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Seed Capital From Angel Investors: Randy Williams, Founder and CEO, Keiretsu Forum (Part 2)

Posted on Thursday, Jun 10th 2010

By guest authors Irina Patterson and Candice Arnold

Irina: How do these local chapters operate?

Randy: They have great autonomy, but conversely, they enjoy the structure and the model that we’ve developed over the past ten years. It started off in the East Bay of Northern California. Keiretsu Forum started in September 2000, and the tipping point was 150 members in our East Bay chapter. Then we grew throughout the Bay Area; we have a rich ecosystem of entrepreneurial activity here in Northern California. And obviously we do have a lot of wealth, too. We have a large area [with a high concentration] of high net worth individuals, and they saw, as I saw, early on a need to take control of their early-stage investing. A lot of our members invoke up to 10% of their net worth for early-stage investing.

We started in Northern California in 2000 with one chapter. And after that, over the ensuing three or four years, we grew to four chapters in Northern California. We’re in San Francisco, we’re in Silicon Valley, and we’re in the North Bay/Marin County area, and of course, the East Bay. So we invoke a spoke-and-wheel concept, meaning that to be efficient and to run Keiretsu Forum correctly, you need a core and then you grow from that core to expand throughout the area. The best way for someone who might be interested in leadership in Keiretsu Forum to work this model is to create a strong core and then grow from that into a region where an ecosystem of entrepreneurs are interested in having their companies funded. Obviously, it has to have a wealth component where the capital comes from; that is, the members to invest in opportunities.

Irina: So, tell me how your financial relationship works.

Randy: We do not take anything when a member invests in a company. So, for instance, if you’re a member of Keiretsu Forum and you invest $100,000 in a company, the money goes directly to the entrepreneur. We have a revenue model that sustains Keiretsu Forum leadership and employees. I do not and have never taken a salary at Keiretsu. I’m here to be a smarter, more efficient investor. But we do have a sustainable model, and our revenue model is one where revenue is coming primarily from our membership dues. In a robust or mature chapter, it’s $3,000 to join Keiretsu and $3,000 to renew annually. That’s our first revenue component. What that entails is that, obviously, we have a lot of touch points during the month. We have a formal screening day once a month to which members are invited to attend. We have formal forums that take place every month – as they have in Northern California every single month for ten years – along with our screenings. So, we have two very formal touch points, our screening day and our forum. And then we have a series of other events for our members that are primarily education focused, what we call “academies” or “K4 universities,” which are basically a way to educate our members in a myriad of subjects they may find interesting. We do not throw any event unless our members are interested. So, they tell us what they’re interested in. It might be about term sheet negotiation, it might be about valuation, it might be about trends in the marketplace, where should we be looking to invest five, ten years from now, where opportunities are emerging.

And we’re blessed; with 850 members, nearly every industry is really supported at Keiretsu Forum. You name an industry and we generally have executives from that industry as part of the forum. And so you can find most of what a company needs sitting at the table, not only in terms of capital, but resources.

This segment is part 2 in the series : Seed Capital From Angel Investors: Randy Williams, Founder and CEO, Keiretsu Forum
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