Seed Capital From Angel Investors: Russ Fradin, The Bay Area (Part 3)

By guest author Irina Patterson

Irina: Do you think in terms of equity?

Russ: I don’t have an ownership threshold. I don’t say, I wouldn’t do this unless I can have x percent.

Irina: Do you think about the returns that you might be getting over a period of time?

Russ: The majority I’ve done still recently, so who knows. I don’t do any of them that I don’t think have a great chance of being ten times. Not that they will be, by the way. But I don’t particularly do any of them that I don’t believe can be ten to twenty times more valuable than they are.

Irina: At what stage of a business’s development do you prefer to invest?

Russ: It depends. I invested in something that was pivoting into a new space and had a ten-year history in one business and had no customers whatsoever in the next business, and that turned to be a great investment.

So, I don’t have a rule. But if it is a pure idea just on paper, it is hard to see how you would do that, only because generally those people have to be very, very, very successful entrepreneurs. It’s not that I am against an idea of doing something when it is just an idea, but it is hard for me to see that that would happen. I did one thing where I invested in something that was an idea on paper, but that was I really knew the entrepreneurs and I really helped them a lot.

Irina: Do you think in terms of total available market?

Russ: Sure. As much as I think this is a great team, I think, this is a great market.

Irina: Do you require the team to have previous business success?

Russ: No. I invested in teams that had almost no previous success, but I thought the people were great.

Irina: What if they are just out of school?

Russ: It is hard for me to see how they would have a great team and great experience if they are just out of school. I am not going to say no, but it’s hard for me to see how it would work out.

Irina: Are there some other characteristics of a founder or founders that could clinch the deal?

Russ: You do certainly know when you see it. Fundamentally, a great engineer who can turn an idea into a very nice looking, well-designed product where you can sit there and imagine being something that’s used by lots of folks. That’s always number one.

Then you tend to have kind of a tireless business developer/seller/marketer. One of the hardest things out there that people don’t spend enough time on is just raising money. Just making sure that entrepreneur can actually raise money is important. If they don’t have that great business developer, it is hard for me to see how that would work out.

Irina: Do you do anything with the businesses you decide not to invest in?

Russ: It depends. There certainly are people whom I helped a ton and ended up not investing in them. For me, it has to be something where I can personally help the company to be more successful. If I don’t feel that I can help them to be more successful, I probably not going to do the investment.

Every once in a while I look at things and I tell them, I think it’s a great idea but I don’t know enough to really help you out. And I don’t really do things where I don’t know enough to help people out.

Irina: What is your sector preference?

Russ: I love things that are around B2B enterprise sales. I love things that are around subscription businesses, online education, and platform-ish type companies. I just don’t know enough about straight e-commerce companies. So, as much as there are plenty successful e-commerce investments, it’s hard for me to see if I would invest in one of those unless it’s being started by a friend.

Irina: What is your preferred type of investment?

Russ: Generally, everybody these days tend to be doing some type of convertible debt.

This segment is part 3 in the series : Seed Capital From Angel Investors: Russ Fradin, The Bay Area
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