Seed Capital From Angel Investors: M. Todd Dean, Keiretsu Forum, Northwest Chapter President (Part 3)

By guest authors Irina Patterson and Candice Arnold

Irina: How many deals do you receive each month, on average?

Todd: Typically, about 40–70 a month for our region alone.

Irina: Out of those 40–70, how many deserve a closer look?

Todd: We narrow that down to the best seven to nine companies. Those seven to nine companies present in front of about 25–30 of our investors. They narrow that down to the best four companies. And, typically, one or two of those companies get funded.

Irina: So, those four companies would come and present during a live regional meeting, right?

Todd: Yes. It’s a smaller meeting, but, yes. The deal screening, which is the pre-screening process, is when the seven to nine companies see a smaller group of the members who vet those companies down to the best four, and then those four companies go on a “road show.”

For example, I’m in Boise right now. They’re going to present in front of about 30–40 members in Boise. Then they go to Bellevue on Wednesday and present to 80–100 investors. Then in Seattle, they’ll present to about 40–60 investors. Then they’ll present in front of about 40–60 investors in Portland.

Irina: So, they go on a regional road show, right?

Todd: That’s exactly right. And it’s the same in each of our chapters.

Irina: What are the most critical factors you look for when deciding whether to fund a company?

Todd: That’s a really good question.There’s no one answer on that one. With startups, they always have holes and gaps. The question is: How big are the holes and where are the gaps? We’re going to look at valuation. We’re going to look at the team. We’re going to look at the intellectual property. We’re going to look at their financials. We’re going to look at their market space.

The members are going to assess, through a very thorough due diligence process, whether it makes sense for each individual member to invest on his or her own, based on the facts that we find in the due diligence. We’re going to look at everything. We want to make sure that we mitigate our risk as much as possible through looking at the facts and finding out what the company does need aside from capital.

Irina: The due diligence is done by the members who are considering investing in these companies?

Todd: That’s correct. And it’s voluntary, which is pretty cool.

Irina: How many investments have you made in the past 12 months inyour region?

Todd: We did 22 companies last year, investing over $9 million in those companies.

Irina: What’s the average dollar amount per member?

Todd: It’s changed a lot in the past two years. I’m going preface it with the market. A couple years ago, there were a lot of $100,000 checks written per member. Then we’d have a handful of members who would do the $500,000 to $1 million checks.

Today, I’m starting to see more $25,000, $50,000 and a handful of $100,000 investments. And I see a handful of our members who will invest $250,000, $500,000, and $1 million checks. So, it’s almost kind of like three different classes of investors in the group. But I’ve started to see more checks written in the past six months; it’s refreshing.

Irina: How long does it take for a company to receive funding from your group?

Todd: On average, from the time they apply to when they receive capital is about from three to six months.

This segment is part 3 in the series : Seed Capital From Angel Investors: M. Todd Dean, Keiretsu Forum, Northwest Chapter President
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