Seed Capital From Angel Investors: Bob Aholt, Pasadena Angels (Part 5)

By guest authors Irina Patterson and Candice Arnold

Irina: How many investments have you done in the past 20 months? Well, I guess each member did a different number of investments?

Bob: Exactly. I’ve got some numbers at the high level for the group. We average about nine to twelve investments per year as a group. And last year, in 2009, we hit that exact number of nine. It was a little bit of a slow year for us. And I will tell you that of those nine, more than half of them were follow-on fundings for existing portfolio companies. We only had, I think, three brand new fundings last year, which is the opposite ratio of what usually happens. And we’re on trend for this year of doing, say again, our twelve – one a month – type thing, but I’m expecting, eight, nine, or ten of those to be brand-new companies.

Irina: What is the amount you usually invest, on average?

Bob: It’s hard to give an average. I’d say the average is about $400,000 to $500,000. Our rounds are up to maybe $750,000, maybe $1 million on an exceptional deal, that the Pasadena Angels will be able to fund. Minimum amounts are anywhere from $25,000, $50,000 if you get only a couple of members and the company only needs a little bit of seed capital. So, what happens on some deals, we’ve actually funded the first round up to $1.8 million, but that was in concert with the Tech Coast Angels and some of the other groups around town. So, if the company truly needs $2 million in capital, they can still come to the Pasadena Angels and we’ll go, “Oh, this looks great. We might be able to raise half of that.” And then we’ll start talking to some of the other angel groups or maybe some of the VCs who do earlier stage investments.

Irina: How often is this the first money that the startup receives?

Bob: The founders are usually putting some skin in the game, so it’s not quite the actual first money, but it’s the first outside money. Or if it’s not the exact first, there may have been a friends and family round right before it. We’re truly seed capital in the first series A round. The investment is probably less appropriate for us as it goes more and more downstream. When a company’s coming to us, filling out a B round or a C round, they don’t tend to get as much traction because, again, we’re angel investors, we’re equity guys, we’re very early stage so that seed round, that A round, is our sweet spot.

Irina: How long does it take for companies to receive funding?

Bob: Very good question. Again, I can give you some range. The fastest I’ve ever seen a company get funded was at about eight weeks. Because you figure our monthly process, to get through the prescreening, the screening, the breakfast and into the due diligence is at least three or four weeks right there. And then our due diligence process can take anywhere from a month to an average of maybe two or three months, so a company’s gonna get money from us, probably in 90 days or maybe a little bit more. I’ve seen when some companies fall out of the process when we give them some to-do’s and say you need to go work on this, you need to go explore this, then when they come back to us, they may get funded in nine months, but that’s because they’ve been in and out of the process several times.

This segment is part 5 in the series : Seed Capital From Angel Investors: Bob Aholt, Pasadena Angels
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