Josh Maher is the president of Seattle Angel, a not-for-profit organization focused on strengthening the startup capital market in the Pacific Northwest. Maher is a Seattle-based investor and consultant with nearly 20 years of experience building and investing in new-technology businesses. He is the author of the bestselling book “STARTUP WEALTH: How the Best Angel Investors Make Money in Startups,” which includes interviews with early- stage investors in Google, Invisalign, ZipCar, Uber, Twilio, Localytics, and other successful and not so successful companies.
Josh, tell us about Seattle Angel
Seattle Angel is a non-profit focused on the intersection of entrepreneurs raising capital and angel investors investing capital. Every day new entrepreneurs and new angel investors enter the ecosystem and at Seattle Angel, our mission is to provide more transparency and teaching to help these men and women learn more about the process, how they can optimize for success, and how they can do so in a collaborative and supportive way.
To execute this mission, we run educational programs, office hours, and mentor programs throughout the year for both entrepreneurs and investors. We also sponsor two programs where investing actually occurs. The best way to learn is by doing, so we’re about to start the fifth year of the highly successful Seattle Angel Conference and the second year of the Seattle Angel Fund. Both are designed to help newer investors and newer entrepreneurs learn to invest or raise capital alongside professional investors. To date we’ve invested over $2.5 million into early stage companies in the NorthWest and this number is rapidly rising with the addition of the Seattle Angel Fund.
If investors are on the fence or curious about how angel investing really works, this is the best method of getting hands-on experience with very little risk. For entrepreneurs, we provide ongoing support, which is unique for an angel group. When startups don’t meet the requirements of the investors for any given cohort, we provide deep feedback, and ongoing support to help the entrepreneurs come back in the future and successfully raise.
How did founding Seattle Angel lead you to writing a best-selling book on startup investing?
Through Seattle Angel, I work with hundreds of angel investors and entrepreneurs, helping them all to navigate the maze of early stage funding. Through this interaction and engagement, I continued to find a gap in the information out there about the different types of angel investors. I reviewed all of the available books on the topic, from David S. Rose’s great book, “Angel Investing“, to Brian Cohen’s book, “What Every Angel Investor Wants You to Know,” to Mike Belsito’s, “Startup Seed Funding for the Rest of us,” to Brad Feld’s, “Venture Deals,” and many more. What I found was a lot of great content, but nothing about the different types of angel investors. At the same time, I was observing first hand how different investors reacted to different entrepreneurs. I realized that not all investors would like the same companies simply because of their predisposition on angel investing. Similarly, I found angel investors who preferred one style of investing seeking guidance from mentors who preferred a different style.
All these interactions where there wasn’t an investment style match resulted in frustration. Angels were frustrated they couldn’t identify and work with mentors who fit their style and entrepreneurs were frustrated they couldn’t identify and work with great investors who fit the needs of their businesses. This led me to realize the information was incredibly important, yet missing. In 2014, I decided I’d interview the best angel investors all over the world and write what I learned in a book on the topic.
What one thing do you hope angel investors learn from your research?
For angel investors, the take away is there are angel investors who follow the hit driven investment style of venture capitalists and there are others who follow the double and triple investment style that is common outside of Silicon Valley. Investors can be successful at either end of the spectrum and everywhere in between. It’s not comfortable to invest in the doubles and triples if in your heart you want to invest in the most exciting, highest growth, highest risk companies on the planet and vice versa for investors who want a deeper understanding of the risk and want to see a path to smaller more reliable return.
Understanding your own personal style, finding mentors whose style matches yours, and sourcing potential companies to invest in that match your style are skills that need to be learned. It takes time, it takes making real investments, and it takes learning and reading.
What one thing do you hope entrepreneurs learn from your research?
For entrepreneurs, the major take away is that there are different types of early stage investors, some want to be hands on every week, some want the occasional updates. Some don’t need a lot of convincing about the market/product because they get it instantly and already have an appreciation for where you see the market going. Others focus more on execution and need help understanding your vision of the future.
The most visionary or momentum investors need little numbers or metrics, but need a lot about your ability to execute as a young company. They need signals that you know how to deliver at the scale necessary to build a business that both you and the investors envision.
The most metric driven or value investors need to see your business model, what you’ve been able to accomplish to date with little resources, and to dig into the assumptions you’ve developed that are the basis for adding capital to the business.
Both visionary and metric driven investors can add value, can lead the round, and are good to have on board. What’s difficult is focusing too much on the metrics when talking to visionary investors and focusing too much on your execution when the market and assumptions haven’t been explained to the metrics investor.
Are you planning to extend the research further?
Yes! I have a number of things in the works. Since conducting the research, I began teaching in person courses on developing a fund-raising strategy. From how to think about capitalizing the business, to finding investors, to pitching, to closing investors, and leveraging investors post-investment. These classes have been incredibly well received and I’ve begun taking the courses on the road. I realize that I can’t get everywhere so I’m also in the process of bringing the course online and writing a book that outlines the process with a colleague of mine. The course will be launching in 2016 and subsequently the book, which will include actionable insights into the legal and practical process of starting a business, hiring, growing, raising capital, and exiting.
Of course my research influences my investing activities every day and continues to be extended as I work with new entrepreneurs and investors.