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Seed Capital From Angel Investors: Alan Rossiter, Vice Chairman, Springboard Capital (Part 5)

Posted on Saturday, Jul 24th 2010

By guest authors Irina Patterson and Candice Arnold

Alan: Another aspect – and this may be more personal to me than it is to Springboard as an organization – is that one of the other major challenges for angel organizations is communicating with entrepreneurs.

When you see as many deals as we do here – we see about 300 a year – you can spend an entire day, every single day, on the telephone with entrepreneurs and not really get a whole lot done for that day.

On the other side, it’s extremely important to the people who communicate with you and interest you in their opportunities. They deserve our courtesy, our respect, and our responsiveness so it is a constant struggle to be responsive back to the people who apply or who are seeking capital. That is a huge challenge.

If you think about us, we see about 300 companies a year. We do on average – a little slower now in this environment – about one deal a year, maybe two.

That means we’re saying no to companies 290 some times a year. It’s very hard to do that and maintain positive relationships, but you have to. It’s part of the business. AngelSoft makes that very easy because you can hit a button and send an impersonal e-mail. That’s not really what you want to do. You’d like to be able to pick up the telephone and speak to them and tell them they may not meet your criteria or something like that. It’s a challenge, I’ll tell you.

Irina: On average, from all sources, how many pitches do you receive a month?

Alan: Somewhere in the neighborhood of twenty to thirty, something like that.

Irina: Out of those, how many deserve a closer look?

Alan: Five. Maybe a little bit more because it’s a process of multiple steps. Clearly half of the deal flow that we see, within the first minute of looking at it, I know it’s not a deal we’re going to do.

So you can cut that list in half almost instantaneously. Normally, then the next step, regrettably, is seeking more information.

There just isn’t enough there to tell, like it’s a very interesting business but they’re not telling you how much money they’re looking for. Now we’ll normally then flow down from that twenty or so to maybe three or four, and we will do a meeting or a Web conference, if they’re out of the area, to drill down a little bit.

And then two, maximum, we would invite to come up and meet with our partners when we meet on a monthly basis.

Irina: When you’re debating whether to invest in a company that presents to you, what factors carry the most weight?

Alan: There are a lot of factors that you look at, and there are a number of different books that have been written about the specific criteria and weighting factors and so forth. The reality is, though, that it is, in fact, a blend of a number of different factors.

I’m going to hit the high ones. The trite answer, I guess, that everyone gives is management. How good is the management? That’s true. That overrides everything. But getting to some more specifics and what I would look at are the market opportunity, not necessarily the size of the market, but the market need for the product or service that they’re intending to offer.

This segment is part 5 in the series : Seed Capital From Angel Investors: Alan Rossiter, Vice Chairman, Springboard Capital
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