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Seed Capital From Angel Investors: Corey Silva, Assistant Manager, River Valley Investors (Part 7)

Posted on Wednesday, Jun 16th 2010

By guest authors Irina Patterson and Candice Arnold

Irina: What is the typical return that RVI investors seek?

Corey: Like all angel groups, we’re always looking for 5 times and 10 times. We’ve had two exits so far, and both were profitable. I believe it was in the 33% area. I don’t remember the exact figures. We have not had a big 5 times or 10 times hit, yet. But we’ve also not lost, you know, we’re two for two so far in making money. Most angel groups only make money on two or three out of ten deals. So far, we’re two for two.

Irina: And who usually does due diligence?

Corey: What we do is after the company makes a presentation – we usually see two presentations a month, occasionally we’ll see a third – as soon as the presentation is done, we have a question and answer session, then the entrepreneurs leave the room and we have our closed door session where we discuss the deal. At the end of that, we ask, Who likes this company enough to involved in the due diligence screening and do some homework?

And people just put up their hands. Sometimes it’ll be three people, sometimes it’ll be seven people. They’re the ones who actually go out and do the due diligence.

My brother and I coordinate their efforts and on certain deals; we get involved in due diligence ourselves because of personal interest. But, again, we both have so many other jobs demanding our attention that we don’t do a lot due diligence, it’s mostly the members who do it.

We just coordinate and facilitate. But it is something that we enjoy, so there have been certain deals that for personal reasons, we get involved in due diligence efforts because it’s fun.

Irina: How long do RVI investors like to stay invested in a company before exit?

Corey: They certainly like to have three- to five-year windows, just like we like 5 times to 10 times returns, but those kinds of things you play by ear. And it’s more important to them that the team, the company, is performing well and that they’re hitting their benchmarks. The exact timeline is less important than the performance.

I think everybody in the angel community would like to get out in three to five years, and we’re no different. But a lot of times, we’ve had deals that stretched out longer than that. We certainly aren’t afraid to go back in, when something didn’t turn out the way we wanted it to, and refresh the management team or whatever.

If we make a commitment, we make a commitment and we like to see it through. RVI is not a group that as soon as it sees trouble wants to back out of the deal. When they make a commitment, they usually stand behind it. A lot of times things get in the way that don’t allow your targets to get hit, but that’s certainly our target.

Irina: At what stage of a company’s development does RVI prefer to invest?

Corey: We don’t ever invite someone, such as an inventor, who has a great idea and that’s it. Those people don’t come to our group. They apply, but we don’t invite them in. A company needs to be more mature than that. They need to have a management team; they need to have executive summaries; they need to have a business model at least attempted, even if they’re wrong. We might help them correct it. But we certainly don’t invest in two people with an idea.

Irina: Do you require that they have customers or revenues?

Corey: We’re not that strict. We don’t insist on revenues. Certainly we’ve invested in companies that didn’t have revenues, yet. But they need to be past that initial stage. And we also invest in companies that have revenues and have been around for a while. It doesn’t need to already be at revenues, although we certainly prefer that.

This segment is part 7 in the series : Seed Capital From Angel Investors: Corey Silva, Assistant Manager, River Valley Investors
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