Angelsoft is a software company, not an investment group.
Angelsoft is the software tool that runs the angel investment industry, and, increasingly, the venture capital industry. Many investors use Angelsoft as their exclusive means of accepting deal flow from entrepreneurs, to evaluate which to move forward with, and when collaborating with other investors and groups across our network.
We also provide tools for entrepreneurs to access these investors, allowing them to access the entire early-stage industry for by subscribing to our “Promote” tool. You can learn more about those tools here.
The New Entrepreneur Newsfeed gives you even more visibility into the funding process, and how your application is being judged and evaluated.
Here is a guide to better understand what each news item means:
- Investor comment on Community:
An investor has posted a comment on your Community deal wall and chose to share it with you. This comment is available to all investors on the Angelsoft Investor Community. You may reply to this comment just once, and it will be posted right below the investors comments for all investors to see.
- An Investor gave your application a Thumbs Up:
Investors on the community can moderate deals Up or Down. You can see your total ratings from investors, including your current relative position among community deals.
- An Investor gave your application a Thumbs Down:
An investor has rejected your deal by giving it a thumbs down. This will affect your relative position in the community negatively, however positive ratings can cancel the negative ones out. Again, you can see how it affects your relative position right on your Investor Community box on the top left.
- An Investor has viewed your Open Deals application:
An investor has clicked on your application and read it over
- New Investment: $100,000 from John Doe, East Coast Angels
An investor has committed funds to your deal
- New Investor: John Doe, East Coast Angels
An investor has expressed interest in funding your deal, but has not entered an investment amount.
- Invitation: Screening Event 2008:
An investment group has invited you to an event. Clicking on the event name will link you to the details
- Referred from Acme Angels to East Coast Angels:
Angelsoft is a network and groups will often share deals between them. This is called a referral. When your deal is referred, it is sent to the second group as if you had applied to that group directly. A new application will show up on your My Applications tab.
- East Coast Angels invited Acme Angels to collaborate:
To finish out a round of financing, Angel Groups often need to collaborate on a deal, or co-invest. When this happens, Group B is invited into Group A’s deal room. In this case, you will not see a new application on your My Applications tab
- A member of East Coast Angels has referred your application to his group:
Congratulations! An investor has referred your deal from the Investor Community to his investment group for further review.
- An investor has viewed your [group name] application:An investor from the designated group has clicked on your application and read it over.
- Application posted to the Investor Community by John Doe: The Investor Community is a feature inside Angelsoft. Investors post deals there when they are looking for outside investors to finish out a round. Applications posted by investors are labeled differently than those posted by entrepreneurs.
The “Two Johns,” Knox, and Bill - seasoned investors all - provide some sobering, yet optimistic commentary on the current state of angel investing.
Some key realities and trends identified, in short (Entrepreneurs, take note):
Focus. Focus. Focus on businesses that move quickly to profitability and positive cash flow.
If you are an entrepreneur raising money now, take what you can get. Like, right now.
Valuations will likely be compressed.
Angels today will be much more proactive in managing their portfolio companies. While amounts invested may or may not change, angels will be much more selective and are going to pay a lot of attention to how their money is spent.
And, as we’ve been observing here at Angelsoft for some time, angel groups will increase syndication in order to pool funds and expertise, diversify, and spread risk (Hmmm…wouldn’t it be neat if there was, like, a platform, that facilitated syndication???).
My two cents, for what it’s worth: Despite the current doom-and-gloom narrative, and in a week where we’ve seen thousand point swings in the public markets, it was absolutely refreshing and encouraging to be in a room with 75 angels who, it seemed, can’t wait to fund the next great startup. I say, just get out of their way!
John May is the Chairman Emeritus of the Angel Capital Association, the official umbrella organization of the leading angel investment groups in the United States. He is a major figure in the global angel sector, having written two seminal books on angel investing, one for entrepreneurs on fundraising, and another for angels on best practices in investing. John serves as the primary East Coast trainer for the ACA’s Power of Angel Investing seminars, and through his management firm New Vantage Group runs several of the most respected andactive angel organizations in the country (which, of course, all use Angelsoft to manage their deal flow and investment collaboration.) What follows is a clarion call to serious angel investors that John issued this week in light of the capital market gyrations.
“Calls have been flooding into me from the press, our investors, and our portfolio entrepreneurs about how to react to the darkening economic environment.Early-stage investors in entrepreneurial companies have always represented themselves as patient investors and supportive partners, not financial engineers. In fact, we angel investors have frequently thought of ourselves as “mentor capitalists.”
So it occurred to me that in this time of political uncertainty, lack of clear direction from economists, and once-in-a-lifetime hurdles, we must stand up and either be true classic angel investors or we should go home. I seriously think that we will look back on this era as one when we stood by our companies and separated ourselves from the quick buck, irresponsible masters of the derivative empire or when we ran and confirmed to the popular press that we were hobbyists and not very angelic at all.
Those of us who believe that serious angels – located in all cities, all states – formed the Angel Capital Association and educated themselves at Power of Angel Investing seminars and told foreign guests that we were part of a movement, must now stand up and support American entrepreneurship like never before.
How can we demonstrate our true colors? Here are just a few action items that come to mind – a short list I hope you will expand and communicate to others in our venturing community.
First, be honest, realistic and communicate.Like never before we need to bring our wisdom and experience to bear and tell it like it is to struggling entrepreneurs. We have a principal-to-principal relationship like no other asset class and we must communicate like never before.
Second, demand stark reality in planning and operations and assume the worst of the coming recession. Do not take half steps. Do not rely on past assumptions of pipeline, financial institution support, and prior partners. Re-confirm relationships.
Third, remember cash is king.Husband current resources, talk to co-investors about capacity to continue support, demand review of current operating assumptions.
Fourth, expand on dialog collaboration with like-minded investors who could partner in supporting current companies in the coming months – syndicating has already becomecommon among angel groups – it may be vital in order to stretch resources. In a time of lack of trust among financial institutions,we need to work alongside fellow sophisticated angels by co-investing in existing portfolio companies.
Fifth, task angels to seek alternatives to growth and to find exits that were ignored, discounted, or unknown before who could buy the company, who could provide support in the short term, and what would happen in a worst case scenario.
Last, angels need to be honest with themselves and not ignore the reality of limited resources available to do new deals even while “protecting our own children.” I suspect in the coming six to twelve months many alluring new opportunities will have to be reviewed in light of the blight of our existing children, and if we meant what we said about being different than hit-and-run financial engineers, we should honestly address current company survival plans before leaping to the next best thing. We may be able to do both – but inward reflection and some “reality therapy” must come first before executing a revised 12-month plan.
We don’t know how bad the upcoming recession and credit crisis will be, but we, of all investors, should use our experience and long-term perspective to help our early-stage innovative company community through these uncharted waters. Let’s stand up together.”
John May
Managing Partner, New Vantage Group, Vienna VA
Chair Emeritus, Angel Capital Association
Alan Patricof is one of the country’s most important venture capitalists and angel investors. He founded the VC fund Patricof & Co. in 1969, which has gone on to become 300-person Apax Partners, one of the world’s largest private equity investors. Three years ago, returning to his roots, he founded Greycroft Partners, an early stage $75 million fund focusing on technology startups (and an Angelsoft user). Throughout this time he has also been an angel investor with his own funds, and continues as an active member of New York Angels. In light of the gyrations in the world’s capital markets, and particularly a Doomsday meeting that Sequoia Capital was reported to have had recently with their portfolio companies, Alan felt it important to put things into perspective.
Here is the full text of a statement that he issued this week, addressed to early stage companies and the investors who fund them:
“The comments made by the partners of Sequoia Capital at their recently held ‘CEO Summit’ have been widely covered by leaks to numerous bloggers. These bloggers have disseminated the details and spread the contagion of the sentiments to the public at large, unfortunately running the risk that the words become a self-fulfilling prophesy. Without challenging the comments, which expressed a heightened degree of doom and gloom for the economic prospects of young start-up companies particularly, I do think it calls for a somewhat more restrained response on the outlook and required action before throwing the baby out with the bath water. Certainly, we are going through a period of enormous economic and political uncertainty. The loss of confidence, primarily in our financial system, as a result of the excess of the past five to ten years (if not longer - we may never know how long some of the flawed practices have been going on) is one of the leading contributors. We are also at the moment looking for leadership on the political front, and both because of very low public support for the President and because we are in the midst of a heated election for his successor, we have no real voice of authority to provide some guidance, reassurance, and inspirational confidence that the bus has a driver who knows where he is going.
Nevertheless, aside from an over-inflated housing boom that had to collapse sooner or later and a complicated financial system that arose in part to fuel this engine, the basic economy was in reasonable shape, with GNP growth and productivity gains supporting a solid, if not vibrant outlook (I know the automotive industry is also going through bad times but it no longer pervades the economy as once conveyed in the expression, “As GM goes, so goes the nation.”)
Advances in technology are allowing companies to make goods and provide services faster and cheaper. The wireless revolution and the Internet have made the dissemination of information easier and more pervasive for the entire world and brought significant benefits to every phase of our economy. That is not going to stop, although it may temporarily slow down. In these difficult times, there will be winners as well as losers (and the former may be fewer in number for a while).
The point is, the financial problems are being addressed, if not a bit belatedly, and some international mechanism will be found in short order for some coordinated policy that will restore order and confidence to the system.
Most young companies, with which we are specifically concerned, are financed with equity capital. That has its positives and negatives; on the one hand, debt is a very small factor in the capital structure of most small companies so loan foreclosures and the interest rate burden are not of prime concern. On the other hand, equity capital, which is provided by private investors, requires confidence in future prospects for reaching profitability and creating a strong market value. Certainly under current conditions it is hard to engender such confidence although history has demonstrated that it is in times like these that great opportunities are created. I have always said, “The best time to invest is when the drums are beating, not when the trumpets are blaring!”
This is surely a time for companies to pay meticulous attention to detail, particularly their cost structure. It is a time to be realistic in their near-term assumptions for revenue growth and take nothing for granted. Raising additional capital to support operations is of course critical, as it is at any time, but this is particularly a time for young companies to be extra cautious in developing pragmatic assumptions of their needs and in focusing on the amount and not necessarily the cost of that capital.
This is not a time to panic, cut off all investment in the future, and burrow into a dark hole. Take a page from the packaged goods industry that the time to gain market share is during tough times when your competitors are weaker in responding. And while this may feel more directly related to portfolio companies, we as a venture industry should not retreat either. It is our strong belief that we can and will continue to make sound investments in excellent opportunities. It is as good a time as ever to start a company with sound fundamentals.
So my point is to heed the caution of the Sequoia comments but to use them only as a strong message to reexamine all cost elements and growth plans and use this opportunity to assure that you are a survivor. Find a way to use this moment to gain your greater share of the market by providing a solution that is needed by others to improve their prospects in the difficult environment ahead. Tighten your belt and live within your means. Although the timing makes this message seem more prescient, it is a philosophy that works for successful companies at all times and at all stages; it is simply put, good business. This is not a time for heroes!”
———–
Here is a Red Herring interview with Alan from last year, explaining why he has such faith in the early stage technology community.
Angelsoft is NOT a matching site. The main difference between Angelsoft and the myriad of “matching sites” on the internet is thatAngelsoft is at its core a deal-flow management tool used by investment organizations every day to do deals - their private deal flow. When you apply to the Investment Community, you are placing your plan directly into a directory in the software that is accessible to all 12,000+ investors. The investment organizations can then click a single button and pull your deal directly into the fold of all of the other deals that they are working on in their pipeline.
But all of these on-line funding exchanges and matching sites claim to bring me to investors, too!
Because 600,000 companies are year are founded in the United States alone and many of them seek outside funding, there are many, many web sites that take aim at this lucrative market and purport to introduce entrepreneurs to investors. The sad fact, however, is that while it’s very easy for a site to sign up thousands of entrepreneurs (who want the money), it’s virtually impossible for them to sign up investors (who have the money.) That’s why none of these sites can legitimately point to their track record for getting entrepreneurs funded (despite any claims to the contrary). Instead, they make their money in one of three ways: selling you as a lead to service providers, selling advertising against your page views as you chat with other entrepreneurs, or charging you listing fees and then up-selling and re-selling you when you don’t get funded.
In contrast, Angelsoft started at the other end. Because it is the unbiased, internal platform used by investment groups, Angelsoft started with the investors. We have formed personal relationships with the general managers of each angel group and venture fund that uses our platform. We know them by name, and speak to them regularly. Their feedback has allowed us to build a system that manages over 2,700 new submissions a month from entrepreneurs and receives many thousands of logins each week from accredited investors (you can see the live statistics for yourself, at http://www.angelsoft.net/industry).
Now, with the Angelsoft Investor Community, you can post your business information in one place, and let investors find you, because they are interested in your company. This is better for you, and better for them. Angelsoft’s corporate mission statement is “more smart money into more good deals”.
Is Angelsoft’s Investor Community appropriate for any kind of investment opportunity?
No. It really isn’t. All those myriad other sites will tell you whatever you want to hear, and hope that you’ll sign up with them, because they are based simply on quantity. In our case, since our primary constituency is the investors, it doesn’t do us—or them—any good to have them wade through hundreds of deals that no one would ever fund. Therefore, this is not the right place for multi-level marketing deals, work-at-home businesses, real estate investment opportunities, film financing deals, local service businesses, franchise opportunities, or other similar lifestyle or financial investment ventures. There is nothing wrong with any of these, it is simply that they are not the types of businesses that have traditionally received funding from angel investors or venture capital firms.
Instead, the kind of businesses that serious angels and VCs seek to invest in tend to have the following characteristics: relatively low capital needs; high scalability; strong management; a unique selling point; a clear potential exit for cash within 5-7 years; and above all, a complete, well-thought-out business plan.
The National Angel Organization - the association of angel groups in Canada has some very interesting summits coming up in the next few months. Our neighbors to the North are vigilant users of Angelsoft and its very exciting to see how they have and continue to use all the features of Angelsoft to promote entrepreneurshp all across Canada.
The first event is the NAO annual summit. The summit will bring together angels from all across Canada and the United States. It will be help in Halifax from October 15-17. (http://2008summit.eventbrite.com/) Angelsoft will be hosting an Angelsoft Lounge all throughout the summit for angels and angel group managers to wander in and out of to get demos and other information on Angelsoft. We hope to see everyone there.
The second event is the Co-investment Summit (http://coinsummit.eventbrite.com/). This event is focused on assisting angel groups in getting co-investment funds for exciting companies that are already getting funded by one or more groups. These companies will use this forum to present their companies to the entire community of angels and generate interest to finish out the rounds for the entrepreneurs. Since most of Canada and the United States’ Angel groups use Angelsoft to manage their everyday deal-flow, sharing the deals among the groups is as simple as a single click. The process as defined by the NAO:
We would encourage all angels to attend these exciting events. Angelsoft is proud to be such an important part of both events.
When we launched Angelsoft 3.0 at the beginning of September, there was a lot of talk about our new homepage. Hank Williams said our dynamic map of live VC and Angel Investors activity was one of the coolest homepages he’s ever seen. Fred Wilson commented on the value of our homepage, particularly the Angel Investor industry stats.
For entrepreneurs, displaying traction to both investors and customers is a key component to success. User numbers are important, but displaying engagement will drive funding and sign-ups.
We feel that the Angelsoft activity map is great way to show transparency into our worldwide network. Not only does it give users an idea of the scale of Angelsoft, it displays how active that network is.
Facebook recently re-launched their website and it looks like they are thinking along the same lines. Their map isn’t dynamic, but i wouldn’t be surprised if that changes soon.
I recently watched August, an indie film about the last month of an IPO’d startup during the bubble burst in 2001. The movie isn’t very good, but at the same time a humorous look at the first bubble for anyone in early-stage capital or the Internet industry.
The best scene is when Josh Hartnett, CEO of Landshark.com, pitches his business. In hilariously vague and dated terms he describes his business as “E. Pure E. Not ‘e-commerce.’ Not ‘e-business.’ Not ‘click-and-mortar,’ dear God, please not that … You want ‘E.’ Pure ‘E.’ Not old, not tired, not stepped on. Not a gram of ‘E’ and 10 grams of baby laxative. ‘E.”
The viewer never gets a better explanation as to what Landshark.com does. As bad as this pitch is, it’s better than what we see from many entrepreneurs. Hartnett is vague, but at least he’s interesting.
Landshark, like many of the initial dot-coms, didn’t have a clear value proposition and it ultimately fails (spoiler). Entrepreneurs haven’t improved much in this department during bubble 2.0, the investors just lowered their expectations.
In addition to vague value proportions, many entrepreneurs are terrible at describing their companies. Hartnett is great at pitching to guys that are too worried about missing out on something to question him. The investors and customers have learned since ‘01, and entrepreneurs have to be able to describe what it is they do.
The first major field on the Angelsoft application is the One Line Pitch, and it’s probably the most important. When an investor browses deals they see the company name, if it has a video, and the one line pitch. This is the one-shot to get an investor to click-through and read the full application. It’s 150 characters, 10 more than a Tweet. Entrepreneurs get another 450 characters (3.2 tweets) to summarize their businesses for the investors that click-through. If they record a video, they have a lot more time to describe their business.
After looking at many deals, especially ones without video, I have no idea what the company does. The problem is one of the two described above. Either the company has no clear value proposition, or the entrepreneur isn’t doing a good job at explaining it. If you are an entrepreneur wondering why you aren’t hearing back from investors, one of these two factors may be the problem.
- An Investor has viewed your Open Deals application: 
- New Investment: $100,000 from John Doe, East Coast Angels
- Invitation: 
- Referred from Acme Angels to East Coast Angels:
- An investor has viewed your [group name] application:
