Seed Capital From Angel Investors: Bob Aholt, Pasadena Angels (Part 8)

By guest authors Irina Patterson and Candice Arnold

Irina: You already told me that for businesses that don’t get invested in, you send them a nice notice and maybe tell them to work on their businesses, right?

Bob: Yeah. We actually have a category that we put a lot of businesses into; it’s called mentoring. It’s part of our being a nonprofit organization – it’s a 506 3(c) or something. But the reason is that we have two parts to our mission. One is to find investment opportunities for our members, and that’s pretty obvious, but the other half of our mission is to educate entrepreneurs. So we really try to give feedback. We’ve got one company that came to our breakfast last month that has been in our process for over a year. It came in very early, not looking for money, but it started establishing relationships and has been mentored over the past nine or twelve months and is actually now going through the process and pitching and has got some traction within the group. It looks like the founder is going to continue in the process. I don’t know if he’s going to get funded or not. But he’s got a leg up because he has spent so much time and effort inside our group and being mentored by our group.

Irina: How do you conduct your mentoring activities?

Bob: It’s not a formal process. What happens is that some members will take an interest in a company. Maybe they came from an entertainment background and this person happens to make stage lighting – I don’t know, I’m making this up – so they go, “Well, you know what, I used to have a business and we used to run stages and I know all about how you sell into this group, so let me work with Joe for a little bit and see if I can get him some contacts with some customers and, you know, start fleshing out his business plan a little bit.” And so they go into this mentoring stage where we keep tabs on them, and the conversation is up to entrepreneurs and the members who want to work with them.

In regard to people we’ve invested in, every quarter, maybe every six months, we try to do a roundtable with entrepreneurs whom we’ve funded and maybe one or two who are in the funding process and get them together because there’s so much synergy and learning. These people are solving the same problems, and if we can get the ones who are already funded together to talk about their common problems, it helps everybody. So, I’m a big believer in roundtables, whether you do them early, late, it doesn’t really matter. If people are sharing information, that’s a good thing.

Irina: Some angel groups have formal mentoring where they charge fees, but this not what you do, right?

Bob: No. The only time angels get money out of a company is when they get an exit or a dividend. We’ve talked about that a lot, in fact. We really shy away from that. To be totally transparent, if a deal closes with us, we usually have lawyer representation, so the lawyers will get paid out of the closing fees, but angels don’t take any money out of closing fees. Angels don’t take any money until the company gets an exit. We’re kind of fanatical about that. There are a couple of groups in L.A. that do charge money, and I understand why they do it, and they present a credible case on giving value in mentoring and providing value, but that’s not what we do.

I’ll go do panels and stuff like that. I’ll do a panel, if they’re going charge the entrepreneur a token amount. If they’re giving dinner and it’s like a $35 or $40 fee, I can get by with that because a lot of times, there are other nonprofits giving these panels and events like that. When you start charging anything more than that, I just don’t think it’s the right signal to send to an entrepreneur. He or she is trying to raise capital and doesn’t have a lot of money. The last thing you should be doing is charging entrepreneurs a significant amount of money to get what we offer free. But then on the flip side, you get what you pay for a lot of times.

Irina: I tend to agree with you that they shouldn’t be charging entrepreneurs steep fees for the mentoring, for the presentations, for the conferences, and so on.

Bob: I get the business model, and if they want do that and can develop the demand for it, great, more power to them.

This segment is part 8 in the series : Seed Capital From Angel Investors: Bob Aholt, Pasadena Angels
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