Seed Capital From Angel Investors: Nicola Corzine, Band of Angels Acorn Fund (Part 2)

By guest author Irina Patterson

Irina: What are your current sources of deal flow?

Nicola: I should say that when the Acorn Fund was created, we recognized that a great deal of education would need to be done for our friends and partners. The reason for that is so many entrepreneurs are used to having to pitch based on the fact they were told that they must have a billion-dollar market opportunity. But we believe that there are tremendous opportunities for products and features that may have only a $50 million or a $100 million real market opportunity, that a company might be very successful [in such a market] and that it might be very right for a small fund like ours to participate.

So, we are not only focusing on those billion-dollar opportunities, but we are also really interested in getting to know companies that clearly understand their market opportunity and want to get out with an acquisition in a few years.

We are spending a lot of time talking to entrepreneurial organizations in Silicon Valley, the law firms and banks that obviously get entrepreneurs early. As a result, we see about ten to twelve companies a month that are potential candidates for the Acorn Fund. And we’d like to increase that number if we can. Now, the deal flow we are seeing inside the Band of Angels is about sixty, but obviously only a subset of those are going to be appropriate for the Acorn Fund.

So far, our best source for deals has been our own members. We have over 120 active angel investors who are a part of the Band of Angels group at large, so obviously they know well what kind of companies we are looking for because they helped to put this thesis together and understand why the Acorn Fund was created. They have been very good at keeping their eyes and ears open to finding these types of opportunities.

Irina: Once there is a lead, what is the next step?

Nicola: Once we get a promising startup, we need some kind of an executive summary to get an early assessment of the deal. That will be looked at by me, Ian Sobieski, and other members of the Acorn Fund who have the right domain knowledge. And from that, Ian or I will have a meeting with the company to get to know them a little bit. [This is to see] how credible the entrepreneur is to us and how much we feel that they are truly taken with the strategy of not building a big business but building a business with a specific means to an end. And from there we will usually invite them to present to larger group, sometimes at our monthly dinner meetings and sometimes to a subset of members, depending on what the actual deal looks like and how we feel the company is best going to be served.

The investment size inside the Band of Angels group is usually up to $1 million. But the investment size inside of the Acorn Fund is more likely to be up to $300,000–$500,000. It all depends on how much the company really needs in order to be successful, because we don’t want them to be in a situation where they run out of money or aren’t able to achieve the milestones they need to simply because of lack of funds.

We are looking for really clear go-to-market strategy; we want to understand how comfortable they are in their own marketplace and why it is that they’ve got something unique that is going to be attractive to potential acquirers.

This segment is part 2 in the series : Seed Capital From Angel Investors: Nicola Corzine, Band of Angels Acorn Fund
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