentality. That's a guy who's
interested in getting deals closed quickly.
I want to see somebody who's
going to lay himself down in front of a freight train if that's what it
takes. I don't want to have to worry about somebody seeing that the
going gets a little bit rough and then they say, Well, sorry, you've got
a write-off, and I'm going back to work for my uncle.
Entrepreneurs fail to
understand that not all angel investors are equal. Money is not just
green. There is what we call smart money and obnoxious money. And
obnoxious money will cost you time and energy.
Entrepreneurs are always
entranced with their own idea.
We have some very high-level
biotech execs in our group, and scientists. But each area is so complex,
and they're such niche ideas, we get plans in and we go, huh?
Sometimes the best thing you
can do for somebody is just tell him, Don't try it.
