The last post on The Perfect Angel Group created an idealized composite group that unfortunately doesn’t exist. The post did beg the question of which is my favorite group, which I’ll answer here. Quick disclaimer—I have visited less than half of the groups in New England, and none South of Boston. So while this is a limited and regional list, I think it’s still instructive to look at a few of the groups in a little more depth.
The Bronze Medal goes to Mass Medical Angels (“MA2”). There are several exemplary features of this group, not the least of which is that it is put on by thorough professionals at zero cost to participants. While zero dues can’t be sustainable in the long run, it is nonetheless a testament of the love and tireless volunteer work put in by its Board. The principals are Richard Anders (a successful serial entrepreneur), Carl Berke and Roger Kitterman, both VCs with the Innovation Fund at Partners HealthCare, and Pushwaz Virk from Dimagi.
What strikes me each time I attend MA2 is the incredible credentials and domain expertise of its members. As the name suggests, it focuses exclusively on medical investments, primarily in medical devices, and its members include department heads of some of the finest hospitals in the world, MD/PhDs, technologists, lawyers, engineers, regulatory experts, biz dev people, etc. Every corner of the medical ecosystem is represented and represented well. Not only does this make for an exceptional screening committee, with the end benefit of uniformly solid, vetted deals making it through to the membership, but it reaches another level entirely on due diligence. While all angel investing is necessarily risky, I’m comfortable guessing that MA2, as it is known, will come up with a higher success rate than any other group I’ve met.
Let’s take Castlewood Surgical as an example of MA2′s due diligence. I invested in Castlewood (via North Country Angels) primarily due to my faith in its new CEO, Wolfgang Daum, who had done an exceptional job for investors at his previous job at Boston Heart Lab. Having tried to recruit Wolfgang to an attractive opportunity in Vermont, I was confident that wherever he chose to go would likely be a great story. So, I invested without deep due diligence. Fortunately, I was able to sit in later on DD with the group from MA2, and I was floored by the thoroughness of the effort. First, MA2 has a standing head of DD, Dave Tischler, whose presence adds for a consistency and professionalism to its process. Then, as at most groups, interested members join in on the discovery process. There have been at least 3 due diligence meetings so far—the first with Castlewood’s founder (a physician/entrepreneur), another with the full management team, including the inventor of their device, and most recently without the company, but with the DD group interviewing with a heart surgeon from Cleveland Clinic, questioning him as a prospective device user acccompanied with an insider’s view of that corner of the surgical market, what hurdles of proof the new company had to pass for fellow surgeons to want to adopt it, the procedures at Cleveland Clinic and elsewhere to get a device through the purchasing and accounting departments, etc. Now THAT is due diligence. And this is all after the original presentation made it through a knowledgeable crowd at both screening and group presentations, both of which were textbook examples of careful investing.
The downside is that such diligence takes time, and long decision times are anathema to entrepreneurs looking for funding. Given, however, the slow state of med devices getting through FDA approval, trial studies, etc., this approach is justified for the medtech sector. And as the best specialist in town, MA2 gets to look at a lot of good flow that doesn’t go to all of the tech-oriented groups.
The Silver Medal goes to Walnut Venture Associates out of Wellesley, MA. Like MA2, Walnut also specializes, but this time in IT sector, although that definition occasionally gets stretched. Many of the members are MIT graduates (albeit from the ‘70s and ‘80s), and they are uniformly experienced investors. Being old pros, things are done a little more loosely. Members rotate chairing the meetings, and there exists a solid camaraderie and respect between members. Not unimportantly for me, meetings are held in the evenings on the campus at Babson College, one of the few angel groups that has evening hours. This leads to a more unhurried pace, and allows for a higher, more consistent turnout. This in turn allows for a lot of shared history and reference. I’ve learned more sitting in on their meetings and talking with their members than at any angel group. While I came to angel investing with the background of 25 years of investing Other People’s Money in public securities, as well as an operational experience of running a successful startup from launch to exit, there was still a huge learning curve for me in angel investing. 18 months later, I still learn from the Walnut members’ understanding of the nuances of angel investing. In summary—interesting deals in capital efficient sectors, domain expertise, experienced professional angels, and a relaxed evening setting that allows for longer discussions with the presenting companies—what’s not to love? Well worth the long drive from Burlington.
And for the Gold Medal position…Open Angel Forum (“OAF”) Boston. Man, even their logo looks like a gold medal. There have only been two meetings in Boston to date, and I haven’t pulled the trigger on a deal that I’ve seen there yet, but Jason Calacanis has come up with a different format that instantly makes this my favorite angel group. Like AngelList, OAF is an experiment in shortening the distance between entrepreneurs and angel investors. Both are global in outreach, but while AngelList is virtual, OAF is creating chapters in big financial or startup centers: Silicon Valley, San Francisco, LA, Seattle, New York, Boston, London, Colorado Springs, and Philadelphia, with management split between the founder, Jason Calacanis, and his associate Jason Krute. The two coordinate with local point people at each chapter. In Boston, that means Bill Warner, the force behind the Unconference as well as bringing TechStars to Boston. Mark Suster’s writeup is here for OAF LA–the format looks consistent across all of the chapters.
In my “Perfect Angel Group” post, I talked about my desire for several things which don’t even exist at OAF, and probably won’t happen in the short term. There is no good recordkeeping, little advance notice if any on companies presenting, no archiving on the website, no due diligence process, and no formal affiliations with other groups. So how can it succeed? It brings a stunning group of people together in the right way, and then gets out of the way. While I’m going to guess that the average angel invests in perhaps just 2 deals a year, the average investor at OAF is far more promiscuous, and that’s a good thing…at least in angel investing. Meetings are in the evening, with plenty of food and drink, and unlike at other groups, the angels and all companies are together in the same room the whole time. No secret discussions, no closeting off of the entrepreneurs. Then, all of the angels introduce themselves, mentioning their most recent deals. (That alone provided a lot of good conversation later on.) Presenters go for 5 minutes, with just 5 minutes for questioning, keeping the format moving, but that’s just the beginning. After the presentations are over, there is all the time in the world to move around in groups, getting the right people together. No one was forced to spend time (other than the 10 earlier minutes) on a deal that wasn’t for them, yet you had all the time you wanted to talk to the entrepreneur you wanted to, while still having the ability to corner a fellow angel for an off-the-record reality check.
From the entrepreneur’s point of view, it’s equally valuable. 20 super-qualified angels (well, some seed capital VCs sneak in), all able and willing to pull the trigger and make a decision, and all with broader connections to other angels should they want to help promote a company and raise a round. While there is a danger that the locals will have already seen some of the presenters before, attention is paid to make sure that a few of the companies are essentially debuting for that crowd. So far, this has been ensured by having at least one of the companies come from out of town. At OAF Boston #1, companies came from Montreal and DC in addition to MA, and at the 2nd meeting one presenting company came in from Ohio. Katie Rae (of Project 11 in Boston, and a MassChallenge mentor) now is selecting the companies to present, but I’m sure she benefits from Jason’s high visibility and his years of experience recruiting the companies presenting at TechCrunch50.
If there is a weakness in the OAF format, I don’t know it. Should an angel like a deal but require more time (or perhaps the ability to bring in some other domain experience), there’s nothing stopping them from making it happen. And with most all of the crowd being professional investors (there were still a few with day jobs as entrepreneurs of their own companies), no lack of resources or knowledge that would keep them from a decision.
So, Open Angel Forum has positioned itself between the old (slower moving, less active) angel group model and the new internet speed dating (or bandwagon or “party round”) via social proof offered by AngelList. It still captures a physical meeting, which I believe is essential, but the flow and participants are qualified in such a way that the signal to noise ratio for all involved is incredibly high. For angels, even if no company is right for you, it still is a focused and worthwhile time to get together with your peers. Without the silly allegations of “AngelGate”, if you’ve had to suffer through the coverage of that.
Congrats to the two Jasons for pulling off a better mousetrap. It is my giri to thank you. May you launch 1000 ships and 1000 companies via your new creation.
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Filed under: Angel, Boston | Tagged: Bill Warner, Due diligence, Jason Calacanis, Katie Rae, MA2, Mass Medical Angels, Open Angel Forum, Walnut Ventures | 6 Comments »
