Seed Capital From Angel Investors: Basil Peters, CEO and Fund Manager, Fundamental Technologies II (Part 3)

By guest authors Irina Patterson and Candice Arnold

Irina: What are your current sources of deal flow?

Basil: Most of the things that I find investment worthy, I’m seeing at an angel meeting. What’s best for entrepreneurs, I think, is to present at group meetings. It’s a much more efficient way for entrepreneurs to meet angel investors and for angel investors to meet entrepreneurs. I belong to three angel groups.

In the angel groups, there are volunteers who take the time to have a look at the companies before they get in front of the rest of the group. And that’s a very good discipline for the entrepreneurs and for the angels because it sets kind of a minimum threshold and it makes the entire process more efficient for both the entrepreneurs and the angels.

There’s also a new social platform called AngelSoft, which is, I think, a very important new element in the structure of the global financial community. AngelSoft is still not as widely recognized as it will be, but they’re solving a lot of the matching problems for entrepreneurs and angels and they’re making a very big difference out there.

Irina: Do you use AngelSoft?

Basil: Yes. It doesn’t mean that there’s not lots of room for improvement. The connection of angels to entrepreneurs today is still painfully inefficient. I think there are many better ways, and I’m enthusiastic about any creative thinking that can help entrepreneurs and angels connect more efficiently.

Irina: If you could imagine an ideal system of deal flow, how would it look?

Basil: What I would like to be able to do as an investor is to screen companies by the kind of things that I’m interested in. Probably the best way to think of it like the online dating industry. Online dating has gotten quite sophisticated now in a couple of ways. One way is that online dating companies have learned how to sort people and how to categorize people and how to match them up pretty efficiently.

Plus, unlike the angel investing world where we only have one platform, there are hundreds of specialized platforms where you get people of special interest groups aggregating and sharing ideas, interacting, and building a little vertically-focused community.

If we were to go forward to 2020, I think what you’d find is online platforms where entrepreneurs could meet angels who are located in their cities, in their kinds of companies where the entrepreneurs could connect with the angels in real time or asynchronistically, share information and, very importantly, where the angels could also have a collaboration and make decisions as a group.

What’s very, very important and what’s just starting to happen now is angel investors, especially angel investors in groups, are just learning how to syndicate or coinvest. This is probably one of the most important things that’s happening in the American economy today.

What it’s allowing to happen is that as angels join groups and as groups learn to syndicate, we’re seeing angels put as much as $5 million or $10 million into individual companies on a pretty regular basis.

I know of companies that have raised over $20 million just from angel investors.

This is tremendously important right now, because the traditional venture capital industry is kind of imploding. So, this ability to aggregate capital to the $10 million or $20 million level is very important, to be able to grow the more capital intensive companies, like Google, for example, or eBay, that require scale to be able to realize their business models.

So, it’s very good for angels and very good for entrepreneurs, but it’s another one of the reasons why traditional venture capital isn’t viable anymore.

This segment is part 3 in the series : Seed Capital From Angel Investors: Basil Peters, CEO and Fund Manager, Fundamental Technologies II
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