Seed Capital From Angel Investors: Bob Aholt, Pasadena Angels (Part 7)

By guest authors Irina Patterson and Candice Arnold

Irina: As far as the total available market for an idea, do you have any recommendations for that?

Bob: Again, total available market, total addressable market, and the amount of market you’re going to capture are all a function of what that return is and how much you’re going to sell the company for. So, if you’re only looking for $100,000 and you can turn that into $1 million by growing this to a $10 million company, then that’s a pretty soft market. And it’s a plausible story and we’ll listen to that. The number you’re looking for? We’re looking for companies that can give us an exit when they have a market anywhere from $35 million to maybe $60 million.

Irina: Some angels won’t invest in anything that will yield less than $500 million. You do work with smaller market companies?

Bob: That’s a perfectly reasonable model, but what that means is you need more capital to get there and therefore, if you’re only going to put in $1 million, there’s going to be a follow-on dilution or you’re limiting yourself to getting out early before it can get to $500 million. So, we do companies that have, obviously; since we put in a little of $20 million and there’s $200 million or more in follow-on rounds to our companies, we certainly get into companies that need large amounts of money, and we understand that. Again, it’s all back to that equation about return. I don’t really care if I have one percent of your company – one percent of Google right now would be a pretty good investment.

Irina: You don’t have to know personally the people you invest in, right?

Bob: No. Since we invest as individuals, there’s a good chance I won’t know the people personally before they come in. But usually, more often than not, they do know somebody inside the group. That’s one of the secrets I the tell people who are trying to get funding – to start networking early and get to some events that we’re putting on and start socializing with angels. You may not be their best friend or the best man at their wedding, but you still should know them and they should be able to know who you are.

Irina: As far as their level of education, do you invest in entrepreneurs straight out of school or do you require business experience?

Bob: You know, me personally – and this is the nice thing about the Pasadena Angels, I’m not speaking for the groups and the others who are investing – I really don’t care. I’m looking not at the education background, but I’m looking at if they’ve got passion, the ability to listen, and the ability to be a leader. Another question that you didn’t ask that I usually get asked as well is, “Well, do they have to have success under their belts?” and my quip back is usually, “Well, successes are nice, but if you have a failure or two under your belt, you’re probably more credible.”

Irina: As far as the business teams, do you need a complete team?

Bob: No. Again it depends on the amount of capital they’re looking for. If I know they’re raising $2.5 million and they’re going fill out part of their team and hire a VP of manufacturing, that’s fine. We are early stage and understand that they’re not going have every piece in place. If they would, they wouldn’t be coming to us for angel capital, they’d be going to VCs or private equity companies for private equity.

This segment is part 7 in the series : Seed Capital From Angel Investors: Bob Aholt, Pasadena Angels
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