This was interesting. The speaker, Wade Brooks, is executive director of the Willamette University MBA Angel Investment fund. A couple of nights ago as he shared notes and research with members of the Willamette Angel Conference. These are the top four things Wade and his group looks for in the companies his organization is considering for investment:
1. Entrepreneurial expertise
They want people who have been there, team leaders who have been through the experience of a startup. Wade says there’s no getting the kind of experience they need without going through it.
2. Affordable loss
Affordable loss is about planning, expense control and careful management. “A little bit of money goes a long way,” he says, when a company is careful with it. If there were no loss, they wouldn’t need angel investment at all; but a big loss means trouble.
3. Early “yes” answers
Ideally, that means people are saying “yes” to sales, and signing contracts. That doesn’t always happen, but there can be yes answers to major allies, distribution channels, beta users, and so on. The best validator is early sales.
4. Milestones met
Wade talked about “a history of performance.” That’s a matter of setting goals and meeting them. He said the company that consistently exceeds its milestones is very rare, but very good to have. Sometimes his group will redo the projections on their own, come up with substitute numbers, and then, even if the substitute numbers are smaller, they still credit the company for making those lesser numbers, if they do.
Wade and his group work with Dr. Rob Wiltbank, who has one of if not the largest database in the world on return on angel investment. The program at Willamette University is impressive — MBA students, with the help of a lot of advice, guidance, and mentoring, are actively involved in making angel investment decisions. The group participates in several of the angel investment groups operating in Oregon, and makes multiple investments every year.
6 thoughts on “A Seasoned Angel Investor Highlights These 4 Factors”
Great things are not done by impulse, but by a series of small things brought together, usually by a team of people with one goal, adding pieces at a time that God controls!
I have manufactures locally who yesterday agreed that we need to make more things here and export them, i showed them 10 new product lines, they want to participate, too bad we don’t have funding.
Local SBA SBDC suggests I go to a “think tank”.
Anderson School Of Business said we can create thousands of jobs with 10 new products, maintain them too. I sure need an angel.
Craig, if you want funding you have to put together a package that’s attractive to investors, because nobody forces them to write checks; they do it because they want a piece of what you’re saying you can build. Generally they like to see deals where the time is controlled a lot by the management team, with the assumption that God’s busy on other stuff.
If the product lines are that interesting and the manufacturers think so, then why aren’t they putting in money? I don’t know your location but I very much respect SBA and SBDCs, normally they know their stuff, and suggesting a think tank instead of a plan implies some doubt about whether you’ve got a great deal there.
If you don’t have actual on the ground experience, then you’ll have trouble ever finding somebody who wants to invest with you unless you connect with people who do, and convince them that they can make money working with you.
Investment is an interesting filter: if you can’t get funded, that’s a message. Something’s wrong. Fix it or forget it. I guess that sounds harsh, but it’s good advice.
I am in the process of putting a business package together to send out to venture capitalists/angels. I am very excited because I have done my research and have an alluring presentation! Sometimes, you also just have to stand out. I read in a quote that it isn’t about the product, its about whether you can pull off pushing the product. Hence the selling ice cubes to eskimos! lol. The toughest customer you’ll probably ever have is that initial investor! I wish luck to anyone that is going through that process themselves!
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