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Seed Capital From Angel Investors: Bob Aholt, Pasadena Angels (Part 6)

By guest authors Irina Patterson and Candice Arnold

Irina: What is the typical valuation of the companies you invest in?

Bob: Okay. This is my soapbox, and this is what I tell entrepreneurs. This is what I told the guys last night. Valuation is a surrogate for return. If you can empathize with an angel and put yourself in their shoes and understand what I’m looking for is a five times to ten times return in three to five years, and you can tell me a plausible story that gets me to that kind of return, then I really don’t care what the valuation is or what the percentage of the company I own is. It’s all a function of the return. So, if you tell me that you’re gonna sell the company for $25 million in five years, and then you need $2.5 million up front, I’m gonna tell you I need 10% of your company. I’m gonna tell you the pre-money valuation is $7.5 million. If you tell me you can sell your company for $100 million and I’m giving you $1 million, now I only need 10% of your company, right? So, the valuation and the percentage ownership are all tied to that return. >>>

Seed Capital From Angel Investors: Bob Aholt, Pasadena Angels (Part 5)

By guest authors Irina Patterson and Candice Arnold

Irina: How many investments have you done in the past 20 months? Well, I guess each member did a different number of investments?

Bob: Exactly. I’ve got some numbers at the high level for the group. We average about nine to twelve investments per year as a group. And last year, in 2009, we hit that exact number of nine. It was a little bit of a slow year for us. And I will tell you that of those nine, more than half of them were follow-on fundings for existing portfolio companies. We only had, I think, three brand new fundings last year, which is the opposite ratio of what usually happens. And we’re on trend for this year of doing, say again, our twelve – one a month – type thing, but I’m expecting, eight, nine, or ten of those to be brand-new companies. >>>

Seed Capital From Angel Investors: Bob Aholt, Pasadena Angels (Part 4)

By guest authors Irina Patterson and Candice Arnold

Irina: And who does the screening?

Bob: Pasadena Angel members; they’re actually investors. Our executive director will look at everything that comes in. And, again, if the guy’s in North Carolina – and I’m not trying to pick on North Carolina or North Dakota or North Sasquatch – that’s not appropriate for us. That entrepreneur will get an email from our executive director saying, “Hey, thanks for the submission but it’s not an appropriate investment.” And if they get past that, they do get a phone call from a member. I’ve got something I have to do early next week. I’ve got to call an entrepreneur and talk to him and find out more about his company. So, everybody who applies on our website and gets past that initial filter saying it’s appropriate will get at least a phone call and a conversation with one of the Pasadena Angel investors. >>>

Seed Capital From Angel Investors: Bob Aholt, Pasadena Angels (Part 3)

By guest authors Irina Patterson and Candice Arnold

Irina: You’re trying to bring some efficiency to the process, right?

Bob: Efficiency is certainly part of it. Effectiveness is another part of it; understanding correlations and causes is another part of it, so yeah, I think all those things go hand in hand.

Irina: So, you get them all to the website. And from all sources, how many pitches do you usually receive a month?

Bob: Usually we look at about 35–50 business plans a month. It varies. Last year, when things were really dark, we were down to maybe 20, but I think this month – we’re gonna have the meeting next week – we’re already at 35 and I’ve got a week to go. >>>

Seed Capital From Angel Investors: Bob Aholt, Pasadena Angels (Part 2)

By guest authors Irina Patterson and Candice Arnold

Irina: So you have other angel groups in the Los Angeles area?

Bob: Yes. There’s Tech Coast Angels and they’re, like I said, a lot like us, but they’ve broken down into chapters so they have a chapter in San Diego, one in L.A., and one in Northern California. So instead of having one group of 100 people, they have five groups and they have actually more members if you total up the five chapters. But we come together at least once a month and meet as a whole group, whereas they do things a on a chapter basis. There are a couple of other angel groups that are now in L.A., such as Maverick Angels, and Keiretsu Forum I believe, has a chapter here as well. So, from an entrepreneur’s perspective, things are looking up. >>>

Seed Capital From Angel Investors: Bob Aholt, Pasadena Angels (Part 1)

By guest authors Irina Patterson and Candice Arnold

This is the second interview in my series of interviews with angel investors and angel groups. This time I talked to Robert (Bob) Aholt, a vice chairman of the Pasadena Angels based out of Los Angeles.

Irina: Hi Bob, tell us briefly about your personal background and about your group. Let’s start with your personal background.

Bob: I’m the vice chairman of the Pasadena Angels, the angel investing group that I do most of my personal investing through right now. I come out of a background around technology, biosciences, and life sciences. I originally had a consulting firm here in Los Angeles that focused on technology consulting and strategies. The company was called Systems Development. I was fortunate enough to be able to sell that back in the early 2000s. Then I moved to a company called Phase III Medical, which was a publicly traded company in New York, and I was the chief operating officer of that company. Phase III focused on providing capital to biotechnology and life sciences companies by investing in a revenue stream or royalty agreement that a company might already have. >>>

Seed Capital From Angel Investors: Nicola Corzine, Band of Angels Acorn Fund (Part 5)

By guest author Irina Patterson

Irina: What is the single most important thing that angel-backed founders can do to increase their chances of success?

Nicola: The important question they have to ask is, Do I really live this product, do I really want to build this company? Is it everything to me? That passion can’t be taught, that passion has to be there from the day one. If that founder, that entrepreneur, really believes in their heart of hearts that the only thing for them is to build this company, then those are the kind of the people that we want to engage with. Because business models will change, strategies will change over time, and hurdles will come and hurdles will go. But if in your heart of hearts you don’t have the dedication, the commitment, and the passion to believe in what you are doing, then there is no way we can help you over that issue. >>>

Seed Capital From Angel Investors: Nicola Corzine, Band of Angels Acorn Fund (Part 4)

By guest author Irina Patterson

Irina: Do you invest in teams straight out of school, or do you require previous business experience?

Nicola: One of the great reasons to work with the Band of Angels at large is the network we bring to the table. It is not just the ability to inject money and sort of walk away and hope for the best; it is having access to some of the most successful angel investors in the United States, who are part of our group. And these are guys who are hungrily and actively looking to make a difference in the investments that they personally adhere to, so at the Band of Angels we have over 120 seasoned senior executives with very nice Rolodexes who suddenly have the ability to open doors for startups that might otherwise not be able to get those first marquee customers. >>>