I was debating whether or not I should go to the Tech Coast Angels Fast Pitch competition last night since I had to catch a cross-country flight out of LAX less than two hours after it ended. In the end, I decided I would be crazy not to go. It’s less than ten miles away, the largest group of angel investors in southern California and a chance to see the ten finalists each pitch their companies in ninety seconds. On top of that, there was a moderated panel with six angel investor/ venture capitalist members of the Tech Coast Angels. As icing on the cake, there was a second panel with founders of several companies in early stage funding. And, for a cherry on top, I guess, they had a fireside chat (without the fireside) with Mike Jones, CEO of MySpace.
The angels were asked what characteristics they looked for in their “perfect” candidate for investment, recognizing of course that perfect candidates don’t exist in the real world.
Advantages they looked for included a serial entrepreneur, someone who had founded and sold at least one company already, someone who had previous experience in the same industry. Another advantage was being in a dynamic industry. They noted that the advantage of an industry with a lower growth rate was that a start-up would not have as many new companies as competitors but a major disadvantage was that there might not be a buyer out there seeking to acquire the company once it became (more) profitable.
Mike Jones said that a disadvantage to him would be if the company outsourced its technology. If you are supposed to be a technology company and you don’t have a technology person at founder/ partner level, that would be a red flag to him.
They all agreed that hiding anything was a deal-breaker. They gave the joking example of a felony conviction, but I presume they meant more things like a previous failed company, bankruptcy, being fired, poor credit or other non-criminal problems, as well as technical difficulties.
There was some discussion on whether ‘exaggerating’ was a deal breaker. Jim Adelman definitely felt it was (I think I like this guy). Others argued that it was human nature to over-sell yourself a little on your resume, but things like claiming a degree from Harvard that you did not have would be a definite out. Adelman disagreed. He wanted complete honesty.
On another topic, Jim Adelman commented,
“One thing we know about all operating plans is that they are wrong. The operations will not turn out the way you think. HOWEVER, your operations plan should be realistic given the drivers in the market.”
Let’s return to his first statement for a minute because it was a point that was made over and over throughout the evening. Scott Sangster put it like this,
“One thing for sure is that the company you end up with will not be the one you started out with. [You need the confidence…] to make that journey.”
Another of the angels (or maybe it was Scott again) said, “the business you end up with is never the one you envisioned as you started out.”
Mike Jones said that his company, UserPlane, originally intended to sell to the education market but found that the sales cycle was just too long for them. Next, they considered the health care market, but that too did not pan out. Finally, they found that dating sites and social media sites really were interested in their product, so they went after that market. The product was eventually sold to AOL for $40 million.
There was a great deal more insight I would have missed if I had skipped this event. For me, I would have to say that by far the most interesting and informative part of the evening was the questions that were asked of the presenters by the angels after each pitch.
It was SO worth going, even if it did mean that I had to fly all night to be in Florida by the next morning.
I’ll have to write about that later, though, because I am pretty sure if I don’t get coffee within the next fifteen minutes I am going to die.