This is the best time for an entrepreneur to start a company and raise money in New Jersey, Cristian Ossa, screening committee chair at Delaware Crossing Investor Group (DCIG) (Doylestown, Pa. and Princeton), told some 60 entrepreneurs and investors gathered at the Venture Association of New Jersey (VANJ) meeting in Whippany June 18, 2013.
“I know that a lot of entrepreneurs don’t like hearing this because they’ve been trying for so long and haven’t been able to raise money. I guarantee you it’s the best time,” Ossa said. “Back in the day, there were only two ways to get money: call your lawyer and ask who the rich people you know are, and then call your accountant and ask the same thing. … There weren’t organized angels.”
Now “rich guys are coming out of the woodwork,” and you don’t have to explain to them what you are doing, Ossa noted. The television show “Shark Tank” and the movie about Facebook, he said, have made being an entrepreneur and raising money hip. “That might not seem like a big deal, but when I was raising money I had to explain even my first steps,” Ossa said.
There are more millionaires than ever in New Jersey, he added — rich people starting their own VC and angel funds. Angels are no longer independent but have formed groups, he noted. “Angels are a very incestuous crowd. We all talk to each other, we all know the good deals that are out there and we all know the deals that are floundering.” If you talk to three angel groups, you may “touch” 150 angels, Ossa told the gathering.
The biggest complaint angel investors have, Ossa said, is they don’t see enough deals. “We want to put more of our money to work.” Ossa invests in technology companies only. He said he has put his own money into about half a dozen companies and has invested his time in another five or so. He has acted as either COO or CIO and taken some equity for that role. “So far, as an angel investor I haven’t had any fantastic exits to tell you about,” he noted.
Not all of Ossa’s investments have been made through DCIG, he said. “If you hear of a deal, it’s a good deal and it’s a Jumpstart [NJ Angel Network] deal, you jump in with Jumpstart.”
Ossa describes himself as a “recovering entrepreneur,” and his background supports this. His first venture in the entrepreneurial space was Giftcertificates.com founded by Jonas Lee. A cofounder, Ossa started the business in a spare bedroom of his house, and it grew to 400 employees in a year and a half. “I was instrumental in raising over $100 million from various VCs and angels in New York and Philadelphia. I had an exit, but not a great one,” he said, meaning that there was very little left for him.
Ossa’s second attempt was eRateRequest.com, a sort of eBay for the containerized shipping industry. It was a much smaller company, and he and a friend “banged out the software in two weeks,” he said. After that, they talked to someone from the former investment bank Bear Stearns who gave them a half million-dollar valuation. Shortly thereafter, they actually oversold their rates, raising nearly $8 million. Bear Stearns upped their valuation to $16 million. “I had a reasonable exit, selling it to a company in Canada,” Ossa said.
His next venture was Live Audience Business Solutions (New York).”I was CTO with Paul Levy (CEO) and Rich Jaffe (CMO),” Ossa said. It raised $3 million from multiple raises from friends, family and angels. The company was then sold to SmartDM. Finally, Ossa founded Rosetta Technology Group (Hoboken), a consulting business solutions firm that is still around today. All of his startups were team efforts, he added.
After that flurry of entrepreneurship, Ossa decided to stop working for a while, spending time with his kids and enjoying life. However, he had the entrepreneurial bug and wanted to “sit on the other side of the table. … It’s a lot more fun being an angel investor than being an entrepreneur,” he said, noting that many angel investors do what they do because they like it. “I [also] want my money to make more money. This is very important to me,” he said.
It’s important to keep in mind that angel investors are always shopping, said Ossa, and are looking to put their money to work. DCIG picks up many of its investments through Gust (New York), he added, and if he were to meet you at a pitch event, he might suggest that you submit an application through Gust.
Some of Ossa’s advice:
Know where you are in the process of raising money. Many entrepreneurs get this wrong. You need this information because the rules change depending on where you are in the process. Raising money is a lot like dating or job hunting: on your first date, you don’t talk about your crazy uncle and you show your best side. “If you are trying to interest me in the beginning, it’s OK to get me excited about your pitch. As you get further along, you need to be precise” about your numbers and absolutely honest. At due diligence,“we are looking to validate everything we believe about your company.” Due diligence can get personal, and any skeletons in your closet will come out, “but I would not bring them out on a first date.”
Everything counts. A lot of entrepreneurs fail here. It’s never the questions angels ask at the table that get entrepreneurs into trouble; it’s always the question they ask as they are leaving the room, when they are unprepared. “I’ve seen entrepreneurs blow it on the elevator ride down … You are always ‘on,’ ” he noted.
Organize your deck and narrative carefully. This seems so obvious but is often ignored. Talk about the problem, the solution, the money, the market and then the team. The story you tell is important. When you talk about the team, “tell me why the team can make things happen.” Always be excited about your product. “If you are not excited, I won’t be excited [and] you won’t get the check.” Don’t be excited about your product; be passionate about your product’s business, he said.
Do your homework. When you step into an angel group, you have no excuse for not knowing its members and their specialties. All that information is available on the Internet.
Make sure that there is money for investors somewhere in your pitch. “I want to give you a dollar and have it come back as 10. You have to show me how that happens,” he said.
Have a working board of advisers. A board of advisers speaks volumes about your ability to get along with other people and excite others about your product. Have regular meetings with them and take at least some of their advice. Deals get squashed when the angel calls the board of advisers and someone says, “I don’t think that guy is ever going to listen to us.”
Practice your pitches. Practice them with anyone who will listen. Do it, walk away, go back later and ask your listeners what stuck with them. Ask yourself, What was the idea I “inceptioned” into their heads in those two or three minutes? Sometimes you don’t realize what sticks. Once you have the pitch down, don’t change it; memorize it, but speak from the heart.
Educate yourself and hire your experts, but then do it yourself. It’s very important that startup entrepreneurs pitch and sell their own ideas and know what’s going on in their businesses.
Think about your nonfunding options. If the entrepreneur doesn’t get the money, he wants to hear that the company “will probably grow organically, with one million this year, 10 million in two or three years. If you’ve got a real business, you can show [that] you can do without the money” but that the money will help it grow exponentially.