Seed Capital From Angel Investors: Nicola Corzine, Band of Angels Acorn Fund (Part 3)

By guest author Irina Patterson

Irina: And what type of experience do you require from the founders?

Nicola: We don’t necessarily expect CEOs, but it is great when they have good domain knowledge, so it is not uncommon or unlikely that we would like to see some VP-level people who are building out their first company idea. We want to help people to become serial entrepreneurs, but we also recognize that in Silicon Valley there is a little bit missing as far the support for that first-time founder. And we’d like to try to bridge that gap with the Acorn Fund.

Irina: So, how many investments have you made in the past twelve months with the Acorn Fund?

Nicola: Four, so far.

Irina: What was an average dollar amount per deal?

Nicola: About $400,000.

Irina: How long does it take for a company to receive funding from your group?

Nicola: We have the ability to move very quickly, but the hurdle is really with the founders’ team. It might take a month or two to get to a good comfort level with the team.

Irina: What is a typical return you seek, and over what period of time?

Nicola: We are looking to make three to five times at a minimum in three years. It is hard to give a pre-money valuation because much of it depends on how much money the startup is looking for. But on average, we are trying to get into a 20%–25% valuation scenario.

Irina: In which stage of business development do you usually invest?

Nicola: We like to mitigate as much as possible some early risks, and nothing is more likely to kill a deal than if you have not taken it out to customers from the get-go for their feedback and their interpretation and understanding of why they would or would not purchase this product. And I would add that the capital the company is looking to raise really should be built more upon milestones than on general admin-type expenses. We are not really looking to fund salaries or team build-out unless that build-out has a direct implication on their success and again getting acquired within the time frame. The Acorn Fund is for a bootstrapped startup that has looked at every other opportunity and come to the conclusion that the best viable option for them at this time is to take a little bit of capital to build out the business.

Irina: What should be the total available market (TAM) for the company’s product or service?

Nicola: We worry much less about that. Certainly, we are not going to look at deals that don’t have a TAM of about $100 million or greater. But we do believe that it is possible to build niche opportunities that open doors to larger companies to get engaged in a market that is desirable to them. You can imagine the opportunities in the medical device space or even in the consumer Internet space, where they are really trying to get a specific audience in mind. So if you are building out a product that has direct relevance to a highly targeted group, whether it be young moms or sports enthusiasts, this suddenly becomes a very lucrative acquisition opportunity for larger companies to get excited about. We do encourage entrepreneurs to look for niche products; we think that many of our fellow angel groups and early-stage VCs just don’t have the bandwidth to work with. So, we think that there is white space for us to be able to come in and make a difference in that sector.

This segment is part 3 in the series : Seed Capital From Angel Investors: Nicola Corzine, Band of Angels Acorn Fund
1 2 3 4 5