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Seed Capital From Angel Investors: Ira Weiss, Hyde Park Angels (Part 1)

Posted on Wednesday, Oct 6th 2010

By guest authors Irina Patterson and Candice Arnold

This is the twenty-ninth interview in our series on financing for entrepreneurs. I am talking to Ira Weiss, who is the faculty director at University of Chicago Booth School of Business (Chicago Booth) and co-manager of Hyde Park Angels,  an angel network that is affiliated with the university and invests in seed and early-stage companies, primarily in the Midwest.

Irina: Hi, Ira. Why don’t you briefly start with your background and how you became an angel?

Ira: I am a professor; I teach at the business school at the University of Chicago, which is called Chicago Booth, and I am an angel investor. I run an angel group here called the Hyde Park Angels, which is an angel group that actually is affiliated with our business school.

My family was very entrepreneurial. My dad ran a chain of shoe stores when I was growing up.

My foray into angel investing is not as typical as most in that I actually went to get a PhD and have a PhD in accounting and business. Then when I took my first academic appointment, which was in New York City at Columbia University; I started working with a colleague there who was a finance professor. He had started doing a few angel investments so I started making a couple angel investments with him and then he and I ran the group that he had called RK Ventures .

I did that with him up until recently, probably for eight to ten years – from 1999 until early this year, 2010 – and made probably 18 investments. We led a group making these angel investments. It was kind of a manager-led angel group. And I started running the current group while I was still helping to run the old group.

So, I was teaching at Columbia and making all these angel investments, which turned out to be more venture capital investments. Then when I moved back here – I grew up in Chicago – I moved back to teach at the school here, and it just so happened that there were some alumni who were starting a group.

So, the alumni asked me to lead the group and we have become an extremely active angel group in the Midwest and we’ve made a lot of very good investments over the years.

Irina: When did the Hyde Park Angels group get started?

Ira: It started in 2007.

Irina: And you came in and started leading the group when?

Ira: Also in 2007, but I didn’t start the group. There were some alumni who actually started the group, and I came in about three or four months later to run the group.

Irina: What is your current title?

Ira: My title is the faculty director. I run the group together with my partner here, Sam Guren. I was the managing director but because I’m faculty at the school, I brought him on, and now he’s the managing director and I’m the faculty director. We run the group together.

Irina: What is the structure of this group?

Ira: We have, I think, 67 members and they all pay an annual membership fee. Whenever we make an investment as a group, we make an investment jointly.

So, there may be 25 or 30 angels who invest in a specific company, but with each investment, we’ll set up a special entity for the investment and make the investment through a special purpose entity.

From the company’s perspective, they only have to deal with whomever the lead angel is from our group who interacts directly with the company. Most of the other angels, unless they’re value add, will not necessarily have a direct relationship with the company.

Some angel groups work the way we do, and with some angel groups, there are individual angels who always invest directly into the company.

The majority of our investments have been through entities that have been set up specifically for those investments. I think that’s one reason why we’ve been able to invest quite a bit with venture capitalists because by investing as a group, we keep the capitalization table at a company pretty clean.

Irina: So, it’s like a fund?

Ira: Yes. The angels make their own decisions about what to invest in, and there are no fees involved. You know, sometimes these entities are set up and people will get fees related to them, but our group is purely a volunteer group.

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