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Seed Capital From Angel Investors: Ho Nam, General Partner, Altos Ventures (Part 7)

By guest authors Irina Patterson and Candice Arnold

Ho: Whenever we turn down companies, they always ask whether we can refer them to other investors. Sometimes the company would be better suited for certain investors who we might know and if there is a fit, we’ll refer them.

But in general, we don’t like getting referrals of companies that other people have rejected, unless they know that this particular company might fit our strategy and they know us well and they think it’s a good match. Certainly, we’ll take those referrals. But if it’s just a random referral . . .  if somebody kept referring us deals like that that were not highly qualified for us, that relationship would not be a very good relationship and we would not pay attention to their next referral. >>>

Seed Capital From Angel Investors: Ho Nam, General Partner, Altos Ventures (Part 6)

By guest authors Irina Patterson and Candice Arnold

Irina: When they come to you, should they have a complete team?

Ho: It is usually two or three people, but we have backed single founders before.

Irina: What’s the most important character trait a founder can have that will clinch the deal?

Ho: One word that comes up a lot is scrappy. A scrappy founder, somebody who is very really resilient, won’t give up and is very resourceful. Scrappiness – I think is a sign of real resourcefulness. Of course, you’ve read our blog post on hedgehogs and foxes. Hedgehogs capture the essence of the kinds of entrepreneurs that we like. There are lots of different types of great entrepreneurs, but we tend to like the hedgehog type. >>>

Seed Capital From Angel Investors: Ho Nam, General Partner, Altos Ventures (Part 5)

By guest authors Irina Patterson and Candice Arnold

Irina: Do you think about the total available market (TAM) when you invest?

Ho: That’s a good question. We talk about that a lot. We do, obviously, like large market opportunities, but we also have the philosophy that it’s really hard to predict what the next giant markets are going to be. >>>

Seed Capital From Angel Investors: Brad Feld, Managing Director, Foundry Group (Part 8)

By guest authors Irina Patterson and Candice Arnold

Irina: Could you compare TechStars to Y Combinator?

Brad: They are similar types of programs. Y Combinator was the first, TechStars was the second. The historical difference between the two programs has been that when TechStars was started, it was very much mentor driven. So, if you look at each of the cities, there are forty or fifty mentors who actively engage with the companies from the very beginning. It’s more than just a famous entrepreneur showing up giving a speech; instead, it’s real, deep engagement. >>>

Seed Capital From Angel Investors: Ho Nam, General Partner, Altos Ventures (Part 4)

By guest authors Irina Patterson and Candice Arnold

Ho: Certainly, dividends are one way, but you could also do shareholder buybacks. Public companies do this all the time. They do a stock buyback program if they think that their stock is relatively undervalued, or they think that’s a good use of capital. The board of directors can set the valuation for the offer to buy stock, or you have an independent third party set it. Any shareholder who wants to cash out can cash out. >>>

Seed Capital From Angel Investors: Brad Feld, Managing Director, Foundry Group (Part 7)

By guest authors Irina Patterson and Candice Arnold

Irina: Do you have any preferred investment types? What is it? Preferred shares?

Brad: Yes, we always make equity investments and we almost always take preferred shares.

Irina: Do you think about exit strategy when you invest?

Brad: We don’t think about it. >>>

Seed Capital From Angel Investors: Ho Nam, General Partner, Altos Ventures (Part 3)

By guest authors Irina Patterson and Candice Arnold

Ho: Somebody who comes in with a fantastic-looking resume will disappoint you many times. If we think we can work with somebody, we’ll err on the side of really trying to help that person. Even if they make mistakes and we’re learning on the jobs all of us together . . . building a company’s a very iterative process. We’ll go ahead and try to work with the founder. >>>

Seed Capital From Angel Investors: Ho Nam, General Partner, Altos Ventures (Part 2)

By guest authors Irina Patterson and Candice Arnold

Irina: What is your current source of deal flow?

Ho: Most deals we get come from our network. We have several thousand people working across our different portfolio companies, so the network has grown over time; entrepreneurs we’ve worked with in the past or people who have heard about us through our network.

We also get deals from other investors who know we’re looking to invest smaller dollar amounts, maybe at earlier stages than some of the larger funds. Then there’s also the network of bankers and lawyers and other service providers – typical network in Silicon Valley. >>>