Announcing AngelLoft, the new angel + executive network


I’m very excited to be announcing AngelLoft, the new angel + executive network. It’s for serious investors and executives and it’s seriously Sydney.

The premise behind AngelLoft [website coming soon] is to provide a premium invite-only forum within which to bring together a group of angels, aspirant angels and top business executives.

The first AngelLoft dinner will take place on Wednesday, 15th December in a private loft at a top Sydney restaurant. The speaker will be Yammer’s newly appointed head of the Asia Pacific region. He’ll be speaking hot off the plane from Silicon Valley and will have some incredible insights to share with you.

In addition, one quality venture will be doing a pitch. In fact that is our mantra at AngelLoft: its about quality – of company, of speakers, of pitches and, of course, of dining.

As readers of Metarand, I am extending an invite to you to join AngelLoft and we’d love to see you at the first dinner. Can you please let me know asap whether you would like to attend on the 15th December. Places are limited and we’ll let you know if you’ve reserved a seat within the next few days. Cost for the dinner will be $250 a head, payable on the night by cash or via Paypal bump.

Let me know by emailing me at randal at seggr dot com.

How To Successfully Pitch Angel Investors

Last week Innovation Bay Angels met for their quarterly dinner to hear pitches from a chosen few entrepreneurs. This was the fourth dinner of the year, a year in which we’ve assessed over 50 Australian companies and by the end of the evening we had heard live pitches from 14 entrepreneurs seeking angel investment this year.

As active angel investors (the group has invested multi millions of dollars to date), we see a lot of deals in different contexts and one thing we value above all is a quality pitch from entrepreneurs who are passionate and who have done their homework on their industry.

Our modus has been to ask entrepreneurs to submit an initial 90-second video pitch. That may not seem like a lot of time, but remember that most television ads only run for 29 seconds!

Those entrepreneurs who are chosen to actually present to the group at the quarterly dinners are given six minutes to pitch and may answer questions from the room for another six minutes.

Why all these time constraints and formats?

We’ve tried the unstructured, open ended approach and it simply does not work. Anyone can bang together a business plan or executive summary on a word processor and make it look good – but getting a message across via video in 90 seconds takes skill.

Standing in front of a room of 40 successful businesspeople and selling a business in six minutes takes further skill, discipline and practice.

Besides, investors have only so much bandwidth to hear from an individual entrepreneur and rattling on for 15 – 20 minutes won’t solidify your investment case, nor would it be fair on others who also want to garner the group’s attention.

What should your video be aiming to achieve?

One of the best comments made recently by one of our angels sums this up succintly:

“Short, sharp, punchy. Gives enough to establish credentials. There is enough in this quick summary to make me want to found our more.”

The videos we receive are placed on a private forum and members of the group are able to ask questions of the entrepreneurs who submitted them, and they have the ability to respond. From these comments (for the last round there were well over 300 comments) and the questions asked at the dinners, we’ve collated a set of Frequently Asked Questions, which I’ve set out below.

Entrepreneurs should know the answers to as many of these as possible and while they may not be able to cover off on each and every one in their videos, we would expect them to do so by the time they finish their six minute pitch.

THE ANGEL FAQs

PROBLEM/SOLUTION
How big is the problem you are trying to solve

What is your core value proposition

MARKET/CUSTOMERS
What is your customer make up – geographically and by industry

What is the return on investment (ROI) for customers

Can you give a bottom up outline of the market size rather than “a % of a $bn market”

How do you define your target segment, how many potential customers are there in this segment and what are they willing to pay for your product or service

What is the cost to acquire customers

If you are initially targeting a niche of early adopters, how will you get across to mass market adoption

Are there any regulatory or entrenched business practice barriers you need to overcome

Is there something about your space that means we need a local solution rather than a modified US solution

Are there any analogies you can use to explain your product, eg “the Farmville of Health Education” or “Groupon meets Zynga”

If you are initially targeting a niche of early adopters, how will you get across to mass market adoption

Are there any regulatory or entrenched business practice barriers you need to overcome

COMPETITION
What is your sustainable competitive advantage

Which are your major competitors and what do you do different

Not for everyone but: why are you best placed to win in this torturously overcrowded and undifferentiated space

While your product may in fact be different from others in the market, how do you get around the perception that it is the same as other products out there

TEAM/THE BUSINESS
Who owns the IP

Who will be on the team for executing

What are your views on the LeanStartup Model

What are the backgrounds of the founders

What is your backstory – how did you come to tackle this problem/market

Does your product exist already – if so, will you be able to demo it

BUSINESS MODEL
Outline some key figures – revenue predictions, staff

How do you make money, what is your revenue model

What is your distribution strategy

Are revenues primarily from product or services. How will that change in the future.

What are your plans for scaling the business (what are the requirements and obstacles to scale)

How are/will you handle the huge amounts of data that you need to gather

THE FUNDING NEED
How will you spend the money

What your investors should contribute in addition to money

THE DEAL
How much equity are you offering to Angels

What will equity split be

EXIT STRATEGY
What’s your exit strategy

One final point – don’t go asking investors to sign a non disclosure agreement. You’ll likely get short shrift.

I hope these pointers assist you in your quest for funding and good luck growing your businesses!

How To Choose Your Angel Investors

Following on from my post about Angel Investing a la Omnidrive, I thought it would be to useful to explore angel investing, both from the entrepreneur and investor point of view.

If done right it can be an awesome experience for all parties – the flip side is unpleasant as hell and can usually be avoided through following a set of basic rules.

I’ll get into what those rules are in a later post. For now though, I’d like to start off by pointing to a great post written by Todd Vernon, CEO and Co-Founder of Lijit Networks, a Boulder, Colarado Internet search company.

Todd identifies the kind of angels based on their motivations and then runs through a few of the simple mechanics involved in angel investing from an entrepreneurs perspective.

[via venturehacks]

Omnidrive: Lessons In Angel Investing And Entrepreneurial Tenacity

I’ve quietly followed the swirl of online storage startup Omnidrive down the proverbial gurgler for the past 6-8 months, but it now seems like its finally been flushed. As pointed out by ReadWriteWeb, Omnidrive.com has expired.

This has prompted one of the company’s angel investors, Clay Cook, to (excuse the continued metaphor) open up the sewer. He has written a lengthy post on one of his sites setting out his investment history with Omnidrive and the aftermath. He also provides copies of email correspondence – in which legal action is mentioned (I’m not sure of the wisdom of airing potential legal evidence, but it sure takes “discovery” to a whole new level of openness).

There are a whole array of points for discussion regarding Omnidrive and Nik Cubrilovic and the situation as it currently stands, but I only want to touch on two main ones, firstly the nature of an angel investment and secondly entrepreneurial tenacity.

ANGEL INVESTING

Angel investing is an art.

The hardest parts are the decision to invest and the decision to walk away from a failed investment.

A practised angel should be able to make a completely dispassionate decision to invest or pass. Many novice angels jump in because someone they know, or admire, has invested. Similarly, many novice angels make investments based purely on gut decision and emotion. Both instances usually end in pain.

I agree that angel investing is mostly an investment in people. Note my use of the plural – “people”. How good is the team, not an individual. Note also that by team I mean committed team – lining up the former CxO of Name.com to come on board at some yet to be determined inflection point should be completely discounted – committed, passionate people make a team.

That said, angel investing should not amount to simply throwing money into an unstructured, or yet to be set up entity, on the basis that the team is a good one. Make sure the right structures are in place to minimize risks, even if you have to put those structures in place yourself.

It may seem trite, but it bears repeating: angel investing is that it is by nature very high risk. An angel usually has little chance of getting a return should the venture not pan out. Unless the angel has preference shares (giving a preference over others when the company is wound up for any $ that the liquidator can hand over to creditors), or has some form of security in place there is little likelihood that a call on a convertible note will produce a return of capital.

It is worth noting as well that convertible notes are falling out of favor amongst well seasoned angels at the moment.

ENTREPRENEURIAL TENACITY

In my last post, I pointed to an interview with Y Combinator founder Paul Graham. One of Paul’s points was that entrepreneurial tenacity is a key attribute of a successful company founder:

I think the key quality is determination. The founders who do the best are the type of people who just refuse to fail. Most startups have at least one low point where any reasonable person would give up. That bottleneck is the reason there are so few successful startups. The only people who get through it are the ones who have an unreasonable aversion to failing.

I’m not going to delve into Nik Cubrilovic’s antics over the past few months other than to say that from all accounts he seemed to be tenacious and trying to do everything in his power to keep his business going. In this post I’m interested in exploring the role an angel plays in supporting this tenaciousness.

At what point does an angel investor open up the sewer. In the case of Omnidrive, who is to say how close Nik had come in selling off the company’s IP – for this he would not have needed to renew the domain. Has Clay Cook’s open letter affected any potential sale? Would Clay have been better off seeking closure in a less public fashion?

There are some important lessons here for entrepreneurs and investors alike.

UPDATE: If you are interested in hearing more about this saga check out ReadWriteWeb, where some of the key protagonists, including a customer or two, open things up further.

Hey guys, we’d be happy to host a Metarand Unplugged no holds barred, duke em out session in the interests of teaching entrepreneurs and investor types some tips.

[Picture courtesy of Poofy]