In Search of Angels

Let’s say that you wanted to get into mortgage lead generation. Given the current market conditions, we should change this to debt consolidation lead generation. If you wanted to become a lead generator in this field, you could as one way to enter, register a domain name, become a publisher of Leadpoint, create a site leveraging their backend, open an Adwords account, and in 24 hours have a business. The same holds true for any number of verticals or offers. If it’s not Leadpoint, you could become a publisher of Commission Junction, Azoogle Ads, CPA Empire, or any number of the successful networks that would welcome you to join. You would become an affiliate, leverage what you’ve learned, heard, and/or seen to start generating some cash flow. If you started to see any hint of success, you might then incorporate and think about getting serious with your business. And, if you happen to meet someone who happens to do this at a show, for instance, you wouldn’t think twice or find that route strange in any way. That’s how "our world" can work.

If instead of a direct response / affiliate business, you wanted to build the next social network, YouTube killer, or widget ad network, generating cash is not as easy as arbitraging traffic. Before you ever officially begin business, you have costs, whether hard or not. You might have the skills to develop the site or have a partner that will work with you in their spare time to build it. If you happen to get very lucky, you can even build something and start to get traction on it without much personal investment. What happens, though, if on the good scenario, your business starts to take off and you find yourself needing cash to grow – to buy servers, hire additional programmers, etc.? Or, in the not horrible case, what happens if you find yourself with a good partner, a working idea but in need of funds to build it? If you are super connected and/or have a track record of success, you might decide to seek funding from the venture community. This isn’t the bubble again, not fully at least. They won’t fund just an idea, not unless you are the co-founder of YouTube or equivalent, someone who has made those in the investment space a large amount of money. For the rest of us, this means finding other sources of money, and outside of friends and family, one of the most common avenues, one that many venture companies will want to see that you have done successfully, are angel investing groups. It’s something that we had the opportunity to sit in on just recently and thought we would share the experience. And, in case you are wondering, the DM Confi was not presenting.

This particular angels group got started at a very un-internet hour. Doors opened at 6:45 with more than half having arrived by the time 7:00 rolled around. This particular meeting, where two to three companies present, happens monthly, so people spend the first 15 mins picking out seats and huddling around the coffee pots getting their morning caffeination going. Once 7:30 rolled around, the head of the group had everyone take their seats. Luckily for me, but not as much for the first presenter, the presentation meeting includes breakfast. Also at their disadvantage or perhaps part of the challenge, they have the room set up like a banquet, circular tables with eight to a table, insuring that half must choose between eating and looking attentive. Fortunately for those presenting, the atmosphere didn’t have the high powered, anxiety producing, guilty until proven otherwise environment associated with many Silicon Valley pitch rooms. This one merely has you not take the lack of attention personally as people focus on scooping up their eggs instead of looking at your slide. Fortunately, for the first presenter, he had great speaking skills which had a good number focusing on him and not their food.

On each table sits a piece of paper with every members name and three columns, each with "yes" or "no" as the options. After the presentation and some internal discussion sans presenters, the members at the table must locate their name and indicate a level of interest in the company. Selecting yes does not indicate intent to invest, but it does indicate you have an interest in learning more, generally due diligence. If enough members select yes, then they will start to dig more deeply into the company. Generally a select number will then lead the due diligence process, which ultimately dictates who, if any, would like to invest. Here too, it’s like herding cats as you need enough people to invest to make the amount worthwhile, and you need to make sure everyone acts promptly enough to make it timely. For the investors, forty of whom came to this morning’s get together, they have no minimum per deal; although the average per person comes to around $25k, and typically, they must invest around $50k to $100k annually to stay an active member of the group. This group has associate members who do not have that obligation to invest but help in the coordination, screening, and due diligence. Some of the larger angel groups will have full-time employees to manage the coordination not just members. It really depends upon that groups style, focus, and investment appetite. As with VC’s, angel groups have different makeups.

This particular group, known for its more laid back approach, (translation: they will pick some duds), had a unique mix of people. The makeup of which reflects the area. Here we had, if there is such a thing, the self-made millionaires – people that grew a business over time and have either sold (non-Internet) or simply stashed away a lot of money, in addition to the media moguls who ran entire TV stations, to dot com successes, to medical professionals. Two-thirds still worked full-time, whereas this counts as a retirement passion for the others. Some even parachute into the companies to help get them on the right track. And, while they might sound like a motley crew, their combined skills mean that they tend to have somebody for just about everything. Some in the groups will often “mentor” a company until it reaches the stage where it’s attractive for angels, putting their own money before bringing it to the group. You can find angel groups all over the country, but the biggest and most active take place on the two coasts. What I look forward to, and what I expect will see soon, are angel groups focused on a specific area, e.g. lead generation. You will have a smaller group – ten to twenty that have not just money but the connections to invest and add rocket fuel to those who seek their help.