Seed Capital From Angel Investors: Michael Gruber, Founder and Managing Director, Cornerstone Angels (Part 3)

By guest authors Irina Patterson and Candice Arnold

Irina: Will your new Independence Equity fund be making seed investments?

Michael: It will be the first institution round, so typically it will be series A and series B type investments. Depending on how large the fund gets to be down the road, the size of investments will change slightly. When we first launch, the fund – this month, next month – the size of the investments is likely to be between $500,000 and $1 million. When we reach some of the higher thresholds, we may be investing $2.5 million initially in a company with the ability to invest more down the road for future rounds.

Irina: Where do you get your deal flow?

Michael: A lot of it is from me and my partner, Larry [Hayward]; we’ve just been very active in our careers with early stage companies – as I’ve mentioned before – advising companies and helping them out.

We’re very clued in to the entrepreneurial community, so we get a lot from folks who are attached to entrepreneurs. Accountants, lawyers, and we also get a lot of referrals through some of our prior portfolio CEOs. If they’ve gone to a new company or if they learn of other companies, they refer us to them.

I’m also a pretty active speaker at entrepreneur, venture, and angel conferences, so I get a fair amount through that. At Cornerstone Angels, we get 300 to 350 opportunities a year that come through us, both through our being in the community but also through our Web presence.

And then, obviously, it’s other active conversations that we do in an ongoing way, either with university folks or folks within industry that we wind up learning about companies within specific areas that we like.

For Cornerstone, we’ll invest in many areas. We don’t do any life sciences, and no biotech, no biopharma, but outside of that, we look at a lot of things.

For Independence Equity, we’re a lot more focused on the industrial and energy spaces, so sometimes we’re more proactive in looking at deals in those areas.

Irina: What’s the best way for an entrepreneur to reach you?

Michael: Go to cornerstoneangels.com and look at the website and then, obviously, look at the basic criteria for companies and apply. We have a Web-based application for people to submit their information.

For Independence Equity, we’re really not promoting it now, but an entrepreneur could go to independence-equity.com. It links to our other company, Venture Lab, which has our backgrounds and the types of stuff we do. A lot of times people find out about us through that as well.

At Cornerstone, typically, our target is for $100,000 to maybe $500,000 as an investment. Sometimes it’s as little as $20,000, and for some companies in the past, it was close to $1 million that people invested. It all depends upon the people.

Irina: What’s your geographical focus?

Michael: We’ll invest all over the country. Cornerstone is focused on Chicago and the Midwest, although more than half of the investments have been outside the Midwest, on the East Coast and West Coast. We have a number of investments in Boston, Texas, even California. We have them all over . . . Illinois, Wisconsin.

We’re nationwide, and we won’t restrict. We try to be focused here. It’s easier to look at, it’s easier for the folks we’ll see, but we’re not restricted to that. We’re unique in that we’re very open to looking at the best opportunities anywhere. We have lots of contacts and resources. We have relationships with other groups everywhere – Boston, Dallas, Austin . . . up in Canada, Calgary, Alberta; Silicon Valley; L.A.; Seattle, Washington; Boise. We get lots of deals from there, and we also have the opportunity to invest in deals from there as well.

We prefer if they’re around here locally, but if the company’s good enough – and it helps if we get some support or, at least, acknowledgement or a warm referral from someone we know in another part of the country – then we’re willing to look at it.

As an example, we have our investment meeting that’s coming up in two weeks. We have two companies from the Chicagoland area, and we have one company from Southern California. So, it depends. We’re very open to it.

This segment is part 3 in the series : Seed Capital From Angel Investors: Michael Gruber, Founder and Managing Director, Cornerstone Angels
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