Western Mass Business Show Interview: Innovation in Western Massachusetts

My thanks to Ira Bryck for a wonderful interview on his Western Mass Business Show radio program on WHMP. We chatted about the various ventures I have had the joy of being a part of, especially the River Valley Investors, Valley Venture Mentors, and my new startups Launch413 & the Lean Innovation Institute. You can here the full interview here: Western Mass Business Show 3.31.18 | WHMP-AM – News – Information – The Arts

Want to Transform the Local Economy?

Good News: Western Massachusetts is home to one of the top 100 startup accelerators in the world and has a rapidly growing entrepreneurship ecosystem. We have dozens of exciting young companies being born every year right in our back yard. WHAAAAAA WHOOOO!

Bad News: Those companies need access to high-risk capital but we don’t have nearly enough angel investors (AKA wealthy people who put their own time & money into startups). Too few angels means too little capital. Too little capital means many of our region’s greatest companies will have to move to where they can find the money.

The Opportunity: If you believe, as I do, that entrepreneurs are our best hope for growing the jobs and prosperity of our region, and if you have an income of at least $250k a year (and/or have a high net worth), I invite you to become an angel investor for our region. Doing so gives you the opportunity to help entrepreneurs with your money and your expertise. Startups are hard. Most fail and in so doing lose their investors money. But the ones that succeed create economy-saving jobs & prosperity. Their founders and investors earn enough to become the philanthropists of the future.

It truly is an opportunity to do well by doing good… and have a blast doing it.

If this sounds like interesting, I invite you to come to a meeting of the River Valley Investors, meet the crazy people betting on the innovators of the future, and consider joining us. To get meeting details, email me paul@angelcatalyst.com.


The Case For Being An Angel Investor

Marianne Hudson, executive director of the Angel Capital Association (the trade association for angel investors in the US) wrote an article making the case for wealthy to consider becoming angel investors. Her full article (with her permission) appears below:

The other day I was listening to an entrepreneur pitch his company to a group of potential investors and it hit me how great it is to be an angel investor. I’m admittedly biased, but I think being an angel investor is one of the best things high net worth investors can do.  Supporting great entrepreneurs is a real kick – and it can bring significant financial returns.

The rewards are many, assuming you can check yes to these basic caveats: Legally, you must have the wealth or income to be an accredited investor. Personally, you must be willing to lose your investment money, should have a portfolio strategy, and use good investment practices.  This high risk, high reward kind of investing isn’t for everyone, but for every article I read encouraging people not to get into angel investing, I see more reasons to do it.

First, consider the potential financial returns.  A study found that the overall return on 1,100 plus angel exits was 2.6 times the money in 3.5 years, or about 27% gross Internal Rate of Return.  Not bad compared to other types of equity investments. Even so, it’s important to look into the details.  More than 52% of those exits lost some or all of the investment and 7% provided nearly all of the returns.  This means that angels need to start with a strategy to make multiple investments to minimize risk and increase the chance of good returns. Angels should also educate themselves on good angel investing processes via eventsreading and networking with experienced angels.

Angel investing can also help diversify your overall investment portfolio.  Ryan Feit, CEO of SeedInvest, put it this way: “Allocating 5% of your overall portfolio into angel investments can increase returns while lowering volatility.  This is because early-stage, private companies generally have a low correlation with traditional asset classes, such as stocks and bonds.  A recent SharesPost whitepaper concluded that allocating 5% to private growth companies could increase the returns of a traditional portfolio by 12%.”

While returns are the measuring stick for any kind of investment, investing in early-stage companies provides a whole set of additional, hard to find, personal rewards:

  • Meet interesting people with fascinating ideas – Top entrepreneurs are the best communicators I’ve ever seen, getting across their technology or medical innovations in ways nearly anyone can understand while also explaining their business models very well. You can feel their tremendous passion and see how fast the wheels in their brains are going.  Through angel investing I have also had the pleasure of meeting other investors. Often we have highly different backgrounds, yet we share a common core that builds great bonds, leading to long-lasting, true friendships. And let’s not forget the great food and beverages we enjoy as we analyze and debate our next investment.
  • Support what you care about – Since angels decide which companies they want to invest in, they can put their own money in the kinds of businesses that are the most important to them. This might be industry sectors you have experience in, or entrepreneurs who are alumni of your university, or supporting a demographic you care about such as women entrepreneurs.
  • Know you’re doing good – As Feit says, “Unlike any other type of investment, startup investing provides the opportunity to invest in innovation and to feel real ownership in the companies that you invest in. Every year, angel investments create thousands of revolutionary and life-changing technologies.” I’ve met so many angels who are also proud that the companies they invest in create new jobs.
  • “Entrepreneurship without the responsibility” – Super Angel David S. Rose coined this phrase in his 2014 book“Angel Investing: The Gust Guide to Making Money and Having Fun Investing in Startups.” Entrepreneurship is exciting.  As I wrote a few years ago, one of my favorite angels has said how much he loved starting his very successful company and selling it for a great return, but he didn’t really enjoy the part in the middle—running and growing the company.  As angel investors, we know that the responsibility for a company’s success lies with the CEO and we can enjoy being involved with the company without having the responsibility of leading “in the middle” to get to a great exit.
  • Learn new skills – Angel investing offers something new for everyone. Learning new things like deal terms, the most effective way to mentor entrepreneurs, or how to be a good board director can be lots of fun. Sometimes gaining these skills can also lead investors on new life paths. For instance, one reason angel investing is attractive to women is because it’s a fast track to learning about being on boards of directors, getting board experience, and then leveraging this to become better candidates to serve on corporate boards.
  • Apply current skills in new ways – Angel Barbara Clarke is an example of how an investor’s background can contribute to the angel process. As she told me recently, “Everyone on a due diligence team has their own unique expertise and experience. For example, angels with journalist backgrounds are good at research and interviewing. My background is management consulting, and I’ve found that I am comfortable with competitor and market analysis, even in industries and fields I am unfamiliar with.”

When you add the financial benefits with the personal perks, how can’t you make a case for angel investing? My advice? Continue to learn as much as you can about angel investing before diving in, but know up front that it is one of the best things you can ever do.

8 Steps To Becoming An Angel Investor

The Angel Capital Association put our a great starter guide for people who are Angel Curious (my term, not theirs :)).

The Short version:

  1. Make sure you meet accredited investor standards
  2. Understand the risks of investing in startups
  3. Educate yourself
  4. Ask experienced angels for advice
  5. Join an angel group or angel platform (like the River Valley Investors)
  6. Develop an initial investing strategy
  7. Actively participate in Q&As
  8. When ready, write that first check

Get the full details from the original article here.

Investor Pitch Template & Tips

After seeing hundreds of formal presentation decks and hearing thousands of elevator pitches, some patterns emerge. Here is my recommended formula for how to put together an 8-10 minute pitch deck & speech for investors.

Full template here, summary below:

  1. Company – Describe your venture in a tweet/sentence | describe what kind of skill set you bring to a job in a tweet/sentence. Some tips on condensing your value proposition into a tweet.
  2. Credibility – Talk is cheap, SHOW us you are someone with more than just an idea / someone we should continue listening to. If you have no credibility yet (very common!), skip this section. Remember to show, don’t tell.
  3. Customer Segment(s) – Give us a quick feeling for who your target market is and that they have enough money to make your venture worthwhile. Better yet, tell use about a sample customer.
  4. Pains – What is the pain (for your target market) you are solving? How to articulate your pains. Some tips on making sure your pains & gains match.
  5. Benefits – What benefits can you deliver to the target market that alleviates their pain? Note: features are not benefits :).
  6. Competitive Advantages – How are you positioned better than the competition? Remember the positioning triangle.
  7. Channel/Promotion – How are you going to find and get your customers cost effectively?
  8. Market size – How many dollars have your problem (video tips on market section)?
  9. Rev. Model / Key financial drivers – How do you make money? Can you make enough? Don’t show a spreadsheet!  Video w/ tips on financials & exit
  10. Exit – How do investors get their money back out plus a lot of profit for them? For instance: can you show us a screen full of logos representing companies like you that have been purchased for a lot of money? video w/ tips on financials & exit
  11. Team – If possible, intersperse this content throughout the rest of presentation. If that is tricky, make a dedicated team section. Remember to show, don’t tell how your team has the skills needed to help your kind of company succeed. What skills / people are you missing?
  12. Next Steps / Ask – ALWAYS end a pitch with some kind of ask. It can be explicit or implicit, but it must always be there. A great way to do it implicitly is to show the audience what your next step is. Get more detailed help on how to make a great Ask here. If you are asking for money, remember “Don’t tell us how much money you’ll burn.”

Hungry for more?

Hat Tip: This content expands on the work I did while working at the awesome www.valleyventurementors.org.

Tax reform’s impact on Angels and Startups

The Angel Capital Association put out summary of the recent tax reform legislation’s impact on angel investors and startups.

Short Version: 

  • Gains on Qualified Small Business Stock (AKA 1202) will continue to be 100% exempted.  (The continuation happened by not being mentioned in the legislation.)
  • The R&D Tax Credit also continues, as does the ability for startups to take up to $250,000 of the credit against their employment taxes.  (This also happened by not being mentioned in the legislation.)
  • It doesn’t include an initial proposal to tax stock options and restricted stock units when they vest instead of when they are exercised.
  • Carried interest can be taxed as long-term capital gains IF they are held for three years or more.  This appears to be a nice compromise that might help some early-stage investors like angels and VCs.

Full article.

If you have interest in angel investing and are local to Western Massachusetts, check out the local angel group I have the privilege of running: the River Valley Investors.


Steve Blank, who developed the #1 entrepreneurship curriculum in the world, recently noticed some of the failings of angel/vc/accelerator pitch events and then proposed an alternative.

Key to his proposal is the real life example of “Moneyball” – where a team proved it could use cold-hard-metrics to dramatically improve upon the old gut-instinct-only system  Steve thinks this can be done for startups, and I am inclined to agree with him.,

I invite you to read the full text on his website and engage in a dialog about it.  Could this give angels a much better way to pick the winners out of the super-early-stage companies we love to work with?  Might it be a better fit for angel groups outside of the major innovation hubs – angels that don’t already believe they “got it” :).

And lastly, might it imply a different model for angel groups?  Instead of bringing in a few companies a month for “1st dates” that emphasize pitching skills, should we be bringing in batches of companies and putting them through a Lean Launchpad experience and evaluating them after 10 weeks of hard work (that we witness)?


Originally posted on the River Valley Investors blog here.