Seed Capital From Angel Investors: M. Todd Dean, Keiretsu Forum, Northwest Chapter President (Part 5)

By guest authors Irina Patterson and Candice Arnold

Irina: Do you pay attention to the total available market (TAM) for companies’ products or services?

Todd: Absolutely. We’ve invested as high as $13 million in a company. That was a company where we were swinging for the fences, and we were hoping that that would be a grand slam, a home run, and the jury’s still out on that particular investment.

Then there’re other companies – some manufacturing companies, some real estate investments that we also do – where we’re looking at a modest return.

Todd: We do look at the markets. I can tell you what we’re not doing is we’re not chasing the trends. A lot of times groups will chase trends. I heard that there’s an angel group on the East Coast doing angel investing for political parties.

That’s great, but that’s not our thing. Our thing is: Let’s diversify our investments across industries so that we can maximize our diversity and increase our upside. Which companies are going to succeed and which ones are we going to brag about to you in another three to ten years? I don’t know. But what I do know is we will have some very, very strong winners. In which industries? I honestly don’t know.

Irina: What about small niche markets?

Todd: Love, love, love small niche markets. I’ll give you an example, a company called CMC, Creative Motion Control. It’s a very niche market. It’s a new type of screw. It’s not sexy. The CEO is very plain. But it’s a company that’s absolutely performing. It’s growing in revenue, and it’s a very niche market. We love niche markets.

Irina: When you invest in teams, what kind of teams do you prefer? Do you they have to have senior executive experience?

Todd: That varies. We have some teams that are very senior teams where they’ve built up $1 billion companies and sold them and they’re doing it again.

We have other startups where it’s their first startup. We look at both and at everything in between. Each company’s going to be different. We’ve seen all of the above, so I don’t think there’s any one that we specialize in or single out. We treat everybody fairly.

We’ll look at what does the team bring to the table, what is their product, what is the market space and what is the potential opportunity on that investment.

Irina: Out of the 70 companies you see each month, you have a lot that don’t make it to the presentation stage. What do you do with them?

Todd: We don’t do anything with them. At least half of them are just too early for us. A lot of them are just too immature. They’re still too young in terms of what we look for. We always get a handful that have astronomical valuations where their heads are in the clouds and they have unreasonable expectations for what they’re doing.

This segment is part 5 in the series : Seed Capital From Angel Investors: M. Todd Dean, Keiretsu Forum, Northwest Chapter President
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