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. >>>

Seed Capital From Angel Investors: Mike Hirshland, General Partner, Polaris Ventures (Part 4)

By guest authors Irina Patterson and Candice Arnold

Irina: On average, from all your sources, how many applications do you personally get per month?

Mike: That’s a good question. Hundreds.

Irina: Out of those hundreds, how many deserve a closer look?

Mike: I would say maybe 8 to 10 are worth pondering to some extent. The others you can quickly funnel off as hasn’t hit the bar to spend any time on at all.

The quicker you can get to that point, the better. You know, 8 to 10, I think you pause to give some consideration. Of those, we only have time to look at a handful, you know, three or four. Of those, some months you’ll pick one and really dig in hard and give a very serious look, and some months you won’t. >>>

Seed Capital From Angel Investors: Eric Pozzo, Fund Manager, Oregon Angel Fund (Part 7)

By guest authors Irina Patterson and Candice Arnold

Irina: When you invest do you consider the size of the market?

Eric: We just invested in a company that does a catheter for cardiothoracic surgery. It basically is a self-cleaning catheter with a little wire in it and a magnet device that can clear gunk out of a catheter for keeping the chest cavity drained [during the surgery].

We looked at the overall market there. It’s probably not even a $100 million market, the entire market size. However, this technology is licensed out of the Cleveland Clinic. The company is run by a very experienced entrepreneur and cardiothoracic surgeon, and we’ve got great connections into three hospitals and hope to establish it as the standard of care in chest surgery.

So, it is a very small market but one where, with the technology, we think we can dominate and create a position where someone wants to buy the company sooner rather than later.

So, at the low end of the market that would be a $100 million market. Some of our other markets can be absolutely enormous, but who the heck knows how much market share you’re going to get long term? >>>