I spent 15 years at a big company and I knew I wanted to try something different. I plan to do my own startup at some point and so I figured I’d find out what life was like on the other side of the table as an investor first. In addition I believe strongly that there need to be more angels in Seattle who have benefited from working at one of the successful local companies who choose to give back to the startup ecosystem and make this a healthy place to start a company.
If you’re still angel investing, where do you find most of the companies?
I am a member of two angel groups – Seattle Angel Conference and Alliance of Angels. I find my deal flow split evenly between those two groups and referrals from friends and associates
What are the top three things you look for in companies where you invest?
I look for an opportunity that can be big. Given the multiples that one needs to achieve on the successful companies in your portfolio, I’m not interested in something that can be a nice business if will never be big enough to achieve a successful exit. Then I look at the team. As many angels investors would tell you, the team is (almost) everything. I’ll take a great team over a great idea every time. Finally, I look for any evidence of customer traction. Even if it is early I look for any evidence that this team’s solution is resonating with potential customers.
How did you incorporate angel investing into your overall portfolio?
I take what I think is a relatively typical portfolio approach, treating my angel investments as their own asset class and allocating anywhere from 5-10% of my portfolio to this class at any one time. Interestingly I spend a completely disproportionate amount of my time on this 5-10% of my portfolio. This is of course one of the joys of angel investing – the ability to have direct involvement and impact in your portfolio companies.
What have you learned since you started angel investing?
I’ve learned that I have much, much more to learn. One of the exciting aspects of angel investing is that even after being fairly active in it for 3+ years, every time I engage I learn something new.
What do you wish you would have known before you started angel investing?
I wish I had understood the cold hard math facts a little better. I would likely have had a little more rigor on early stage valuation if I had.
What space are you most interested to invest in next?
I don’t have a particular industry bias but I feel most comfortable investing in the software IT space
What resources should entrepreneurs and angels use to learn more?
There is no lack of great educational forums put on by all the angel groups in town. If one wanted to, one could go to an angel event just about any night of the week. Geekwire maintains a good listing of these events as does StartupSeattle.com. If I could recommend one book that all angels and entrepreneurs should read it would be Early Exits by Basil Peters.
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