Archive for Investing

Help Scout hits Appsumo!

February 1, 2012 Entrepreneurship, Investing

Help Scout home pageHelp Scout is the first startup that I invested in, way back in mid 2011. Wow how life has changed since then! Working on my own startup now, and living in  the happiest city in the world (Boulder, CO)… still I love what Help Scout is doing; they’re working to make our online world just a wee bit better.

Today they popped up on Appusumo with quite a deal; something like 84% off of a 6-month subscription. Will it pay off? Not sure yet, but I’m excited to find out. I’m a fan of Appsumo; but like many deal sites out there it remains to be seen whether enough of their clients are willing to spend decent money for things of value… or whether they’re just looking for (almost) freebies from the discount bin at save-a-lot.

Anyway. What is Help Scout? Why did I invest and why do I care?

Simply, they are trying to make Customer Service not a 4-letter word for startups and small businesses. To the customer, every interaction should feel like a personal 1-on-1 email… but the business obviously needs to make sure that every customer request is handled; that they don’t send out duplicate answers; and that anyone answering a customer question has enough knowledge of that customer to be helpful.

The Help Scout system does exactly that, without getting in your way. Nice.

I believe it is a real problem that needs to be solved. In my last company customer service was, to be frank, a cluster#*$. Many people entered, nobody escaped. I am a fan of bringing customer service back to what it should be: personalized, caring, pro-customer interactions, with a platform in the background to keep things on track.

I’m starting a company (Vim Funding) right now, and I have every intention of using Help Scout as soon as we get past customer #3… to me it just makes sense. If you’re interested, hit up that Appsumo  page and give them a look! Tell Nick that Steve Reaser sent you and I’m sure he’ll make it worth your while.

(Appsumo deal teaser below.)

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Promoboxx Investment

December 2, 2011 Boulder Startups, Investing

Promoboxx Logo

I’ve been meaning to write about the startup investments I’ve made to date; somehow I keep putting that off. Anyway…

Investment #3 for me, PromoBoxx, just popped up on TechCrunch today, so I thought now would be a good time to mention it.

As Sarah Perez nicely summarizes:

Today, brands spend nearly $30 billion each year supporting retailers with offline materials, including in-store signage, yellow page ads and newspaper ads. But almost none of that marketing money is spent online, even though 90% of all products are still sold through physical stores.

That’s where Promoboxx comes in. Using its online service, stores can set up retail promotions in minutes, with sweepstakes, coupons, giveaways and other promotions that aim to drive foot traffic to stores.

It’s a great niche, and a great team. These guys are doing it right — it isn’t about marketing gimmicks; rather it’s about engaging customers with brands they already like, and in many cases giving them a great reason them to shop in their local store rather than just order online.

Very excited to see how they grow this company. I know they’d love it if you’d take a minute to send them a “congrats” on closing their big seed financing round by stopping by their blog or via twitter.

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Impressive 2011 Boulder TechStars Demo Day

August 9, 2011 Boulder Startups, Events, Investing

On 8-4-2011 I was fortunate enough to attend the 2011 Boulder TechStars Demo Day. This was my first time attending, and while I had a pretty good idea of what to expect, I was still blown away.

I won’t try to describe all 12 companies in detail here, though if anyone is interested in my notes on any of these companies just hit me up.

Instead here are 3 brief summaries of each company:

… and here is a livestream transcript[launch.is] of the event from Launch which fills in more of the important nuts and bolts (size of markets) that the other brief write-ups left out.

These write-ups capture the basic idea of each company, but of course miss the essence of the presentations — these entrepreneurs know their stuff and put it all on display that night… if you ever have the opportunity to attend one of these, GO. You will either be madly inspired by what these teams are doing or utterly depressed by your “competition”; or perhaps both.

A couple of things I keep thinking about since this event:

The depth of talent in that room was something special. Most of these teams had spent many years immersed in the problem area they are disrupting, and many of these entrepreneurs have had successful exits in the past — clearly not in it for a quick buck, these guys and gals are passionate about building things and improving the world.

What David, Brad, and others have created with TechStars is truly amazing. It’s almost like they took a reality-TV formula “let’s put a bunch of people into intense competition with each other and see what happens” and twisted it into “let’s put amazing people together into an intense situation where they build upon, inspire, support, and mentor each other” — when you do that, amazing things happen. It must feel wonderful to see this thing they have created blossom into what it is today; there’s clearly a reason they are a top-ranked[techcoctail.com] program. Congrats.
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Going to Angel Bootcamp!

June 8, 2011 Investing, SCR News

Very excited to be attending Angel Bootcamp next Tuesday 6/14 in Boston!

I’ve been spending as much time as possible over the last three weeks (since my next chapter crystalized during Boulder Startup Week) learning everything I can about investing, entrepreneurship, and Boulder. I still have much to learn I am not one to shy away from a challenge or to skimp on my reading.

When I heard about Angel Bootcamp last week it was a no-brainer — it would have been criminal not to at least try for an invite. I feel lucky to have been accepted and look forward to an intense day of learning. Will share everything I can here afterwards!

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Angel Boot Camp 2011 Boston

June 6, 2011 Events, Investing

Quick note for anyone interested in becoming an angel investor — especially if you live near Boston.

The 2011 Angel Bootcamp is next Tuesday, June 14th, from 12:30-6:30pm. This is a free event but is invite only; if you are interested apply soon!

More from their site:

Have you thought about investing in startups but weren’t sure how, or even whether it’s for you? Would you simply like to learn more about how early-stage investing works, either as an investor or as an entrepreneur?

Angel Bootcamp is your chance to learn from the experts. Dozens of the region’s most prominent angels and early-stage VCs will be on hand to share their experiences and answer your questions. Why should you become an investor? How do you find and evaluate potential investments? What’s the right amount of money to invest? How do you set terms? How do you work with other angels, entrepreneurs and VCs? What are the legal issues?

We’ll address these questions and more. Join us for an afternoon of learning and networking.

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Early Exits Workshop

June 2, 2011 Investing

Basil Peters of AngelBlog has an interesting series of 3 videos describing how Angel Investing and traditional VC investing work together (or more to the point, don’t work well together) in the 21st Century.

His central thesis:

Angels and entrepreneurs would have more fun, and make more money, if we focused more on our exits

The videos are well worth watching; if pressed for time, however, you can also skim through the presentation PPT which is on his site as a PDF. A few points from his summary:

  • Successful investing requires two things – investing right and exiting well
  • Angel investing is still new – about where traditional Venture Capital investing was in the mid-1980s
  • The economy has changed and traditional Venture Capital isn’t working for today’s tech companies
  • When VCs invest, on average it adds about a decade to the exit timeline – the math explains why.
  • The best strategy is to have angel investors or traditional VCs – but not both – university research shows
  • Most M&A exits are under $20 million – because that’s what works for the acquirers in today’s economy
  • The media does us a disservice by writing stories about the really big exits – which aren’t happening as often anymore
  • Google wants even earlier exits – their sweet spot is under $20 million and they prefer pre-revenue companies

My notes on videos 1 and 2:

  • He emphasizes an “Early Exit” strategy, by which he means ~3-5 years, not 10+ years (which is a typical VC timeline)
  • Angels used to think the goal was to find the right company, write a check, hope that a VC firm followed, and then wait 10-15 years for an exit. This worked in the 90s but not anymore.
  • Traditional Venture Capital doesn’t work in tech; Angel returns and Entrepreneur returns both suffer under the traditional VC “rules”
  • Traditional VC firms have grown too large; and since they can only invest the money once and need to generate a 20% annual return, they need to focus on getting a 30x return on the 20% of deals that are successful. In 1996 the average VC investment (prior to a successful M&A) was $5M. In 2008 it was $25M. This means the only acceptable exit is at least $750M, and those kind of exits are rare! By forcing a situation where the only acceptable outcome is a billion dollar exit they put everyone in a no-win situation.
  • 92% of available exits work for Angels and Entrepreneurs but not traditional VC firms. This puts their interests and the entrepreneur’s interests at odds with each other. VC firms will often put mechanisms in place to block an exit which produces less than the return they need:
  1. Series A – 10x exit
  2. Series B – 4-7x exit
  3. Series C – 2-4x exit
  • 10x-30x growth takes 8-12 years on average
  • In total, a traditional VC round and their need for a “moonshot” adds about 10 years to the wait for an Angel to exit and dramatically increases the risk of failure.

Angel Investor math just makes more sense!

  • Smaller investments can make sense
  • Returns as low as 300% over a few years are attractive
  • Exit objectives are much more aligned with entrepreneurs.

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First Time Startup Investor Q&A

May 26, 2011 Investing, Startup Life

Below are my notes from another Boulder Startup Week 2011 talk. I don’t represent to speak for David and Brad, and any misstatement of the content of this talk is on me and me alone.

 

First Time Startup Investor Q&A – 5.18.11 – TechStars – David Cohen, Brad Feld

  • Q: How much money does one need to be an angel investor? A: A typical investment may be $10k-$25k. One needs to be able to do many such deals in a year, since a high percentage of startups will fail. If you can’t afford to lose 50k per year (net) over several years without getting an ulcer, you may want to consider other options.
  • Investing in a startup is almost always a group endeavor. There are official Angel groups — some are effective and some are not. Good groups make plenty of investments; often have an activity requirement. Less effective groups are more social in nature and less active with their investments.
  • The Boulder Angels have a monthly lunch event.
  • Boston “Common Angels” is a good institutionalized group.
  • Beware of any angel group which charges investors to listen to a pitch.
  • Think of 3 types of angels, based on when they invest:
  1. Leaders — write checks early in the process, help pull the rest of the round together. They add credibility and help get others involved.
  2. Followers — may commit early, but the check comes later. Still can be very useful if you get a promise of a check as soon as the round comes together; evidence of support for the startup adds momemtum.
  3. Everyone else — checks that come together as the round finalizes.
  • “Control” only comes into play when things are going south. By that point, there is often little that can be done to salvage a crashing startup.
  • Angels are generally more interested in reputation than money. They take on more risk than VCs, since they are involved so early in the life of a company — most businesses fail.
  • As an angel, you should have an explicit strategy (write it down!). How many businesses you intend to fund per year, at what approximate $ value. What type of businesses? Have a 2-4 year fund at your disposal.
  • Many companies an angel funds will go to zero; the rare breakout, though, can return 100x.
  • Some angels are fully engaged in a company; some offer some resources or guidance; some offer $ only. One is not necessarily any better than the other. Fit is the key — make sure that there is a match between the kind of involvement the entrepreneur needs/wants and what the angel is able and willing to provide.
  • Consider a deal that offers the angel extra equity over time for actively advising, helping.
  • Angel advice: when you are interested in a deal, make your decision and commitment quickly. 24hrs after receiving term sheet.
  • Angel advice: get entrepreneurs to ID the biggest issues they will face; discuss how they will overcome them. Perhaps you will need to help.
  • Angel advice: tell fellow angels about your investments. Build momentum to help make your deals happen.
  • Angel advice: take phone calls, answer emails.
  • Read “Do More Faster” — you won’t regret it. (thanks for my copy, David!)

This was an extremely interesting and useful session for me. Really helped crystalize the direction I want to go with things; helping people start businesses and make their dreams real will be very fulfilling to me.

I hope to work with both David and Brad in the future.

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