Seed Capital From Angel Investors: M. Todd Dean, Keiretsu Forum, Northwest Chapter President (Part 4)

By guest authors Irina Patterson and Candice Arnold

Irina: What’s the typical valuation of a company?

Todd: Typical valuations are about $1 million to $5 million. I would say on the high side, between $1 million and $10 million, but most of the companies we’re looking at are between that $1 million and $5 million valuation range.

Irina: What percentage of a company’s equity do you usually seek?

Todd: It depends on whether we’re doing a bridge round or a price round, or whether we’re doing a finishing off round or starting a round. It’s across the board on that. Every company’s going to be different. Typically the companies are raising about $500,000 to $1.5 million to $2 million today, on valuations of $1 million to $5 million. >>>

Seed Capital From Angel Investors: M. Todd Dean, Keiretsu Forum, Northwest Chapter President (Part 3)

By guest authors Irina Patterson and Candice Arnold

Irina: How many deals do you receive each month, on average?

Todd: Typically, about 40–70 a month for our region alone.

Irina: Out of those 40–70, how many deserve a closer look?

Todd: We narrow that down to the best seven to nine companies. Those seven to nine companies present in front of about 25–30 of our investors. They narrow that down to the best four companies. And, typically, one or two of those companies get funded. >>>

Seed Capital From Angel Investors: M. Todd Dean, Keiretsu Forum, Northwest Chapter President (Part 2)

By guest authors Irina Patterson and Candice Arnold

[Todd continues his discussion of why he thinks the group’s model works.]

Todd: The third thing is the amount of resources that our members are able to provide to the companies. Anybody can write a check or invest in a company and that’s one thing, but when you’re working with startup companies, they’re like kids.

They have all different personalities, and they make good choices and bad choices, and they need a lot of help and guidance. With that, because of who our members are – ex-CEOs, ex-CFOs, ex-serial entrepreneurs – we understand what these companies are going through. Oftentimes they’ll need an introduction to Microsoft, or they’ll need a VP of business development or a board member or some help on their financials. >>>

Seed Capital From Angel Investors: M. Todd Dean, Keiretsu Forum, Northwest Chapter President (Part 1)

By guest authors Irina Patterson and Candice Arnold

This is the seventh interview in our series on seed financing and angel investing. I am talking to M. Todd Dean, Keiretsu Forum’s Northwest Chapter president.

Irina: Hi, Todd. Please tell us about yourself.

Todd: I was in insurance for about ten years, and then through a divorce, I stumbled into a startup company. Some friends and I invested in the company, and I worked for the company for about a year and a half, and it went bankrupt. And the reason it went out of business was leadership and the CEO of the company. So, that was my first induction into angel investing, which was in 2002. >>>

Seed Capital From Angel Investors: Corey Silva, Assistant Manager, River Valley Investors (Part 13)

By guest authors Irina Patterson and Candice Arnold

Irina: What about the angel-backed companies, what can they do to improve their chances of success?

Corey: Reach out and get some of the coaching that you were just talking about [I was talking about 1M1M initiative] I’ve heard of other groups that do similar things, so reach out and get some of that coaching.

If they can find a way to attend some angel meetings – I know it’s not exactly easy – but if an entrepreneur should have any connection into an angel group or into any kind of investment group, or where they can get into one of these regional or national conferences, or if they can be a guest at a meeting – I know it’s very hard to do – but if there’s any way where they can see the profits ahead of time, that’s always a huge advantage. >>>

Seed Capital From Angel Investors: Corey Silva, Assistant Manager, River Valley Investors (Part 12)

By guest authors Irina Patterson and Candice Arnold

Corey: I think where you can get into some trouble is if you have too many of the ride-along types in the group, too many who are there more for the social aspect and don’t really have the time to put in. If you have too many of those without enough of the active, go-getter angels, then it’s easier for an angel group to become more of a social club than an actual investment group. There’s just always a balance that you’ve got to have.

A really important thing – something I’ve learned from RVI members – is to think creatively and to not necessarily follow the trends or, like a lot of groups, follow whatever’s the hot space or these guys have some credentials or look who’s on their board, they’ve got this fancy guy on their board . . .  A lot times of people get stars in their eyes. Even professional, successful angel investors can get distracted by things that aren’t necessarily practical or important. >>>

Seed Capital From Angel Investors: Corey Silva, Assistant Manager, River Valley Investors (Part 11)

By guest authors Irina Patterson and Candice Arnold

Irina: Do you charge a fee for entrepreneurs to present?

Corey: We do not. We charge no fee. In fact, not only do we not charge a fee for presentation, but we give free coaching services, for which most angel groups that have some kind of coaching services or boot camp or whatever charge. We don’t do that. >>>

Seed Capital From Angel Investors: Corey Silva, Assistant Manager, River Valley Investors (Part 10)

By guest authors Irina Patterson and Candice Arnold

Irina: What do you do with the deals that you decide not to invest in?

Corey: I’d say a slim majority of them don’t end up qualifying for our group’s interest. I’d say it’s accurate that less than half of the deals that my brother and I prescreen end up getting to the membership. But it’s not always because they’re not quality deals. Some of them aren’t quality deals. You get some crazy guy who’s got some idea he thinks is worth $20 million. >>>