Seed Capital From Angel Investors: Saad Khan, Partner, CMEA Capital (Part 4)

By guest authors Irina Patterson and Candice Arnold

Saad: Almost all of the investments I have made have been before the companies had ideas for what they wanted to do. Again, it comes back to the same point. Exceptional people figure out the right markets to go after and the right technologies to build, and they know how to shift and adapt to where the opportunity is.

I’ll give you an example: I’m an investor in a company called Pixazza. When we actually first invested in the company, it was a group of a few engineers.

It actually had a different name; it was called Bemuz. The entrepreneurs had a number of different ideas about what they thought they might want to do, but didn’t know [for sure].

The first iteration of the company ended up being – and we wrote a check before this – something related to a social music product.

The second iteration of the company ended up being an interesting annotation platform for user-generated video.

The third iteration went in a different direction. Finally, I think it was the fourth iteration, they came to the conclusion that, in fact, the real opportunity was to help monetize images on the Web, and they built a platform to do that.

What’s interesting about them is we went in eyes wide open, knowing that this was just going to be a lab to try out cool stuff.

The reason we were excited was not because of a specific pitch or a specific idea, it was only because we knew that these people were exceptional entrepreneurs and engineers.

In their case, they decided on this new idea of monetizing images on the Web. They, then, attracted other talent, they brought on a CEO who’s an exceptional guy himself.

They ended up raising a series A with other folks, including people like Google Ventures. When we made the claim that, “We’re building AdSense for images in a platform for publishers to be able to monetize their own images in an interesting way,” we certainly had a lot of credibility.

It’s interesting, it wasn’t a linear process to get there. You fast forward to today and the company is an Alexa 50 top sites property in terms of the traffic it receives.

They’ve probably tagged on the order of seven billion image views. They’re generating revenue.  They’ve raised several rounds of funding and are off to the races.

That’s not what we saw in the beginning. What we saw in the beginning was a group of exceptional people, and that’s what we invested in.

Irina: In the past 12 months, how many investments have you made?

Saad: A total – the investments that I’ve personally made – probably about five. The last few months, we’ve probably done three.

Irina: And how many investments does CMEA have in its portfolio overall?

Saad: Between 20 and 25 investments.

Irina: What is the average dollar amount per investment?

Saad: It depends. From a seed perspective, they start off with about $250,000 to $500,000 checks.

The difference for us is we’re not just angel investors. We have a $400 million fund, so we have the ability to put significantly more capital into the companies that we invest in.

So, $5 million to $15 million is certainly par for the course for us, in terms of what we can and what we like to put into companies.

What’s interesting about the Internet space is that a lot of these companies don’t need a lot of cash to take off.

I think for some companies, for instance, the seed investment may be all they ever need to become profitable or to reach the milestones that are interesting for the value and direction of the company.

We look at it from the perspective not of how much money do we want to put to work in these companies, but how much money do the companies need for what they’re doing?

That means, if a few hundred thousand dollars is all they need, then that’s certainly something we do. But when things are going well and the company needs more growth capital, one of the values of having a bigger fund behind you is that you have access to that just through the people who are around the table.

This segment is part 4 in the series : Seed Capital From Angel Investors: Saad Khan, Partner, CMEA Capital
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