Irina: How do you swap deals with other angel groups? By e-mail?
Corey: That was how it was done years ago, and it’s still done that way, sometimes but there’s a Web platform called AngelSoft, and that makes it really easy. There are features right inside AngelSoft, so we can just send deals right through the AngelSoft system to any group that uses it. That makes it easy.
Irina Patterson and Candice Arnold have posted a series of interview segments with Corey Silva of River Valley Investors. Corey answers a wide range of questions from how he got his start to the ins-and-outs of how RVI operates and invests.
While we appreciate Corey’s kind words about Angelsoft in the fourth segment, the 13-part series gives an excellent overview of the angel investment process.
Entrepreneurs will find it to be a helpful orientation to what goes on behind the curtain. Investors will find an interesting story of Corey’s path from Rock n’ Roll musician to manager of the River Valley Investors angel group along with a great reference point for managing an angel investor group.
For those new to early stage venture investment, syndication is when multiple investor groups (VCs or angels) contribute funds to a cumulatively larger investment sum in a single company. Syndication is an opportunity to spread risk, combine resources, and collaborate with strategic partners in other regions.
Venture Hype has published the first post of a 2-part interview with Paul G. Silva regarding “Angel Group Syndication Process Design.”
Silva emphasized the importance of unified collaboration. The groups used Angelsoft to coordinate their combined due diligence efforts:
Unite ALL interested investors from all groups into 1 due diligence team, all sharing 1 set of tools. In our case we all used AngelSoft’s Co-invest feature to make sure everyone was on the same mailing lists and looking at the same documentation.
There they gave a great 30 minute presentation about how prospective angels should find deals, work with portfolio companies, and approach angel investing in general (I won’t spoil their grand finale, but suffice it to say that the last five minutes of their presentation should be mandatory viewing for every past, present and future angel investor on a monthly basis.)
But don’t take my word for it, listen for yourself:
A great write-up of the sage (and virtually unanimous) advice from the participants has been posted on VentureBlog by August Capital’s David Hornik (host of the annual Lobby conference.) Here’s the distilled summary of his summary:
It’s a small community — if you screw one entrepreneur, you’ll be out of the angel business because entrepreneurs talk (Conway)
Angel investing is about learning on the job, which means that you can plan on screwing up your first 10 deals at least (McClure)
If you assume that the money is gone once you’ve invested it — that it is like a lottery ticket — then you will have a better time angel investing (Buchheit)
Work with other angel investors so that you can get the advantage of their expertise (Zurich)
There is no rational way to arrive at valuation, so don’t be overly concerned about getting it right (Graham)
Don’t worry if the idea seems crazy — if it didn’t seem crazy, it would be too late to invest as an angel (Graham)
The lifeblood of angel investors is deal flow — you need huge deal flow to find enough stuff that is worth investing in (Ravikant)
The best deals come from other angels(Ravikant)
Don’t be afraid to throw a little dynamite into the status quo and see what comes out of it — often times interesting stuff emerges (and sometimes nothing does) (Dearing)
The Rule of 12 — you need to invest in 12 companies to have statistical diversity — invest in fewer than 12 deals and you run the risk of them all failing (Maples)
Like in the movie “Oceans 11,” you want to pull together the best team of angel specialists there are out there — it increases the likelihood that the company will succeed (Maples)
Help bring your entrepreneurs together so that they can learn from one another (Poler)
By being a connector, you will see the most interesting stuff and work with the most interesting people (Senkut)
Angel investing is all about the syndicate — you can lead if you want to but it can be lonely until others join in the syndicate (Clavier)
Angel investors need to distinguish themselves from others with money – what do you bring to the table? Contacts. Experience. Advice. (Young)
Only invest in stuff you actually know something about — otherwise you’re just buying a lottery ticket (Young)
This is an overview of all the tools we provide for configuring your the entrepreneur funding request application for your specific group. You may want to do this when you first setup Angelsoft, or over time as you learn more about how entrepreneurs are answering specific questions
2) Adding Deals:
Here we’ll cover how to get your deals into the Angelsoft platform. Entrepreneurs can submit their fulll profiles to you directly, but you may want to back load some deals, or track your own information.
3) Setting Permissions/Deal Access:
An introduction to the last of the top level tabs, the Community. Definitely the place to start if you’re looking to find deals or to find new co-investors from the Angelsoft investor community at large.
This is an overview of all the tools on the “My Groups” tab. It covers the Deal list, Group Document Vault, Group Messages, Events, and Member tabs.
2) Deal Tools:
A basic overview of the tools we provide on the deal level. Each deal has a dashboard, documents vault, message forum, and a deal history tab. This video will give you a quick tour.
3) Investor Community:
An introduction to the last of the top level tabs, the Community. Definitely the place to start if you’re looking to find deals or to find new co-investors from the Angelsoft investor community at large.
You can create a deal in Angelsoft by sending or forwarding an email to your drop-box email (newsubmissions@YourGroupName.angelgroups.net ).
Remember these simple rules to maximize your use of the drop-box email:
The subject of the message will be the Deal Name.
The files attached to the email (up to 10MB) will go in Documents.
The body of the message will be posted under Messages.
This will speed things up, and allow you to start tracking ALL your deals in Angelsoft.
For a more advanced option, you can also add ::referral source to the subject line, to indicate the person or organization who referred the entrepreneur to you. For instance, if a company named ABC General was introduced to you by Sam Smith, then the subject line should be: ABC General::Sam Smith.
Based off an internal e-mail about search engine optimization strategy:
When you start determining the SEO strategy for your site, the first instinct might be to try and figure out how search engine bots think and act and go from there, but that’s only half the battle. It doesn’t really matter if you know how a bot interacts with the web if you also don’t think about how it sees the web. So, what follows is a little thing I like to call “SEO and Your Grandma”.
Something that you need to understand about bots is… they’re dumb. Okay, maybe that’s a bit harsh. It’s more that bots don’t comprehend as much as a regular web browser. Since what they’re really concerned about is text and links, that’s how most of them see the world. They can’t parse what’s in images (only what they link to) and they don’t really care about new-fangled things like CSS (first working draft published in 1996) and JavaScript (first implemented in 1995). They’re sort of like your grandmother in that sense, and not the cool one who listens to Coldplay and tells dirty jokes. They’re more like the traditional granny that sees the world simply, doesn’t really keep up with the latest trends, and if they encounter something they’re not familiar with, they just ignore it, or even forget about it altogether and head back home. Therefore, if we want granny to pay attention to something, we have to try and see how granny sees.
So, how do we do that? Easy–turn off CSS, JavaScript, and images. Yes, it can be done. There are prefs to disable all three in every major browser, but if you want to do it much more easily in Firefox, check out Chris Pedrick’s Web Developer extension. You’ll have a nifty new toolbar that will let you turn off images, JavaScript, and CSS in a couple clicks each, and you’ll also have a bunch of new tools that let you handle cookies, window sizing, validation, and some other stuff you’ll find fun (if you’re a front-end web developer). If you’re really hardcore, though, you can try looking at pages in just a text-based browser. There’s Lynxlet for OS X, some Lynx ports for Win32, and I’m sure most of you *nix people already know what to do. After trying to browse for a few minutes with those, you’ll have a new understanding of the word “tedium,” but on the plus side, you’ll have one app that instantly puts you in bot mode.
And that’s all there is to it: just a small install and you’re ready to go. If you start making sure to give your public pages a quick look with your granny goggles before letting them loose, you’ll be able to eliminate a lot of potential SEO problems. Looking at pages this way can also help you figure out where you can make improvements, since you’ll be seeing things more from a bot’s perspective. At the very least, it’ll help put you in the correct mindset for SEO, and you can start building from there.
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
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.
After trying to browse for a few minutes with those, you’ll have a new understanding of the word “tedium,” but on the plus side, you’ll have one app that instantly puts you in bot mode.