Seed Capital From Angel Investors: Michael Gruber, Founder and Managing Director, Cornerstone Angels (Part 2)

By guest authors Irina Patterson and Candice Arnold

Irina: Could you give us a timeline of your career up to this point?

Michael: I graduated from the University of Pennsylvania in 1990. I studied international relations and economics. It was basically an East Asian studies within the international relations. I studied Japanese, and I spoke Japanese pretty fluently. Later on, I studied Mandarin as well.

At the end of 1990 I moved to Asia. At first, after graduating from college, I was in New York with another Japanese company, a Japanese trading company, which I managed mortgage loan portfolios for until, I believe, the end of 1990 when I went to Japan. I was in Japan until the middle of 1991.

Then I went to the San Francisco area, Burlingame, where I worked for the same company. It’s called Koei. I worked with them in Japan and in California. Then from 1994 to 1996, I was back in Chicago getting my MBA, and I was doing some advisory work, when I started my own firm with early stage companies.

From 1996 to 2002, when I was out in San Francisco again, I worked with a variety of companies and founders to build up their businesses, as well as with companies like Intuit, InsWeb, and others.

Irina: When did you start angel investing?

Michael: Initial angel investments were back in 1996, so more than 14 years ago. I was on my own when I got involved with the angel group back in 2000, which was the group, Keiretsu Forum That’s the group out in San Francisco, and I was one of the founding members through my investment group. Ever since 2000, I’ve been involved in a more formalized sense, whereas a number of years before, I was involved in an individual sense.

Irina: When did you start Cornerstone Angels?

Michael: From 2000 to 2002, I was involved with Keiretsu, I was out West, and when I came out to Chicago, I was starting to develop Keiretsu in Chicago. I formally launched it at the end of 2003 to 2004. I ran that until 2006. I founded Cornerstone Angels, which toward the end of 2006.

Irina: What is the structure of your group?

Michael: Cornerstone Angels is an angel group. It’s a member-based organization composed of high net worth individuals and other folks from either family offices or funds, who get involved in looking at and reviewing companies. People invest on a deal-by-deal basis, although we do have a legal vehicle through which we can aggregate funds to invest. We don’t have a committed pool of capital for the group, but we have the ability both to allow folks to invest individually in a company as well as for the group to collectively aggregate dollars and invest in a company.

Many times people invest directly into a company, so there’s no LLC, necessarily. That’s one way. The other way is aggregating capital and investing, for which we have a separate vehicle. We have a more, I would say, advanced vehicle to do that. We have what’s called a series LLC, which is basically the master fund vehicle. Each separate investment would be a separate series within that, which is essentially an LLC for each company. We haven’t used it yet, but it allows us to bring together dollars and invest directly in a company.

Irina: How many members are in your group?

Michael: We have folks who are both full-on members and other folks who serve fully or with a group that make investments over time. This way, we have anywhere from 30 to 60 people at our meetings. We have a core group of 15 members who are most active, but we have a group of folks who are affiliated with us in a variety of ways and who may invest with us.

Irina: Did you say you were fundraising for a new fund?

Michael: That’s a totally separate entity. That’s called Independence Equity, which is a separate fund, a committed fund, more of a traditional venture fund for which we’re raising capital both from individuals and larger institutional sources. It’s targeted at being a $35 million fund, but it may get to $75 million. Within the next month, we’ll be having our first official close of $10 million out of which we’ll start to make investments.

Cornerstone will have a partnership role with the fund, just given that there may be opportunities that come through Cornerstone that may be appropriate for the fund. Given that we have a more specific niche that we’re going at, it may allow members to get some benefit of the fund investing in it, and then people will be able to invest almost like a sidecar, side investment basis. But it’s separate from Cornerstone. There’s a relationship there, but it’s not affiliated with Cornerstone.

This segment is part 2 in the series : Seed Capital From Angel Investors: Michael Gruber, Founder and Managing Director, Cornerstone Angels
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