At Angelsoft we spend most of our time making sure we are doing everything possible to build tools that serve both Entrepreneurs and Investors. It’s a tough balancing act because the needs of both often conflict. The one thing I’ve heard most from entrepreneurs lately is that they need the plans submitted to the Investor Community to be better promoted to our 15,000 investors.
We took steps to help them out which resulted in a doubling of the number of views that Investor Community submissions receive. The feedback from our Investors has been positive as well. Making both side of the equation happy is central to our product decisions and we think we succeeded with these new features.
To take advantage of these new features you can post your deal to the Investor Community where it will be accessible to the 15,000 investors that use Angelsoft. Screenshots
Investor Community live deal-feed added to the Investor dashboard
The right side of the investor dashboard is a live, auto-updating feed of the most recently viewed Investor Community deals. Investors will see this every time they log into Angelsoft. The middle section of the dashboard displays updates on all Investor Community deals they are interested in. Screenshot
Investors now receive an email every 2 weeks with the 5 closest and 5 highest rated deals
It is a lot to ask investors to go seek out entrepreneur plans. Now we email the investors in our system every two weeks with a simple email informing them of the 5 closest deals to them and the 5 highest rated during the previous two weeks. Our first email went out before Thanksgiving and received tremendous response. Screenshot
Entrepreneurs now receive more feedback from investors. Investors can easily leave you feedback in the form of a rating or written feedback. You can see ratings and respond to feedback on your Application Manager. Learn more on our blog here and here
Investor activity ratings
At the top of the investor dashboard we now display ratings on investor activity. We show them how they score relative to the rest of the community on the amount of feedback they provide to entrepreneurs. We think this will result in more entrepreneurs receiving the feedback they need. Screenshot
This is a major step forward in improving the funding process for entrepreneurs. Spend some time with these new features and leave comments with any feedback that you have.
John May is the Chairman Emeritus of the Angel Capital Association, the official umbrella organization of the leading angel investment groups in the United States. He is a major figure in the global angel sector, having written two seminal books on angel investing, one for entrepreneurs on fundraising, and another for angels on best practices in investing. John serves as the primary East Coast trainer for the ACA’s Power of Angel Investing seminars, and through his management firm New Vantage Group runs several of the most respected andactive angel organizations in the country (which, of course, all use Angelsoft to manage their deal flow and investment collaboration.) What follows is a clarion call to serious angel investors that John issued this week in light of the capital market gyrations.
“Calls have been flooding into me from the press, our investors, and our portfolio entrepreneurs about how to react to the darkening economic environment.Early-stage investors in entrepreneurial companies have always represented themselves as patient investors and supportive partners, not financial engineers. In fact, we angel investors have frequently thought of ourselves as “mentor capitalists.â€
So it occurred to me that in this time of political uncertainty, lack of clear direction from economists, and once-in-a-lifetime hurdles, we must stand up and either be true classic angel investors or we should go home. I seriously think that we will look back on this era as one when we stood by our companies and separated ourselves from the quick buck, irresponsible masters of the derivative empire or when we ran and confirmed to the popular press that we were hobbyists and not very angelic at all.
Those of us who believe that serious angels – located in all cities, all states – formed the Angel Capital Association and educated themselves at Power of Angel Investing seminars and told foreign guests that we were part of a movement, must now stand up and support American entrepreneurship like never before.
How can we demonstrate our true colors? Here are just a few action items that come to mind – a short list I hope you will expand and communicate to others in our venturing community.
First, be honest, realistic and communicate.Like never before we need to bring our wisdom and experience to bear and tell it like it is to struggling entrepreneurs. We have a principal-to-principal relationship like no other asset class and we must communicate like never before.
Second, demand stark reality in planning and operations and assume the worst of the coming recession. Do not take half steps. Do not rely on past assumptions of pipeline, financial institution support, and prior partners. Re-confirm relationships.
Third, remember cash is king.Husband current resources, talk to co-investors about capacity to continue support, demand review of current operating assumptions.
Fourth, expand on dialog collaboration with like-minded investors who could partner in supporting current companies in the coming months – syndicating has already becomecommon among angel groups – it may be vital in order to stretch resources. In a time of lack of trust among financial institutions,we need to work alongside fellow sophisticated angels by co-investing in existing portfolio companies.
Fifth, task angels to seek alternatives to growth and to find exits that were ignored, discounted, or unknown before who could buy the company, who could provide support in the short term, and what would happen in a worst case scenario.
Last, angels need to be honest with themselves and not ignore the reality of limited resources available to do new deals even while “protecting our own children.†I suspect in the coming six to twelve months many alluring new opportunities will have to be reviewed in light of the blight of our existing children, and if we meant what we said about being different than hit-and-run financial engineers, we should honestly address current company survival plans before leaping to the next best thing. We may be able to do both – but inward reflection and some “reality therapy†must come first before executing a revised 12-month plan.
We don’t know how bad the upcoming recession and credit crisis will be, but we, of all investors, should use our experience and long-term perspective to help our early-stage innovative company community through these uncharted waters. Let’s stand up together.”
John May
Managing Partner, New Vantage Group, Vienna VA
Chair Emeritus, Angel Capital Association
Alan Patricof is one of the country’s most important venture capitalists and angel investors. He founded the VC fund Patricof & Co. in 1969, which has gone on to become 300-person Apax Partners, one of the world’s largest private equity investors. Three years ago, returning to his roots, he founded Greycroft Partners, an early stage $75 million fund focusing on technology startups (and an Angelsoft user). Throughout this time he has also been an angel investor with his own funds, and continues as an active member of New York Angels. In light of the gyrations in the world’s capital markets, and particularly a Doomsday meeting that Sequoia Capital was reported to have had recently with their portfolio companies, Alan felt it important to put things into perspective.
Here is the full text of a statement that he issued this week, addressed to early stage companies and the investors who fund them:
“The comments made by the partners of Sequoia Capital at their recently held ‘CEO Summit’ have been widely covered by leaks to numerous bloggers. These bloggers have disseminated the details and spread the contagion of the sentiments to the public at large, unfortunately running the risk that the words become a self-fulfilling prophesy. Without challenging the comments, which expressed a heightened degree of doom and gloom for the economic prospects of young start-up companies particularly, I do think it calls for a somewhat more restrained response on the outlook and required action before throwing the baby out with the bath water. Certainly, we are going through a period of enormous economic and political uncertainty. The loss of confidence, primarily in our financial system, as a result of the excess of the past five to ten years (if not longer - we may never know how long some of the flawed practices have been going on) is one of the leading contributors. We are also at the moment looking for leadership on the political front, and both because of very low public support for the President and because we are in the midst of a heated election for his successor, we have no real voice of authority to provide some guidance, reassurance, and inspirational confidence that the bus has a driver who knows where he is going.
Nevertheless, aside from an over-inflated housing boom that had to collapse sooner or later and a complicated financial system that arose in part to fuel this engine, the basic economy was in reasonable shape, with GNP growth and productivity gains supporting a solid, if not vibrant outlook (I know the automotive industry is also going through bad times but it no longer pervades the economy as once conveyed in the expression, “As GM goes, so goes the nation.”)
Advances in technology are allowing companies to make goods and provide services faster and cheaper. The wireless revolution and the Internet have made the dissemination of information easier and more pervasive for the entire world and brought significant benefits to every phase of our economy. That is not going to stop, although it may temporarily slow down. In these difficult times, there will be winners as well as losers (and the former may be fewer in number for a while).
The point is, the financial problems are being addressed, if not a bit belatedly, and some international mechanism will be found in short order for some coordinated policy that will restore order and confidence to the system.
Most young companies, with which we are specifically concerned, are financed with equity capital. That has its positives and negatives; on the one hand, debt is a very small factor in the capital structure of most small companies so loan foreclosures and the interest rate burden are not of prime concern. On the other hand, equity capital, which is provided by private investors, requires confidence in future prospects for reaching profitability and creating a strong market value. Certainly under current conditions it is hard to engender such confidence although history has demonstrated that it is in times like these that great opportunities are created. I have always said, “The best time to invest is when the drums are beating, not when the trumpets are blaring!”
This is surely a time for companies to pay meticulous attention to detail, particularly their cost structure. It is a time to be realistic in their near-term assumptions for revenue growth and take nothing for granted. Raising additional capital to support operations is of course critical, as it is at any time, but this is particularly a time for young companies to be extra cautious in developing pragmatic assumptions of their needs and in focusing on the amount and not necessarily the cost of that capital.
This is not a time to panic, cut off all investment in the future, and burrow into a dark hole. Take a page from the packaged goods industry that the time to gain market share is during tough times when your competitors are weaker in responding. And while this may feel more directly related to portfolio companies, we as a venture industry should not retreat either. It is our strong belief that we can and will continue to make sound investments in excellent opportunities. It is as good a time as ever to start a company with sound fundamentals.
So my point is to heed the caution of the Sequoia comments but to use them only as a strong message to reexamine all cost elements and growth plans and use this opportunity to assure that you are a survivor. Find a way to use this moment to gain your greater share of the market by providing a solution that is needed by others to improve their prospects in the difficult environment ahead. Tighten your belt and live within your means. Although the timing makes this message seem more prescient, it is a philosophy that works for successful companies at all times and at all stages; it is simply put, good business. This is not a time for heroes!”
———–
Here is a Red Herring interview with Alan from last year, explaining why he has such faith in the early stage technology community.
Angelsoft is NOT a matching site. The main difference between Angelsoft and the myriad of “matching sites†on the internet is thatAngelsoft is at its core a deal-flow management tool used by investment organizations every day to do deals - their private deal flow. When you apply to the Investment Community, you are placing your plan directly into a directory in the software that is accessible to all 12,000+ investors. The investment organizations can then click a single button and pull your deal directly into the fold of all of the other deals that they are working on in their pipeline.
But all of these on-line funding exchanges and matching sites claim to bring me to investors, too!
Because 600,000 companies are year are founded in the United States alone and many of them seek outside funding, there are many, many web sites that take aim at this lucrative market and purport to introduce entrepreneurs to investors. The sad fact, however, is that while it’s very easy for a site to sign up thousands of entrepreneurs (who want the money), it’s virtually impossible for them to sign up investors (who have the money.) That’s why none of these sites can legitimately point to their track record for getting entrepreneurs funded (despite any claims to the contrary). Instead, they make their money in one of three ways: selling you as a lead to service providers, selling advertising against your page views as you chat with other entrepreneurs, or charging you listing fees and then up-selling and re-selling you when you don’t get funded.
In contrast, Angelsoft started at the other end. Because it is the unbiased, internal platform used by investment groups, Angelsoft started with the investors. We have formed personal relationships with the general managers of each angel group and venture fund that uses our platform. We know them by name, and speak to them regularly. Their feedback has allowed us to build a system that manages over 2,700 new submissions a month from entrepreneurs and receives many thousands of logins each week from accredited investors (you can see the live statistics for yourself, at http://www.angelsoft.net/industry).
Now, with the Angelsoft Investor Community, you can post your business information in one place, and let investors find you, because they are interested in your company. This is better for you, and better for them. Angelsoft’s corporate mission statement is “more smart money into more good dealsâ€.
Is Angelsoft’s Investor Community appropriate for any kind of investment opportunity?
No. It really isn’t. All those myriad other sites will tell you whatever you want to hear, and hope that you’ll sign up with them, because they are based simply on quantity. In our case, since our primary constituency is the investors, it doesn’t do us—or them—any good to have them wade through hundreds of deals that no one would ever fund. Therefore, this is not the right place for multi-level marketing deals, work-at-home businesses, real estate investment opportunities, film financing deals, local service businesses, franchise opportunities, or other similar lifestyle or financial investment ventures. There is nothing wrong with any of these, it is simply that they are not the types of businesses that have traditionally received funding from angel investors or venture capital firms.
Instead, the kind of businesses that serious angels and VCs seek to invest in tend to have the following characteristics: relatively low capital needs; high scalability; strong management; a unique selling point; a clear potential exit for cash within 5-7 years; and above all, a complete, well-thought-out business plan.
As an entrepreneur, when you login to Angelsoft you are brought to the My Applications tab where you can manage all of your applications to groups. Recently we added the ability for entrepreneurs to see updates on investor activity relating to your deal.
On the right hand side of the My Applications tab you will find the News Feed
Here is a guide to better understand what each news item means:
– Application rated:
An investor has rated your deal and chose to anonymously share it with you. Investors use a star system, moderating the best opportunities to the top. They rate your deal using a 1-4 star scale on four categories: Management, Market, Product, and Deal Terms. Some groups use the rating system as designed, others use it as a proxy for interest in which case the actual values don’t mean anything. Investors can also leave comments which often includes advice for the entrepreneur.
– Application was privately rated:
If the investor does not share their rating, your News Feed will tell you that the application was privately rated. We are actively encouraging investors to share their ratings with entrepreneurs. However, in some cases it would be inappropriate to do so.
- An Investor has reviewed your application:
An investor has clicked on your application and read it over
- New Investment: $100,000 from John Doe, East Coast Angels
An investor has committed funds to your deal
- New Investor: John Doe, East Coast Angels
An investor has expressed interest in funding your deal, but has not entered an investment amount.
- Invitation: Name Of Event:
An investment group has invited you to an event. Clicking on the event name will link you to the details
- Referred from Group1 to Group2:
Angelsoft is a network and groups will often share deals between them. This is called a referral. When your deal is referred, it is sent to the second group as if you had applied to that group directly. A new application will show up on your My Applications tab.
- Group1 invited Group2 to collaborate:
To finish out a round of financing, Angel Groups often need to collaborate on a deal, or co-invest. When this happens, Group2 is invited into Group1s deal room. In this case, you will not see a new application on you’re My Applications tab
- A member of East Coast Angels has referred your application to his group:
An investor has referred your deal from the Investor Community to his investment group for further review.
- Investment Terms updated by John Doe:
An investor has made changes to the investment terms, which can be viewed on the My Investors Tab
- Application posted to the Investor Community by John Doe: The Investor Community is a feature inside Angelsoft. Investors post deals there when they are looking for outside investors to finish out a round. Applications posted by investors are labeled differently than those posted by entrepreneurs.
Once you have submitted your application you will be brought to the Entrepreneur Application Manager. From here you can see the number of investors that have viewed your deal, referred your deal into their Angel Group, the ratings you have received, the comments left for you by Investors, and the amount of time your have remaining in the Investor Community.
On the right hand side is the News Feed, where you will see all investor activity on your application. Investors rate submissions to bring the best opportunities to the top of the Investor Community. Investors can choose to share comments on your deal, which you can reply to. Read more about ratings and comments.
If an investor is interested, they will refer your deal into their Angel Group’s Angelsoft account for review. Angelsoft is used by most of the world’s Angel groups to manage ALL their deals, not just the ones from the Investor Community.
When an investor refers your deal into their group’s Angelsoft account, the General Manager is notified by email. That deal shows up at the top of the New Submissions list which is the first thing that the members of the group will see the next time they log in. You will be notified by email of the referral. When you log into the Funding Manager you will see that you have a new section for this group.
A deal-specific email address is included. This allows you to communicate with the investor that referred your deal along with the General Manager of the group. As your deal progresses, you will continue to use this email to communicate with all interested investors.
2. Register or Login if you already have an account
3. If you have previously applied to another Angel Group, you will be asked if you want to import your answers from that application. You can do this at any time by clicking the import button at the top of the screen
4. Fill out your application. This is often the only document that an investor will look at; make sure that you fill it out completely. Do not put “see business plan†in any of the fields. Investors do not look at business plans until much later in the process, if at all.
5. Upload a video pitch or click “Record With Webcam†to record a video using your webcam directly in your browser. A video pitch vastly increases the number of investors who will look at your application.
6. The application will autosave every 10 minutes, but you can click save at the top of the screen at any time. Click Save & Close to finish your application later.
7. When you are ready, click Submit at the bottom of the page. You will be brought to the payment screen where you will be asked to pay by credit card. The cost to post to the Investor Communtiy is $250.
Over the years Angel Groups have found that by charging a submission fee, they dramatically reduce the number of frivolous submissions from entrepreneurs. The logic goes that a less than serious entrepreneur will find a fee daunting, while a serious entrepreneur will find the fee a nominal cost of business.
We applied this same logic to the Investor Community and have found that it works. It’s not a perfect system, but it does act as a pretty good filter. Without it, our community would be crushed with an influx of low quality deals, and its value would be lost for both entrepreneurs and investors.
In the interest of full disclosure, we operate a global infrastructure and provide world class software tools for both Investors and Entrepreneurs. Investor Community submission fees help cover some of these costs.
The Investor Community is open to 13,000 investors in the 400 groups that use Angelsoft. We have spent 4 years hand-selecting each Investment Group on our system to ensure that their membership is only made up of SEC Accredited Angel Investors or Venture Capitalists.
These are wealthy individuals who have already made their money and are now looking to invest in startup companies. They are not looking to startup another business, and therefore not interested in stealing your idea.
All of these investors can see your deal and has the option to rate and comment. Read more about ratings and comments. Ratings and comments can be seen by all investors.
While we wish we could let you in to take a look around, we need to keep the community restricted to SEC accredited investors. What we can do is give you a peek behind the scenes of what the Investor Community looks like to investors.
Deal Directory The Deal Directory is where investors can browse through submitted deals by criteria such as location, rating, number of views, and industry.
Summary Information On the Deal Directory each company is shown with a summary.
This includes:
Company name
Whether or not a video is included
The One Line Pitch
Industry
The Thumbs Up/Thumbs Down rating investors have given the deal (entrepreneurs can see ratings on the Application Manager)
The number of views the deal has received (entrepreneurs can see this number on the Application Manager)
The number times the deal has been referred by an investor into their group for further review (entrepreneurs can see this number on the Application Manager)
The number of comments that have been made on the deal (entrepreneurs can see comments shared with them on the Application Manager)
A Deal Each deal is displayed in a standardized format that Angels are familiar with from their personal Angelsoft accounts.
The answers to Angelsoft application questions are listed in the main section. Company vitals such as Management and Financial Information is listed in the side bar on the right.
The video is available to watch as the investors read through an application
Documents are available for download. A PDF of the application is automatically generated for the investor to print out (entrepreneurs can also download this PDF by clicking on Preview in the Application Manager)
Investors leave feedback with the Thumbs Up or Thumbs Down rating
Investors leave comments in the Deal Discussion section at the bottom. Entrepreneurs can respond to comments from their Application Manager and the response is posted here.
When An Investor Is Interested If an investor is interested in a deal they click Refer This Deal To My Group for further review. At this point the entrepreneur is notified.
– Application rated:
- An Investor has reviewed your application: 
- New Investment: $100,000 from John Doe, East Coast Angels
- Invitation: 
- Referred from Group1 to Group2:
- Investment Terms updated by John Doe:
