"Angel Investing 101", talk by the New York Angels

[Ken Gosier]

Hello IASE! I recently attended a talk in NY by the chairman of the NY Angels, and wrote up my thoughts afterwards. I thought the IASE community might be generally interested to hear about the content of the talk:



April 2008. NY Angels presentation, "Angel Financing 101", presented in NY by David Rose. chairman of the New York Angels

In April 2008 I went to a talk in Tribeca on "Angel Financing 101," given by David Rose, chairman of the New York Angels. Most of the talk was relatively basic, talking about the mechanics of Angel Investing: who the Angel Investors are, what's their profile, in terms of entrepreneurial experience, net worth, how they would value the comany and what equity percentages they would require, etc. Also an interesting talk on how Angels would value the company.

Specific space angel details were as follows: He mentioned Space Angels Network (SAN) at least twice in his talk. (The audience was a totally non-space crowd -- this was a talk for members of the NYU and NY community in general.) At one point he was making the point that, as an entrepreneur, you should apply to those angel groups that are most applicable to you. The quote was: "If you're a pharma company, then don't apply to the Space Angels." (At this point, I had the urge to raise my hand and tell him about the microgravity benefits for pharma, but decided to hold back.) Later in his talk, he made a similar point, saying that there were specific angel groups focused on specific areas. He used Space Angels Network again as an example of a group that's focused on space, and used Golden Seeds as a NY-area group that concentrates on companies started by women.

After the talk I spoke with Mr. Rose for a couple minutes, since I was quite interested that a sophisticated investor -- who obviously sees deals from many industries on a regular basis -- would mention SAN of his own accord several times during a talk on "Angel Investing 101." He told me that he was a member of SAN, and had invested in Space Adventures (though not through SAN, I believe.) However, he was unaware of Xcor and the recent investment by Boston Harbor Angels. I gained a couple things from the conversation: Firstly, he is interested in SAN as a "virtual angel group" -- one that doesn't have a specific geographical center. Also, he thought that space was a perfectly viable area to invest in currently. I asked him if he thought space was viable even though the market itself is developing currently, and his general comment was, "Sure, I am interested in space as an investment." Esther Dyson has stated previously that her fellow members of the NY Angels see space as "that thing that Esther does," however, as stated previously, I found it quite interesting that the chairman of the NY Angels -- who sees a large amount of deal flow -- would be interested at this level in space.

[Guillermo Söhnlein]

Ken,

Thanks so much for posting this summary! Let me add my own thoughts:

First, as the Managing Director of Space Angels Network, I can tell you that David Rose is one of several "Founding Members" -- accredited investors who have made at least 1 space-related investment in the past 2 years. While one of the benefits of membership is confidentiality, we have a few high-profile folks who want to use their position to promote Space Angels Network. We'll be making a formal announcement and adding them to our Web site next month, but for now I can tell you that this group does include Esther Dyson.

Second, the good news for space entrepreneurs is that our Founding Members are committed to the "democratization of early-stage aerospace investment." These few individuals certainly don't need a network to access deal flow, conduct due diligence, or negotiate terms; they already have all that on their own. However, they realize that the industry will be much better served if there were a central point of access for both entrepreneurs and investors, such that the investment community as a whole could become more organized and active. This can only help attract more capital to space-related ventures.

Third, on a more general non-space-related note, you have to understand why David Rose in particular is so excited about the model of a virtual angel investor network: he is also the founder of Angelsoft, a hosted Web-based application suite for managing angel investor groups and venture capital firms. While their solution certainly helps traditional location-based angel investor groups, his long-term vision is to enable virtual (and affinity-based) angel groups ... like Space Angels Network!

Finally, there is another underlying trend that is driving Space Angels Network, Angelsoft, and David Rose: while only 5% of all angel investments in the U.S. are made via formal angel investor groups, the promise of affinity-based virtual groups is that we can somehow tap into the other 95% of investors to drive significantly more syndicated investments ... into specific industries. This is precisely why we were able to secure one of our new Advisors (who we will announce next week), namely John May, Chairman of the Angel Capital Association. He has absolutely no interest in aerospace, but he does think that affinity-based virtual groups may signal a new paradigm shift in angel investing.

I guess I could sum up all of this by saying that my longer-term view for Space Angels Network follows very closely to the evolution of the X PRIZE Foundation. The core of their belief lies in the catalytic power of prize competitions to drive innovation and spawn new industries. They started with the Ansari X PRIZE focused on sub-orbital flight. However, they have since expanded not just within space but also into other industries, such as automotive and genomics. Likewise, Space Angels Network--while currently focused on the aerospace industry--is built on a core belief that affinity-based virtual angel investor networks can be a powerful mechanism for organizing sources of early stage capital for particular industries or market segments.

Only time will tell if we can fulfill our ultimate vision. For now, having folks like David Rose involved certainly helps push us in the right direction.

Thanks again for your post!

Guillermo

[Guillermo Söhnlein]

I thought of another interesting point to share regarding one of my own conversations with David Rose.

He believes that even though an angel investor may be interested in seeing space-related deals (either as a passion or as a means of diversifying their portfolio), most individual investors won't make more than 1 such investment in any given year (or probably every 2-4 years). Therefore, not only do entrepreneurs currently have a very small pond in which to fish competitively, but they also have to catch investors at the right time in their diversification/investment cycle.

In order to improve the odds of success for these entrepreneurs, this is even more reason to create an expansive network of investors!

[SpaceTourist]

I presume the requirement for a cash-out procedure in business plans comes directly from this 2-4 year investment cycle.
Therefore, Space Angels Network needs to gather together a fairly large group of Angels in order to make it a successful source of funding.
Am I correct?
And if so, how well is SAN accomplishing this objective?
GT

[Dave Hook]

I agree with Ken: there are numerous investment potentials in space operations and activities that are not clear at first to the casual observer. The micro-gravity benefits to pharma is there, absolutely. I recall while I was a cadet that there were many nay-sayers to the GPS program. However, public investment in space for land navigation has led to opportunities that were only wild conjectures back then (Who has a TomTom in their car?). It only takes a quick review of recent history to see clear evidence of how efforts managed by NASA and other entities eventually led to Super Glue and portable computers. This all goes back to a discussion that Guillermo started, "What is the [Return on Investment] of space?" I posit that it's bigger than we can imagine right now.

[Richard D. Dell Jr.]

Point well taken on the Pharma having a very important Space economy connection.

We, the Space entrepreneurs of the USA have both the courage and technical expertise to make commercial New Space happen for this country, and commercial New Space will ultimately have enormous impact on the economy in many areas other than the obvious ones.

Those VCs who don't have the memory to recall that NASA's early activities brought us Fuel Cell technology to begin with, and not just TANG and VELCRO, will not be the VCs to enjoy the benefits of our technical expertise and courage.

That simple, I suspect. There is more opportunity and wealth to be created out of the New Space economy than any angel or vc will ever understand anytime soon.

[Joe Landon]

Hi Ken, It's great to hear people like David Rose talking so positively about space investing.

I wanted to add some observations I’ve had while working with Space Angels Network. On your comment about pharmaceuticals – I agree that there are definitely applications within the pharma industry where microgravity could be valuable. I take the position that space is a PLACE, not an INDUSTRY. This idea has come though in the applications that we’ve seen so far to Space Angels Network. We’ve received applications for many different industries including telecommunications, semi-conductors, consumer products, and entertainment – not to mention a few ‘traditional’ space companies as well. We think that there are a lot of markets where space-related ideas, technologies, or processes can add value.

The other encouraging trend we’ve seen is that many of the angel investors who have joined Space Angels Network are not space industry insiders but people from a wide variety of backgrounds. They are people who have long been interested in space but only now are starting to see it as a viable place to put their money to work.

[Joe Landon]

Hi Ken, It's great to hear people like David Rose talking so positively about space investing.

I wanted to add some observations I’ve had while working with Space Angels Network. On your comment about pharmaceuticals – I agree that there are definitely applications within the pharma industry where microgravity could be valuable. I take the position that space is a PLACE, not an INDUSTRY. This idea has come though in the applications that we’ve seen so far to Space Angels Network. We’ve received applications for many different industries including telecommunications, semi-conductors, consumer products, and entertainment – not to mention a few ‘traditional’ space companies as well. We think that there are a lot of markets where space-related ideas, technologies, or processes can add value.

The other encouraging trend we’ve seen is that many of the angel investors who have joined Space Angels Network are not space industry insiders but people from a wide variety of backgrounds. They are people who have long been interested in space but only now are starting to see it as a viable place to put their money to work.

[Ken Gosier]

Hi guys, thanks so much for all the replies!

A couple other things to add:

Guillermo: Thanks for the note about Angelsoft. David Rose definitely promoted it in his talk.

Also: In addition to John May, they also pushed Bill Payne in the talk. They gave out free hard copies of his book, "The Definitive Guide to Raising Money from Angels" at the talk. A PDF copy of the book is also available at his web site:

www.billpayne.com

The cost is $37 for the PDF download. They were pushing Bill Payne as the "godfather" of Angel Investing in the US, and pushing the book as well. Thought the IASE community would be interested in that as well.

Joe: Awesome to hear about all the different industries and their interest in space! That's the mission of SAN; I'd def be interested to hear more details as they become non-proprietary! :-)

ps. lots of neat space happenings in New York recently. I recently attended a talk by Jeff Bezos, which I will write up as I get time.

[Agravatb]

Hi Ken
First of all thank you very much for the interesting topic. I would like to add that : Every dam sector in this world is going to be positively affected by Space , as Space race has already begun by the entry of private player like xcor, virgin, spacex etc.....It is a huge market, and it is going to stay for a very long time. It is up to VC what, how , when to target for.