Angel investors may be more aptly named than you think. While venture capitalists put the capital in capitalism, angel investing is a different thing. The checks frequently come from personal accounts rather than big funds. And angels often invest to make a difference or to support founders and ideas they believe in. The reality is that at the angel stage, risk is high and the likelihood of returns is low. Even well known - and extremely successful - VC Fred Wilson says that "early stage VC is a lot like baseball, if you get a hit one out of every three times, you are headed to the hall of fame."
The reality of a great deal of early stage investment is that achieving net zero over time is a somewhat optimistic expectation. The reward, in large part, comes from supporting the startup ecosystem and seeing people you believe in build valuable products and businesses.
When entrepreneur turned angel investor Jeffery Potvin decided to turn some of his success into investments, he met a lot of interesting people with "great ideas and terrible pitches." He says, "I kept seeing the same problem over and over: They couldn't get attention and their value proposition didn't make sense." He attributes this to the fact that most entrepreneurs are "builders, not sellers." And so, he found himself doing a lot of the entrepreneurial business of selling - that is, the selling of the business as an idea - for those he invested in.
However, Potvin could see that his one-off interventions wouldn't scale. And the fact is that most startups require multiple investors (and multiple rounds of investment) to make it in the long term. He quickly identified a need in the market for early stage mentorship. So, he set out to build an organization that would teach key market disciplines and help startups with business fundamentals, as well as the technical and tactical strategies that help build future leaders.
Building A Network
In 2016, Potvin founded Open People Network (OPN) - a group of entrepreneurs and business professionals that guide founders. OPN helps them stay focused on their vision while guiding them along the entrepreneurial life cycle through an Accelerator Program, Supporters Fund, and PitchIt Series.
However, OPN is more than just another business venture for Potvin. In fact, the angel in him won over his inner-entrepreneur and he founded OPN as a not-for profit (with the Supporters Fund operating as separate for-profit venture). "I always wanted to help startups," he says. With OPN, he's been able to take that desire and reach many more entrepreneurs than he ever could have alone. "At OPN, our team works as advisors, mentors and yes, as investors."
Since October 2016, OPN has hosted 54 Shows with nearly 5,000 attendees featuring more than 200 pitches. Eighteen startups have received funding through the Supporters Fund and another 28 startups received funding from other investors.
"When I was building my first business, there were angels. But 13 years ago, there weren't very many of them. And really, nobody understood whether they should take money, much less how to get it." In fact, Potvin says that at the time, many entrepreneurs had concerns around taking investment because they feared that the terms would be brutal or that they'd lose control. And the reality was that they had few resources to learn best practices around obtaining investments in their businesses.
"But throughout the years, and though through ups and downs, I always had mentors," he says. "And there was a value in those mentorships." However, they weren't from the startup world. So, in retrospect, he realized that they didn't always know how to guide him as he worked to build his first company Hardboot, which provides outsourced technical resources for enterprise companies. "But all the things I didn't do right, I learned from. And with OPN, I want to help others learn how to do them so that they can drive their business forward." In fact, he says he's learned one simple lesson about whether a burgeoning business should seek investment: "If you want to grow a stable business, you don't need money. If you want to grow fast, you need money."
There are a few other tips he'd offer to any founder, particularly those who are perfecting their pitch. "First, before you build anything, define your problem. Then verify it with a company or two. Second, being marketable is everything. Reduce risk. Work with an early customer to ensure that you are solving a problem and to show that there's a market. And third, get in front of people--at pitch events, speaking at and attending conferences... work on that elevator pitch."
Perfecting the Pitch
To address the need to nail the pitch, a key component of OPN's approach is PitchIt, a series of interactive events that help entrepreneurs showcase their company to potential clients and investors. OPN also does a small number of "Skip the Line" PitchIt events that are intended to accelerate the time from pitch to funding, something Potvin feels keenly impacts the startup ecosystem.
"I'm part of six angel groups. I see what they are looking for. On the other side, we work with startups on pitching. With Skip the Line, we're trying to reduce the time it takes to get investment."
In fact, if Potvin could change one thing in the startup investing ecosystem, it would be to "loosen the belt at the lower end of the funnel." For some early stage companies, an investment of a few thousand dollars can mean giving them the drive to keep going or the extra month they need meet their first big product deadline. He believes that government investment at these early stages would bolster the entire ecosystem. Even government funding of as little as $10-$30k would reduce the risk for angel investors. And with some of the risk off their shoulders, angels could be there to do what they love: Give entrepreneurs they believe in that initial push to get a great idea to market.
In the meantime, Potvin and the group he's brought together will continue the mission of OPN by bringing together entrepreneurs, investors, sponsors, business leaders and partners to create a community of sharing, inclusion, and collaboration to support the entire startup ecosystem. "We want to make people comfortable chasing their dreams."