One of the advantages of networking in Denver – it’s still a surprisingly small community, and it doesn’t take long to work your way to the top of the pyramid. Our mayor recently made the eyebrow-raising proclamation during Denver Start-up Week: “We’re going to knock out out Silicon Valley. We’re going to become Silicon Mountain!” Well…I’d rather our city come across as naïvely ambitious than un-entrepreneurial. One of the many challenges we have in achieving this lofty goal is a deficit of early-stage angel capital…or more accurately, angel investors stepping up to the plate and writing checks. Smartly, Brad Feld, the king of Silicon Mountain and arguably the top of our start-up-investing pyramid, is holding a number of invite-only dinner meetings with capable-yet-underactive angel investors in an effort to spark the activity of this nascent community. Brad and his Firm, Foundry Group, which seems to fill more than half of its portfolio from outside of Planet Boulder and Silicon Mountain, would certainly benefit from an increased number of companies in Colorado moving through their riskiest stages, riding on the wings of mile-high angels.
So off to dinner I went, albeit not as an angel investor, but as a representative of a fund that will make angel-sized investments given the right opportunities. I had my own pre-conceived notions of how this was going to go and what Brad’s agenda might be, based upon nothing more than my stereotypes of “VC guys” and some colleagues who’d met Brad briefly…I have to say that Brad was surprisingly humble and generous with his time. He gave useful and well-balanced advice to…well, let’s call it like it is: not the most experienced group of angel investors ever assembled.
And so I present to you the top lessons from a dinner with Brad Feld:
- Angel investing is a crap-shoot, so don’t get too caught up in your analysis. 5-year pro-forma’s? Meaningless. Hockey-stick growth projections? Ha! We’ll see…Business plan? It’ll change. Brad is the first to admit that he really has no clue which of his angel investments will pay off and when. “At such an early stage, you have no idea. So, I invest in people I like and ideas I have some sort of interest in. I don’t have to be passionate about the product, the entrepreneur does, but I like to have at least some interest in it so the investment is at least fun for me.”
- Angel investing is a crap-shoot, so make lots of investments. Too many angel investors make a couple of large investments that fail and never try again. You have to realize that the majority of your investments are more likely to fail than not so smaller investments in more companies are better. “Decide on a budget you are willing to invest and commit to investing that over the next two years in 10 companies. You need time diversity as well as company diversity.”
- It’s called angel investing for a reason…don’t be a devil. “In business we have a tendency to feel like, if we perceive ourselves as more experienced than the person sitting across from us, it’s our job to evaluate rather than teach. It’s not your job to call up the entrepreneur and say, ‘I thought you were going to have x-number users or x revenue by now, what the hell is going on here?’ How about calling to ask, ‘How can I help?’ Offer solutions and assistance. If they’ve changed their business model don’t criticize, it’s your role to help the company succeed so think about connections you can make as the company changes.”
- If it’s not fun than why are you doing it? Brad cited a general attitude amongst angel investors– it’s too much work, too risky, and not necessarily as lucrative as investing in a VC or angel fund. The point is to enjoy supporting the company and entrepreneurs directly. If you don’t think it’s fun to “work” with the company and risk your capital for the privilege of participating in the journey then don’t do it!
- There’s nothing worse than an angel investor or angel group that never invests. “There’s one of these in every city – the angels of…wherever…who never invest.” You’ll attract attention and deal-flow if you start writing checks. You’ll establish a reputation as someone who’s in the game and is worth seeking out. Conversely, if you are one of those people who looks at deal after deal with little or no intention of investing, the entrepreneurial community will take notice. If you lose some money on your first couple deals but establish a reputation as a legitimate investor and learn a thing or two in the process, consider it money well spent.
Solid advice aside, I’m officially a Feld fan for a bigger reason; he understands the importance of giving to the entrepreneurial community before you get something back. “I have no idea if our paths will cross again or what may come from this meeting but I believe you have to put yourself out there and contribute what you can without any expectations for what you may gain. It’s not a selfless act, I know doing this will benefit me greatly, I just can’t pre-determine what those benefits will be.” I agree with Brad completely. Too many people won’t make the effort to be in the room or at the table because they can’t define for themselves what the benefit will be. Forget trying to define it. That’s not how opportunity works. You have to go to everything. Meet with everyone. Focus on the value you can add and trust that you’ll create the opportunity.