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The second Boulder Open Angel Forum event is happening on August 4th at 7pm. In case you aren’t familiar with the Open Angel Forum, the organization is dedicated to providing entrepreneurs with access to the angel investor community based solely on merit and without any fees.
The first Open Angel Forum in Boulder was dynamite. David Cohen, the founder/CEO of TechStars drove the event and is also hosting this one. He has scheduled it the night before the TechStars Boulder 2010 Demo Day with the hope of having some out of town angels that are here for Demo Day attend.
I’m on an Acela train between Boston and New York (listening to Boston’s More Than A Feeling – how recursive) on my way to the TechStars Boston 2010 Investor / Demo day. I wasn’t able to make it to Boston yesterday for the Angel Boot Camp as I was running around NYC with the CEO of a company I invested in last week introducing him to a bunch of potential customers and partners.
It sounds like Angel Boot Camp rocked. My long time friend and co-angel investor Will Herman wrote a post titled Angel Investing that summarized some of his advice. Will is finishing up his 31st angel investment (we’ve done a bunch together – including my very first one – NetGenesis in 1994) and he walks through what he’s learned from 16 years of angel investing. Don Dodge also has a great post up titled How to be an Angel Investor…and make money.
On the eve of the graduation of the TechStars Boston 2010 class, I thought I’d weigh in with some additional advice to anyone who either is or wants to be an angel investor. Some of this repeats what Will and Don said, but I’ll try to be additive (and specific). For context, I’ve made over 75 direct angel investments primarily in two time periods – 1994-1996 and 2006-2007. I’m out of the angel business as all of my investments go through Foundry Group (the VC fund I’m a partner in) but I’m an investor in a number of “super angel funds” as well as a co-founder of TechStars and I continue to regularly make seed investments from Foundry Group alongside of angel investors.
So – here’s the advice:
1. Be promiscuous: To be a successful angel investor, you have to make a lot of investments. I generally made about one investment a month when I was active as an angel. While this pace may not be right for everyone, if you are doing less than four investments a year, I don’t think you are making enough. Play the field – it increases your chance of hitting a monster and it’s a lot more fun.
2. Have a long term financial strategy: Early on I decided that I was going to write the same size initial check in every angel investment. In the first phase (1994-1996) this was $25k. In the 2006-2007 phase this was $50k (although I broke this rule by occasionally doing $25k or $100k and in several cases, even more.) I always assumed I’d double down on each investment before the company either raised a VC round or was acquired (so – when I put $25k in, I was really allocating $50k to the company.) Then, I decided how much I was going to invest over a particular time period. In the 1994-1996 time period I decided to invest $1m in angel investments. So – that gave me capacity for 20 investments (I did more – oops.) In 2006-2007 I allocated more (and did more). However, since I had a time frame and an amount per company, I had a baseline pace that I could go at before I got uncomfortable with how much I was investing.
3. Understand the difference between 0x and 100x: I’ve had two of my angel investments return over 100x each. Since I had a strategy of investing the same amount in each company, all I needed was one 100x to allow me to have 99 companies completely flame out and return 0 and I’d still break even. With two investments at over 100x, I now have a built in gain of significantly over 3x across all of my investments since I’m made about 75 of them and I’m now deliciously “playing with house money” on all of the rest.
4. Choose people over ideas: I have never regretted making new friends through an angel investment that failed. I have always hated working with people I didn’t like, or didn’t think were A+. It’s an easy filter – use it.
5. Decide quickly: My best investments as an angel were made after one meeting and I’ve often committed in the meeting. Sometimes it has taken me longer – usually a second meeting or a long meal. But there’s no reason for an angel investor – especially an individual one – to drag the entrepreneur through a long, protracted due diligence process.
6. Don’t torture entrepreneurs: Remember, you are supposed to be an “angel investor”, not a “devil investor.” If you really want to be a great angel investor, decide quickly and then help the entrepreneur get their financing done! Be a force for good in the universe.
7. Run in a pack: The best angels run in packs. They share deals. They love to work together. They don’t feel obligated to invest in each others stuff, but they often do. And they communicate with each other. If you run in a pack, different people will take the lead role in different cases – sometimes I’d be the lead investor in an angel deal and – with a $25k check pull together a $500k round. Other times I’d just be one of the $25k checks in the $500k round and pawn off the work on one of my friends. Either way, I have a lot more fun playing with others – especially when the companies win!
I’m sure some of these don’t work for everyone so I’d love to hear any criticism from other angels out there. And – feel free to add your own tips, especially about – ahem – working with VCs.
Jon Pierce of BetaHouse has decided to organize an Angel Boot Camp in Boston on June 1st. The idea is that anyone interested in learning more about how to get started with angel investing can attend and learn from some people who’ve been there and done that.
David Cohen at TechStars wrote about why he thinks it’s important. Jon Pierce also wrote about why he’s doing Angel Boot Camp as well as listing some of Boston’s Best Angel Investors.
While June 1 is still several months away, sign up and put Angel Boot Camp on your calendar now.
I know I owe everyone a follow up to my post from last week titled The Proliferation of Standardized Seed Financing Documents. To the many of you out there that emailed me in response, thanks for all of the thought, ideas, suggestions, and offers of help. More on that soon.
In the mean time, I noticed today that Dow Jones is running a seminar titled Negotiating an Angel Deal: What Angels, Entrepreneurs & VCs Need to Know. My partner Jason Mendelson is one of the panelists, along with several other notable lawyers and angel investors. If you are interested in this particular topic, I expect there will be a “robust” discussion as I know that the opinions between a few of the folks on the panel vary pretty widely. If you are interested, sign up here.
When I wrote my post titled An Angel Investor Group Move That Makes Me Vomit I expected to write my little rant and be done with it. A month or so later Jason Calacanis picked up the mantle and started a Jihad against the idea of angel groups charging entrepreneurs to pitch to them.
The result is the Open Angel Forum. I participated in the second event last week in Boulder. I thought it was spectacular and the twitter stream from #OAFCO reflected this sentiment. About 20 active (at least four investments in the past year) early stage investors (angels and seed stage VCs) attended. Six entrepreneurs presented their companies in short seven minute pitches. Five sponsors underwrote the food and drink at the event. There was plenty of networking before and after. That was it – small, intimate, and highly relevant to all.
Most of the presenters wrote blog posts about the event which will give you a great feel for what they experienced.
- Odojo – My Experience presenting at The Open Angel Forum
- FaceFile – Open Angel Forum Colorado
- Grogger – OAF: Things Getting Better for Entrepreneurs
- TeamSnap – TeamSnap presents at Open Angel Forum
- Kijubi – Kijubi @ Open Angel Forum in Boulder Colorado