Seed Capital From Angel Investors: M. Todd Dean, Keiretsu Forum, Northwest Chapter President (Part 7)

By guest authors Irina Patterson and Candice Arnold

Irina: Do you have a success story to share?

Todd: The one that stands out is Napo Pharmaceuticals, which went public in a 24-month time frame. The investors got a fifteen times return. That was nice.

We’ve had a lot of positive returns on the real estate over the past ten years. Obviously, that has not been the case over the past year and half to two years. But from 2000 to 2008, we had great returns on real estate.

And we’ve had a number of base hits. We’ve had a number of two times, three times, and five times returns where the companies got taken out early in their growth stages or they were acquired and we were to get a two times return on our investment in a 12- to 24-month time frame. We haven’t had a lot of home runs, yet. I think the forum is still young, and as the markets continue to come back, we’ll see some very nice returns here in the next three to eight years.

Irina: What do you think angels should do to increase their success?

Todd: That’s a good question. There are a lot of things. Number one, investing through a group mitigates the risk tremendously. I think Keiretsu Forum is the leader as far as groups. They’re pioneering how investments are done with startup companies. Now, with that being said, there are literally hundreds of other angel groups, and it is a growing trend.

And the beautiful thing about that is it helps, period, to invest through a group rather than individually. Rob Wiltbank is the leading statistician in the country on angel investment returns. If you go to the Angel Capital Association website, Rob’s got some white papers on there.

You can see that angel investing is outperforming venture capital returns today, and that, Irina, is history. That’s history.

It just goes to show that if you invest through a small group or a large organization such as Keiretsu Forum, you increase your upside and mitigate your risk at the same time.

Irina: Of course. You’re using shared intelligence.

Todd: You say that as if it’s common, but most people don’t realize that. And that’s why I’m glad you’re talking to me.

Irina: That’s the angel side. Now what do you think angel-backed companies can do to increase their success?

Todd: I think the answer is to focus on revenue. It’s all about revenue today, and traction. If you want to do R&D and improve the product, that’s great, but it doesn’t build the valuation of the company and it doesn’t help to raise capital.

It’s all about revenue today. It doesn’t matter what the product is. It doesn’t matter what the industry is.

If you look at the clean tech and sustainability space, you have hundreds of millions and billions of dollars going into these companies that may or may not have revenue. If you’re an investor, you’re not going to see a return, and you’re certainly not going to see a return any time soon.

That’s the beauty of this economy – and this is actually a plus to what’s going on in our country right now – is that it’s teaching companies and CEOs to do more with less money and to focus on traction and building a company with less.

Irina: Thank you, Todd. Fantastic insights.

This segment is part 7 in the series : Seed Capital From Angel Investors: M. Todd Dean, Keiretsu Forum, Northwest Chapter President
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