Investors Give Startups Their Best Advice at NJEN Gathering of Angels

At the New Jersey Entrepreneurial Network (NJEN) meeting in Princeton on June 12, 2013, angel investors talked about their investment philosophies and provided their best advice to startups seeking funding.

The luncheon meeting was held in reverse venture fair format, with angels taking places at tables after lunch and startups visiting them there. Before the meeting, angels, startups and others networked at a poster session outside the luncheon room.

First to speak was Mario Casabona, engineer, former entrepreneur, successful angel investor and CEO of the accelerator TechLaunch(Clifton), who advised the startups to be tenacious. He said startups, even ones that come from accelerators, need tenacity to persevere; money won’t chase them. “You have to sustain yourself; in some cases you have to bootstrap and in some cases you have to wait until a VC comes to you,” he said.

Up next was Bert Navarrete, managing partner at Tigerlabs (Princeton), who called himself a “relapsing VC.” He told the group he had been spending most of his time flying back and forth to the Bay Area investigating Internet software companies. Tigerlabs invests in firms from the very early stage up to series A, he said. “We are focused mainly on healthcare IT as well as supporting student entrepreneurs,” he noted, and the company also runs a coworking facility.

Right now, traction trumps everything, Navarrete told the group. “If you are in the market to raise an institutional round of financing, I would encourage you to hyperfocus on your product and gain as much traction and data points around users, small amounts of revenue and pilots as a pathway to success,” he said.

Ellen Weber, executive director of Robin Hood Ventures (Philadelphia), an early-stage angel group that invests in the Internet, life sciences and physical sciences, told the startups to “really make sure you have a good group of advisers behind you, the right attorney, the right accountant, the right incubator or accelerator. All those things can make a difference in the ability to attract funding and to use that funding wisely.”

Yaniv Sneor, a founder of Mid Atlantic Bio Angels (New York), said his new group of 77 angels invests all over the world, focusing exclusively on life sciences. His advice: “Look at potential investors as potential clients as well. Just as when you go to a customer, you need to understand the market needs … how an angel group or investor works and thinks, and why they are doing what they are doing. Then pitch to that need. … If you understand what the investor’s sweet spot is, it will make it a lot easier for you.”

Jeff Snellenburg of Mid Atlantic Angel Group (Philadelphia) and PA Angel Network, and an investor in Delaware Crossing Investor Group (Doylestown, Pa., and Princeton), offered his own suggestions: “You usually get one shot at going into an angel group, maybe two, so you must be prepared. Have your executive summary, business plan, PowerPoint presentation and investor deck in a ready position. If you are not ready, ask for help. You can go directly to the angel groups and ask for help. Say, ‘I don’t know exactly what I need’ or ‘Is this sufficient for your process?’ Also, be coachable. If you think you know everything and are not willing to listen, that’s a challenge for us to invest in you.”

Katherine O’Neill of Jumpstart NJ Angel Network (Mount Laurel) discussed national trends, including that angel groups are syndicating nationally, regionally and sometimes across specific investment interests like green tech. Most early-stage VC money has long since fled the market, she said. More than $20 billion in angel investment is being made every year, and the average size of each deal is increasing. The average deal is about $600,000 and is syndicated. Some 75 percent of angel investing is not occurring in Silicon Valley, she added.

O’Neill’s advice: “We talk about the shiny thing at the heart of everyone’s business, the important piece of technology or what you built, but when people are making the investment, they are making the investment in you. If you are not the person who can bring this to fruition and make it happen, it doesn’t matter how good that technology mousetrap is. People are looking at you as the person who will make this happen.”

Glenn Fratangelo of Innovation Garden (Princeton), an early-stage seed venture fund that invests in post-revenue companies, said his firm likes post-accelerator graduates and is “big into numbers and data points.”

His suggestions: “When you take on an angel investor, you are taking on their personality and their value add, so look for smart money. … Find the right investment group for your needs, make sure your sources and uses statement is rock-solid with no fluff, make sure… you are good at one thing and … you are best at that one thing when you go to market, to try to reduce market risk.”

Randy Harmon — principal of Foundations Business Development Group, a technology commercialization consultant with the New Jersey Small Business Development Centers and moderator of this portion of the program — couldn’t resist sharing his own wisdom.

Calling himself a “recovering incubator manager” who had been with the former Rutgers Business Incubator (New Brunswick), he said, “I learned that the companies … most likely to be successful are those that have a viable bootstrapping strategy … they can fall back on, just in case they are not able to raise that financing out of the gate.”