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What Angels (and others) Consider Before Investing.

Empress recently sponsored an investor panel discussion on the ad tech, media and social sectors that examined business and investment opportunities and trends. The event held at the Arlo Hotel NoMad featured Brian Cohen, Chairman of New York Angels and Josh Ernest from Revel Partners.

New York Angels is one of the longest running active angel groups in NYC and has invested over $100 million entrepreneurial ventures, representing over 100 accredited angel investors. They typically invest $100,000-$1,000,000 in seed / early-stage companies, and syndicate deals with angel group partners and VCs up to $2 million. They bring the ability to pool money to make larger investments, to mentor entrepreneurs to help them achieve their goals, and to make introductions that can help accelerate growth.

So much for what they do.

But how do they do it? What do they look for in a start-up business / founders?

Brian noted “We look for specific opportunities in promising markets” Take the example of VinePair – a NYC-based start-up that focuses on helping people learn about wine, beer & spirts. The company was founded by Joshua Malin (President & Co-Founder) and Adam Teeter (CEO & Co-Founder). “This company focuses on a specific target and activity: helping Millennials better understand and appreciate cooking and drinking” Brian noted.

“They had a methodology for raising the visibility of the business – by succeeding at the really hard part – crafting deals with liquor, beer and wine manufacturers. Then they produced their own content, which is really outstanding.”

Brian went on to observe “It’s really hard to make money with content.” Working typically as a very early-stage investor he said “We seek an emotional connection as angel investors. We have to believe in the business – in the ability of the founders to execute well, to build the business, to seize the market opportunity.”

Brian qualified his enthusiasm for start-up investing by saying “But few angels make money from their investments, it’s nearly impossible. Everything that can go wrong usually does.”

“We want to know if the founder knows how to run the business, we trust them to figure it out when it comes to solving problem.” He continued “when we see that behavior consistently we as angels are much more likely to invest.”

When asked about trends in the Ad Tech sector Brian observed “No one really knows. It used to be programmatic advertising – but now I am not so sure. We’re always looking for a new play – but they are hard to find. There are too many ad-tech platforms, it’s mush out there.”

Josh Ernest works for Revel Partners, a Venture Capital firm self-described as “Founded by Founders for Founders” with a mission to champion the next generation of enterprise visionaries. They capitalize on their own entrepreneurial heritage to invest in post-revenue Seed to Series A stage – looking for companies who have some initial sales traction but need capital to help accelerate growth.John chimed in

“We look for competitive advantages in both technology and the business model, a unique strategy that is working. In Media and publishing that means striking the right partnerships and creating the right kinds of content in clever and creative ways (video) and then to produce it in an affordable way that can be scaled”

Josh professed a real fascination with “finding out what Millennials want” – he noted “Getting a group of Millennials rabid is key.” He continued “we like to use alternative success metrics, like monetization per user (revenue per monthly active) and businesses that show a path to grow their audience.”

“Our investing involves an element of trust and partnership. We invest in a line, not a dot.” Jsh went on the say “We get to know the companies / entrepreneurs we invest in, with the idea of a 5-7 year long relationship. We need to validate our assumption that the founders are gong to be able to build a successful business, from ideation to creating an MVP (minimum viable product) to scaling the business.

Josh professed an additional view about Millennials as well – “I’m fascinated with Millennials in the workplace, but it’s really hard to evaluate deals in a space when we don’t know what’s going on.” This may be even more of a reason for savvy founders to clearly explain their business models upfront, and in simple terms, during their pitch to potential investors.