Seed Capital From Angel Investors: Dick Reeves, Executive Director, Huntsville Angel Network (Part 5)

By guest authors Irina Patterson and Candice Arnold

Irina: You were telling me about two companies in your portfolio that failed, and you lost about $1 million combined on both of them. What were the reasons for their failure?

Dick: Both failed for the same reason. They failed for factors that were outside of their ability to control. That’s always the biggest threat. The first company was an energy company trying to do a bio-diesel conversion  and it failed when the price of oil dropped more than 50% in 2008. The second company was marketing private-label prescription pharmaceuticals. They lived in a special little regulatory exemption that the Food and Drug Administration (FDA) had in place for this type of drug. They were a marketing company, essentially. They had a very successful first year, and the FDA changed the rule and forbade what they did. >>>

Seed Capital From Angel Investors: Raymond Chan, Tech Coast Angels (Part 5)

By guest author Irina Patterson

Irina: What do you do when you get incomplete business teams?

Ray: We go in there and help. I especially love to work together with the entrepreneurs. We do what they don’t want to do or what they don’t know that they need to do. >>>

Seed Capital From Angel Investors: Raymond Chan, Tech Coast Angels (Part 4)

By guest author Irina Patterson

Irina: What is a typical valuation of a company when you are investing?

Ray: We don’t touch anything more than $4 million.

Irina: Do you think in terms of equity, and how much equity do you usually seek?

Ray: In terms of equity, it depends. We don’t have the percentage that VCs typically have. We are more entrepreneur friendly than most. It all depends on the negotiation and on how much we like the company, so we don’t have a hot number that we use. >>>

Seed Capital From Angel Investors: Dick Reeves, Executive Director, Huntsville Angel Network (Part 4)

By guest authors Irina Patterson and Candice Arnold

Irina: What do you do for companies that you decide not to invest in?

Dick: We make contacts for them. That’s probably the biggest thing we can do for them – help them understand what they need to do to make them more eligible [for funding] or can help them understand that they’re trying to do something that they ought not to do. I think when you help someone make a good decision about where to go from here, you’ve helped him along the way and done him a favor.

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Seed Capital From Angel Investors: Dick Reeves, Executive Director, Huntsville Angel Network (Part 3)

By guest authors Irina Patterson and Candice Arnold

Irina: At what stage of a business’s development do you prefer to invest?

Dick: Really, anywhere from what I would call pre-seed to developmental. We’ve even invested in one expansion-stage company.

Irina: How about if somebody comes with an idea on paper?

Dick: No. But we have other partners here, like the business incubator, that will work with them. We’ll, in some cases, show them how to find some friends, family, and fools money. >>>

Seed Capital From Angel Investors: Raymond Chan, Tech Coast Angels (Part 3)

By guest author Irina Patterson

Irina: Let me ask you, are there any charges to entrepreneurs at any stage as they are going through the process of presenting to TCA?

Ray: No, we don’t believe in charging because we see them as our customers; they are our partners. I don’t think its right to charge our customers a fee to work with us. >>>

Seed Capital From Angel Investors: Raymond Chan, Tech Coast Angels (Part 2)

By guest author Irina Patterson

Irina: What are your current sources of deal flow?

Ray: It’s an interesting question. About three months ago we actually redid our website, making it more entrepreneur-friendly, so that people can just apply with a very simple application. On top of that, I designed a new marketing program.

In the past year we have been doing a lot of Tech Coast Angels press release announcements about our funding and our performance, so that have been the biggest source of our deal flow. When people look for funding, they come across us through Google, so that has been the major deal source in the past year. >>>

Seed Capital From Angel Investors: Dick Reeves, Executive Director, Huntsville Angel Network (Part 2)

By guest authors Irina Patterson and Candice Arnold

Irina: How many pitches do you receive per month, on average?

Dick: In a month, I’ll hear from 12–15 capital seekers.

Irina: Out of those 12–15, how many deserve a closer look?

Dick: One or two.

Irina: What would be your next step of engagement with them?

Dick: We’ll get some initial information from them in terms of an executive summary, non-confidential information, a phone call where we can explore a little bit. The telephone call eliminates eight or ten of the typical twelve that I’ll hear from in a month. >>>