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Seed Capital From Angel Investors: Brian Cohen, Vice Chairman, New York Angels (Part 7)

Posted on Thursday, Dec 30th 2010

By guest authors Irina Patterson and Candice Arnold

Irina: How do you feel about entrepreneurs who drop out of school to build their companies?

Brian: I think, for the most part, entrepreneurs have to be educated. There’s no turning away from the fact that a good education represents curiosity and a desire for personal advancement. There are always exceptions to the rule, but I think you have to stick with the tried and true talent that comes from smart people excelling at various educational institutions.

That doesn’t mean it’s from a name school, by the way. You know, you come from City College of New York because you couldn’t afford to go to an Ivy League school. High ntelligence is something you can find in a variety of colleges.

Irina: What about business experience?

Brian: I’d say that would be number two on my list of things, the wisdom, experience and having understood how to build a business. Yes, I would definitely say that would be a critical component.

Irina: Does New York Angels have a sector preference?

Brian: I think the sector preference is more self-definable. We’re in New York, we’re very Web 2.0-centric. It’s also definable by the membership. We’re now taking on a couple of members outside the Web 2.0 industry, in the fashion industry. The fashion industry in New York is on a rebound.

Having internal experience among the angels is a critical component. We had a bright kid come in the other day, and he said the sneaker industry is a hot opportunity, so we found two angels. One of them has become a member. They got interested in the idea of building a sector for fashion. So, a lot of it is driven by that. Some of it is driven by the fact that we have somebody in the graphics arena, so we look at graphic opportunities more . . .  3D, for example. It’s really representative more of the talent, knowledge, and experience of our members.

Irina: When you say ‘fashion,” does it have to do much with the Web, or is it fashion in a traditional sense?

Brian: I think everything has something to do with the Web, whether people use it as a tool or a destination. We looked at a man who creates perfect, well-tailored shirts for men, and you design them online. We don’t know much about the fashion industry, but we certainly know about tools and understanding online environments.

So, we needed somebody to explain to us why this guy is the right person, who he knows, how he’s designing the shirts, where he’s getting these shirts done, what the mechanics are when you design the shirts, the quality of the material, his pricing strategies. Using the Web as a tool is one thing. Using the Web as your destination is another.

I would be hard pressed to imagine that we would invest in a company that wasn’t in some way using technology to its fullest.

Irina: What is your preferred type of investment?

Brian: I think 99% of the time, angel investors recognize the risks that they’re taking at a pre-revenue level, and preferred shares is appropriate.

Irina: Do you invest in any other way, for example, royalty deals?

Brian: We try to stay very clean, very straightforward. I haven’t done any of those. I don’t think we would consider them.

Irina: How about convertible debt?

Brian: Yes. Convertible debt is another tool, and that’s more functional, relative to early limiting of legal expenses. Early debt can be used on the basis of a share price or a ceiling. We can certainly look at convertible debt for those reasons.

Irina: New York Angels have been in operation for eight years. Have any companies exited, yet?

Brian: There have been, I think, three companies that have exited through  acquisitions.

Irina: What’s your biggest investment success to date?

Brian: Nothing that I would want to champion. We had one that was a 10x company called Design2Launch. We’ve had a recent one, through two acquisitions, called Buy Your Friend a Drink. We’re now on the cusp of a couple of acquisitions that are exciting.

This segment is part 7 in the series : Seed Capital From Angel Investors: Brian Cohen, Vice Chairman, New York Angels
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