Seed Capital From Angel Investors: Michael Gruber, Founder and Managing Director, Cornerstone Angels (Part 1)

By guest authors Irina Patterson and Candice Arnold

This is the thirty-ninth interview in our series on financing for entrepreneurs. I am talking Michael Gruber, founder and managing director of Cornerstone Angels, a Chicago-based group of angels that seeks to provide financial capital and mentorship to early-stage companies in the greater Midwest.

Irina: Hi, Michael. Why don’t you start with your background?

Michael: My background consists of building up early stage companies and an appreciation and passion for technology.

I, early on, got involved in technology and software and wound up working in both Japan, for an interactive game software company, then, later on, in the United States where I built up an entire line of interactive gaming software for conversion from the Japanese markets to the U.S. and European markets.

Later, I was managing one of our licensing activities with large gaming companies, such as Nintendo, Sega, and others. Over time, I continued to work with a lot of early stage companies from both the software side and the Internet side. A lot of them were venture funded, including companies like Intuit, where I ran all their online financial services and launched their first Internet-based products.

I did a lot of stuff on the Internet side relating to financial services; I was part of the senior management team of a company call InsWeb, which was doing similar things in the insurance space.

I spent time in Asia. Then I spent over ten years in Silicon Valley. I’d also worked with a number of founders. I was helping their business development by pitching investors and helping them get interest from a lot of top-tier venture capitalists.

After doing that with a number of different companies, I went back to Chicago, where I got my MBA.

During that time, I started my own consulting and advisory firm, working with early stage companies to help them position themselves for growth, building a product, business development, and showing them how to position themselves for raising capital.

After coming back to Silicon Valley and working with a number of companies, I wound up working with a later stage investment firm where we both looked at technologies that we’d back, fund, and build. We would also look for certain opportunities where we’d basically create startups from scratch.

It was through those efforts that I started getting involved with an angel group, which started at almost the same time that the bubble burst in March 2000, not typically a good time for an investment group to start. I wound up getting involved with that group.

When I moved back to Chicago, in September 2002, I was looking to either start another company or run another company, I didn’t quite find what I wanted. So, I wound up essentially setting up an affiliate of this angel group out here in the Chicago area in the Midwest. I ran that for a number of years.

After doing that for a few years, I spun out and created a new angel investment group called Cornerstone Angels, and that group has been up and running since the end of 2006.

So, with both the predecessor angel group as well as Cornerstone Angels, the group has now made 26 investments in 18 different companies, of which there’s been over $5 million that’s been invested in companies. The companies, in aggregate, raised over $700 million both before our investment and afterward.

At the same time I was doing these angel group activities, I was continuing with my advisory work with early stage companies. My partners and I have helped a lot of companies raise a significant amount of money from individual angels, venture capitalists, private equity, and some public-based large companies.

Our key strategy as value-add is really acting as partners to these companies and allowing them to grow. We have a group called Venture Lab, which works closely with the founders, the management and, sometimes, with their investors to create real value with those companies.

Then the last piece of all my activities and experiences is some of those same partners and I are in the process of launching a brand-new early stage fund focused on improving resource utilization, which, essentially, means looking at the demand and supply of a lot of the key resources we have, which in the end have a lot of renewable themes.

We have a lot of interest in areas relating to energy efficiency, waste, and alternative energy. We’re about to launch this fund within the next month, and it will be supporting a lot of early stage companies, primarily in the Midwest, although we’ll look across the country for opportunities.