Active angel investor John Ason has sat on numerous funding panels discussing seed and early stage investing. Those discussions beat the drum for entrepreneurs to perfect their investment pitches, hone their executive summaries, and be referred via a trusted contact. Those are just a few of the fundamentals that save active professional angel investors a lot of time when weighing through the many investment pitches made to them.
John Ason who appreciates entrepreneurs who follow those fundamental angel investing guidelines, yet personally tends to cut against the grain as to how he selects which startup to invest.
A retired AT&T executive, John has been making investments in start-ups for over eighteen years. With over 60 investments, he has had “home runs”, an expression investors like to use to describe an exited investment that has paid a high multiple over the original investment. His home runs have included: Diapers.com, LiveLook and XLibras. Those successes now enable him to make larger investments in seed and early stage ventures. He typically invests from $100,000 to $500,000 in each venture, but occasionally will agree to invest $50,000 to “see how things go.”
What is unique about John’s approach to investing is that he is industry agnostic. He has successfully invested in ventures that are in a variety of industries in which he has no specialized expertise. This cuts against conventional practice that encourages entrepreneurs to find an angel who knows their domain or industry.
John makes his investments based on a number of factors. He strictly avoids medical device, biotech and pharma, but otherwise he places less weight on the particular industry. One reason he avoids those industries is they have a longer startup gestation period than other industries. That in turn leads to a longer period for an investment exit which is a concern to every angel investor. Outside of those three industries, he will welcome an entrepreneur’s request to review their one page executive summary. Simply send to Ason@comcast.net and he will usually acknowledge receipt by midnight that day.
Keeping well-networked is a top priority for him, both on the investor side and the entrepreneur side. John spends a good deal of time in New York and Philadelphia searching out prospective star-tups to fund. That has also helped him build a strong personal investor network that he can tap into when a deal emerges.
While the trend has been for angels to be organized as groups to vet and syndicate deals, John does not belong to any organized angel groups. It seems he has little patience about some things; yet he will take a deal to other angels he knows, if more funding is neededand once he has had made the decision to personally invest.
What excites John about a particular opportunity? “I invest in seed and early stage ventures that potentially will give me a 10x return. I look for great people who I believe will carry it through. Often it is pre-revenue and even pre-customer,” he explains.
What steers him away from an opportunity? “Sometimes I receive an executive summary and there is no explicit statement of what the company doesthat’s a deal killer right there. I want to know upfront how much they are looking for and if they have a 3-5 year forecast for the business. If that is missing, I am concerned and therefore not excited. Also, if I am seeing too much activity on the same business model, I have less interest.”
One needs to keep in mind that once an angel has put money into a venture, he or she has taken on risk and therefore seeks to have strong communication with the entrepreneur. But, each angel investor is different. Many want some level of involvement, especially if something ignited their passion to invest or they may been very successful in that venture’s industry.
John has certain expectations. “I look for an entrepreneur who I know is going to provide updates on a timely basis. If there is a serious problem, they should be prepared to tell me immediately. Those are my two top expectations. If I get involved at all, it is primarily to keep things calm and the team focusedthere is a lot of stress in a startup.”
Once he has received an emailed proposal, it takes a few days to fully review depending upon his personal schedule. He will most likely have some follow-up questions or he will let the entrepreneur know he will take a pass. As most investors, whether angel or venture capital, he prefers to not get into answering precise questions as to why he is not interested. Rather, he expects that an entrepreneur who is truly prepared for funding be ready to pursue other avenues. He feels they should have the wherewithal to learn what changes or improvements are necessary. If the entrepreneur remains persistent, he may eventually gain the attention of the right investor.
