A Gathering of NJ Angel Investors

I found them last Friday just off the Garden State Parkway, exit 131-A. The Woodbridge Hilton to be exact.

At the New Jersey Innovates Conference 2011 organized by NJ Entrepreneur, a group of Jersey-centric angels shared their  business experiences and their current investing approaches with an audience spread out across the startup curve.

Based on the David S. Rose investment course I completed last month, these private investors fit the angel profile and their advice followed familiar angelic principles but with exceptions—this is Jersey after all.

Panelists Tad Martin (former COO of Overstock.com), Mario Casabona (founder of defense electronics company ERI), and Anne Shehab (pharmaceutical business development at several bioscience startups) are all former successful entrepreneurs who crossed over to the “dark side” as private investors.

Nothing too surprising about them, angel-wise. Allergic to large bureaucratic organizations, check. Loves the thrill of creating something new, check. Interested in nurturing others. Enjoys risking capital for the chance to make a huge return.  Laughs off (after crying over)  failed investments. All of the above.

One of the many interesting aspects of this particular angel panel, is that two of them, Casabona and Shehab, are themselves part of a larger angel grouping. In the case of Casabona, it’s Jumpstart NJ Angel Network, where he is currently chairman overseeing more than $27 million invested in mostly Mid-Atlantic (NJ, PA, and NY)  projects. And Shehab is a member of Golden Seeds, an angel collective that has over 30 investments in biomedical companies spread out across the US.

Martin acts more like a traditional angel investor, placing a few bets in areas he knows well— e-commerce and software companies, mostly in NJ and in NYC. But there are variances with him as well. Martin is also on the other side of the term sheet, as founder and CEO of Cross Commerce Media, a media analytics company.

Over the course of an hour-long Q&A, I heard the familiar angel commandments uttered. Management team is critical. No skin in the game is a deal killer, as in “thou shalt invest in your own company.” Angel investing is risky. SBIR’s (from the government) is free money. You need to invest in a minimum of ten companies not all in the same sector. Angel investing is risky.

Then we all had a chance to see how the sausage is made.

Based on Casabona and Shehab’s experiences, it became clear that the key benefit of being part of an angel group with entrepreneurial expertise across several industries is that it helps to reduce risk.

Obviously an angel has more tolerance for risk—perhaps bordering on enjoyment— than the rest of us but even they can fear to tread, like regular mortals.

In a group angel situation, potential investments pass through a review process involving multiple business minds analyzing business plans until they find the ones deemed worthy. Then a lead investor with deep experience in the particular market and who can figure out proper pre-money valuations—always a difficult calculation—will bring in the others and close the deal.

In theory, the wisdom of the angel crowd should eliminate many of the obvious losing propositions. But sometimes going it alone has its advantages. One of the big wins, at least admitted to during this hour, was Casabona’s, acting as solo investor in a company within his own industry of defense electronics.

He hit a home run, earning back four times his original investment over an 18-month period.

According to Casabona, anything that gets your money back counts as a homerun in his book.

That’s a piece of angel wisdom that no doubt keeps these investors, as well as the entrepreneurs they are helping, in the game for another inning.

Related articles

• Hoboken Tech Meetup 2/23/11: David S. Rose’s Reality (techoverseblog.c0m)
• JumpStart NJ Angel Network (jumpstartnj.com)
• Golden Seeds (goldenseeds.com)
• NJ Entrepreneur (njentrepreneur.com)
• Cross Commerce Media