Seed Capital From Angel Investors: Eric Pozzo, Fund Manager, Oregon Angel Fund (Part 4)

By guest authors Irina Patterson and Candice Arnold

Irina: What is your educational background?

Eric: I have a bachelor’s of science from Brown University. I sold scientific instrumentation for number of years out of college, and then I went back to Dartmouth for an MBA. I graduated in 1980 and came out to work for Intel as a financial analyst.

I started at a company in 1982 when I was – I don’t know – 29 years old and ran that for seven or eight years. We enjoyed a modest exit, and I’ve just been involved in helping to manage or start little companies ever since. And moved over to this side of the table about three years ago.

Irina: What was the name of the company you started?

Eric: The name of the company was Microcosm.

Irina: What was your role there?

Eric: I ran the company as president but what the company did was . . .  at the time, instrumentation was hosted on minicomputers, and Intel had a line of instrumentation for debugging microprocessor designs called in-circuit emulators. They were all hosted on $25,000 computers, and Intel knew it was a great idea to get rid of the $25,000 computers and move things over to personal computers, but they didn’t want to kill $100 million business.

So, some engineers and I went off and started a company to start pioneering re-hosting instrumentation on personal computers versus minicomputers.

Irina: What is the instrumentation?

Eric: The instrumentation was in-circuit emulation, and it was a way of debugging a microprocessor based design for someone who’s designing PC or phone or anything that had a microprocessor in it, there were all these very specific tools to debug the design. You know, to find any bugs in the software or the hardware design. And those were the types of instruments that Hewlett-Packard sold, Techtronics, Intel, companies like that.

So, we designed our own instrumentation from the ground up, but it was designed to communicate with personal computers that cost $5,000 versus these minicomputers, which cost $25,000.

Irina: I see. So, how many companies did Oregon Angel Fund invested in the last 12 months?

Eric: Approximately five.

Irina: How many companies do you have in your portfolio right now?

Eric: We started in 2007. It’s an annual renewing fund, so we have 15 unique companies in the portfolio. Some of our investors have been with us for four years, so they have 15 companies in their portfolio. This is my third year, so I have 11 companies in my portfolio now and hope to have 13 or 14 by the end of the year.

The idea is, in angel investing, placing small bets in a diversified way is one of the keys to success. A lot of angels can’t afford to place lots and lots of $25,000 out in different companies. This is a way to get a lot of diversification for a $25,000 investment.

Irina: So, in essence, each investor puts about $5,000 in each company?

Eric: Correct. That’s the right ballpark figure. If the investment is $400,000, they may have less than $5,000.  If it’s $750,000, they may end up with $6,000 in that company. But, in essence, they end up with $4,000 to $6,000 in five companies a year.

The lowest we’ve done is $405,000 and the highest we’ve done is $750,000.

Irina: How many angels does your group have right now?

Eric: This last year we had 64 angels. And we don’t get matching funding from the state of Oregon until we hit 60 investors. So, with 60 investors we have a match from the state so we’re always somewhere between 60 and 64.

The first year we didn’t have a match from the state. It was a much smaller fund. The other thing I might add is a number of our angels do do side-by-side investing. So, they look at this as a great way to get involved with a lot of due diligence, get a nice diversified portfolio. But when they see a company they really like, they’ll put more money in as side-by-side investor.

Irina: They write personal checks?

Eric: Right, they write the personal check, but they usually ride along on our documents and it may be the same closing. One of the things in our due diligence is we try to determine how much money the company needs to get to a major milestone. It’s usually a bit more than we’re going to be putting in, so if we’re putting $500,000 to $750,000, chances are they may need $1 million to $1.5 million. Sometimes we’ll make that the minimum close and sometimes we’ll close before that, but we want to leave the round open until they achieve that.

This segment is part 4 in the series : Seed Capital From Angel Investors: Eric Pozzo, Fund Manager, Oregon Angel Fund
1 2 3 4 5 6 7 8 9 10 11 12