Angel Investing, Entrepreneurship & Learning

I’m still waiting for a few responses to my last blog entry, but I’ve had some interesting thoughts about the question (I know… it’s kind of sad that I’m answering my own question :)).  A few months ago, I went to breakfast with Phil Reed (partner at Highway 12 Ventures) and he made a comment that has stuck with me since then.

“I like to think that our success has come because we are an ‘Entrepreneur’s Investor.”

What Phil was explaining was that he and his partners didn’t start out their careers as investors.  In fact, most of them were successful entrepreneurs that decided to turn to the “dark side” to do some investing.  He explained that he believed that to be a real advantage because he knew what the entrepreneur was going through and he had a pretty good grasp of the latest technology.

This type of investor has just recently changed teams.  He/she has just had a nice exit and is looking to put some of that money into the latest upcoming deals.  Here in Utah, there are quite a few of  those investors because of recent exits in the state.

Let me make a quick clarification:  by saying that the recent-entrepreneur-investor is appealing, I am not saying that the never-been-entrepreneur is a bad investor.  It just seems that they look at deals differently –the former will look at deals for their potential, while the latter seems to only look for their faults.

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A friend of mine showed me The Funded website about 6 months ago and I always thought that it was a cool idea.  I liked how it flipped the tables and allowed entrepreneurs the opportunity to rate and speak out (for good or bad) against VC firms across the country.  Since then, I have thought about (here’s a free idea for someone — if you are interested, let’s talk) putting together a similar site dedicated towards rating angels and angel groups, but thought that it could possibly jeopardize my role at FundingUniverse.

To me, anytime you can put more information in the entrepreneur’s hands, the better.  Why?  Well, we all know that there are some angels out there that put together ridiculous deals (usually because the entrepreneur doesn’t know any better).  In the end, the company and the entrepreneur suffer.  The problem is that the word never gets out and so the angel keeps doing bad deals and more entrepreneurs suffer.

Luckily (and I mean this sincerely), the majority of the investors that we work with at FundingUniverse don’t fall into this category.  Most understand how to structure a good deal that will help the company to grow and motivate the entrepreneur (because he/she maintains controlling interest in the company).

Since this train of thought has been on my mind today, I wanted to get your opinion and ask you (all 4 of my regular readers) the question “what makes a good angel investor?”

• Is it the terms that the investor negotiates?
• Is it the strategic experience/expertise that he/she brings to the company?
• Is it his/her connections?
• Is it strictly the cash?

Those are just a handful of questions to get your mind going.  Those of you that have had angels invest in your company — what has been your experience?  I’d love to hear good or bad.

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We’ve been quietly spending the summer working on a private, invite-only social network for angel investors and VCs — think Linkedin with a focus around deals. One of the things that we pride ourselves on (at FundingUniverse) is the quality of our investor network. Every single investor on our site has gone through both an internet and phone interview to prove her legitimacy as an angel. We’ve now taken that one step further by closing off open registration to angels and making it an invite-only private network.

Now, investors that join our network will be able to connect to other like-minded angels from across the country. They’ll be able to see each other’s investment preferences and boast their personal investment portfolio. Collaboration and syndication on deals has never been easier.

One of the hidden gems of the service is the tool we’ve developed for investment groups. Any investor can create his/her own private investment group online — it doesn’t matter if the group consists of 2 friends casually looking at deals or 80 active members of a large angel group — the tools will work for both.Let me give you a quick example: let’s say that 2 friends and I want to do some casual investing on the side. By the click of the mouse, I can create and name my own group, invite my 2 friends, and start adding interesting deals to our group watch list. Now, anytime 1 of the 3 of us logs in, the 3 of us will all see the deals that are on our group watch list. We can make private comments to each other regarding the deals and even send out a quick email to the group inviting each other to come & “vote” on the deals.

The service adds deal flow, organization, and easy communication to any investment group.

After a few demos, we already have small and large groups of angels adopting the tools. As the quality and quantity of our investor network grows, so will the quality and quantity of quality deals (and vice versa).

I don’t know a group of individuals that are more “relationship-based” than angels and VCs. Their world is all about who you know and they place a lot of emphasis on their network. At every event, many angels are coming to me asking… “who’s that gentleman that….” or “tell me about what investor x has done…” With our new service — that will all come very easy.

(If you are an investor and are interested in an invitation, feel free to contact me personally at bblake at fundinguniverse.com.)

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Summers are pretty dang slow in the investment world.  It’s weird that almost everything (including new deal introductions) almost come to a stand still during the summer.  Most angel investment groups don’t meet during the summer and personal meetings are few and far between.  As a result, I was anxious for the fall to come around to see some of the deal flow pick back up.

I think that we are off to a great start for the Fall of 2007 because there are already a handful of exciting companies that we have seen here in Utah.  Tomorrow’s our first SpeedPitching luncheon since June 6th and I’m excited to see how things turn out with the companies that are presenting.  We have a nice mix of companies and industries — including technology, telecom, wholesale retail, energy, and food.

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