Recently, Scott Shane, a very smart and decent guy who is a professor of Entrepreneurial Studies at Case Western Reserve, has been highly visible around the web blogging and commentating in support of his recently published book, Fool’s Gold: The Truth Behind Angel Investing in America.
His main thesis is that ‘people’ have a very misleading view of that rare creature known as an “angel investor”, and that angels are far less numerous, generous, and active than ‘everyone’ thinks. In support of this he has extensively research the subject, pulling together all of the available statistics on the field, from the Angel Capital Association, the Center for Venture Research, and even us at Angelsoft (which we’ve been happy to provide.)
As I read his book, and many of his subsequent blog postings and commentaries, I am alternately baffled, bothered and bewildered by his conclusions. First, let me say that his research is legitimate and (as far as anyone, including me, can tell) accurate. So I am not disputing his facts. What I object to, however, is that he sets up straw men to demolish, in order to make lurid points that I believe lead his readers to draw inaccurate conclusions on the state of angel investing.
Take, for example, his contention that angels in America invested “only” as much money last year as venture capital firms. Is the fact of “angel investments = vc investments” accurate? Yes (to the best of our knowledge.) But phrasing it as “only as much” somehow implies that someone is maintaining it is much more. Hunh?
What we and the facts all agree on, is that LAST YEAR ANGELS INVESTED $26 BILLION IN US COMPANIES!! Who on earth is claiming it is anything higher than that??
Meanwhile, in a recent blog post on Small Business Trends, Scott opines that so-called “active investors” are a myth, because even among the cream-of-the-crop angels, the self-reported average time they spend with their portfolio companies is a miniscule 41.9 minutes a week [gasp!] Once again, I can confirm his facts, but substantively disagree with his conclusions!
I’m one of his “cream of the crop” active angel investors. I’m the Chairman of New York Angels (one of the largest and most active angel groups in the country, with 22 deals this year alone), have 70+ companies in my personal portfolio, and spend my full business time on angel-related activities. That said, it would be absolutely correct to say that there are some (indeed, many) ventures in which I have invested on which I spend less than 41.9 minutes per week. And the problem with that is??
I’m not running the business, the entrepreneur is! The last thing he or she wants is me looking over his or her shoulder and micro-managing the company. If that’s what I need to do, then I shouldn’t have invested in this venture in the first place.
Think about it this way: if, after pulling together an investment round of half a million dollars for a company (including corralling the investors, structuring the deal terms, and doing due diligence analysis, all for no compensation, and then investing $100,000 of my own money), I followed through by serving on the company’s Board of Directors (which would be active involvement indeed), kept updated by asking for and reading weekly management reports (which is way more than most CEOs want to provide), referred the CEO to a dozen high-level sales and business development prospects from my network during the year, and then introduced them to five top-tier venture capital firms for potential participation in a follow-on investment round…would that be the kind of “active” angel investor you’d like to have?
I think the answer from any entrepreneur I’ve ever met would be “yes, in a heartbeat!”
Now, let’s look at my time involvement post closing:
As I mention early and often to anyone who will listen, the sensei of state-of-the-art presentations (which you will use to raise startup funding, inspire your team and sell your product to customers) is a gentleman named Garr Reynolds, the former Manager of Worldwide User Group Relations at Apple Computer. He writes the most influential blog on the subject, Presentation Zen, which was recently turned into the most influential book on the subject, Presentation Zen: Simple Ideas on Presentation Design and Delivery (Voices That Matter), a copy of which I present to every CEO who comes to me for training.
I have been asked to essentially talk about the contents of the book. I will indeed talk about the themes and ideas covered in the book, however, I have entitled the presentation How to Think Like a Designer (and why it matters). The applications of the items I discuss will focus on presentations, particularly presentations that are given with the aid of slideware, but the ideas can be applied to other types of presentations and even other types of disciplines such as web design and professional communications of all types. I have come up with a list of 10 ways to “think like a designer” with examples for each and applications for presentation design. Yet, there are of course more than 10 things we can learn from designers that may help us in our own work, so if you’d like to share your list — or even just a few tips of your own — please share those below. I appreciate your comments. Look forward to connecting with you during the webcast.
I can’t recommend this highly enough, but if you are not able to make the live webcast (at which you’ll be able to ask questions), the archive of the webcast should be available about 72 hours after the live event. Garr’s presentation, blog and book are mandatory reading for any entrepreneur who is serious about communicating his or her vision.
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.
In a pithy but perceptive post on O’Reilly ONLamp.com several years ago (which has, in some quarters, achieved almost iconic status), Derek Sivers wrote the following, which I think is an excellent way of clarifying why angels and VCs put much, MUCH less stock in “good ideas” than do the entrepreneurs who submit them:
“It’s so funny when I hear people being so protective of ideas. (People who want me to sign an NDA to tell me the simplest idea.) To me, ideas are worth nothing unless executed. They are just a multiplier. Execution is worth millions.
Explanation:
AWFUL IDEA = -1
WEAK IDEA = 1
SO-SO IDEA = 5
GOOD IDEA = 10
GREAT IDEA = 15
BRILLIANT IDEA = 20
NO EXECUTION = $1
WEAK EXECUTION = $1000
SO-SO- EXECUTION = $10,000
GOOD EXECUTION = $100,000
GREAT EXECUTION = $1,000,000
BRILLIANT EXECUTION = $10,000,000
To make a business, you need to multiply the two.
The most brilliant idea, with no execution, is worth $20.
The most brilliant idea takes great execution to be worth $20,000,000.
That’s why I don’t want to hear people’s ideas.
I’m not interested until I see their execution.”
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.
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.
Angelsoft is backending the BootStrapper Summit, which will be held on October 2nd in New York.
The BootStrapper Summit is a Startup Showcase & Investor Conference for the East Coast PE/VC Community. It will feature 15 vetted companies, across 5 tracks (Seed Spotlight, Digital Media, Mobile & Telecom, Enterprise, Cool Concepts) and will be open to 100 investors.
All 15 companies have filled out Angelsoft applications, which will be available online for the attending investors to pull into their own Angelsoft accounts for further review.
The current RSVP list includes Grand Banks Capital, RRE Ventures, First Mark Capital, DFJ Gotham, Greenhill SAVP, Intel Capital, Shellback Partners, Goldman Sachs, Alliance Bernstein, Avenue A Ventures, The Connectors Fund, NY Angels, Golden Seeds, and Tristate Ventures.
The keynotes by Kevin P. Ryan (AlleyInsdier.com) and Scott Cohen (24/7 Media) round out what looks to be an impressive event.
If you are interested in attending this event as an investor you can register at http://bootstrappersummit.com. The event is full for entrepreneurs, but you can apply to be considered for the April event. If you already have an Angelsoft application, simply log in on their site, import your application answers, and click submit.
After watching the video of my “How to Pitch a VC” presentation at the TED conference, Garr Reynolds, who writes PresentationZen (the name of both the most influential presentation blog on the web, and also the best book ever written on presentation design) asked if I would mind if he created a summary slide show of my top tips that he could use with his students. Mind? I was delighted! So here’s the really, really short crib note version of my pitch training sessions. The first list are the personal qualities in YOU that an investor looks for; the next set are the inside tips that will make your presentation come across as uber-professional. Good luck with your pitch!
In the early days of New York Angels, we noticed what appeared to be an anomaly in our operations. We had quickly established a good incoming flow of deals, and had followed that up with an effective screening process, but we found that we were actually funding a much smaller percentage of the presenting companies than we had expected. What was particularly puzzling was that we KNEW these were likely fundable companies, because we had spent over half an hour with them around a table during the screening session, and only picked the very best ones (typically the top 10%) to present to our whole group. But after hearing the fifteen minute pitches during our monthly meeting, our full membership just didn’t get excited enough to put their money to work. A puzzlement. We eventually figured out the problem: the companies were great, but the pitches were awful!
That was when we instituted mandatory pitch coaching for every single company that was selected to present to our membership. The result? Our investment rate more than DOUBLED, and we have funded over $35 million into more than 50 companies during the past six years. In that time, I have handled most of the coaching duties on behalf of the group, and have gotten pretty good at helping entrepreneurs refine their Powerpoint presentations to meet the need of their target audience: early stage investors. Word began to spread about these sessions, and soon BusinessWeek came by to do a story about them, giving me the moniker of The Pitch Coach. The next thing I knew, there seemed to be even more demand for presentation training than there was for my investment dollars!
These days, I spend quite a bit of my time teaching entrepreneurs how to clearly and persuasively get their message across. Most of this happens for New York Angels, at business schools like Yale, Columbia or NYU, or for institutions like the National Science Foundation. However a couple of years ago Chris Anderson, the Curator of the renowned TED conference (and a fellow New York Angel member) asked if I would do a session during the “TED University” event before the main conference. I agreed, but wondered how I would be able to compress what is usually an hour long presentation into the allotted 12 minutes. The answer? Talk faster! [grin] So, with the compliments of TED.com, here is The Pitch Coach, in the super-express-version of “How to Pitch an Angel (or VC)”. I hope you find it useful! (The ‘expand’ button in the corner will bring up a full-screen version.)
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.
