Seed Capital From Angel Investors: Mike Hirshland, General Partner, Polaris Ventures (Part 8)

By guest authors Irina Patterson and Candice Arnold

Mike: If a company is not coalescing into something where you think it’s a very big outcome, in that case, what you want to do is think about either getting cash flow positive on the existing positive, or if there’s going to be a need for more capital, keeping it pretty small so that you don’t overfund the company and end up putting the entrepreneur in a position where she can’t be successful and also have the investors be successful. >>>

Seed Capital From Angel Investors: Eric Pozzo, Fund Manager, Oregon Angel Fund (Part 11)

By guest authors Irina Patterson and Candice Arnold

Irina: So your group funded an airline company?

Eric: Yes. The interesting part of the story is the business that we invested in is not doing as well as everyone thought it would do; however, the company has been able to bid for a lot of these government-subsidized routes for central air services, where it’s part of economic development.

And they have a real business model where they can aggressively compete for these bids and win these bids, and they’ve been able to establish a solid, sound business that’s growing like crazy and is nicely profitable.

Now, it’s not the business we invested in, which was commuter [flights], but it’s still an airline business. It was very strange that we’d invest in an airline business when the conventional wisdom said, “How stupid can you be?” The fact that the company is doing very well is because it’s evolved. Anyway, that may or may not be an interesting story, but it’s a little out of the normal. >>>

Seed Capital From Angel Investors: Mike Hirshland, General Partner, Polaris Ventures (Part 7)

By guest authors Irina Patterson and Candice Arnold

Irina: What are some character traits that you look for in entrepreneurs?

Mike: You know, if we had to generalize, the things that most likely to get us excited, that correlate to success are extraordinary product abilities, in terms of functional expertise, and then that intangible but very important entrepreneurial spirit, which is a combination of passion, vision, dedication, and stick-to-it-iveness. >>>

Seed Capital From Angel Investors: Mike Hirshland, General Partner, Polaris Ventures (Part 6)

By guest authors Irina Patterson and Candice Arnold

Mike: For seed deals, typically we get a small amount of the ownership. In many instances, we’re less sensitive than angel investors for whom the seed is . . .  that’s when they buy shares. That’s their investment.

For us, maybe we’ll invest $100,000 or $200,000 in the seed, but in a successionary [stage], we’ll put $5 million or $10 million in, in follow-on rounds. The valuation for the seed is not as critical for us a lot of the time. >>>

Seed Capital From Angel Investors: Eric Pozzo, Fund Manager, Oregon Angel Fund (Part 10)

By guest authors Irina Patterson and Candice Arnold

Eric: We’re very efficient with the way we work with our attorneys; we can typically on our side, do an investment for $20,000 to $25,000 in legal fees.

A lot of the documents are fairly templated. You know, you amortize that over $1 million, it’s not a huge part of the funding and the protective provisions are preferred. If a company does go south, the fact that you get your money back before the common shareholders, things along those lines. There are some basic protective provisions. >>>

Seed Capital From Angel Investors: Eric Pozzo, Fund Manager, Oregon Angel Fund (Part 9)

By guest authors Irina Patterson and Candice Arnold

Irina: We were talking about one of your investments, Columbia Power Technologies.

Eric: It’s a pretty early stage based on how far they have to go to get to where they want to be for us. They have not finished some of the designs on the turbine, and they haven’t gone to production in a lot of things.

It’s really a true angel investment where we believe they have a superior technology for harvesting wave energy, and if they are able to succeed in what they’re doing, it’s going to be a real winner and one that we’re delighted to be in on early. Even if it’s not a winner, we hope there’s a technology that can be sold and get a return of capital, maybe not everything we want. It’s really a high-risk, high-reward type of investment and way outside of what we normally do. >>>

Seed Capital From Angel Investors: Mike Hirshland, General Partner, Polaris Ventures (Part 5)

By guest authors Irina Patterson and Candice Arnold

Mike: No founder has the complete package. Whether it’s great technical chops or product chops or business and strategy acumen, you never have a founder who has all of that.

When you define what the company needs to do, during the next, say, 12 to 24 months, to be successful, the founding team needs to be pretty darn good at that. In many instances, that’s more technology and product oriented than it is market based and stuff. >>>

Seed Capital From Angel Investors: Eric Pozzo, Fund Manager, Oregon Angel Fund (Part 8)

By guest authors Irina Patterson and Candice Arnold

Irina: Why do you think you were not successful at investing in people right out of school? What did you learn from that experience?

Eric: There are a lot of mistakes one makes in one’s youth, and no matter what you suggest to these folks as an older person, they’re destined to make a lot of the same mistakes.

In common lessons, software projects always slip. That’s just a given, and you get individuals right out of school and they say, “No, this isn’t going to slip.”

So, cash is king, and an expense may look great when you have $5,000 in the bank, [then] you start to wonder, Why the heck did I spend that money back then because I don’t have any money to spend now. It’s just a lot of common management mistakes. >>>