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Seed Capital From Angel Investors: Raymond Chan, Tech Coast Angels (Part 5)

Posted on Sunday, Oct 3rd 2010

By guest author Irina Patterson

Irina: What do you do when you get incomplete business teams?

Ray: We go in there and help. I especially love to work together with the entrepreneurs. We do what they don’t want to do or what they don’t know that they need to do.

Basically, we complement them, and we want to focus them to do on what they do best. That is to build a product, to sell the product. And we will augment them because we have a lot of connections ourselves. All our members are either experienced startup entrepreneurs, they have been there several times before, or they were previous CFOs or CEOs of companies.

So, we have connections. You asked me before about what Tech Coast Angels bring to the table – investments are just a part of the story. Our connections, know-how, and involvement are equally important. For example, in an incomplete team, we will bring in legal help with very discounted rates from our partners. So, instead of their going out to get legal help for IP or for corporate reasons, we have a hugely discounted rate from our partners, because our partners want to get into the deal earliest with us.

Hopefully, down the road, they will be the chosen legal firm for the company, if they’re successful. The same for marketing, the same for accounting — things like that. We bring in a lot more than just money.

Irina: Is this you recruit from your angel members or from your approved service providers?

Ray: In terms of getting day-to-day operations, it is usually our deal lead or the angel members themselves. In terms of service providers, we get them mostly from our sponsors.

Irina: What is their fee structure?

Ray: It depends. Some of them do it pro bono, some differ their payments — it’s all over the map.

Irina: You said you receive about 80 applications a month and you look at about 20 deals. Out of those 20, how many usually get funding?

Ray: I would say we invest maybe in two deals a month.

Irina: What do you do with those who don’t get funding, if anything?

Ray: Well, we tell them how we feel. We give them feedback. And the whole idea is to give them information so that they know the reason why as well as some useful information for them to improve so that they can come back again.

Irina: Do you have any sector preference?

Ray: Not really. Because we have five different networks and locations – for example, in San Diego there are lot more of pharma and biomedical device companies, so we have more of those deals there, for LA a lot more digital media. We just kind of go with the the locations, depending on the concentration of industry in different locations.

Irina: Do you invest mostly in technology companies?

Ray: I would say probably, but again it all varies — we invest in retail, we invest into bio-chemical, bio-medical, green [companies], we invest into services . . .  it varies.

Irina: So, it doesn’t have to be an online or technology company?

Ray: No, not at all.

Irina: Do you have any preferred type of investment?

Ray: We usually use three types. We do common shares, convertible notes, or preferred shares. It all depends on the size and the stage of the company. We don’t have preferences.

Irina: Do you plan your exits?

Ray: We focus on helping to build the company. And if this company’s successful, then I think we should let the market to decide. If at one point the company is acquired by another company, that’s great.

Irina: What is your biggest investment success to date?

Ray: I think Green Dot. The one I mentioned to you earlier. They have been our biggest return to date.

Irina: How long did they stay with you? What’s their story?

Ray: Green Dot, I think nine years. And Green Dot is a wonderful story. I dare not to repeat, not to spoil his story, because it’s a fantastic story, from getting funded by the TCA, how we changed the vision, all the way to the IPO. I am going to invite [the founder] to come to our virtual angel meeting so that he can tell the story. He has a fantastic, wonderful story that all entrepreneurs should hear.

This segment is part 5 in the series : Seed Capital From Angel Investors: Raymond Chan, Tech Coast Angels
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