Four Weddings and a Funeral for an Angel Investor

Angel Investment commentary

Well, March has come in like a lion. Not only did we get 26” of snow two weeks ago in Burlington, but also I’ve been experiencing a blizzard of activity with my angel investments—4 good events, and 1 bad. Which is a great ratio, but then again, these are only midterms, and most final grades aren’t in.

So, what’s to celebrate? The best news came first: an exit on one of my investments.  The good news was accompanied by the first breaking of my Angel Investing New Year’s Resolutions: rather than wade through the reams of paper related to the sale, I just signed the consent agreements and am now waiting for the incoming wire.  If it doesn’t come in, I guess that means I should have continued to pledge to read all the fine print.

Next good news is an investment in NoiseToys, a startup out of Dogpatch Labs San Francisco. The current NoiseToys website displays an existing app, which has had a fair amount of success. However,  I’m more excited about a stealth app in beta now, called “Apptitude”, which allows people to share which apps they use—like merging social search with the App Store. I’ve always loved to just swap phones with people to see what gadgets they are using, and Apptitude allows this to be done among friends virtually rather than in-person. The app is clever and useful, and as always, I love the team. Here’s the AngelList writeup on NoiseToys. This is a West Coast company, and I can thank AngelList and the power of Skype video for making this investment both available and “diligenceable” for me.  Quick story on diligence: I saw that one of their investors was Charles Huang…who I assumed was the Charles Huang at Spark Capital in Boston. Charles and I talked for 10 minutes—we hadn’t met, but had 50 people in common on LinkedIn–when I finally asked him about what he liked about NoiseToys. Charles had no idea what I was talking about, and it turns out that the Charles Huang who invested is not Charles Huang of Spark, but rather the co-inventor of GuitarHero, out of the Bay Area.  So I got to meet two great guys out of one Huang number. (Sorry about that one.) So that much more of a bonus, regardless of what happens with NoiseToys. Just as with my investment in CardMunch, this is not a first time app for the founders—they’ve already honed their chops on previous products and are well-positioned to move the company forward on a ramen noodle budget.

Good news #3. Just last week, I visited the new Cambridge office of Incentive Targeting, which is doing a follow-on round. Incentive Targeting uses loyalty card information to more effectively target ads for grocery shoppers, and it does so in a Google AdWords-type way that makes it easier and more effective for the advertisers (the consumer packaged goods people like a yogurt manufacturer) to communicate and run promotions with grocery chains.  This was a pretty easy decision to follow-on: the round comes just on the heels of the announcement of a major new customer and another new pilot program, the combined extent of which will double their reach in terms of registered shoppers. Just as good, they have developed a novel (for grocery stores) new product along the lines of Groupon for groceries.  The two new client wins make it far less risky than at the time of investment last year when they had just one beta client, and I am delighted to follow on.  My visit also had had some serendipity to it: I had run into Rich Tarrant Jr. of MyWebGrocer at a Champlain College’s “Speaking from Experience” series. Besides running one of Vermont’s hottest internet companies, Rich is also a trustee at Champlain College, which has emerged as a key player in bringing together Vermont’s entrepreneurs. When Rich asked me what was up with Incentive Targeting, which is in the same Grocery/Internet/Ad space, it made me realize that I had been negligent on keeping abreast with the company. Which led to my meeting, and subsequent re-investment. And come to think about it, these two firms could work perfectly together—nudging me for some behind-the-scenes schmoozing to add value to my portfolio and to Vermont. Rich and Win Burke—call each other!

The fourth “wedding”—all in the space of 6 weeks, which is a bit scary—is an investment in Green Goose, a startup which recently rocked the house at Jason Calacanis’s Launch Conference. Green Goose is a combined hardware-software play (which always gives pause) combining inexpensive sensors you can put on anything from toothbrushes to barbells with a gaming layer to help promote good behaviors. Rather than describe it further, you can see links here and here, and read more about it here.  While I saw the live feed from Launch, this was a company where social proof was important. Bill Warner was the first backer, soon followed by Katie and Reed from Project 11, Jason Calacanis from OpenAngelForum and Launch, (not to mention Shervin Pishevar, Jay Levy, and other angels I don’t know)

I saw Boston investor Bill Warner last Wednesday, and when I mentioned my regret that I wasn’t able to be at the Launch Conference to see GreenGoose, Bill clued me in that the company was thinking about expanding the round. A few emails later, and now I’m in. I’m a little wary about the jumping onto the bandwagon, following the herd, being a lemming, what have you, but this is an extremely interesting company, and one that jives nicely with both my healthcare and mobile theses. With a CEO who can make a killer presentation. Expect lots of press on this firm as it expands.

And now for something completely different. I also had the not-pleasant task of saying no to a portfolio company who was looking to get another round. I’d already followed on once, albeit with a tiny commitment, before, but now was the time to give the bad news. Why the no? On the outset, the company is in a big space, has a potentially huge product, and is led by an experienced entrepreneur with a terrific advisory board. They had announced some pivots (which in itself is not bad—Incentive Targeting has changed their pricing model, so I’m not against those who change their minds), had missed some numbers (don’t we all—hard to remember any company which actually makes their initial projections,) but the killer problem was personnel: the company has lost several team members, and one of the replacements hired had already been found lacking.  Back to my 60% jockey, 40% horse theory, I was disappointed at a company which has a bankable CEO and advisory board seems unable to attract and retain the key technical co-founders or successors.  I’m still invested in the company, but I’m unwilling to put more into it.  While not yet a funeral, this is one of those times I’ve got buyer’s regret. There are a couple of other companies I now regret having put money into, but I’ll try to do my best to give counsel to all of those companies in the hope that they can turn it around. But the stark reality of startups is a high failure rate.  If and when (and there will certainly be a when for many) the firms end up DOA, I’ll do my best to figure it out and write about it.

I’m eager to learn more about the lessons of failures. I applaud those angels like Joe Caruso who list their loser investments as well as their winners. (And I’d happily take all of Joe’s losers if I could also get his winners.) Readers, I’d welcome any links to articles referring to “lessons learned” from bad startups, and especially bad angel investments. Know of any good blog entries? There must be several–let me know.

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