Seed Capital From Angel Investors: Lewis Hower, Executive Director, University Impact Fund (Part 6)

By guest authors Irina Patterson and Candice Arnold

Irina: But you will clearly be looking for some returns, right?

Lewis: Absolutely, yes. We view this space from [the point of] recognizing that there are strong business models and strong opportunities that if and when applied to the right sector and segment, there is the ability to get a considerable financial return. >>>

Seed Capital From Angel Investors: Dave McClure, Founder, 500 Startups (Part 8)

By guest authors Irina Patterson and Candice Arnold

Dave: When I receive a referral from someone, I always ask, “Are you investing?” If he’s not investing, I really want to understand why. Why does he think if he’s not going to invest that it’s a good opportunity for us to invest? I sort of hold myself to the same rules.

Only in the case where it’s an area that we don’t understand very well but we think it’s an interesting company would we do that. If there was something in clean tech or green tech that we don’t do and we thought the founders were great, maybe in that situation we might refer them. But if it’s a consumer Internet investment, small business, financial services, Web infrastructure or an area that we do invest in, if we’re not investing, I usually don’t refer those deals. Unless it’s like later valuation or something. >>>

Seed Capital From Angel Investors: Dave McClure, Founder, 500 Startups (Part 7)

By guest authors Irina Patterson and Candice Arnold

Irina: When you’re deciding whether to invest in a company, to what factors do you give the most weight?

Dave: Usually, product is the most important to me. But I think a lot of people say team is most important. I do agree with that, but it’s also really difficult to get an understanding right away of who those people are unless you already know them. If you look at the product, that’s probably the most useful information that reflects on the team. >>>

Seed Capital From Angel Investors: Lewis Hower, Executive Director, University Impact Fund (Part 5)

By guest authors Irina Patterson and Candice Arnold

Irina: Do the partners participate in your conference calls with entrepreneurs?

Lewis: It depends on the situation. Typically, if we’re working just for the entrepreneur and helping him, it’s just with the entrepreneur.

If it’s working with one of the funding organizations, a lot of times the call will be with me and our student team that’s been assigned to that deal and then the partner or director at that firm or foundation. At that point, it’s less about questions and more that’s when we produce an interim report or a rough draft, if you will, that allows that person to say, “I want you guys to spend more time on one certain element,” or, “This looks good. Let’s just polish it up and we’ll be good to go.”
>>>

Seed Capital From Angel Investors: Dave McClure, Founder, 500 Startups (Part 6)

By guest authors Irina Patterson and Candice Arnold

Irina: So, what’s your return target?

Dave: I think 10x to 20x is the ideal target. Obviously, if we get more than that, that’s great. But that’s probably not the typical scenario. In most cases things don’t work and usually we get zero. I think we have a very different strategy from most funds.

Because we’re not looking for board seats or control, the amount of the company is not important, it’s just the return.

Hopefully at incubation or seed, we’re thinking in terms of a 10x to 20x return or better. At series A, we’re thinking somewhere around a 10x return and at series B, maybe a 5x return. >>>

Seed Capital From Angel Investors: Lewis Hower, Executive Director, University Impact Fund (Part 4)

By guest authors Irina Patterson and Candice Arnold

Irina: Have you made any investments already?

Lewis: No, we have not made any investments, yet, out of the University Impact Fund.

Irina: If an entrepreneur heard about your program and want to get in touch with you, what is the best way to reach you?

Lewis: We have a website, www.uimpactfund.com, that explains what we do and has our contact information.

Also, a lot of the deals and information and connections that come through our door come through our personal networks as well as the strong networks of the folks on our board who are advisors to our program. >>>

Seed Capital From Angel Investors: Dave McClure, Founder, 500 Startups (Part 5)

By guest authors Irina Patterson and Candice Arnold

Irina: Do you hold any events for entrepreneurs?

Dave: Actually, I put on a decent-sized 300- to 500-person conference on a quarterly basis. I also run a lot of user groups and events, meetings, and dinners.

We’re running one called Warm Gun, a conference about design and measurable designs, for both engineers and designers.

Earlier this year we ran a conference called SMASH Summit that was about online distribution platforms, primarily Facebook, Twitter, and YouTube but also a bunch of other online marketing tools.

And then I’ve done different conferences that Eric Ries has run called Lean Startup; those are about customer development and conversion metrics. >>>

Seed Capital From Angel Investors: Lewis Hower, Executive Director, University Impact Fund (Part 3)

By guest authors Irina Patterson and Candice Arnold

Lewis: Going forward, our model is that we will continue to have students.

We are a student program and will be for as long as we’re around. We do that same type of project work but typically we will end up working more with the investment funds and foundations and high net worth individuals who are making investments in the impact investment space.

We provide our services on a pro bono basis with the understanding and agreement that if that organization ends up funding and investment and we like that investment, we will have the ability to co-invest alongside that organization.

That model, again, is the same model that the University Venture Fund uses,  our sister fund – if you will – has proven to be a very successful and unique model in that it is real time investing.

There are LP’s in the fund looking for market rate returns. The great thing about the model is that because there is value add work that we do, we are able to invest alongside some of the top funds and names in the space. >>>