Seed Capital From Angel Investors: Eric Pozzo, Fund Manager, Oregon Angel Fund (Part 8)

By guest authors Irina Patterson and Candice Arnold

Irina: Why do you think you were not successful at investing in people right out of school? What did you learn from that experience?

Eric: There are a lot of mistakes one makes in one’s youth, and no matter what you suggest to these folks as an older person, they’re destined to make a lot of the same mistakes.

In common lessons, software projects always slip. That’s just a given, and you get individuals right out of school and they say, “No, this isn’t going to slip.”

So, cash is king, and an expense may look great when you have $5,000 in the bank, [then] you start to wonder, Why the heck did I spend that money back then because I don’t have any money to spend now. It’s just a lot of common management mistakes.

Things like learning how to work with individuals, motivate individuals. There are some things that even just a few years out of school can help you with.

I’m not saying that we wouldn’t look at someone out of school. We, quite frankly, haven’t had any real business plans come across our desks from people right out of school.

First of all, as I mentioned, we’re really not the very first money into these companies. It usually means that they’ve had some ability to raise $50,000, $100,000, or $150,000 from somewhere. Typically, unless you’re from a wealthy family, that doesn’t come the day you graduate from college.

Irina: What do you think about business plan competitions that are run in colleges?

Eric: I think they’re just great. As a matter of fact, one of the companies I funded was a winner. I helped them on the business plan competition, and they were winners in it. I just haven’t been a winner in the investment. The entrepreneur still hasn’t given up. He’s still plugging away at the idea.

I’ve mentored at the local University of Portland here for ten years now. I’m very supportive of the business plan competitions of universities, just realizing that most of these companies aren’t going to become winners right out of school.

I have seen businesses formed right out of school, and I’ve actually seen one go on to a successful exit, but all the others have either struggled or failed.

Irina: Do you have a sector preference?

Eric: As I said, we look at everything. An investment we’re working to close now, we’ve been voted to invest and I’m just working now on the closing documents as a wave energy company, an 80-foot, tens and tens of tons buoy that has a turbine in it that harvests wave energy. I mentioned heart devices, T-shirt companies, lots of software platforms. We’re pretty agnostic. I would say what we don’t invest in is a single restaurant. If it was going to be a restaurant chain, a franchise, and they’d already had some proven traction out there, we might look at them. Games, you know, someone’s going to produce a new hit game or a movie. Those are investments that angel groups typically shy away from, we would shy away from them. A number of us are out of Intel, so semiconductors kind of scare us as an angel group, not that we wouldn’t look at them.

We wouldn’t invest in a retail store unless it was going to franchise, but we do invest in retail products or services that are used to go to retail. There’s one company that does virtual gift cards so that someone can just put her Visa card number in on a website and the gift card shows up on her cell phone or a bar coded printout. That’s an application that’s aimed at retail but it’s not retail.

Irina: What does the wave energy company do?

Eric: It’s called Columbia Power Technologies. They’ve had a fair amount of private investment, but they’ve also had a lot of grant funding from the Navy and the Department of Energy.

They have a one-seventh scale prototype that’s going to be plopping into the Puget Sound in November. That’s a big fjord off of Washington state, just north of here.

They hope that within a year and a half they’ll have a production ready prototype out that will generate half a megawatt of power. It’s going to require a lot more investment than we’re putting in over the course of another couple of rounds.

This segment is part 8 in the series : Seed Capital From Angel Investors: Eric Pozzo, Fund Manager, Oregon Angel Fund
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