Seed Capital From Angel Investors: Ira Weiss, Hyde Park Angels (Part 5)

By guest authors Irina Patterson and Candice Arnold

Irina: How much do you usually invest in a company?

Ira: I typically invest $25,000. Sometimes it’s as low as $10,000. A few times it’s been $50,000 to $100,000, but it’s usually $25,000. Our group tends to invest somewhere between $300,000 and $750,000, as a group.

Irina: How long does it usually take for a company to get funding from your group?

Ira: It’s usually two to three months. I wish it was shorter, but realistically it’s probably six weeks to 12 weeks.

Irina: When you invest, do you think in terms of the valuation of a company?

Ira: Yes. Usually, it’s $1.5 million to $3 million. I would say that’s a typical valuation range, but  I’ve done higher and I’ve done lower.

Irina: Do you think in terms of equity?

Ira: As I said, our group tends to invest somewhere between $300,000 and $750,000, and that is usually for between somewhere between 10% and 20% of the company.

Irina: What returns do you usually seek?

Ira: I would say, 5x to 15x range. We’re probably always thinking more like 15x to 20x, but I think realistically is 5x to 15x.

Irina: Over what period of time?

Ira: Over probably five to seven years. But more realistically it’s five to 10 years. A lot of times we end up at ten years.

Irina: At what stage of a company’s development do you usually prefer to invest?

Ira: We’re usually investing at the seed stage. It’s almost always the first round. It’s either series A or convertible debt into the first round.

Irina: Is it OK for a business to be just an idea on paper, does it have to already have customers?

Ira: We don’t require it, but we do have a preference for them to have at least some initial customers. It makes it much easier on figuring out what adoption is going to be like.

Irina: Do you think in terms of the total available market or total accessible market?

Ira: Absolutely, we always want a sense of what is the addressable market size for this product. Also, related to that, is it a growing market, is it a shrinking market, is it a stagnant market? Like most other people, we prefer to invest in markets that are growing. I think there’s this old saying, “The rising tide lifts all boats.” So, the quicker the market’s growing, the better that is.

Irina: Do you have any particular size in mind?

Ira: We generally want the market size to be $500,000 million or more. At $100,000 million is going to be a little small but $500,000 million, that’s probably the lowest we want to go in terms of addressable market size. If the company only gets 10% of the market and it’s a $500,000 million market, it’s $50 million in revenue. And that $50 million in revenue is great for a company but it’s not that easy to get 10% market share.

Irina: Let’s talk about the people. What kind of experience do you require the teams to have?

Ira: We prefer people with technical backgrounds. The two things we care about the most are how smart somebody is and then if she or he is persistent and passionate. Those are the two keys.

We look for people who are really, really smart. And the one thing that we have felt is the most important to someone being successful at these businesses is just his or her pure persistence.

And, usually, if we’re going to back someone, we want it to be a team of at least two people because teams usually work out better than just one person. You’ve got a partner to work with and someone to challenge you and you challenge the other person.

Irina: Do you require any previous business experience?

Ira: We certainly prefer someone who has some relevant business experience, particularly if he has experience in the space. But we don’t require it.

We do invest in people right out of undergrad sometimes. We’ve invested in a couple of people like that.  Probably of the last 10 investments, maybe half had previous business experience directly in that space, and half have not had experience directly in that space. They had some other experience, but not necessarily directly in that space.

Irina: What do you do if a team is incomplete?

Ira: The team doesn’t need to be complete. Given the amount of money that we put into a company, we want to make sure that the team is complete enough that they can keep moving the company forward. Like, you don’t need a finance person and a marketing person, you don’t need somebody in every discipline. We just want to make sure that the team is complete enough that they can keep the ball moving down the court.

This segment is part 5 in the series : Seed Capital From Angel Investors: Ira Weiss, Hyde Park Angels
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