Like sugar with the medicine, the path to attracting and keeping active and engaged angel group members is by making their angel group experience valuable and fun. Sometimes the fun comes first.
“Our whole approach is to have meetings be something people want to attend,” says John Huston, founding member of Ohio TechAngels Fund (OTAF). “When we started out, we asked ourselves, what would make someone who has the wealth to do anything they choose to do come to our angel group meeting one night a month?”
Four years later, OTAF (www.ohiotechangels.com) has 218 members and averages more than 100 attendees at their monthly meetings. “People come because our meetings are fun,” Huston says. “We hold them at beautiful venues, serve substantial hors d’oeuvres, and take the sharp edge off just trying to hit our hurdle ROI.”
Valerie Gaydos, executive director of the Private Investors Forum (PIF) www.privateinvestorsforum.com, an active investment network in Philadelphia, PA says, “An angel group has to provide value that makes members’ lives better, richer, or faster. It’s the same kind of value that we look for when we are investing in companies. Having fun makes creating the value easier.”
Fun doesn’t mean frivolous
“We hold our meetings at a different country club every month,” Huston says. “It’s private and easy to park. We encourage our members to bring spouses, friends, and family members. They know they will see two to four really interesting deals, have good conversations with interesting people, and be making a difference in the entrepreneurial landscape of Ohio.”
Two to four high quality investments are presented at each OTAF meeting for members’ vote. “Our first 17 companies raised $23 million. Our fund provided $3 million; our members added $4 million, and VCs and other angels supplied another $16 million,” Huston says. “That additional $16 million shows why we open our meetings to our members’ friends.”
OTAF members who are interested in deals that don’t fit OTAF focus on pre-revenue ventures can bring those opportunities to our meetings for a five-minute cameo. “Our goal is to be ‘deal central’ for the central Ohio region,” Huston says.
The cameos offer two benefits to the membership: Angels who bring in cameo deals create exposure for non-OTAF deals in which they have invested, and the other angels have the opportunity to consider later stage investments that they might not otherwise see.
“Love of the deal is why angels are in the game,” says Katherine O’Neill, executive director of Jumpstart New Jersey Angel Network in New Jersey (www.jumpstartnj.com). “At the end of the day, people do want a good deal. They do want to invest and make money.”
Jumpstart’s investment geography reaches from Connecticut to Virginia. The region’s great and expansive deal flow is an attraction to membership. “The way early stage VC funds are fleeing the market creates a great opportunity for angels,” O’Neill says. “There are so many interesting things going on. Our members see Jumpstart as a way to get in on that.”
In addition to the group’s regular monthly meeting, Jumpstart holds a “meet the angels night” once a quarter. Because so many Jump Start members are entrepreneurs themselves, they readily support the event.
“We invite the entrepreneurs to a reception where they mingle with the angels. It gives our members a chance to connect one on one with entrepreneurs,” O’Neill says. “We’ve found and funded some of our biggest deals from those meetings, deals that were sort of left of center and not necessarily on our path of interest.”
PIF holds one annual deal event…but it lasts all year
The Private Investors Forum introduces members to deals in a different way than most angel groups. The Angel Venture Fair (AVF) is an annual event for PIF members and other angel investors by invitation only where 20 pre-screened and extremely well-prepared companies out of a pool of about 125 applications present. PIF members then spend the rest of the year working with these businesses for deals.
“The AVF is more than an event; it’s a process by which PIF compresses the deal screening process into a three month period,” says Gaydos. “PIF solicits companies to apply to the AVF in February of each year; then members spend the next few months working with them. It’s one unique way that we attract members to PIF—a compressed screening process and a chance for members to take roles in these companies’ growth.”
This is different from angel groups that primarily use a process of monthly screening meetings or presentations for deal flow. “PIF does that too, Gaydos says, “but we primarily select companies from the initial pool of companies which have applied to AVF and which have received rigorous review and coaching before presenting. This gives PIF a chance to build companies as part of the investment process. Now, that’s real fun.”
PIF invites accredited active angels with various industry expertises from all over the region to participate in the screening process. Investors who join PIF in advance of AVF not only get a free ticket to the event as a member benefit but they can also participate in the screening process.
PIF has created a Due Diligence Fund where members can tap into a pool of money set aside to assist members in conducting due diligence on companies—as long as the findings or research reports purchased are shared with other PIF members.
Gaydos says members like that the PIF model doesn’t pressure them to make investments. “While we don’t require a minimum investment and PIF doesn’t currently have a fund,” she says, “more than 73 percent of the AVF selected companies get funded by PIF members. About half our members are in every deal where our group invests.”
Angel groups keep members by connecting with more than money and fun
For OTAF, this means connecting with the next generation and with the members’ desire to make a difference and leave a legacy.
“We encourage our members to bring their spouses and the next generation to our meetings,” Huston says. “There are so many sons and daughters who have MBAs and have gone through entrepreneurial curricula in college. Seeing live deals with real money at risk with true investors makes these nights very valuable to the next generation, particularly those children who want to start a venture.”
Over the years, OTAF members have come to embrace more readily deals that make a difference as well as a return.
“The nights that have the greatest energy are when we look at something—say a medical device—that could have a profound impact on human-kind,” Huston says. “The room lights up when everybody instantaneously understands that if this company brings this product to market, it could really improve patient outcomes, or when people recognize that a problem is quite pervasive and the entrepreneur might have a truly elegant solution.”
Huston continues, “Most of our members share a common desire to make a difference in Ohio. Our goal is to provide a bright path to money and mentoring that the entrepreneurs in our state can find and follow.”
