This is Part Two of our profile of Morristown-based SoundBoard Angel Fund, a group started in March 2012. We learned back in April that SoundBoard had invested in New Jersey e-learning startup Tabtor (Kendall Park). Tabtor competes with personalized learning companies like Kumon to provide math worksheets on iPads for tutoring, point-of-learning analytics, gamification and personalization. Its differentiation: patent pending Real-Paper technology that allows sharing and review of handwritten work, automatic grading, video tutorials and adaptive analytics.
Since principals Jonathan Hakakian (JH), managing director, and Richard Magid (RM), founding investor, established SoundBoard, the fund and the angels alongside them have made eight investments in six unique companies, including two follow-on investments. The company represents 22 individual investors and has made it clear that it would like to make more investments in New Jersey.
In Part One of our Spotlight (found here), we featured SoundBoard’s origins, its evolution and investing philosophy.
How does deal flow work at SoundBoard?
JH: Most of the deal flow comes through me. The best deal flow comes recommended from other investors or our own investors who are out there looking. Once in a while we get referrals from other entrepreneurs. We don’t take cold emails anymore.
RM: We also, of course, have a vast network coming from our consulting business. We are getting some referrals from family offices, investment bankers and other funds and angel groups. We are also seeing some flow from VC firms who are not going down-market, not making smaller investments. We’ve created a good, solid network in New Jersey but also in the metropolitan area and on the West Coast.
If I’m a startup entrepreneur, what would you want me to know about you and what you are looking for?
JH: Right now it’s all about the entrepreneur. As Katherine O’Neil of Jumpstart NJ Angels would say, we are always backing the jockey. If we don’t mesh with the entrepreneur, if we don’t believe in the entrepreneur and see his vision and that they can really make the business happen, then we can’t invest. This is where it starts with us.
RM: We are also looking for scalable models, a clear point of differentiation. Some market acceptance would be nice, but it is not necessarily required. If we see some early revenue, even though there might be pivoting that needs to take place, we have a sense that someone will pay for the product and services.
Does SoundBoard want to be involved in the day-to-day operations of its companies?
RM: Yes, we want to be involved. We have 22 limited partners with 22 different backgrounds and career histories, many of whom want to get involved with the investments.
JH: In two of the companies we have investor seats on the board. For one company, we have a full board seat. We are looking to be active in the investment as much as possible given our experience in building an effective operating team.
Do you have any words of wisdom for the New Jersey startup entrepreneurs reading this? As Jay Trien of the Venture Association of New Jersey would ask, how do they get you to write them a check?
JH: Be open to listen to the investor side of the table. I know that sometimes it’s not easy to take an investor’s advice, but hear them out. Keep an open mind.
RM: Show up as an active listener and be 100 percent transparent and honest. Any fact that they share that doesn’t align with what is written and what others may say about them is a problem. We see way too many times where people don’t have their story straight. They are telling a story and not telling the truth. There is no room for not telling the truth when you are trying to find partners. … If they can’t be 100 percent honest from day one, it will probably not get better in more difficult times.