The Current State of Angel Investing for Investors & Startups

COMPLETE TRANSCRIPT:

Sandy:

We started the Westchester angels about four years ago. We started very humbly. We started in our friends. I’m sorry for that. I don’t know how to shut that off. We started in our friend Rob Kissner’s business Digital Arts Experience complete with red, green and yellow chairs and pictures of super Mario on the wall. And then we graduated to the KOI shared workspace. And, and here we are today we’re the new with the new angel group in the Tristate area. But as we get into the conversation, we do lead a lot of initiatives that brings a lot of angel groups together. So that’s the short of it. More, more information is on LinkedIn profile if you need any more.

Jonathan:

That’s great. So, and just decided to be the Mario stickers on the walls weren’t your idea, right?

Sandy:

No, Rob had a business that caters to after school activities for middle school, high school kids, three D printing. And so we started very humbly.

Jonathan:

Yeah. Yeah. All good, good stuff. That’s great. So that’s, that’s a little bit about the about the Westchester angels. And, and I know you guys have been been just a solid group in the community. We’ve had we’ve had meetings at our space for, for a couple of years now at this point with with you guys. Great. Great group of guys. Always have a great meeting. And then there’s always the invite for for cocktails and nachos downstairs after

Sandy:

It’s part of the bar. Yeah, it is said, you know while you’re, while you’re discussing that, you know, every angel group in the Tristate area has her own personality and temperament and we’ll get into the New York area angel Alliance. But the way we run our meetings, we’re serious about investing, but we like to have fun. So all of our meetings wind up back before the virus at the Hudson grill bar. And we do that for a reason. It allows investors to talk to startups in a very relaxed atmosphere. We allow service providers to come and talk. So it’s, it’s a, it’s a really part of our personality.

Jonathan:

That’s great. That’s very cool. So, yeah, so that’s the Westchester angels. And then I know there’s the the New York area angel Alliance. I know you’re the founder and what is it? Self-Proclaimed chief bottle washer,

Sandy:

Right. Well, you know a little bit about that. Well, I have the luxury and privilege to be able to be the leader of the Westchester angels full time. I’m not compensated my compensation or hugs, handshakes and thank yous. And I visited all the angel groups in New York city from the New York angels, the, the Harvard business school alumni, angels, the angels. The golden seeds is probably about it. 1520 angel groups in New York city. And I had an idea to bring all the leaders together because we all are in the same space. So I had a, a, a very large summit meeting and all the age of leaders got together. And what we do now is we have monthly deal flow calls every month to share deal flow. We’ve had a couple of emergency calls about how angel groups are what angel groups are doing in this current virus space.

Sandy:

So if you’re an investor or if you’re a startup, you can go to the New York area, angel alliance.com website. It has all a listing of all the angel groups in the area. You could click on those links. So if you’re an investor and you want to get involved in angel groups, there’s a, there’s an angel group for you. And if you’re a startup and you’re looking to get funded this is a one stop shop for you stop shop for you to find out which angel groups you want to apply to.

Jonathan:

Oh, that’s great. That’s very cool. And so in terms of that, I mean, you’re, you’ve obviously been in touch with a lot of a lot of angel groups and everyone seems to be more or less going through the same things. Right now we’re all experiencing the same ups and downs with the landscapes. So, I mean, what’s, what’s going on with the other groups in terms of like activity and meetings. Are meetings still being held? Are they like this one?

Sandy:

So I’ve been on conference calls with the angel capital association, which is the nonprofit umbrella over most all angel groups in the country. And I’ve had a couple of conference calls with local area angel groups to find out how they’re proceeding or not in this current environment. And the overall majority of angel groups are going forward with a virtual conference with virtual investor meetings. I, and one of the things that the New York area angel groups are doing the first thing every angel group did in this environment outside of having virtual meetings and maybe one or two of postpone their meetings. But all of us have reached out to our portfolio companies to see how we can best help startups that we’ve already invested in. And for the, for the Westchester angels, we’re the new guys on the block. We don’t have the largest portfolio so far.

Sandy:

We’ve invested close to a million dollars in our history. But you talked about the New York angels, the golden seeds, the 37 angels. Those angel groups have hunt dozens, hundreds of angel group of startups in their portfolio. That’s a full time job, reaching out to all of the startups to see how we can best help and what the Westchester angels has done over and above what we, what we’re doing to reach out to our portfolio companies is, I’m intimately involved. Westchester County. I actually had lunch with County executive Latimer a couple of months ago before the virus hit. I know a the heads of the economic development and we’ve gathered our members to help volunteer to help small business owners in our community. And as soon as the SBA landscape, which is a mess right now, gets sorted out we’re ready to help small business owners rebuild, rebuild their business. Cause our members have a lot of expertise in a lot of different industries and it just makes sense to pool our, our, our collective experiences together to help.

Jonathan:

Yeah, absolutely. Yeah. And that’s, that’s important too. And I think what’s, what’s interesting to see come out of this is, I mean, I guess right now, what are the, what are the areas or startups or industries if you will, that are, that are hit the hardest with this and what do you think they, they need out of this right now? You know, you know,

Sandy:

Warren buffet is sitting back and his, his, his, his, his, he’s probably drooling cause this is where he makes his investments. He doesn’t really invest when the market’s are high. You know, the markets have come up a little bit. Ah, hopefully they’re going to stay stable. But a lot of angel investors, unless, unless you have some challenges with your health, heaven forbid or your family members have challenges. Most angel investors are looking at this as an opportunity and certainly the landscape is different. There are certain industries that are going to do well and are doing well and there’s certain industries that are going to have challenges. You know, e-sports is booming and we’re having a one of an e-sports company pitch at our next investor meeting. That’s not an angel investment. It’s a, it’s an ETF that was put on the New York stock exchange called nerd. And I know the founders, two young CFAs. So in these different times, we’re having a little different investment opportunity for our members. So, you know, alcohol is thriving. Cannabis is thriving. Cause in California, cannabis is a compassionate use industry far be it for me to, to argue with that conversation. You know, anything virtual is doing well as compared to industries that are going to be challenged. Retail, travel musicians or struggling and addic you’re on the line. You would know better than anybody about the challenges musicians are having. You know,

Speaker 3:

I believe it’s the entire music industry has been completely turned upside down there. There probably won’t be any live concerts of any consequence until at least next year. And, and big of big festivals maybe next summer.

Jonathan:

Oh yeah. It’s rolling in the festival season too. So that’s,

Sandy:

I was actually going to be going into a recording studio. We have a little band, John, we’ve played together. I was actually Dick, I was going to go into a recording studio. My friend Lincoln LEAFers a recording studio and GE Smith is out of business and Larry Campbell’s out of business where I’m going to record with them. That would be an unbelievable situation, but we’ve postponed that. So a little diversion here, but it just goes to show that there are industries that are in favor and there that are industries that are going to be challenged even as we hopefully start to recover here and hence the opportunities. [inaudible]

Jonathan:

That’s true. That’s a good point for sure. And I guess the startups that you guys have have worked with in the past, and then when you’re reaching out to them, is there any sort of common common request for help or is it kind of like across the board or are you just starting to reach out to them?

Sandy:

Well, we’ve reached out to all of our companies and you know, angel investing is, we invest in good teams and good leadership. We’d rather invest in a good team with a good idea than a great idea and a marginal team. And right now, leadership for startups is really critical. If investments are going to be made, they’re going to be made and industries that are in favor right now, but more importantly with teams that really get it. You know, unfortunately if you’re a college kid coming out of college, you don’t have a lot of business experience and, and you have some idea for an app, those are going to be challenging angel investments. If you’re a seasoned professional or you have experience and you have a really unique idea that can disrupt an industries, you know, the cream is going to rise to the top here.

Sandy:

And one of the other things that we’re, we’ve seen before the virus is a crazy valuations. And you know, valuations is one of the key metrics of how we invest, whether it’s an equity position or if it’s a convertible note. You know, we’ve seen valuations, a company’s done $100,000 with a convertible note with a cap of $10 million. You know, that’s a challenging investment. So in this atmosphere, I would expect to see valuations come down to more reasonable levels, especially for startups that are just getting going. If the bit pre, you know, they got bait or whatever. If you have revenue and your revenue company and you have a half a million dollars, $1 million in revenue, the multiples of those revenue and valuation should be a lot more realistic. So that might be a silver lining. That valuation should be a little more reasonable going forward. Cause you know investments in businesses is going to get tighter. You know, a lot of monies get tied up, you know, if you’re going to banks and the, the capital requirements are, are, are much more difficult now than they’ve ever been.

Jonathan:

Yeah, absolutely. Well that’s, that’s a good point. So you think there’s almost going to be some sort of like leveling a little bit? I mean, making numbers a little more realistic I guess in the long run though, that’s going to give, you know, the, the, the startups that kind of come out of this a little bit more of a of a chance, right. Cause they’re not going to be suffering on these gigantic evaluations out of the gate.

Sandy:

Yeah. And a lot of startups, listen, if you’re in a poor financial where a lot of startups is just not gonna make it, you know, unfortunately, you know, a lot of startups, they go a hand to hand anyway. This is going to put a challenge to start ups. I mean, everybody’s applying for government loans and I’m on top of that whole thing through the Westchester economic division and the SBA loan landscape, which I’m not really qualified to talk about the specifics. It’s a mess. It’s gonna take time for startups to get money and a lot of startups to just not going to make it unfortunately if they’re not properly funded at this point.

Jonathan:

Yeah, yeah. That’s a, that’s a tough one, right? I mean, that’s, I think this, this entire period and the business landscape and what it is, is it’s just shown us that, that it’s just one of these scenarios where I don’t think everything is, is cake and butterflies, you know, and we have to figure out how to, how to get through it and what’s the best plan of action is there. But I mean, I guess on that note, any, any optimistic, you know, notes from, from your side of things? There’s stuff you’re seeing out there.

Sandy:

You know, w we we’d like to see, look at the glasses half full rather than half empty. We’re optimistic and we’re excited about the opportunities that it can present themselves to invest in startups going forward. We’re certainly, we’ll be looking at things with a little sharper eye, more emphasis on the leadership abilities, but there’s going to be opportunities out there and all the angel groups in the Tristate area are focused on new opportunities. I just had a conference call with all the leaders Monday afternoon. So this is a timely call cause I’m educated now on what’s going on with all the angel groups in the area. Everybody’s going forward. Virtually everybody’s going to go forward with a little sharper eye to industries and leadership and, and, and, and valuations. But there are going to be opportunities then that’s why the Westchester angels, our next investor meeting is going to be on April 23rd. It’s going to be virtual. We have two portfolio companies that are pitching. We have another company that has an interesting no downside risk to sign up a term sheet. And then we have my friends at nerd not a typical angel investment, but it’s a an East sports investment with a publicly traded company on New York stock exchange. And you know, I think very, very highly of the all four startups that are pitching think very highly of the leadership and that’s critical right now.

Jonathan:

Yeah, that makes sense. So not just looking at the product, but the team behind it as well as the leadership. That’s a, it’s understandable cause if anything survives this, it’s going to be under, under good leadership. Without a doubt. How did they use, how did these startups come to come to find you? You know, in the midst of everything that’s going on?

Sandy:

Well, that hasn’t changed. There’s one platform that brings angel investors together with startups. It’s called gust G U S t.com. That’s where startups make their applications. They put their slide deck, their financials, and then once they put their application on the Gus platform, they could probably apply to the majority of angel groups across the country cause that platform comes free with your membership. In the angel capital association, there are a lot of angel groups that use other platforms. The second most popular I would think is the pro Cedar platform. That was created by the golden seeds. It has a little more bells and whistles. A lot of angel groups had their own a platform like the arc view fund, which I’m a member of and I’m an, I’m a director of a, that’s the largest cannabis investing fund in the country. They have their own platform and you know, there’s a distinction with angel groups between funds and traditional angel groups where do do due diligence is done in groups and individuals write their own checks out funds.

Sandy:

Right now we’re fully funded. They have cash in the bank as compared to you know, individuals write in their own checks out. But the Gus platform is critical and I advise startups every day to agonize over that platform in their application. And another thing that Westchester angels are, are going to be doing next week. As soon as we get everything set up, we’re reaching out to the probably a hundred or so applicants on the gust platform with free mentorship on their slide deck and their application on gust. And we have a, we have an intern that’s gathered all their email addresses. So we’re going to be setting up, I think on calendary Calendly, I can’t never pronounce that platform, but we’re going to be providing a half hour free, no strings attached. A mentorship for startups just to help give back and make sure that the startups application and their pitch deck is the best it can be. So if there are startups on the line, it’s only gonna be for startups that have applications on the gust platform. And I’d be willing to have a conversation with any startup to help at that point.

Jonathan:

Yeah, that’s great. Makes sense. Well, and then I guess for those startups, and it sounds like this is one of the services they’re offering, but you know, how do you speak to these startups to give them advice in terms of how to, how to maybe form some sort of pivot, you know, in the, in the current landscape if they’re going down one route and you guys see another way. I mean, have you had those, those conversations or is it,

Sandy:

Yeah, well angel investors traditionally are not bashful. We are definitely not bashful. And that’s, and John, that goes right back to the leadership conversation we learned a long time ago that you can’t help people that don’t want help. We’ve had that 23 year olds that have never had a paycheck before in their life. They’ve seemed to have accumulated all the business knowledge on the planet. We cannot help people that don’t want that kind of help. But we’re here to help and that’s part of the angel investing space. Even non virus is we, we invest. And where were the first guys on the ladder after friends and family with had the riskiest investment profile because these are very young companies, but not only do we provide investment dollars, but we provide help wherever we can get wherever we can. We like to say that my partner Michael wiser came over with a good you know, a statement. We provide good Rolodex for people that actually remember what Rolodex is, are w we’re here to help. We want to see startups succeed whether we invest or not.

Jonathan:

Yeah, yeah. Well, and then I think that’s the, I think that’s the right mentality for sure. Yeah. So getting a couple of questions on both of the Chatham and my phone at the same time. So here’s one. So what angels focus on as an investment changed? Are you looking for different structures and how sort of planned to actually scale, you know, once they’ve initiated their themselves and their business actions?

Sandy:

Well, if you’re talking about technical structure at this point in time, if you’re a C Corp, that’s a more appealing structure than an LLC because a C Corp comes from the board of directors. And if you have a really good knowledgeable board of directors, that’s critical in this time because usually the board of directors, usually the start up will have a seat. Usually it’s an odd number three, five or seven. But a board of directors, we just got off a conference call with Oculus, which is the Pearl in the Westchester angels oyster so far. And they have a really terrific board of directors that’s really helping guide them in these difficult times. So so far as technical stuff, we’d like to see C corpse right now with a really mature an experienced board of directors to help the startups guide themselves in these challenging times.

Jonathan:

Got it, got it. And here’s another one. This one’s a little more specific, but I’m sure you have recommendations on med tech, med tech investors,

Sandy:

Med tech. Yeah. we’re seeing we’ve seen a lot of platforms that bring physicians together with patients in a lot of different walks of life from a weight loss to tell a portal for medicine. Obviously those startups if they have traction, they should be doing very, very well. Right now. Doctor’s offices are overwhelmed. A lot of people don’t want to do, let’s I have my monthly checkup in may. I’m not very excited to go to any doctor’s office at this point cause you know, you might have some sick patients there. So the telemedicine con industry is one of those industries that that could be very interesting going forward. But that’s a crowded space. It was a crowded space beforehand. You know, Westchester County has the bio incubator right outside and Valhalla, which is in between Regeneron and New York medical center. There’s a lot of really interesting startups there that have telemedicine platforms. So those kinds of applications would certainly be something angel investors would like to, would, would visit going forward.

Jonathan:

Yeah. Gotcha, gotcha. Makes sense. And here’s another one, kind of in the same vein, but a a little more specific. So arts and angel investment, obviously we talked about musicians and how they’re so hard hit and our music. So music is close to your heart personally, but you know, have you, have you seen anything out there? It’s been a good match for for connecting the arts, you know, whether they’re musical artists, musicians or actual artists. You know, with investment opportunities.

Sandy:

Yes. So the way angels make money is we invest in companies early and we only invest in companies that want to scale and execute to build their business for an exit. We own 99 times out of a hundred angels make money if there’s an exit opportunity. Traditionally, arts and music do not provide those type of opportunities for angels to invest. That said, we’ve seen platforms that bring musicians together. We’ve seen platforms that early on we saw a platform that allows musicians to create a music music and invent audiences can create lyrics, but we really haven’t seen in the four years and the hundreds and hundreds of startups that we’ve touched. We haven’t seen a lot of startups in AMU music and the art space for that reason. There’s, you know, we don’t know. There’s no way to make money in those for, for an angel investor.

Sandy:

Sandy that was, there was the one that the music lessons, yeah, music lessons for sure. A virtual music lessons. We’ve seen a bunch. We’ve seen a handful of startups that are bringing musicians with you know you know amateur musicians. But you know, that’s a, what we call virtual matchmaking. Virtual matchmaking is oftentimes a difficult and angel investment because you’re only as good as the supply of musicians and the supply. You’re really a virtual matchmaker, if you will. So those, those can be challenging investments because again, we’re looking for companies that are going to go from very low revenue or no revenue to scale to 10 or $20 million, so they could be bought out for hundreds of millions. And you know, we might be able to get 15, 20 return on our investment. And that type of investment scales out the investments that are going to fail. These are very risky investments on average across the country, about 60 to 70% of angel investments fail with absolutely no return whatsoever. So most angel investors that do this that wanna do this seriously create a well diversified portfolio of angel investments, different industries maybe or in their areas of expertise to balance out the losers with the handful of big winners that we might see.

Jonathan:

Yeah. Yeah, that makes sense. And then kind of in the, the artists fame, we’re moving a little bit away just a bit. So you know, creatives, people in the creative industries, so maybe not artists, but graphic designers things like that. Not necessarily them themselves, but platforms that would kind of avail opportunities to people like that are in those, in those professions. Have you come across anything like that or when something like that, the interesting and in a time similar to now, you know, with what’s going on.

Sandy:

You know, it really depends upon the leadership again, in their business plan, you know one of the challenges with virtual matchmakers and those types of industries is there’s no barrier to entry. We don’t know if somebody in Iowa was doing the same thing, if not better. You know, as compared to a widget that has a robust patent estate that’s going to disrupt an industry, at least there’s a barrier to entry. So the competition is challenging because it, we just don’t know if there’s going to be another platform out there somewhere in the country that’s going to be better. And a lot of those, a lot of those startups, those are those are races. You know, you’ve got to scale and get traction before your competitors can scale. So it’s really a, it’s really a race.

Jonathan:

Interesting. So startups that are utilizing or leveraging emerging markets outside of the country itself, have you had anything come across your your plate?

Sandy:

Yeah, we’ve, we actually did a lot of research on a company called peel away sheets and they provide hospitals and different you know, camps where you put you know, hospitals, it’s a really arduous task to change bed sheets for critically ill patients. So peel away really good young entrepreneur. Max Cohen has this platform where you put a sheet on a bed but it has seven layers and you peel it away. They’ve actually pivoted their, their biggest market is overseas in and the middle East, the majority of their business is overseas. I mean, we didn’t invest, but we, we, we like team. But you know, scaling, it doesn’t really matter where you scale as long as you get scale. So we would take a look at those kind of companies that want to scale.

Sandy:

But for the Westchester angels, we would only consider investing in startups that are physically headquartered in New York or New York or the New York city or the surrounding area. Because the only way we found out to know if there’s a really good leadership or a team is to spend time with them as much time as we can without a, without a big obnoxious and leading them on, you know, I went with, sometimes we throw startups a wrench to see how they, they handle it. You know, we want to visit them in their location and sometimes we visited them at a kitchen table cause that’s where they’re doing their business or, or shared workspace such as KLI has. And we like to go out to the bar with them, have a drink or to see how they, you know, talk and and react and you know, we, we like to invest in good, good teams and good leadership.

Jonathan:

Cool. Very cool. Here’s another good one. So do you know of or anticipate new opportunities for angels in the area of renewable energy, which which is, you know, obviously I feel like it gets, it gets more interesting every year. But 

Sandy:

We’ve, we’ve seen a lot of we’ve seen a bunch of startups in renewable energy wind and, and that tends to get very technical. And you really would have to have that expertise and that space to do a good job on that. But alternative energy certainly would be an interesting startup for an angels to consider, especially if there are utility patents issued. Which would be a barrier to entry for that new technology. So that would certainly be fertile ground for an angel investment. Absolutely.

Jonathan:

I can imagine having a patent probably, yeah. Probably helps a little bit.

Sandy:

Well, you know, patents are a really good thing cause it could protect the space. Yeah, we would, we’ve often had patents reviewed by patent attorneys just to see what the claims are, but to patent it, you know, in order to protect your patent, you have to spend money and time to protect your patent. So a patent may not help us startup, but it may help the sell of a startup on an exit because the larger company would have the wherewithal to protect the space. I’ve invested in a company that robust patents they were infringed upon, but they didn’t just didn’t have the time or the money to go after the infringers.

Jonathan:

Yeah, yeah. I could imagine that’s a, that’s a lengthy battle that probably costs a lot of time, effort, and money. Of course. Now is that something that, that the angels would get involved in if, if I had a patent on a product or service that I bring to the table, to the angels and you say, Hey, this looks good, let’s, let’s move forward. Is that a service that did the Westchester angels or angel groups would provide or is that fall a little bit outside and you just hope that they, they kind of come to the table with that already?

Sandy:

Well, that’s where good leadership comes in. A good advisors, you know, there’s a lot of gestation period is going to take years for the patent to get issued. There’s such things as provisional patents, which are very simple patents, but they’re not patents. It just protects your place in line going forward. So in general, you know, a, a patent if it’s done well, can can protect your space and prevent that. It is a good barrier to entry.

Jonathan:

Got it. Very cool. That makes sense. Oh, here’s the, here’s a classic one. So personal preference when it comes to investment vehicles. So we’ve got some vertical notes or equity

Sandy:

Fair question. We see this a lot. Wherever possible. Listen, if you ask 10 angel investors, you’ll get 11 different opinions. We’ve invested in equity, we’ve invested in convertible notes. And for those out there real a convertible note is really a debt instrument that allows you to convert to an equity position based on a trigger. It’s usually the next raise. Sometimes it’s a time element. Convertible notes do come with some challenges. You, if the VCs are coming in the next round, sometimes they could put the startups in a very compromising position by saying, if you want our millions of dollars you know, we want to be preferred equity. Everybody else has common equity. So you get into challenges like that. There’s a couple of things that we’ll end the conversation with angel investors right away. Number one is a safe note. A safe note is, is a developed by our friends in California as an easy way for startups to raise money.

Sandy:

It’s not a very legal costly document, but it doesn’t provide angels with any legal motivation. The startup to actually convert that note, safe notes, we’ll usually end the conversation because it adds an additional risk to an already risky investment. The second thing that ends conversations right away with angels is please sign an NDA. We’ve had startups that have been poorly advised by attorneys to have NDA signed. And I, I counsel the startups to fire those attorneys as soon as possible because if I were to sign an NDA for every startup that I touched, I wouldn’t be able to pick up the phone and talk to anybody. I wouldn’t be able to talk to, you know NDAs in the cannabis industry would prevent me from investigating almost any angel investment in a cannabis industry. So safe notes, NDAs basically end the conversation right away. You’ll find a handful of investors that may invest in a safe note. By and large, no angel group in New York city is going to consider a safe note.

Jonathan:

Hmm. Interesting. Good to know. So how about this one? So the current climate has it changed in general preference of early profitability for a company versus pushing for rapid growth, even though maybe initially it might burn through

Sandy:

A lot more capital? You know, it’s interesting you’ve seen a whole host of IPOs recently event, right? Lyft, Uber, these companies started as an angel investment years ago. They went into the, now they’re traded on the New York stock exchange and they’re still not profitable. So there seems to be a push to build revenue, build revenue, build revenue. But I think it’s a balance. You really want to build revenue until you can get to some sort of profitability. But you know, that’s an individual conversation based on individual startups and how they plan to scale. And that’s where the due diligence comes in. For angel groups. We do a lot of due diligence. We kick a lot of tires simply to compensate for the risk that angel investors will take.

Jonathan:

Got it. Okay. Good to know. And what does that process look like? You know, for me, pretend I am a startup and I just, I walked through the door. I need Sandy, right? Yeah. I want to, I want to talk, I want to talk with my future with the Westchester angels. Walk us through kind of what that, what that looks like, what the timeline is on.

Sandy:

Well, there’s a gestation period to get money from angels and I advise startups if you’re going to raise, if you’re looking to raise a half a million or $1 million, that’s going to take you six months minimum because first you have to make your application on the gust or what are similar platform. And then from there your only objective is to continue to get to the next conversation and get screened so you could pitch to an investor, to the investors of each angel group. We go through probably on every other month, a couple of maybe a hundred 150 applications. We screen eight companies in pers via zoom now before the virus in order to select the three or four toL pitch to our investors. And what an event, when a startup makes a pitch, their only obligation is to continue to get to the next conversation. To get into due diligence.

Sandy:

Due diligence could take weeks or months depending upon logistics, depending upon the complication of the industry. If you’re in the medical industry, if you have a medical device those, those tend to be more complicated because insurance and things like that. So every, every due diligence effort that the West just your angels has been through takes on its own timeframe and personality. We try and respect the startups. We don’t want to mislead them. If we’re not interested, we’re going to tell them right away if we are interested. We want to do a lot of due diligence and, and, and give them an answer within a reasonable amount of time cause we respect the startup’s challenges to to raise money.

Jonathan:

It’s funny you brought up medical devices, one of these questions right when you said that, do you have medical device expertise or invest in medical devices with potentially short FDA pats?

Sandy:

Yeah, so we had shot, we did a little, a lot of research in our early days in a medical company and we decided not to pursue medical devices because it’s a complicated space. And then we became experts literally overnight when white Plains hospital investment arm, East post road ventures became members of the Westchester angels. We have doctors physicians, people that understand the space. So now we entertain medical platforms, we entertain medical devices. We certainly will not entertain molecules going through clinical trials. Those are for bigger boys. That’s really a farm big pharma or biotech application. But medical devices are tough, you know, because it could take you years to get market validation. And that’s why we like to see startups that have some sort of revenue because it’s market validation as compared to a company that has a product in beta. There’s no market validation. And that’s some of the challenges we see with medical devices and plat more medical devices. It could take years to get some market validation. You know, every, every startup thinks their business or platform is the best thing since sliced bread. We like to talk to customers of these startups to confirm that.

Jonathan:

So here are two, a two more number based questions. So number one, is there a valuation or dollar amount that would separate an angel investor from a PE group?

Sandy:

Yeah, it’s kind of a fuzzy line. Usually if you’re going to raise $1 million or less or maybe a more, that’s really an angel raise. Because angels, you know, traditional angel groups are, are, are our investment. We’ll put anywhere from 50 up to maybe 150 where the new guys on the block the golden seeds in New York game, just the Harvard angels, they have a lot more members. They’ve been doing this a lot longer. They could put hundreds of thousands of dollars together, but once you start to see

Sandy:

Raises a $2 million or more, usually that’s going to be a challenging angel raise because of the time required. So usually when you get to two or $3 million raise, that’s really a borderline between angels and VCs. And we have a lot of investors on the line here that had more experience in that area than I do than they want to offer their opinion as well. But when we see valuations, we’ve, we’ve invested in valuations as low as $2 million. The highest of investment we’ve done based on valuation was a $12 million valuation. But it was for a company that had three and a half million dollars of revenue. So it was a multiple of revenue.

Jonathan:

That’s true. So as an angel investor or group, are you more likely, we’re biased to invest in around it’s North of 750,000 or be the lead investor and around around 400 K and lower.

Sandy:

Oh, all those conversations are certainly in the space of angel investing and what we do from the New York area angel Alliance. Once we’re in a start, once we’re in due diligence with the startup, we refer those startups to all the other angel groups in the area. And we’d like to share good startups and all the angel groups in New York city. We all share our startups. So once they get into due diligence with us or any other angel group in the area, they’re automatically [inaudible] to probably a half a dozen, dozen or more angel groups. So to help, because if a company is going to raise $1 million in the West, just Rangers wants to put a hundred in. We’re not going to put the hundred until they raise the majority of the balance of the rounds. So it’s an angel groups. Best interest to get more interest. We have never ever been shut out of around based on competition with other angel groups. It’s, it’s collaboration. It’s not competition.

Jonathan:

So I’m looking at the time right now and it looks like we’ve got about 10 minutes left. So I just want to make sure that we can get in some, some last thoughts and anybody that is interested in looking into being an investor or working with the Westchester angels. Just want to give enough time for that. So Sandy, just closing, closing thoughts. I mean things things that we can kind of take out of this. Reasons to be optimistic, whether you’re an investor or a startup, things that we should be looking forward to coming out of the evangelism.

Sandy:

This is a really challenging time. You know, I’m living in constant fear because I think my wife may shoot me very shortly because we’re living together. God bless her. But listen, our country is, we’ve gone through world Wars. We’ve gone through nine 11. We’ve gone through the, the, the crisis, the banking crisis in 2008 in 2008, we came a couple of steps away from anarchy if the banks open the business model with the fed that was created is a really good model. Warren buffet makes a living by investing in depressed times and, and not investing in the best times. He, he invests when there’s fear and he sells when there’s greed. So we will get through this as a country. It may take some time but we prefer to look at the glass half full that there’s going to be opportunities out there that may not have presented themselves in the past, maybe with lower valuations, maybe in industries that are poised to thrive in his atmosphere. So we’re, we’re looking at this as an opportunity going forward. And at the same time, we’re doing our best to help through white Plains hospital, through a Westchester economic development organization. And as I say, we’re going to be reaching out to all the companies that have applied to us on gust with half hour mentorship free, no strings attached. So their gust applications could be the best they could possibly be.

Jonathan:

Yeah. That’s great. So, okay, here’s, here’s an interesting one. So do you look at company’s social media presence at all? When is that part of your due diligence? When you’re, when you

Sandy:

Considering, yeah. Yeah. And, and you know, when, when a company says that we ask them how you’re going to execute and they say social media, we usually say next. But social media, you have to tell us, you know, we’re, we’re investors of average intelligence. We have to be taken by the hand and shown how you plan to execute. Social media is certainly a viable way to do it. But just don’t say social media. We want to know exactly how you’re gonna use social media to build your brand, to increase your sales and reach your target clients. You know, social media is a really good way to reduce your price of customer acquisition. So social media is a very important part of scaling for a lot of companies, but we have to know the specifics just on say social media.

Jonathan:

Got it. Got it, got it. That makes sense. Okay, great. So if anyone has any other questions, just drop them in the, in the chat. I’m just staring at that and rattling them off as the, as they come in.

Sandy:

So anybody on the conversation, I’ve free field to email me if I could be of any further help. Sandy S a N D y@westchesterangelsplural.com. I spent a lot of time on the phone with startups trying to guide them. If you’re an investor and you’re looking for an angel group, we would certainly welcome, you have to be an accredited investor to be an angel. And the accredited investor details are on the net. So you could look at it. Most angel groups are going to have you sign a docu. All angel groups will have you sign a document stating that you are an accredited investor. But again, we’re here to help. We want to see startups succeed. Whether we invest or not and we pool our talents with all the really terrific angel groups in the city. And it’s a really fun space. If you’re an angel investor there’s no shortage of startups looking for funding and it’s going to keep this old guy young as I go forward.

Jonathan:

Cool. All right, so here’s another one. Oh, so do you examine and value companies social conscience, commitment to environment or female ownership? Are those things that you take into consideration?

Sandy:

Yeah. You know, when I look at leaders I don’t really care if you’re black or white, big or tall. If you’re Indian, if you’re American, if you’re Portuguese, I only, we only see shades of green. That’s the only thing we say is can you be a leader and can you execute? We don’t really care. Your ethnic background, your, your sexual orientation is insignificant to us. There are angel groups in New York city where they’re all, those are requirements. The golden seeds will only invest in companies led by or have a female in the C suite. The 37 angels follow. They are a group of female investors. The gain jewels, which is grown in leaps and bounds. They’re really good friends. I love those guys. That is the LGBT angel group. They’re really, I’ve morphed into a larger more of a VC investment, but they only invest in companies that are led by or have a, a significant member that’s part of the LGBT community. So if you’re interested, go to the New York area, N Y area angel alliance.com. That is a one stop shop for all of the angel groups in the area. You could click on their links and you can find out that you change or groups temperament and personality. And that’s why it was created.

Jonathan:

Very cool. All right, so we’ll see if we’ll see if we can tackle this. And this one gets into the cares act a little bit so far. We can push this one, but are there any provisions in the cares act that assist startups primed for angel?

Sandy:

I am not familiar with that. That’s a, that’s a conversation that kind of went over my head. That’s a changing conversation. Those conversations I’m really not qualified to talk about. But most every startup is looking for government funding one way or the other. Payroll protection, SBA loans. And we’re working with the Bridget Gibbons and Deb Novick of the new of the Westchester County development organization to see where we can help also with community capital, New York and the tap, which is the acceleration project, another nonprofit. And we will be helping startups once I received that funding and helping them scale their businesses back. Sandy, there are plenty of grants out there yet, Jeff, thanks very much. I’m not familiar with the grants or the, or the government lending opportunities. Those questions are better suited to people that have experienced in those areas. Thank you, Jeff for that. You’re right.

Jonathan:

All right. So I think we’re, we’re kind of wrapping this up. If you want to just let people know if they’re interested in possibly getting involved with the Westchester angels, whether it be on the investment side or on the startup side, just let people know and that would be, yeah, it’d be great.

Sandy:

Yeah, we’d be happy if, if there was an accredited investor that you would like to join our virtual meeting. We allow a credit investors to join you email me and we’ll have you sign the accredited investor form. Then you’re more than welcome to join one meeting as our guest.

Jonathan:

Very cool. Great. All right, well everybody, I think we’re going to call it here. Thanks for joining us. Quite creative space and Sandy Rollman of the West angels and the New York angel Alliance. Hope everybody stays safe, happy, healthy and sane. We’re going through this interesting time together, but apart everyone take care.

Sandy:

Thanks everybody. Stay safe. People.

gs.

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