At the 17th New Jersey Tech Meetup Monday night, Fabrice Grinda, co-CEO of New York-based OLX Inc. and a “superangel” investor, discussed his philosophy, explaining his narrow but successful investment criteria. Also presenting at the meeting of about 120 N.J. entrepreneurs, angels and developers were three startups, though none of them was building its business in N.J.
As always, the evening, which took place at Stevens Institute of Technology’s Howe Center, began with a half-hour-long networking event and various announcements. The group held a raffle, sponsored by local businesses and some generous tech sponsors (listed on the website), to benefit the Hoboken Boys & Girls Club. Aaron Price, the group’s organizer, announced a recent partnership between NJ Tech Meetup and American Express Open.
The audience choice award-winning presentation was made by Princeton University grad Mike Dirolf, also the first presenter. Dirolf is a founder of fiesta.cc, which lets users create group email lists directly from the email, by “copying in” fiesta.cc. Questioners seemed impressed with the flexibility of the application programming interface (API). The company is working out of Dogpatch Labs in New York.
Next at the mike was Jersey City resident Gil Harel, who presented BiteHunter, the website and mobile app that bills itself as a Kayak for restaurant daily deals, aggregating them in real time. Located in the West Village, BiteHunter has just released an updated version of its iPhone app, which allows it to show limited-time offers from companies like Groupon Now, Living Social Instant and ThinkNear Inc. It calls this feature BiteNow. The company’s business model is based on lead generation, and every time it sends someone to a major deal supplier it receives a small referral fee.
Presenting last was Raj Moorjani of Manhattan-based Tracks, a mobile app and Web service that lets users create stories by sharing photos with their friends. For example, if you attend a wedding, you and your family and friends can contribute photos and make a “track” of the event. It’s a more organized way of compiling photos taken of your life. Unlike Instagram, which seizes moments, “We’re about capturing the whole experience from end to end,” Moorjani said.
After the presentations, Grinda began his speech, pointing out all the mistakes he had made after selling his startup Ziggy for $80 million in cash and investing $1 million each in six startups, all of which failed. He has changed strategies, now invests in a lot more startups with fewer investment dollars—around $50,000 each—and never joins boards. To date, he and his partner Jose Marin have invested in 86 companies. This year he has already invested in 31 startups and 10 follow-ons.
Grinda splits his angel investments among three buckets. Passive investments are brought to the partners by friendly VCs or early-stage funds, and Grinda and Marin are among the many investors in the deal. In the second category of deals, Grinda and Marin help entrepreneurs raise money. These may be first-time entrepreneurs, and Grinda and Marin lead the round, bridging the deal with $200,000 or so and syndicating it to their list of 250 angel investors, who may be interested in participating. Finally, for up to two companies a year, Grinda and Marin basically run an incubation business, devising the idea, finding a CEO and team to execute it, giving the team equity investment in the startup and providing the funding. For example, last year the company created an “Expedia for Brazil,” Viajanet.com.
Grinda noted that he has a day job and is too busy to consider deals that fall outside his parameters. He specializes in consumer Internet facing deals featuring business models that are easily replicated—an eBay for Russia, for example. Most of his investments of this type are located in Brazil, Russia and Germany.
Further, Grinda will only consider companies in the following segments: travel, e-commerce, marketplaces and user-generated content. If an entrepreneur presents a new idea that has never been tried anywhere else in the world, he said, “we will only look at the business if it is in the U.S. market. We will take concept risks, but we are not going to take market risks.”
Grinda says it takes only one hour for the two angels to decide whether to invest in a company after meeting the team. Two questions they ask themselves after that meeting: Do we like the team? and, Do we like the pitch in terms of meeting business selection criteria? Regarding selection criteria, the angels expect the startup’s website to already be live and making money, around $5,000 to $10,000 per month. Businesses should have at least $1 billion in revenue potential, he said, and the potential market for the idea should be between $10 billion and $20 billion. The business model should be well-defined. Also, potential businesses should have low capital requirements.
“You want to be in a business where you have a good shot at winning and are one of the top three players,” Grinda said, and a scalable idea is important. The angels also like to be in businesses in which there is very little risk of margin compression by customers. For example, one customer shouldn’t represent 70 percent of your sales and have leverage over you, Grinda explained. Your idea should occur in a rapidly rising market, because that kind of market floats all boats. Finally, the idea should be one the entrepreneur knows how to execute and can get excited about.