Angel Fund

Willamette MBA

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How to Capture the Attention of People Richer than You »

In the Willamette Angel Fund, we see hundreds of entrepreneurs over the course of two short semesters. Often, we can’t help but sympathize with them. These are people who have spent countless sleepless nights and double-mortgaged their family homes to pursue a dream. In fact, many of the students in our fund are entrepreneurs themselves. Yet, when we sit down to discuss a deal, we often decide whether to pursue it in a matter of minutes, or even seconds. Quick and fundamental decisions make or break even the best deals.

This is valuable information whether you stand in the shoes of the entrepreneur or the investor; or indeed if you stand in different shoes altogether. The speed with which we must sift through those hundreds of deals illuminates the challenges we will face as innovators, as well as the pointed questions we need to ask as managers. Knowing what questions matter ensures our time and resources, and those of our organizations, is well-spent. This brings us to our three simple rules of deal-review.

1. Don’t bury the lead.

Last spring, while reporting on a company from Seattle, a pair of students began by explaining the product — a multipurpose hook for use while camping. At that point, Professor Read left to refill his coffee, indicative of the overall level of interest in the room. Nonetheless, the students persevered — and eventually clarified that two million of these hooks had been sold through REI’s national distribution channel. Those of us still in the room were instantly riveted — and upon his return, Professor Read was aghast he had missed such crucial information. Investors are not known for their patience — when an aspiring entrepreneur buries proven revenues deep in a slide deck, most investors have long since stopped paying attention and gone for a cup of coffee. This takes us to our second rule…

2. Traction is always the lead.

Nothing is more valuable to a young startup than actual, paying customers. Until customers arrive with cash in hand, the business model remains in doubt. The reason is simple — a company is only as valuable to potential acquirers as the revenue it ultimately generates. When angel investors are looking for 1,000% returns, early traction is absolutely critical.

3. Where there is doubt, there is no doubt.

People like to brag about their own success. Skilled entrepreneurs love to highlight what makes them better than everyone else. If a founder has paying customers — they will tell you. If a founder is talking to national distributors — they will tell you. If a founder has a venture capitalist lined up for the next round of funding — they will tell you. If you have not been told that a given fact is true, it is almost certainly not. In this world, if you have reason to question an assertion, it is almost certainly not worth betting on. This is useful to remember in any business dealing. (And for you movie trivia buffs out there, the “when there is a doubt, there is no doubt” quote is attributable to Ronin, 1998).

Conclusion: Embrace Short Attention Span

As a matter of necessity, investors do not tend to be patient individuals. They are CEOs and managing partners whose time is worth hundreds of dollars an hour and billed in six-minute increments. They are used to short bullet points carefully tailored to what they most care about. If you want their attention (and money), they need to know upfront why they should care about what you have to say.

Don’t bury the lead.

Traction is always the lead.

Don’t leave room for doubt.

 


Nathan Foos

Nathan Foos is an MBA/JD candidate at Willamette University, and is an alumnus of the WU College of Liberal Arts where he studied history, mathematics, and economics. With a strong interest in the provision of capital to growing firms, Nathan has actively engaged in the experiential course offerings at AGSM, including the O’Neill Student Investment Fund and the Willamette Angel Fund. In particular, Nathan enjoys angel investing because he can engage on a personal level with investee companies, obtain real-world insight into a plethora of industries, and learn from the mistakes and successes of hundreds of startups.

A Partnership of Angels, in the City of Angels »

 

Himalaya Rao-Potlapally and Liz Hartman after a breakfast meeting with the Pasadena Angels.

Anyone thinking the Willamette Angel Fund is a sequestered student activity should have been with us earlier this month, where class kicked off quickly by taking three of us to Southern California for a delicious dinner and rousing breakfast meeting with our regional partners. A mere two-and-a-half weeks into the semester, our first trio of students flew down to Los Angeles to attend their first mid-week breakfast meeting with the Pasadena Angels. The Pasadena Angels proved an extremely valuable partner last year, generating three of the four deals the Willamette Angel Fund seriously considered, and we are extremely excited to be working with them again.

The trip started with dinner at the North Italia restaurant in El Segundo, where Himalaya Rao-Potlapally (pictured left), Liz Hartman (pictured right), and I got together with David Cheng. David is a former Willamette alumnus who now works for K1 Investment Management, a private equity firm based out of Southern California. K1 Investment Management specializes in enterprise software companies. Thanks to the success of our previous students in selecting great startups, K1 was involved in the purchase of at least two companies the Willamette Angel Fund has invested in.

Then, it was off to the hotel to rest up for the breakfast meeting the next day, where the Pasadena Angels were bringing a strong start to the year by showcasing life science technologies, travel management software, and a gaming social network venture. Los Angeles and the surrounding metropolitan areas generate an astonishing amount of entrepreneurial activity in the software, biotech, healthcare, mobile app, consumer goods, and financial services space. Every month, Pasadena takes several dozen applicants and whittles them down to just two pitches at each breakfast meeting, ensuring we see top-quality companies.

As we kicked off the tenth year of the Willamette Angel Fund, we returned with our first potential investment of the year — a life science company that has developed a new drug efficacy test to aid in treating blood cancers. Whether we write this company a check or not, remains to be seen. Either way, the power of partnerships is clear. Working with an angel investing group in Pasadena to launch startups that may grow to be acquired by a private equity firm in Los Angeles, one of the most important jobs for us is building the relationships that make it all happen.

To learn  more about the Pasadena Angels or K1 Investment Management, check out their websites:
http://pasadenaangels.com/
https://k1capital.com/


Nathan Foos

Nathan Foos is an MBA/JD candidate at Willamette University, and is an alumnus of the WU College of Liberal Arts where he studied history, mathematics, and economics. With a strong interest in the provision of capital to growing firms, Nathan has actively engaged in the experiential course offerings at AGSM, including the O’Neill Student Investment Fund and the Willamette Angel Fund. In particular, Nathan enjoys angel investing because he can engage on a personal level with investee companies, obtain real-world insight into a plethora of industries, and learn from the mistakes and successes of hundreds of startups.

Why We Don’t Vote »


The easy answer? Because Rob Wiltbank says so. But that’s only the start of the story.

It’s the second day of class, and we’re discussing our investment methodology — how we screen companies, how we evaluate the companies we select, and how we decide to write a $50,000 check. With nine students in the class and the ominous threat of having to sift through hundreds of companies over the next eight months, the obvious question arose: “so… how do we vote on each company?”

The answer, perhaps surprisingly, is that we don’t–and in fact we shouldn’t–vote. We all enrolled in a graduate management program to learn to be leaders, partners, and innovators. That means we are learning to be comfortable with sharing our ideas, professionally debating with our colleagues, and making difficult decisions without the simplicity of hiding behind a vote. If eight students are in favor of a deal, voting lets the ninth off the hook and absolves them of responsibility. The lone “no” vote is allowed to keep quiet, because in a vote people focus on the results, not the reasons. And then when the deal goes south, the “no” votes can simply say “I told you so,” and walk away clean.

If you take away voting, you take away that protective shield. Each person is required to explain why they like or dislike a deal. They can’t hide behind a one-word answer. That lone “no” vote is required to point out to the rest of the class that the company is hemorrhaging cash and has a CEO who can’t sell. Perhaps the “yes” votes already knew that, in which case nothing changes. But, perhaps they had overlooked those concerns in their enthusiasm, in which case everything changes. In these situations, it is better to regret saying too much, than regret saying too little.

At the end of the day, the no-voting system works because it relies on the ambition and enthusiasm of each individual to drive deals forward. We have just three hours each week to discuss the hundreds of deals we see. If the opposition is too great, the deal naturally falls to the wayside and more popular deals take center stage, no voting required. Prioritization doesn’t become a political issue. And we learn how to move the fund ahead when the decisions are not easy “yes/no” binaries, but commitments to early stage ventures with uncertain futures.


Nathan Foos

Nathan Foos is an MBA/JD candidate at Willamette University, and is an alumnus of the WU College of Liberal Arts where he studied history, mathematics, and economics. With a strong interest in the provision of capital to growing firms, Nathan has actively engaged in the experiential course offerings at AGSM, including the O’Neill Student Investment Fund and the Willamette Angel Fund. In particular, Nathan enjoys angel investing because he can engage on a personal level with investee companies, obtain real-world insight into a plethora of industries, and learn from the mistakes and successes of hundreds of startups.