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Seed Capital From Angel Investors: Corey Silva, Assistant Manager, River Valley Investors (Part 9)

Posted on Thursday, Jun 17th 2010

By guest authors Irina Patterson and Candice Arnold

Irina: Do you ever invest in deals that can go on generating dividends?

Corey: Yes. As a matter of fact, we’re looking at a deal right now. We haven’t invested in them yet, but we’re at the stage of negotiating terms. We’re just entering that stage. And that’s exactly the nature of that deal. It’s not the kind of company that they would want to sell. It’s the kind of company that looks like it has a really good shot of just providing significant cash returns on a yearly basis. So, again, that’s not a traditional angel-type deal. That’s not usually what angel groups are interested in, but like I said, our group is atypical.

As I was saying before, we’ve only had two exits so far. In terms of the investment world, we’re new – we been around since the early 2000s – so we’ve only had those two exits and those were classic angel deals. The companies got acquired and we made money off it.

But as I said before, we’re in due diligence with a deal right now and at the stage of negotiating terms. So, that’s precisely what it would be. It would be the kind of deal where there are no plans to sell the company. The plan is just to optimize the management team, negotiate the right terms and just milk it like a cow because in our minds, it’s a pretty low-risk play.

Most of the pieces that need to be in place are there now and the management team doesn’t want to get out and sell and we don’t think that would be the right move. We think they’re right. It would be a nice deal that you could just kind of milk for ten years and just take cash out of it and then maybe far down the road sell it. Who knows? But certainly we do entertain non-traditional angel deals like that.

We did a lot of research into debt financing, as well, which we haven’t done, yet, but my brother – the manager of the group – did a lot research into it and talked to a lot of other groups that are doing it. So, we certainly entertain non-traditional angel deals.

We like to stay on the cutting edge. When there are trends developing, you like to get in on the ground floor, and that’s certainly been a trend that’s developed lately and we looked into. We found out what would be good for us. I think that for most of our members, it’s not something that they’d actually be interested in doing. But it’s good to do some research on it just in case things change in the future.

Irina: What is your preferred investment type?

Corey: I’d be hard-pressed to answer that question for the group because again, there’s so much variety. Different members of the group come from different backgrounds There are couple people in the group who are VCs who obviously, come at it from a different angle than the regular angels. But I’d say, as a general rule, they don’t seem to like convertible notes. I don’t want to make overly broad statements, but that’s one I feel pretty safe making. It seems that, as a group, they aren’t very interested in convertible notes. I’m sure there could be exceptions made, but in general, that’s something they try to avoid.

Irina: So, they usually invest in common shares and preferred shares?

Corey: Yes.

Irina: The exit you usually aim for is M&A, right?

Corey: Yes. Like most angels, that’s almost always the route we go. Like I said, we’re pretty close to getting into a deal that’s not going to be like that, and we entertain other sorts of deals, but yes, M&A, that’s primarily what we look at.

This segment is part 9 in the series : Seed Capital From Angel Investors: Corey Silva, Assistant Manager, River Valley Investors
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