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Seed Capital From Angel Investors: Geoff Ralston, Silicon Valley (Part 4)

Posted on Thursday, Sep 16th 2010

By guest authors Irina Patterson and Candice Arnold

Geoff: Sometimes I’ll say to entrepreneurs, “You have a decent idea but your pitch sucks. You’ve got to learn how to take your idea and sell it. If you’re going to go through PowerPoints about X, Y, and Z, this isn’t why I invest. This isn’t how you sell someone.”

I’m always willing to give it [my advice] whether they like it or not.

Irina: Do you have a sector preference?

Geoff: Consumer Internet, I love that. I think mobile is transformative so I’m thinking a lot about mobile and how that affects things. But that’s not all I do. I like infrastructure plays, so I will sometimes invest in infrastructure plays. I’m not so picky as to what “sector” that infrastructure is for. I like things that tend to be general, generic. I like platforms that cut across sectors.

Irina: What is your preferred type of investment?

Geoff: I don’t care so much really. It doesn’t tend to make that big a difference to me in the end. I guess it’s almost always preferred shares that I get, and that’s fine. I don’t focus a lot on that. The chances of that making a difference on a particular deal are too low to worry about. I used to kind of hate convertibles. Convertibles with discounts a lot of times I won’t do at all. Convertibles with a cap, as long as the cap’s low enough, I’m OK with that.

Irina: How long do you like to stay invested?

Geoff: I never think that way. I don’t think it’s really sensible to think about that. My deals are so small, I’m like a mouse riding on the whole thing. If the elephant comes crashing down, I go crashing down with it. If the elephant learns how to fly and gets wings, then I fly with it.

Irina: How do your deals usually exit?

Geoff: I haven’t had an IPO, yet. It’s always been an acquisition.

Irina: What is your biggest investment success to date?

Geoff: I guess Lala, the one that I angel invested in and then took over as CEO. I made the most money on that. The biggest return might have been Bix. I’ve had three pretty good sized returns, Bix, Mint, and Lala.

Irina: What is your biggest daily challenge as an angel?

Geoff: Making the decisions. Deciding yes or no, it’s always hard. And then telling people no and doing it in a way that’s useful to them.

Irina: What do you think angels could do to have a bigger impact on entrepreneurial ecosystem?

Geoff: I think the angel ecosystem is fairly effective. I don’t know if it’s efficient from anyone’s perspective, but there’s a lot of seed money out there. Angels should always do their best to give clear feedback and then move on, not dilly-dally around. I’ve been guilty of this as well.

Irina: What do you think angel-backed entrepreneurs can do to improve their chances of success?

Geoff: That’s a broad question. That’s like asking, why do entrepreneurs fail?

There are a gazillion reasons why entrepreneurs fail and a gazillion reasons why they’re successful. What can they do better? I don’t think I can answer that question as a general rule. Some entrepreneurs do things really great and succeed, and some entrepreneurs do things not so great and don’t succeed.

The bottom line is it’s really hard to be a successful entrepreneur. I don’t have a magic answer that could say if they just did ten percent of this more they would be more successful. I don’t know what that is. It’s really hard. I could say, always hire great people – yes. Never take no for an answer – yes.

From a fundraising perspective, I think entrepreneurs tend to be fairly naïve, especially new ones. They should spend a lot of time learning about it, learning about what it takes to raise money, and really take that in to make their fundraising process as efficient as possible. Because I do think they are really inefficient in that.

Irina: Agreed. In fact, this series is trying to address this issue by educating entrepreneurs on their seed capital options. Excellent insights. Thank you, Geoff.

This segment is part 4 in the series : Seed Capital From Angel Investors: Geoff Ralston, Silicon Valley
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