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Seed Capital From Angel Investors: Russ Fradin, The Bay Area (Part 2)

Posted on Saturday, Sep 18th 2010

By guest author Irina Patterson

Irina: If an entrepreneur decides to seek funding from you, what is the best way to reach you?

Russ: I am maybe the easiest person in the world to get a hold of. I will meet with almost anyone if I think there is some interesting reason to do it.

Personal connections and introductions are always better than random, blind e-mails. But I had a person I just invested in whom I haven’t met before. He blind e-mailed me, and he happened to know just one person whom I knew a little bit. I met them and I was really impressed with what they are doing.

So, I am relatively easy to meet with. That is just the way I am in general. I think that there is a lot of benefit can come from meeting with smart people even if you don’t invest in their company. Between Twitter, Facebook and LinkedIn, I get e-mails all the time.

Irina: From all your sources, how many pitches do you receive a month?

Russ: I don’t know how many I get. I probably meet with four or five [companies] a month.

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

Russ: Because of the way they come to me, I’d say, at least half of the ones I meet with I wind up pretty interested in. That is actually the downside of being the angel entrepreneur.

I get excited about lots of ideas. That’s why I have been involved in so many early-stage companies. Almost everyone I meet I get very excited about the idea if that is a smart passionate person delivering the pitch well. It kind of takes me a day or two to decide if I really like it or if I was just excited because I like the person.

Irina: What is your next step when you find a deal that you are excited about?

Russ: It depends; if that the space that I know something about, then generally I introduce them to other folks whom I think should be excited about it as well. If that’s a space I know nothing about, then I look and find folks whom I know and trust who can help me to think about if it’s a good idea or a bad one and why.

I stick to similar processes as most people. I don’t invest in things I know nothing about unless a close friend who is an expert in that space is leading the investment. I am the first person to write the check only if that is the space I know a lot about.

Irina: What factors do you give the most weight when you are debating whether to invest?

Russ: How much I like the entrepreneurs. How good I think they’ll be. There are very few companies that wind up ultimately being successful with their first idea. It’s always something that looks like the first idea, but it very rarely that first pitch wind up being the thing that is super successful. In the early days, is all about the team and how well they work together and how passionate they are and how much they know the space and how big I believe the space is going to be.

Irina: How many investments have you made in the past twelve months?

Russ: I’ve probably made between twelve and fifteen in the past eighteen months.

Irina: What was the average dollar amount per investment?

Russ: Everything from $25,000 to $250,000.

Irina: How fast a company can expect to receive funding from you?

Russ: If it’s something I really know, generally pretty quickly, generally within a couple of weeks. But a lot of times you get pitched on an idea and then they go away, they work on an idea some more, and that takes two more weeks. There are people whom I invested in six months later.

Irina: Do you think in terms of valuation when you invest in a company?

Russ: Sure. In the angel rounds people generally have reasonable valuation expectations. There is a deal I am looking at right now that I love, but I probably wouldn’t do simply over valuation.

Mostly angels deals are done in somewhere in $2 million, $6 million, and $8 million pre-money range. I don’t have a certain number. I did invest in something that raised money at $300 million in pre-money, and that turned out to be a great investment. I’ve done one thing that has been at $300 million pre-[money], one that was $12 million pre-money, and one was $2 million pre-money. It can be a negative factor, but that is not my first criterion.

This segment is part 2 in the series : Seed Capital From Angel Investors: Russ Fradin, The Bay Area
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