Seed Capital From Angel Investors: Ira Weiss, Hyde Park Angels (Part 3)

By guest authors Irina Patterson and Candice Arnold

Irina: Can you be more specific about the process how your students work with local businesses?

Ira: What I mean is that there are local startup companies that recruit our MBA students to work with them on their businesses. The local startup companies want to be part of the business plan competition because it gives them exposure and helps them to improve their business plans. Also, they get an audience of venture capitalists at the end of the business plan competition, and they get a lot of value-add from the school. In some cases, there are businesses that are started by students.

Irina: I see. Now, out of all of your sources of deal flow, which one is the best?

Ira: The resources that are really good for us are our angels. And we actually get a lot deals from local venture capitalists because if a company is a little bit too early for them, some VCs in Chicago will invest early and some of them will not.

The ones that are a little bit later stage investors, if they find something that’s interesting, they’ll send it to us because they know that when we get a deal in, we try to take very good care of our entrepreneurs. We try to add value and we’re very responsive. We try to treat them extremely well. So, I think people are keen to send us deals.

I think local venture capitalists are our best sources of reliable deals now but those VCs, our angels, and the business plan competition, are all sources.

Irina: Do you use any online sources?

Ira: We use an online software program called AngelSoft, and we use that to help manage our deal flow. People can apply through our website, so we will occasionally look at deals through there. We also go to conferences in the Chicagoland area. We have not used a lot of online sources at this point.

Sometimes we’ve had an investment thesis. Then we look around and try to find a competitor in the space and try to figure out where the competitor is located and whether we want to invest in the competitor instead of the first company.

That’s not usually the case. Usually, an entrepreneur brings an idea to us and we decide whether we’re a good fit. But there are some cases where people will come to us and we will get interested in the space and look around for other things in the space.

The problem there for us is we’re pretty geographically constrained, so the chance that some other business that we’d find is located in the Midwest or the Chicagoland area is relatively low.

Irina: You mentioned that you use AngelSoft. What is your experience with AngelSoft?

Ira: We’ve been very pleased with it. For our group, it’s been a very good deal management source. It allows us to keep all the information online, it allows our members to go in and rate deals, it allows entrepreneurs to put information online, and it allows us to keep our notes for each company online so that angels can log in from wherever they are to look at it. It would be really hard for us to run our organization as effectively without it. It’s been very, very helpful.

Irina: Are there any fees?

Ira: As long as you are an angel group and not a venture fund, there are no fees. The only fees they charge are, if you collect money through the site. Some people are not thrilled with this, but the only fee that we charge entrepreneurs is an application fee of $45 for each entrepreneur. We don’t charge any presentation fees or any other fees.

You know, you can apply via our website. Before we had this minimal fee set up, we would get inundated with random submissions, and there would be so many businesses.

People wouldn’t even look at our criteria. They’d just send it to us. And they wouldn’t even look at whether we were a reasonable fit or not. So, once we put in even a modest fee, we get mostly reliable sources and we direct them to our website. AngelSoft takes a portion of that, maybe 10% because it’s collected through the website. Other than that, it’s free for angel groups.

This segment is part 3 in the series : Seed Capital From Angel Investors: Ira Weiss, Hyde Park Angels
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