Seed Capital From Angel Investors: Ira Weiss, Hyde Park Angels (Part 2)

By guest authors Irina Patterson and Candice Arnold

Irina: Could you be more specific about the fees?

Ira: What I mean is that some groups may charge a carry or a management fee. We don’t do that. Our underlying legal structure is a state nonprofit and whenever we make these investments. For example, we have an investment in a company called UICO, everybody gets together and makes an investment in UICO. That group of people will collect and extra 3%, but that’s just to cover the entity’s fees like accounting fees, whatever fees relate to that entity.

The main thing that makes our group unique is because of the affiliation of the University of Chicago’s business school, we use MBA students the same way that a venture fund would use associates.

We have a team of anywhere from eight to ten MBA students who volunteer to work with us to help our angels make the investments. They help with screening and they help set up calls, to some extent they help us with the analysis.

What’s really nice about that for our angels is that usually . . .  you know, if you’re an angel like Ron Conway, Mike Maples, or some of these big angels, you may have a small fund and resources that you have that allow you to use other people to help get deals for you.

For many angels, the challenge is that you’re doing a lot of the work on your own.

You may have some other angels to work with, but you don’t get any personal leverage from having someone working for you. So, what we do is we’ll pair an MBA student with the two or three angels who are leading an investment in a specific deal, and our MBA student will help those angels with whatever they need related to that specific deal.

Irina: Roughly, how many hours do students put into working on this type of assignments?

Ira: Our students will spend somewhere between 10 and 20 hours a week. They work with us through the entire school year and some of them work through the summer. During the summer, it would be a full-time job and we’ll pay them. During the school year, it is effectively part of a class.

It’s very competitive among the students to get these positions because it’s very good experience for them. So, we’ll typically get probably 10 to 15 applicants for each spot. We end up with some really, really good students. In fact, last year, two of the students who worked with us as associates got jobs as associates at very good venture funds, so it was a good experience for them.

Irina: Do they get academic credit, too?

Ira: They don’t formally get academic credit, actually. It’s formally not set up as a class.

Irina: You said you pool your money together when you invest, but you don’t have an actual fund, right?

Ira: No. We don’t have a fund.  At some point we might, but currently, no, there’s no fund. For each investment, everybody makes his own decision about whether to invest and the money gets pooled together for each investment, but there’s not a dedicated pool from which we invest.

Irina: What is your geographic focus?

Ira: We primarily focus on the Chicagoland area and the Midwest. We will invest outside the Midwest if one of the founders of the company is an alumnus or alumna from the school. Our angel group is open to anyone, some alumni and mostly not alumni. Here and there we’ve looked at companies that are coastal but have alumni. One company we invested in actually is co-located in San Francisco and Chicago, and that is run by an alumnus from the school.

Irina: What is your current source of deal flow?

Ira: We get our deal flow from a few different places. Because our angel network has 67 people in it, a lot of our angels will bring deals into the group. I would say that’s one of the biggest sources that we have. Entrepreneurs whom we’ve invested in before are a very good source of deals for us.

And the third big source of deal flow is actually from the university, from the school. Primarily, there are two ways that we get deals from the business school. One is that there’s a business plan competition that business school puts on called the New Venture Challenge and that attracts some very good business plans. The students will hook up with a local business and go through the business plan competition.

That’s been a very successful business plan competition. Over the past few years, each winner of the business plan competition has gotten venture funding within six months of the business plan competition, in most cases.

This segment is part 2 in the series : Seed Capital From Angel Investors: Ira Weiss, Hyde Park Angels
1 2 3 4 5 6 7 8