Day 1: Seed Investing As a Team Sport

I sit at a table with Lucy Holifield of the Atlanta Urban League, Edward Rolle of the Bahamas Entrepreneurial Venture Fund and Laura Mann of Empire State Development Corporation in New York. All of them are looking for ways to raise funds for their pet projects.

Holifield is pretty new to the whole game and wanted to know by the end of the conference if angel investing would be the route for her organization’s initiatives. Rolle said manufacturing is thriving in the Bahamas, but the culture of doing business there is much different from the U.S. And Mann said she is hunting around the tech industry to further expand her state’s economy.

All are eager to learn the secrets of angel investing in this five-hour-long workshop with moderator Cecil Carter and speakers John Hart of Lumetrics, Inc., Jim Bourdeau of Nixon Peabody, Glenn Ballman of Genesis Exchange, Marc Oettinger of Los Alamos National Laboratory and Deb LaBudde of The Entrepreneurs Network.

This icy meeting room at the Rochester Hyatt is swelling with knowledge, so it seems a waste to start the workshop with a video of well-known Vegas Valley angel investor Bill Payne explaining the basics of angel investing: that angels make 50,000 investments/year compared to 3,000 for VCs; allocating 5-10% of one’s net worth to 8-10 investments; and “it’s inappropriate for an angel to sit on boards of every company he/she is investing in,” he says.

Luckily, the video didn’t bog down the workshop’s momentum for too long, and we eventually got down to the team sport aspect of investing. First: psychology.

“The reasons why angels invest is interesting – you have to understand their psychology because it varies all over,” said Deb LaBudde. “Some angels are more financially minded; others are just looking to stay busy in an area they’re familiar with.”

Glenn Ballman added, “Don’t get frustrated if you don’t close in your backyard – open your map to find the industries you’re looking for.”

Second: A case study. Mr. Carter proceeded to act the part of an entrepreneur pitching us a brilliant idea and each table had to work as a group to put the company through a thorough due diligence. We found gaping marketing holes in the business plan, and challenged the financial projections.

In short, the group proved the workshop’s title – when angels work as a team, no nook or cranny is left undiscovered.

Day 2: How NASA Is Investing Your Tax Dollars Into Space

Although there were plenty of interesting seminars on this first full day of the conference, none were quite as shocking as “NASA: Building A Case For Commercial Space.”

“NASA has awarded $500 million to two companies to create opportunities for significant new commercialization in space.” Sounds great for the entrepreneurs; sounds like yet another way the U.S. government funnels our money into ventures we never blessed. The rationalization is that the space program as we know it is about to phase out by 2010, so the $500 million is jump-starting the next phase: space tourism, biotechnology in space, point-to point transportation of people. Cool, huh?

Red Planet Capital, one of NASA’s strategic venture partners, is investing part of that money into “technologies that are relevant to NASA’s mission needs, including space exploration and the aeronautics industry.”

According to Dennis Stone, manager of Strategic Outreach of the International Space Station Program, “we could be flying from New York to Tokyo in two hours or less.”

Day 3: Mark Heesen, president of the National Venture Capital Association, says Florida is hot

Mark Heeson, president of the National Venture Capital Association, just talked to an audience of about 40 conference attendees about “How to Work With the Big VCs,” and mentioned some of the best regions for investments in the current market, namely Florida.

Once a haven for high-priced luxury condos, hurricanes and retirees, this subtropical peninsula is attracting big investment bucks. Mr. Heesen tells us how and why.

“The warm weather is very attractive to entrepreneurs,” said Heesen, after listing biotech, medical, health care services and IT as the main industries attracting investment capital.  “Florida has gone out of its way to be extremely aggressive in getting the California-based Scripps.”

The one downside, he added, is that Gov. Jeb Bush can’t oppose his brother on stem cell research, but that hasn’t stopped companies from building labs in Florida. Moreover, the Milken Institute just ranked the University of Florida #5 in turning biotechnology research into commercial applications.

Later at lunch, where Hillary Clinton was supposed to end the conference with her own political bang, but never showed up, I ran into Lucy Holifield of the Atlanta Urban League again. She said she was glad she attended the conference and learned some valuable lessons, especially about “cram downs.”

“There might be more risk in angel investing than I originally thought.”

I am an entrepreneur. I have a proprietary idea that is going to revolutionize the [FILL IN THE BLANK] market. I have fire in my belly and my home’s equity in my mouth. I have a team of experts working by my side 20 hours a day, and a business plan that can flex with market changes and unforeseen obstacles.

I have faith that an angel will take me under her wing. I wake up every morning wondering if today will be the day.

Unfortunately, it’s the Devil’s Advocate, who visits more regularly.

“How old are you? Oh, how cute. Why don’t you come back and see us after you’ve been in the real world a bit longer.”

“Yes, we know the healthcare industry is a $1.5 trillion market. What percentage of that will ‘Exerflex’ take?”

“That’s a great idea, but ABC Company is already doing it and making money.”

When it’s always acid raining on your parade, it’s no surprise another entrepreneur falls into the pits of The Devil’s Advocate hell every day.

According to Fastcompany.com, “Every day, thousands of great new ideas, concepts and plans are nipped in the bud by devil’s advocates…A devil’s advocate encourages idea wreckers to assume the most negative possible perspective, one that sees only the downside, the problems, the disasters-in-waiting…Innovation is the lifeblood of all organizations, and the devil’s advocate is toxic to your cause.”

As an entrepreneur, there is no running from the Devil’s Advocate, so I can either befriend him or constantly fight him. He exists to bring me back down to earth from the creative highs that tell me I am destined to be the next Jeff Bezos or Oprah Winfrey.

Take Johnny Cupcakes, for example. In the vein of pet rocks and Paul Frank’s monkey t-shirts, Mr. Cupcakes has turned a joke into a $1.2 million business selling cupcake-themed t-shirts. The Devil’s Advocates call him a “one-trick” pony and wonder out loud, “You can’t live off the glory of cupcakes forever.”

True, but Mr. Cupcakes is an entrepreneur with plenty of other ingredients stashed in his baker’s hat. He has added belts, underwear and jewelry to his line of t-shirts. And the possibilities for cupcakes can be endless for a guy who says he sees in perpetual “cupcake vision.”

If anything, The Devil’s Advocates help us entrepreneurs from being blinded – by frosting, in Mr. Cupcakes’ case – or for others, our delusions of grandeur. As Scott Clark, “The Company Doctor” writes in bizjournals, “[entrepreneurs] have large egos needing to be nurtured. They tend to believe they are always right, and it is difficult for them to heed the advice of others (no matter how sound the advice) when it differs from their own beliefs.”

So, listen to your Devil’s Advocates. They’re looking out for you without even knowing it. And when you’re wildly successful selling cupcakes or “revolutionary ideas,” write them a nice letter on expensive stationery with the simple word, “Thanks.”

Comments
By Yudy Valdez on 9/28/2006
That is such a sweet vision. My Devil’s Advocate is on the job 24/7, but I keep head strong and keep insisting on my dream!

By Imran Anwar on 9/28/2006
There are two kinds of “naysayers”. Cultivate one, avoid the other.
The good kind will give you doses of reality and show why your idea will not fly… but will help you either wake up OR find a way on HOW to make it work.
The bad kind will simply say it can’t be done, shouldn’t be done, no one will want it, you’re crazy, etc… as they said to everyone who ever created anything meaningful in this world.
As a mentor and advisor, I try to be the former. Seek that kind, avoid the other kind.
Imran
http://IMRAN.TV

Follow the “entrepreneur’s point of view” in The Devil’s Advocate Blog at www.theangeljournal.com.

Editor’s Note: This article was originally published in The Angel Journal on June 30, 2006. We thought we’d highlight it today in order to show how prophetic it was…and ominous.

Baby Boomers are finding themselves with excess assets and deeper pockets than entire governments, while young entrepreneurs figure out how to write business plans that combine capitalism with social causes.

It’s quite a 180-degree turn in one generation. In the 1960s, if you were a young person who wanted to work for anything but money, non-profits and government jobs were the natural outlets.

Today, corporations like Wal-Mart are adopting “corporate social responsibility” initiatives, and young people who believe it is possible to keep the bottom line cushy while saving the world, are increasingly turning to the private sector, rather than the government, to fund their ideas.

Jonathan Ritchey, president of Freedom Water, based in Kelowna, BC, says he knows from experience that it’s easier to secure financing from private investors than the government, although he acknowledges that Canada “recognizes the value of partnerships with the private sector.”

“As far as the U.S. is concerned, it is our perception it is much harder to get funding from the government,” said Ritchey. The 30-something inventor has secured four rounds of funding from enthusiastic investors.

It isn’t difficult to convince investors that Freedom Water’s mission of creating potable drinking water from air will make them money and address the global problem of 2.6 billion more humans sharing the tiny 1% of available fresh water on Earth by 2025.

In February 2005, Freedom Water qualified for a $500,000 allocation from the Provincial Government of British Columbia, Investment Capital Branch and in August 2005, the National Research Council for funding under the Industrial Research Assistance Program (IRAP) gave the company $65,000.

“We asked for twice what we received, but we were grateful to get whatever we could,” Ritchey said. “The thing with private sector is that it doesn’t come with all the baggage. We believe the private sector is where to get funding.”

Warren Buffett, the billionaire investor and executive, confirmed that belief last week when he gave $31 billion to the Bill & Melinda Gates Foundation, which focuses on global health, education and agricultural biotechnology.

“Philanthropy is flourishing as the number of super-rich people keeps growing. But the new donors are becoming much more businesslike about the way their money is used, ” said Matthew Bishop, Chief Business Writer for the Economist Magazine.

Frustrated with politicians’ messy history of mismanaging everything from taxes to Hurricane Katrina relief funds, individual investors have decided they know better how to spend their money.

“When the government steps in to manage any program, especially when it tries to do it quickly (in response to the public demand for relief!), I think it is inevitable that fraud and corruption and mismanagement will result in squandered funds,” wrote Funding Universe co-founder Paul Allen in his blog. “The government is simply not as efficient as the private sector.”

Since 1992, Investors’ Circle has grown from a small community of investors interested in exciting, early-stage social enterprises to a thriving network that has invested over $130 million in over 200 companies. Investors’ Circle members have been behind Zip Car, Guayaki, Niman Ranch, United Villages, TerraCycle, Evergreen Solar, Verdant Power, among others… and you could be the next! Click here…

The workshops will provide participants with an understanding of the programs and resources provided by the Overseas Private Investment Corporation, which is the U.S. government agency responsible for supporting private sector investment in developing countries. Speakers will include senior government officials from OPIC and other agencies, international bankers, and representatives from businesses investing overseas who will share their insights and experiences. Networking opportunities will be available and participants will be able to arrange one-on-one meetings with OPIC officials. For more information, visit www.trademeetings.com.

Judy Wicks, Mark Albion and Pierre Ferrari tackle the big issues of scaling a mission-driven business at the Investor’s Circle Spring 2009 Conference in San Francisco.

SAN FRANCISCO - During a panel called “The Prospects for Social Enterprise” at the Spring Investor’s Circle Conference, David Crane, special advisor to Gov. Schwarzenegger for Jobs & Economic Growth, introduced himself to an audience of investors and entrepreneurs by talking about his history with the alternative energy movement.

“I graduated from college in 1975 during the oil crisis. And nothing has changed.”

Huh? What? Nothing? Hmm. I was born in 1975.  I grew up in Long Island and was taught to turn off the water while soaping, only flush when necessary, and to turn off the lights when I left a room. And Mr. Crane, you say that we’re less sustainable now than we were in 1975. I am at the point that this whole socially responsible investing/green movement is just more marketing spin and rhetoric to help some people continue making money while others continue to breathe bad air in places like Hunter’s Point.

And I don’t think I’m the only one. How are you going to deal with me? How can you change me?

“We decouple utilities from sales,” responds Mr. Crane. “We established performance standards for appliances…”

He says some other things, but I am having a hard time following.

Did he answer my question?”

After the panel, David Zetland, who received his PhD in Agricultural and Resource Economics from UC Davis in 2008 and is now an S.V. Ciriacy-Wantrup Postdoctoral Fellow in Natural Resource Economics and Political Economy at UC Berkeley, approached me and confirmed that no, Mr. Crane did not answer my question, usually government officials can’t…and they don’t want to. Crane is a member of the double-speak class of society. That means, he’s not only a government official, he is also an investor. He plays both sides of the fence, so he has to be uber conscious of the things he says in public, since he is serving opposing interests: the people and his own pocket.

Is it possible to serve both interests? Mark Albion, who spent nearly 20 years at Harvard University and its business school as a student and professor, and is a “seven-time social entrepreneur,” phrased the question best: “How can we be Marxists AND own our own jacuzzi?”

Proponents of the so-called socially responsible investing movement say that you can have your angel cake, flip it over and eat some devil’s cake too. This is where I pause for a moment…and writing stops. I talk with Josue Rojas, a fellow journalist at New America Media, and ask him, “Is it possible to have your cake and eat it too?”

“Yeah, if you’re a politician,” he says with a knee-jerk. Now, granted, he had no idea that I was writing about a politician. He goes on to tell me about a 1986 film called, “Salvador,” about a Pacific News Service (New America Media’s old name) journalist who goes to El Salvador to report about the civil war and make a little money.

And the sum of the film is this - a journalist, whose solemn oath is to pursue truth and protect the First Amendment, accumulates wealth not in gold, but in experiences. So, in this case, yes, you can have your cake and eat it too.

Back to the “socially responsible investors.” Can they live in a mansion AND empower the people? I think about Marie Antoinette, another cake-eater, and I’m not so sure…until considering the ending of Sofia Coppola’s version of her story…

She bowed down to the people.

So, this is my conclusion: If you kill your ego, if you stop promoting the book you wrote about all your fantastic and amazing successes, and you actually GO TO WORK for these people you swear you want to benefit, then yes, you may have your cake and eat it too.

The jury is still out on the one person in government right now, who not only CAN, but also WANTs to address me and my real-life questions: President Barack Obama. And not only that - he just HAS to. His life does not belong to him anymore. Just like George W. Bush was obliged to stay true to his legacy, Obama must stay true to his - and that is the fact that he is a BLACK MAN. Generations before him have sweat, bled and fought for the position he holds right now.

And like Judy Wicks of White Dog Cafe [VIDEO] proved over her 26-year career, the trail she blazed is a practice, not a speech.

As a Latina - with one part white, one part black and one part native - I’ve got mad pride for Obama’s plight. As a journalist, I’m keeping my cynical lens on, because I know the CHANGE slogan is just as much rhetoric as the GREEN slogan. As an extraterrestrial, observing from the outside looking in, I will be interested in seeing how Obama’s communication strategy, harnessing the power of ethnic media, will unfold over the next 3.5 years.

SAN FRANCISCO - Are all ventures social ventures? “Yes,” said Jerry Engel,  professor at the University of California at Berkeley and general  partner at Monitor Venture Partners, who moderated a panel at the Spring Investor’s Circle Conference on April 21. He cited the definition  of socially responsible investing as, “investing in a manner that takes into account the impact of investments on wider society and the natural environment.”

“Investments in new companies are at their lowest in 11 years,” said  Engel to a room full of new and experienced members of the socially  responsible investment group at the Westin St. Francis. “There are no exits…the exit doors are closed shut. There are no IPOs right now,  they’re dead.”

Cheryl Smith, board chair of the Social Investment Forum, countered,  “There was an IPO in the last month - Rosetta Stone - but there are  definitely not a lot of opportunities for that.”

One company that has become the poster child for a successful socially responsible exit is White Dog Cafe, founded by Judy Wicks 26 years ago. The company started out as a take-out coffee shop, and organically grew into a full-fledged restaurant serving organic food and supporting social causes such as economic justice and global fair  trade, environmental sustainability and opposing GMOs.

“An entrepreneur who saw value in the brand bought it in January,” said Wicks during lunch with Amir Alexander Hasson, founder and CEO of United Villages, which distributes WiFi to rural village retailers looking for more efficient ways to stock their shops.

Philip Mickelson, director of Investor Relations for ZAP!, an electric car company, said that his industry is constantly struggling for capital to develop its technology. Established in 1996, ZAP! builds three-wheel cars, among other electric-powered vehicles.

Michael Finney, managing director of Finney Capital in San Francisco, already has an investment in an electric motorcycle company, but he has been searching the Bay Area and conferences like these for an energy efficient company that is at the perfect stage for an angel investment.

It might be too late in the game.

“We’ve been here before,” said David Crane, Special Advisor to Governor Schwarzzeneger for Jobs & Economic Growth, who also spoke on  the morning panel to discuss prospects for social enterprise.  “We’re less sustainable now than we were before.”

Crane said he graduated college in 1975 and returned to his hometown of Evergreen, which was the capital of solar energy development. It was the height of the oil and energy crisis, and his generation was optimistic that they would find the solutions to saving the planet.

Which leaves us with the million-dollar question - is SRI, which includes investments in cleantech and solutions to climate change, just another bubble inevitably heading for a bust?

David Zetland, postdoctoral fellow in natural resource economics and political economy for the University of California at Berkeley, said, “Yes. Last year, I called it a bubble. That’s just how humanity works.”

Zetland writes a blog called Aguanomics.com, which includes an interview with James Lovelock, the 90-year-old who developed the “Gaia” theory: “Most of the ‘green’ stuff is verging on a gigantic scam…It’s not going to do a damn thing about climate change, but it’ll make a lot of money for a lot of people and postpone the moment
of reckoning.’”

Natalie Storie of Storie Enterprises, LLC said she just started learning about socially responsible investing, and she was glad she attended the conference because there are so many new variables to consider in angel investing.

“We used to just focus on traditional investments,” said Storie. She goes on to define “traditional” as the kind of investment that yielded the most amount of money.

Confirmed Keynotes Include:
- Michael Allman, President & CEO, Sempra Generation, Sempra Energy
- Michael Bauer, Entrepreneurs-in-Residence, Foundation Capital, Department of Energy
- Stefan Heuser, President & CEO, Siemens Technology-to-Business Center, Siemens
- Michael Splinter, Chief Executive Officer, Applied Materials

Conference Highlights Include:
- The best investment opportunities and technologies
- Insight into international trends
- In-depth analysis of markets including water, energy efficiency and storage
- Where are the best opportunities for exits in alternative energy
- 60 Start-up CEO presentations

To receive the special 15% discount exclusively for Astia members: register online or call 866.291.1800 and mention code AEISMP.

“Them” is the wealthy 1%.

They can’t help that they know nothing about common men. They went to the best schools. They have the best real estate. They eat the best food. They are wealthy, and that makes them “the enemy” in the working person’s mind, when really, the difference between them and us is not the amount of Benjamins stuffed in our respective wallets.

It’s our attitude toward life.

Where we see depression, anxiety and unpaid bills, they see opportunity to use their minds to solve a problem.

Where we see nothing but an abyss ahead of us, they see that what goes down eventually comes back up again - a basic physics or calculus lesson, but if you didn’t pay attention in high school you probably missed those analogies in life.

I used to be us, but now I am them. Believe me, I don’t have a posh address and I certainly don’t drive a sports car and take vacations in the Hamptons, all stereotypical pasttimes of them. And perhaps not everyone in the 1% is wealthy because they have money. Wealth isn’t about money, really. It’s about freedom.

Freedom to buy as many shoes as you want?

If that is your bliss, then yes.

Freedom to travel as much as you want?

If that is your bliss, then yes.

Freedom to do absolutely nothing?

You are the wealthiest mutha-f-er in the neighborhood, I would guess.

THEM sounds like such an insult these days as mainstream media continues to villify all those Gordon Gekkos while making Obama the superhero that will squash THEM finally.

And then what? The pessimists will be looking around, twiddling their thumbs, wondering, “Who’s in charge? You mean I still have to work???”

I read what a write sometimes and I get scared. Because I come from a blue collar puerto rican household that has always voted democrat and believed in socialist values and suddenly I am spouting the ideals of a Libertarian.

It’s all because I spent 3 years talking to angels. Angel Investors, the architects of capitalism as we know it today. They are the first ones to invest in a start-up company  - not the cafe on the corner of your block - but Starbucks.

They are hella rich and hella smart. Some are evil, some work harder than a migrant worker.

I have talked to about 50 of them between 2006 and the present.

Stay tuned for profiles on angel investors from around the world.