Thinking Like an Angel Investor

Posted by Handshake 2.0 at 6:45 AM on March 24, 2010:

In Becoming an Angel Investor, I wrote, "I want to be an angel investor.  At least I want to know how an angel investor thinks." 

Okay, I'll practice.  Let me pretend I'm an angel investor.  

Let’s say I have $100,000 to invest.  I qualify as an accredited investo r- I have a net worth of $1 million or more, my annual income is $200K or more, or I meet other criteria to be an accredited investor. 

Following the advice of my mother, “Don’t invest anything you can’t afford to lose,” I can lose the whole $100,000 and not experience financial hardship.

Where could I invest my $100K?  I could get about 3% for 5-year CDs.  I might make 6% on real estate if I’m in it for the long haul, maybe 8% in stocks, again over the long haul, but in these days and times...

Gosh, can’t I get a better return than that?

“Angel investors expect a 500% return in year five.”

A 500% return in year 5?!  Now that’s R.O.I.  I’m in!

So, I give my money to a cool start-up to do what it needs to do, I get an equity stake in the company, and all the great things that happen to the company happen to me, too, because I’m now a shareholder.  Rich, rich, I’ll be rich!

Hey, wait, if bad things happen to the company, I want my money back, okay?

What?!  I don’t get my money back?  With a CD, I can get my money back.  Real estate, hey, people need a place to live.  If I don’t like what’s happening with stocks, I can cash out in a second.

You’re telling me that if I give this company my $100K and the company tanks, I don’t get a cent back?

According to the Wall Street Journal, "at least half of all angel investments lose money and 48% of investments with final outcomes result in a 100% loss."

This is risky business.

Yes, but 500% in year 5...

As an angel investor, I'll go stealth to the VT KnowledgeWorks Entrepreneurship Summit on April 7 and 8 in Blacksburg, Virginia.  I’ll sit in the crowd and watch those 15 presentations by companies who want my money.

Given the risk I’ll take if I invest, I don’t care how cool the idea is, how "green" it is, how earnest the entrepreneur is, how altruistic an investment in his or her company would be, or whether or not the PowerPoint includes a cute music video with everyone shaking hands.

I have one question and only one question:  “How are you going to make A LOT of money?”

***

I seem to be writing a series of posts on angel investing.  Here's what I've got so far, most recent first.

Angel Investor Comments on Becoming an Angel Investor

Talking About Money

Becoming an Angel Investor

An Entrepreneur in Every Garage

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Handshake Media, Incorporated, the parent company of Handshake 2.0, is a VT KnowledgeWorks member company.  VT KnowledgeWorks is a client of Handshake Media.

Sharks or Angels?

Posted by Handshake 2.0 at 8:41 AM on March 15, 2010:

Could we possibly see a feeding frenzy at an event called the "Open Angel Forum"?

We'll all find out together.  The Open Angel Forum is a live event.

Well, the "we" will be those who register.

On the second day of the the two-day VT KnowledgeWorks Second Annual Entrepreneurship Summit, April 8, 2010, 1:00 PM, we'll see what happens to the five finalists selected to pitch their ideas and funding requests to an amphitheater full of angel investors and spectators.

Will their ideas be greeted by sharks or angels?

In alphabetical order by company name, the companies selected to present are:

Actifity.com - Frederick Cook

LimbGear - Tyson Daniel

Maxtena- Dr. Stanislav Licul

NewCityLabs- David Poteet

RRx - Robert Giles

We're getting the scoop on the five presenters and will share what we find out.

And some interesting conversation about angel investor funding occurred on this post related to the launch of DayOne Ventures @ VT KnowledgeWorks.

***

On Handshake 2.0, you're invited to read about about LimbGear, Maxtena, NewCity, and Rural System / RRx.

The two-day VT KnowledgeWorks Second Annual Entrepreneurship Summit on April 7-8, 2010 will be held at the Inn at Virginia Tech and Skelton Conference Center in Blacksburg, VirginiaRegistration for the Entrepreneurship Summit for attendees, advertisers and vendors is required as long as space is available until March 31, 2010.

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VT KnowledgeWorks, LimbGear and Rural System (RRx) are clients of Handshake Media, Incorporated, the parent company of Handshake 2.0.

Tech Showcase - Gotta Have GIS

Posted by Handshake 2.0 at 6:11 AM on December 15, 2009:

Layers of GIS data "Badges? We don’t need no stinking badges."
- Mexican bandit, Blazing Saddles

"GIS? We don’t need no stinking GIS."
- Companies without GIS

When I was a child, my father, Robert Giles, spoke of Geographic Information Systems (GIS) with reverence.  In the 1960s, he was one of the pioneers of GIS, using a light board with his team of graduate students to painstakingly digitize a map by hand with an attribute, then another map of the same place by hand with another attribute, so that layers of data resulted about one particular area.  He and his students then wrote lines of code and used punch cards and the mainframe computer to analyze all those layers of attributes and prescribe optimum locations for power lines in Virginia.

Today, personal mobile devices with Global Positioning Systems (GPS) are ubiquitous, using GIS to analyze only a few attributes - a location map, satellite date, and time - to tell a person where he or she is.

When my father was using GIS, computers were still tools, essentially large calculators, so their limited power limited the number of layers of attributes that could be analyzed to a couple dozen.  Computers are now so powerful they can take into account and analyze hundreds of layers of attributes almost instantaneously and in relation to each other. 

What if my mobile device had its own personal GIS, not just GPS?  What if my mobile device would answer not just, “Where am I?” but “What is best for me to I do?”

I don't think it's an original question or idea but it came to me from discussing GIS with David Bradshaw and Jeremy Rasor of InteractiveGIS, serving as project manager for my father’s new venture, a rural land management system, Rural System - a component of which uses GIS - and the site designed for Rural System by Automation Creations.

This post features a screenshot of the cool animation made by Automation Creations that can be clicked on to show how the attribute layers accumulate. 

What if the layers weren’t about roads, ponds, and trees, but all about me?! 

What if I were standing on a street corner with my own personal GIS on my mobile device and it “knew me" enough to analyze what I value in attribute layers - houses with cats asleep on the porch, tea shops serving scones if it’s 3:00 PM, restaurants serving grits if it’s 8:00 AM, jewelry stores with sales?  And what if, based on what it had "learned" about me from data I had entered and from queries it had tracked and weights I had assigned, or it had assigned, it recommended the next step, perhaps not just to physically put my right foot in, but philosophically?

As a person and a consumer, GIS might show me my own personal power line.

As a company owner, what we offer and what our potential clients value might show up in their personal power lines.

Where do we sign up?!  I gotta have GIS.

***

InteractiveGIS was featured in another edition of the Tech Showcase on Handshake 2.0Interactive GIS, Rural System, and Automation Creations are clients of Handshake Media, Incorporated, of which Handshake 2.0 is an enterprise.

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Venture Counsel - a law firm for entrepreneurs This edition of the Tech Showcase on Handshake 2.0 is sponsored by Venture Counsel, a law firm for entrepreneurs located at the Virginia Tech Corporate Research Center in Blacksburg, Virginia. Ken Maready, head of Venture Counsel, reviewed Handshake 2.0's Social Media Authenticity Policy - Guides Concerning Use of Endorsements and Testimonials, helping to create a document about which Mark Schaefer - author of the blog {grow} and the post The World's First "Authenticity Policy"? - stated, "As far as I know, this is the first published, legally-validated 'authenticity policy.'"

Ken Maready's "Legal Concerns for the Web 2.0 Business" was accepted for inclusion in volume one of the new series, Enterprise 2.0: How Technology, E-Commerce, and Web 2.0 Are Transforming Business Virtually, by Tracy Tuten, Ph.D.  The Enterprise 2.0 series is scheduled for publication by Praeger Publishers, an imprint of Houghton Mifflin Company.

Tech Showcase - Have You Googled Yourself Lately?

Posted by Handshake 2.0 at 9:14 AM on November 4, 2009:

How do technology company founders, a frequent subject of the Tech Showcase on Handshake 2.0, get found? With 63.5 of the market share of all search queries, it's likely to be through Google.

First page Google search results for Anne Giles Clelland According to TechCrunch, "Of the 137 billion estimated total searches performed in the U.S. last year [2008], 85 billion were done on Google. What’s even more impressive is that nearly 90 percent of all the growth in search volume was also captured by Google. Most of that growth came from increasing the number of searches per person, rather than bringing more people to Google."

Almost a year ago, for the VT KnowledgeWorks blog, Inside VT KnowledgeWorks, I wrote Google Yourself, a post inspired by advice from Seth Godin. Ten months later, I wrote about what I found when Google opened a window on its archives and allowed searches from Google 2001.  While the Google 2001 search is over, I took a screenshot from a former life (.pdf).

Having Googled myself a year ago and retroactively ten years ago - I Googled myself - Anne Giles Clelland - and this site - Handshake 2.0 - this morning. 

First page Google search results for Handshake 2.0 My observations:

1) The top listing for each term is linked to sites, or to accounts on other sites, that we created.

2) Nine of the ten listings on the first page of results for my name are linked to sites, or to accounts on other sites, that we created.

3) Six of the ten listings on the first page of results for this site are linked to sites, or to accounts on other sites, that we created. 

I then Googled our client, Barry Welch, founder of FurnishWEB, the Software-as-a-Service (SaaS) order and inventory portal for the home furnishings industry.

My observations:

1) Although many share the name "Barry Welch," 4 of the top 10 search results linked to sites, or to accounts on other sites, that we created. All four linked to social media channels, including posts on two blogs, Handshake 2.0 and Inside VT KnowledgeWorks, Twitter, and YouTube.

2) Six of the ten listings on the first page of results for "FurnishWEB" linked to sites, or to accounts on other sites, that we created or assisted in creating.  Four of the six were social media channels, including posts on two blogs, Handshake 2.0 and Inside VT KnowledgeWorks, Twitter, and YouTube. Three of the remaining four results linked to our client's FurnishWEB site itself.

My conclusions:

In personal relationships, I know - and respect - the futility of attempting to control what others think and feel about me.

That said, do I wear professional attire to meetings with potential clients? Yes, I do. I mean business. 

Through conscious use of social media, we have established ourselves and our clients online as corporations and enterprises - with distinct brands - led by active, engaged people.

So, to answer my own question, yes, I've Googled myself lately. When someone else in that almost 64% market share finds me through Google, I've got on a very nice suit. And so do our clients.

***

Z. Kelly Queijo contributed to this post.

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Venture Counsel - a law firm for entrepreneurs This edition of the Tech Showcase on Handshake 2.0 is sponsored by Venture Counsel, a law firm for entrepreneurs located at the Virginia Tech Corporate Research Center in Blacksburg, Virginia. Ken Maready, head of Venture Counsel, reviewed Handshake 2.0's Social Media Authenticity Policy - Guides Concerning Use of Endorsements and Testimonials, helping to create a document about which Mark Schaefer - author of the blog {grow} and the post The World's First "Authenticity Policy"? - stated, "As far as I know, this is the first published, legally-validated 'authenticity policy.'"

Ken Maready's "Legal Concerns for the Web 2.0 Business" was accepted for inclusion in volume one of the new series, Enterprise 2.0: How Technology, E-Commerce, and Web 2.0 Are Transforming Business Virtually, by Tracy Tuten, Ph.D.  The Enterprise 2.0 series is scheduled for publication by Praeger Publishers, an imprint of Houghton Mifflin Company.

FTC Truth-in-Advertising Revisions - The Area to Watch

Posted by Handshake 2.0 at 7:40 AM on October 6, 2009:

With regard to Handshake 2.0's Social Media Authenticity Policy - Guides Concerning Use of Endorsements and Testimonials, Mark Schaefer - author of the blog {grow} and whose Can You Outsource Authenticity? I cited in my post explaining the origin of Handshake 2.0's Social Media Authenticity policy - asked, "Did the lawyers have any issues with worth mentioning?"

Not then, but they do now.  The Federal Trade Commission announced revisions to the FTC’s Guides Concerning the Use of Endorsements and Testimonials in Advertising, also known as "truth-in-advertising" rules.  We wrote about "shaking hands" with the FTC Guides here.

From Ken Maready,  head of Venture Counsel, a law firm for entrepreneurs, on the latest revisions to the FTC Guides:

I think the area to watch in practice is when there’s any kind of exchange going on at all - i.e., you blog favorably about a local company and that local company writes something favorable about you, or gives you free ad space or an equivalent benefit, even if not quid pro quo in your mind.  It is these areas where people are going to get caught up inadvertently.

***

Ken Maready heads Venture Counsel, a law firm for entrepreneurs located at the Virginia Tech Corporate Research Center in Blacksburg, Virginia. He reviewed Handshake 2.0's Social Media Authenticity Policy - Guides Concerning Use of Endorsements and Testimonials, helping to create a document about which Mark Schaefer - author of the blog {grow} and the post The World's First "Authenticity Policy"? - stated, "As far as I know, this is the first published, legally-validated 'authenticity policy.'"

Ken Maready's chapter, "Legal Concerns for the Web 2.0 Business," was accepted for inclusion in volume one of the new series, Enterprise 2.0: How Technology, E-Commerce, and Web 2.0 Are Transforming Business Virtually, by Tracy Tuten, Ph.D.  The Enterprise 2.0 series is scheduled for publication by Praeger Publishers, an imprint of Houghton Mifflin Company.

For Early Stage Start-Ups, Who Owns the IP?

Posted by Handshake 2.0 at 6:00 AM on June 19, 2009:

From Ken Maready:

Assignment of intellectual property to a startup needs to be an early step. As an attorney working with technology startups, I find it is best if I can meet with founders during the early conceptual stages, long before they organize their companies, as there are some early legal and business issues that can potentially cause missteps, even failures.  Although typically simple to address early, they can be very costly, if not impossible, to fix later on.  One of the earliest concerns is corralling and protecting a new venture’s core intellectual property.

When a group of founders first incorporate a company, it is common for them to assume that the ideas, concepts and technology (the "intellectual property") they’ve discussed among themselves will automatically belong to the company.  But it is helpful to remember that the company is its own separate entity apart from the founders and the company doesn’t own anything until someone assigns or licenses to it, usually by written contract.
 
It is important to get each founder to sign an assignment of intellectual property to the company as early as possible, typically in connection with the initial issuance of their stock.  This assignment will state that the company owns the ideas the founders have previously conceived or developed which are related to the technology or business practices on which the company is based.  This is in addition to any in-licenses from a university or other institution in which technology has been developed. 

And remember that the founders might not own everything they believe they own – IP developed, even in part, during the course of employment for someone else (or using their previous employer’s equipment or facilities) might give the previous employer a claim to a company's IP, something that needs to be planned around.

Not only will these steps help ensure that the company owns the technology the founders think that it owns, it will also help prevent a co-founder from "taking his or her ideas elsewhere" – at least as far as this technology is concerned.  

***

Ken Maready heads Venture Counsel, a law firm for entrepreneurs.  Venture Counsel is located at the Virginia Tech Corporate Research Center in Blacksburg, Virginia.  He writes the Venture Counsel blog and can be followed on Twitter, @venturecounsel

Ken Maready's chapter, "Legal Concerns for the Web 2.0 Business," was accepted for inclusion in volume one of the new series, Enterprise 2.0: How Technology, E-Commerce, and Web 2.0 Are Transforming Business Virtually, by Tracy Tuten, Ph.D.  The Enterprise 2.0 series is scheduled for publication by Praeger Publishers, an imprint of Houghton Mifflin Company.

Added 3/22/10:  Ken Maready has joined Hutchison Law Group.