By guest author Irina Patterson
Irina: What is your biggest investment success to date?
Liz: I think our biggest investment success is that none of our companies has gone broke during this economy. It’s still too uncertain in this economy and the exit market — I’m really excited about a couple of them. I don’t know, we’ll see. But I think not losing a company in this economy is really amazing.
Irina: So, you’ve been doing this for a while. Looking at the whole landscape of angel investing, is there anything that could be done better?
Liz: I think that the Angel Capital Association has been an enormously positive organization for the angel world because it organized the world of angels, helped them connect with each other, helped entrepreneurs find them, and brought some structure and process to the world.
And right now, I think they’re really in a wonderful place because people are sitting on a lot of money even though a lot of people are afraid to spend it. I think the fact that angels are organized — I tend to be though a little bit overly-organized, I really like little funds – is good because I think it brings more process and procedure than just networks do.
I’m working on getting another group together in Missoula, Montana. But the thing that has happened that I’m really pleased about is that angels have helped educate entrepreneurs, so that entrepreneurs do better and angels make money. But angels make money only when entrepreneurs succeed. So, I think that the whole education piece has been the key. It’s not just formalized, it’s the experience as much as it is formal.
Irina: What do you think angels could do increase their chances of success?
Liz: I think we just have to continue to do education. We actually have a little business plan for our fund, and part of it is continuing education. I just did a seminar last Friday in Missoula, with the new angel group that’s coming around and about five [angels] of my group went, just kind of to get a reminder on term sheets, valuation, due diligence . . .
And we’re getting ready, I think, pretty soon to do a half-day just on valuation, and we often have an IP attorney come in and update us on what’s going on in that world. So, I just think you have to to have a little discipline about it. If you’re going to be an angel investor, you need to be an angel investor. It’s not your life, it doesn’t have to take up all of your time, but you need to have some commitment to it.
Irina: And what do you think entrepreneurs could do to increase their chances of success?
Liz: I think they shouldn’t take money from angels whom they don’t like. I think they should date, they should get to know the people better that invest in them. And I’ve always been very open about sharing sort of who my angels are. I think the companies need to educate themselves as well.
That’s one of the reasons I’m going to do this other piece of curriculum in Montana so that companies and entrepreneurs have a much more realistic expectations about who angels are and how they work. You know, they’re not in their company day-to-day , they’re not micromanaging things. And frankly, angel investing to me is very cultural. Each group is different, just from the dynamics of who’s in it.
Irina: Exactly. As I’ve been interviewing angel investors, I noticed that, too – angels, they are all very different. Thank you, Liz. I enjoyed our talk.