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Seed Capital From Angel Investors: David Rose, Founder and CEO of Gust (Part 1)

Posted on Saturday, Oct 1st 2011

Today, I’m talking with David Rose, who founded AngelSoft, now Gust, in 2004. Gust provides a platform where angel investors and entrepreneurs can connect and discuss ventures. Originally created with angel investors’ needs in mind, Gust now has more than 750 investment organizations worldwide using its platform to manage deal flow and other day-to-day tasks. Over 125,000 startups have, through Gust, worked with more than 35,000 individual investors on their ventures. The company is based in New York City, has a development office in Vancouver, British Columbia, Canada, and a European office in Paris, France.

Sramana: Hi, David. Before we get into the AngelSoft story, can you give us a little bit of your background and what thought processes have led up to the AngelSoft story?

David: Sure. It’s actually now a Gust story, which is the new incarnation of AngelSoft. My background is typical of an entrepreneur in that I have no background whatsoever in anything that I’m doing. My early training was as an urban planner. I have a degree in urban planning. And then I went into government and politics, working for U.S. Senator Daniel Patrick Moynihan. I went back to business school and got an MBA in finance, spent over a decade in real estate development and finance on the East Coast. I then started, along the way, a technology software company, which grew into an Internet company. I eventually moved into it full time. We ended up getting venture financing. We ended up getting very, very big, over 100 people, raising tens of millions of dollars with a wonderful product, which then nobody bought, which was very depressing. So, the company ended up restarting as a pure Internet company doing some exciting things in the wireless content space. I got more venture capital, hit the dot-com boom, and became a multi-national company. It was going great, got really big again, then hit the dot-com crash and disappeared again, whereupon my spouse said, “No more startup companies.”

That’s when I became an angel investor. I then founded New York Angels, which is one of the more active angel groups in the country. Over the last decade or so, I’ve done probably 80 investments in early-stage startup companies. Along the way, with my experience as both an investor and an entrepreneur, as well as a focus on future trends, which I’m involved with, since I run the entrepreneurship and finance program at Singularity University out at the NASA Ames Research campus in Moutain View. It was clear that there was a major societal change under way with the democratization of capital.

As technology advanced, it was cheaper to start a company; therefore, more entrepreneurs were empowered to create companies. It took less money, which meant more people would be empowered to invest in these companies, creating more angels. Individual angel investors and angel groups and networks were growing, combined with the globalization approach, which was happening all over. The number of angels and entrepreneurs around the world was increasing. When this was all starting, seven or eight years ago, I was sort of in the middle of it, given the stuff I was doing as an investor, as an entrepreneur. But there was no anything; there was no international industry platform, technology or anything else. It became apparent to me that the efficiency of the industry could be improved and value could be created if, in an ideal world, there was one universal platform that could tie everybody together. That sounded like and insane dream, but that’s what entrepreneurs do. So, I finally got permission from my spouse to start another company.

I started a company to create that platform for this future day, in which everybody in the world who wanted to be an entrepreneur would be an entrepreneur. Everybody who want to invest could invest, and you could connect the two together and work on long-term value creation. But it turned out that the challenge there was not creating a technical platform. Many people had tried that over the years and hadn’t succeeded, not because of the technology but because it turns out the marketplace was not there. If you go out and look at the entrepreneurial world, there are thousands and thousands of entrepreneurs who would love to get financed for their visions, but the number of investors who proactively go out and look for those starving startups is actually very, very small. None of them go online and go searching for entrepreneurs.

Every site – and there’d probably been 150 of them since the late 1990s – that had started to match up entrepreneurs and investors either went out of business or ended up changing a business model to something else, such as lead generation or advertising or whatever, simply because there wasn’t a two-sided market. There were no investors. Faced with that, we realized that the challenge was to get investors. Forget the platform. The challenge was to get investors involved first. The only place, back now seven, eight years ago, that you could find legitimate angel investors who were writing real, legitimate checks, was through these angel groups and networks that they had formed themselves to organize themselves and pool their resources and pool their deal flow and so on.

This segment is part 1 in the series : Seed Capital From Angel Investors: David Rose, Founder and CEO of Gust
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