Seed Capital From Angel Investors: Manu Kumar, Founder and Chief Firestarter, K9 Ventures (Part 5)

By guest authors Irina Patterson and Ravi Bulusu

Irina: Do you have any interesting stories?

Manu: Sure. I met one founder in December 2008. I had my second and third meetings with him in January. The company had not even have been formed yet. It was only a single person or, rather, the founding team with one person leading. I told them in January, “I know that your round is going to be oversubscribed. So, here is my check.” He said, “Manu, I can’t take your check right now because we don’t even have a company set up yet.”

I told him, “Mark my words, I know you are going to be oversubscribed and I want to make sure that I can participate in the round for this company.” Sure enough, the company did have very active fund raising process. They raised a great round of financing, and fortunately I was able to participate in that round of financing and help that founder pull it all together.

Irina: What do you think is the most important thing that the angel back founders can do to increase their chances of success?

Manu: I would answer that in terms of what I have seen as common mistakes. A lot of angel rounds happen to have a large number of investors who are syndicating in order to pull together the angel round for the company.

One of the common mistakes that I have seen founders make is they either don’t set up their board of directors, or they set up a board where everybody is on the board of directors, or everyone is attending the board meeting either as a director or an observer.

That is something that founders need to do better because having a good board structure in place is very important in terms managing the company and reducing the burden on the founders in terms of keeping the governance of the company in order. Getting the board structure right and making sure that the board is being helpful to the founders is something that I would advise most founders to watch out for.

Irina: What do you think angels can do to increase their chances of success?

Manu: The number one thing that angels can do is to be more picky and select better companies. I would say that there has been too much money flowing at the angel stage. In a lot of cases, there has not been enough diligence done by the angel investors.

A lot of angel investors end up investing on the basis of who else is investing, and that is not a good metric to use. They really need to do their own homework to decide whether they want to participate in the financing of a company and whether is a good company. In short, it comes down to being more picky about which company you are investing in.

Irina: Which means more work, right?

Manu: Which does mean more work. Yes, it definitely means a lot more work. You are doing fewer investments, but you are focusing on what investments you are doing.

Irina: What are your personal daily challenges as an angel?

Manu: Probably my single biggest challenge is managing time. I could spend a lot of time working with my existing portfolio companies. I spent all morning today working with one of my portfolio companies. I could spend a lot of time looking at new companies.

As the solo player for K9, I also do the administrative and back-end stuff. It is about striking a balance between those three things, working with portfolio companies, looking at new companies, and doing a lot of administrative stuff. Managing the time is probably the biggest challenge.

Irina: Is there any service that you wish you could have that could help your work flow?

Manu: Not really. I have looked at a lot of services that I could use in order to help me manage my time better, but some of them are just way too expensive. So, it would not make sense for me as a fund of this size to engage those people or services to do this.

At this stage with a small fund it is a question of managing time, and so far I have been pretty pleased with both the pace of investing as well as with the balance between the amount of time that I spend with the current portfolio companies and with new companies. It is an ongoing balancing act that requires daily effort.

Irina: This was wonderful, Manu. I have  learned a lot and enjoyed it. Thank you.

This segment is part 5 in the series : Seed Capital From Angel Investors: Manu Kumar, Founder and Chief Firestarter, K9 Ventures
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