Seed Capital From Angel Investors: Bob Aholt, Pasadena Angels (Part 4)

By guest authors Irina Patterson and Candice Arnold

Irina: And who does the screening?

Bob: Pasadena Angel members; they’re actually investors. Our executive director will look at everything that comes in. And, again, if the guy’s in North Carolina – and I’m not trying to pick on North Carolina or North Dakota or North Sasquatch – that’s not appropriate for us. That entrepreneur will get an email from our executive director saying, “Hey, thanks for the submission but it’s not an appropriate investment.” And if they get past that, they do get a phone call from a member. I’ve got something I have to do early next week. I’ve got to call an entrepreneur and talk to him and find out more about his company. So, everybody who applies on our website and gets past that initial filter saying it’s appropriate will get at least a phone call and a conversation with one of the Pasadena Angel investors.

One of things we’re trying to do better is close those loops of communication. And, again, I think, usually less than 10% of the applicants who come to us are not appropriate because on our website, as you start the application process, it tells about what we’re looking for and what we do, what our sweet spot is, and says that we only invest in companies in Southern California. So, people who read that will probably not go much farther. It’s not an overly time-consuming process but it’s maybe a half hour, an hour, and you have to put in your business plan and your financials. There’s some effort to that, so you’re not going to do it if you’re not an appropriate company.

Irina: When you look at these plans, what factors do you give the most weight to when you’re debating whether you’re going to fund a company?

Bob: I don’t suppose there’s anything unique or a silver bullet that we have. We’re looking for companies that have a technology or some kind of a product that’s scalable, that can hit a large market. We’re looking for companies with a good entrepreneur, a person who seems to have passion and listens and can lead a company at least for the next two, three, four, or five years. At a high level, that’s what we start looking at. And then we make sure that the deal seems appropriate. Generally, we invest in either a preferred stock or maybe a convertible debt into a preferred stock instrument. So if they’re looking for a loan, that’s probably not us. We’re more equity-type guys.

Irina: And who does the due diligence?

Bob: Let me make sure you understand. Pasadena Angels is a nonprofit organization. So the Pasadena Angels never make an investment in a company, it’s the individual members. So, when I say I invested in a company, I truly wrote a check to the company. So, say your company wants $250,000, you’re coming to our group and you’re trying to get 10 investors to write $25,000 checks. And so, the reason I bring that up is because our due diligence is done by those same members who are writing checks. And as part of a nonprofit group’s charter and not actually investing in the company itself, the Pasadena Angels don’t do due diligence. We come together as a group and the individuals do due diligence and rely on each other, but each individual member is responsible for doing his or her own due diligence.

Irina: As a nonprofit, how are you funded?

Bob: We charge membership dues to each of our members and we allow some companies to sponsor us, but that’s a pretty minor amount. [Most of] our funding is internal from our member dues.

This segment is part 4 in the series : Seed Capital From Angel Investors: Bob Aholt, Pasadena Angels
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