June 28th, 2013 The Hatchery - Long Island Angels
On Friday, June 28, 2013, OLC attended The Hatchery’s Friday speaker series. Long Island venture capitalists and their firms were featured and three panelists took the stage: Marc Alessi of Long Island Angel Network, a technology- and innovation-focused early-stage and emerging growth fund investing in companies in the $500,000 to $2 million range; Corey Massella of Long Island Capital Alliance, which assists local companies in raising growth capital; and Vincent Tang, Principal at Canrock Ventures, an early stage technology venture capital fund.
Corey Massella: I’m the president of Long Island Capital. We helped fund about $150 million in capital since our launch. We used to do Series C to capital, but because there’s been more angels, we’ve started collaborating. We now focus on 1 to 5 million rounds. Our functions—we’re doing quarterly or we collaborate with other institutions. When we do our forum, we feature five to six companies and we make sure to bring in as many investors as we can. Most of us are involved in early stage. We also feature investors in a panel—we have the panel discuss their interests and answer questions. I’m a partner in an accounting firm, too. It’s mid-size and I manage the tech part of the business.
Marc Alessi: My background, I was in state legislature, got involved in the technology sector after incentivizing seed stages for investors. Tech investors asked me to take over Long Island Angels, which I did for some time. I recently resigned from that organization, though.
Vincent Tang: I spent seven years in early-stage investing. Canrock’s been around since 2010 and it’s an early-stage investing firm. Our focus is geared to CMOs, instead of traditional IT. It’s about marketing these days and CMOs have more power now.
MA: Long Island Angels are focused on Long Island startups and in NYC too, but we’re all over the map. They have an eclectic board. Regarding New York, there’s not much difference between New York Angels and Long Island Angels. They actually invited me to see how they work. There’s some syndication, but I don’t know about the dealflow that’s happening. About the vetting process, it’s an emulation of what NY Angels are doing. We used to be all about business plans, but now it’s an executive director that screens all of them. I had to go through 20-30 applications a month and choose the best four out of all of them. We’d ask the entrepreneurs to come in and we’d hear their pitch.
CM: We’re always gearing up for quarterlies. At this point, we call our investors and send out a notice to our community and we usually get 20 applications. We look through them and vote. We select board members that should coach the entrepreneurs and rom that point we’re ready to go. As I said before, we select board members to be part of a panel too.
From here, the floor was open to the audience for questions.
Q: What should I do in my investor valuation?
CM: It’s all about valuation. The core of your presentation is to justify your valuation.
MA: The general rule for Long Island Angels is $3 million in valuation—no more than that. It also depends on the deal.
VT: Forget about one way of thinking. There’s so many ways around it. The key thing here is: Can you build a business? Percentage ownership isn’t a primary problem. It’s secondary.
Q: When it comes to it, what are the successful presentations to you?
VT: What I focus on is—give me one page. I invest in enterprise software. You need to convince the CTO, CMO, CEO that you can—and you will—increase sales. It’s details, and that’s what I’m looking for. I don’t care about addressable markets. What I care about is, are you tackling the problem in a new way, can you create enough value.
MA: When I see people’s eyes light up is when entrepreneurs talk about their first exit, the metrics, plans for scaling, a beta product, and when you can talk about that, it leads to an interesting board discussion.
Q: What’s the average wait time?
VT: It depends on the entrepreneur. It can be anywhere from one month to six months to get to know them. It also depends on what space they’re in.
Q: How often are you guys involved after the investment process?
CM: It depends—if we’re on your board, it’ll be pretty often. If not, quarterly.
MA: For Long Island Angels, it’s quarterly.
VT: We try to be in touch as much as possible. We’re there to help and answer questions and nurture our relationship.
Q: What do you expect from an exit?
CM: When seed investors ask you that question, they want to know if you have a vision.
VT: But seed investors shouldn’t even be asking that to a CEO. That’s what boards are for. They figure out the exit strategy in place of the CEO. They should have it figured out and show it to investors. The last thing on the CEO’s mind is an exit.
Q: What is your feeling on non-technical co-founders?
VT: Unless they have a deep industry insight and a solution that no one else can see, we generally don’t invest.
MA: A lot of the time it’s a technical founder, marketer and a UI/UX designer.