Seed Capital From Angel Investors: Brian Garrett, Co-Founder And Managing Director, Crosscut Ventures (Part 4)

By guest authors Irina Patterson and Candice Arnold

Irina: How does Open Angel Forum work?

Brian: Jason Calacanis put together a new platform for entrepreneurs to pitch a group of angels without paying to get in front of the them. He was upset by some of the pay-to-present angel networks that had popped up.

So, he started Open Angel Forum. They’ve now launched in several cities across the U.S. and internationally. The one that I most recently attended had five companies pitching to more than 40 local angels and seed investors here in Los Angeles.

It’s a very efficient way to get your story in front of a good group of active angel investors looking for new opportunities to put money to work.

Irina: What happens after entrepreneurs present?

Brian: Generally, the companies leave the room and the group discusses the opportunities. If somebody’s already an investor in the deal, she explains why she likes it and what she’s excited about. Then each individual has the opportunity to follow up with the entrepreneurs if it’s an opportunity he’s excited about.

Irina: What was your experience with AngelList?

Brian: So far, the group of people who are listed and looking at deals are a lot of people whom I’ve known for years. I think it’s a very good way to see a lot of deals and get a better sense of what’s being funded in different geographies.

I’m always curious to see things listed up there that are Los Angeles based, making sure that I’m on top of everything that’s coming through this market.

I think they’ve done a great job. It’s a valuable resource for all of us. I think they’ve had a great deal of success getting companies funded.

Irina: Have you met with anybody from Los Angeles?

Brian: Yeah. I’ve taken one or two meetings off things I’ve seen on AngelList. I haven’t funded anything, yet. I think, again, most of our deal flow comes from trusted sources, so if you’re an entrepreneur and you’re thinking about listing on AngelList, more than likely you know someone who knows Crosscut, and you can find a way to get to us without AngelList.

But I’m intrigued to actually use AngelList for something that we have committed to invest in, and then seeing if we can fill out syndicates in a more efficient manner by leveraging their platform.

Irina: I see. So, when you need additional funds, do you advise entrepreneurs to go to AngelList, or do you do it yourself for them?

Brian: We definitely have been pointing entrepreneurs in that direction but, of course, you need a social referral to get AngelList to list the company. I have yet to do that, but I’m intrigued by its being an easy way to communicate to a lot of active investors who may see something in a particular opportunity where their background is a good fit. I think it’s a good way to curate a strategic group of individual investors around an idea.

Irina: Do you know how many companies received funding from investors through AngelList?

Brian: I don’t know. I think they’re starting to tout some of their success metrics. I just haven’t been tracking it directly.

Irina: When you’re debating whether to fund a company, what factors carry the most weight?

Brian: As I already mentioned, it’s 80% the individuals who we’re backing. Do they have a previous track record of success? Do they have domain expertise in the area that they’re now trying to build this new business? Do they have any strategic advisors and people who can validate the problem they’re trying to solve? Those are the primary pieces.

Then you layer on, obviously, market size and hurdles the entrepreneurs may face in finding their way to scale, the efficiency of the business model that they’re pursuing.

We’ve been pretty focused on transactional businesses as of late. A good part of our early portfolio was ad tech or ad-centric solutions. We’ve shifted now to more monetizing the consumer directly or monetizing the small business for the service that’s being provided.

It’s mostly the quality of the entrepreneurs, the potential market opportunity that they’re pursuing, their traction to date, and how capital efficient they’ve been at hitting their first milestones.

One of the big themes of super angel or micro cap funds today is finding models that don’t require $5 million or $10 million of total financing, that they can hit total value creation milestones with much smaller amounts.

This segment is part 4 in the series : Seed Capital From Angel Investors: Brian Garrett, Co-Founder And Managing Director, Crosscut Ventures
1 2 3 4 5 6 7 8 9 10 11