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Bril Flint, an active angel investor, spoke at the University of Texas Entrepreneur in Residence “Money Talks” speaker series on Tuesday night at the AT&T Executive Education and Conference Center downtown. Flint is the incoming chairman of the Central Texas Angel Network, known as CTAN. Before becoming an investor, he served as an executive at Apple, Dell, EMI-Capital Music and Bain. Following his talk, Flint answered these questions.
Q. What’s the biggest mistake an entrepreneur makes when seeking an angel investment?
A. There are a bunch of mistakes they make. I think the biggest mistake they make is they often don’t listen as much as they should. They are pitching to a bunch of really smart people and they don’t pause enough to take in the feedback. It’s often times very good advice they could be getting from the investors that would make a company more investable, or improve their business, or give them leads on where to go all over town to find customers or better profits.
Q. How does an entrepreneur know when to bootstrap and when to seek an angel investment?
A. It really depends on how much money they need to raise. I mean it’s not worth going through the process, for example using CTAN, unless you need to raise $200,000 to $250,000 at a minimum. There’s a lot of due diligence that needs to be done, legal costs and a lot of time. So a lot just depends on how much money they need to get off the ground. Almost always the answer is to bootstrap first. It’s hard to raise money from an angel group these days unless you have a finished product and/or revenue that you’re generating because it’s a competitive business. There are a lot of good startups out there. When angels are weighing which one should I write a check for the one that has revenue or a proven product or a proven business model is going to win. Bootstrap until you can prove that.
Q. How much should an entrepreneur ask for in an angel round?
A. The sweet spot for deals we do are anywhere from $200,000 to $1.5 million. If they truly need more money than that it starts getting out of the range of what a group of angels can really put together.
Q. What kind of relationship can an entrepreneur expect to have with an angel investor?
A. The best relationship is one where the angel knows about their business and can offer advice. The entrepreneur better be open to that because they can benefit greatly from getting contacts and employees that are skilled and client leads and getting advice on all of these issues a startup faces. Most angels want to be actively involved. They will not necessarily be actively involved in everything in their portfolio. But it’s key to find investors that know something about the business and can help them. They need to be open to that.
Q. How does CTAN compare to other angel networks around the country?
A. We’ve reached a tipping point I think the past year. We’ve crossed a line where the activity level is picking up dramatically. We’ve always been smaller than Silicon Valley and probably not as active as say the Boston area. But I think that’s changing rapidly. We’re getting a lot of people moving here from the West coast and the East coast both. Because they like the Austin lifestyle and they see opportunities here. So we’re getting investors moving in, especially from Silicon Valley. And we’re getting entrepreneurs who want to start their own business. It’s a business friendly environment. There’s a lot of talent here. There’s open space, nice lifestyle. Whereas before we weren’t one of the well-developed communities, again, I think we’ve reached a tipping point where we suddenly are becoming very attractive to investors and entrepreneurs alike.
Q. Who are the angel investors?
A. There’s a mix. The traditional view was kind of a 35 to 60 year old retired male successful executive. That’s probably still true today. But now we’re getting an influx of younger folks, many of whom are successful entrepreneurs that want to get involved in angel investing and kind of give back to the entrepreneurial ecosystem. We’re getting more women involved and they bring a different perspective to the equation, both from the investor side and the entrepreneur side. We’re also getting more members of our angel group who are representing family offices that want to add this investment class to their portfolio. So that’s another trend we’re seeing.
Q. What kind of impact do you expect the new crowd-funding legislation to have on angel investing?
A. I don’t think it will have an immediate impact. There’s going to be some companies where it might make sense to go that route. It’s too hands off for most of the guys in our investor network. They want to be more directly involved in the company. They generally have a higher standard of due diligence when they make an investment. The crowd-funding model really doesn’t lend itself to that. I’ve participated in stuff on Kickstarter that’s one of the best examples of crowd-funding out there. I’ll do that at $50 a time instead of $20,000 at a time. I think it’s interesting. Someone may figure out how to make it work for certain types of companies. I don’t think it will have too much of an impact on the types of deals we do.
Q. What are some of your favorite investments?
A. One of my favorite investments, probably the one that is doing the best right now, is a company called Phunware here in town. They’re in the mobile space. I invested because of the CEO and the rest of the management team is very strong. They are very successful entrepreneurs. They’ve done several prior ventures. They know what they are doing. They are experienced. They are playing in one of the biggest markets there is. Another company is Volunteerspot. Another great CEO Karen is fantastic. Very different way of looking at things than most of the entrepreneurs we see. It’s got a great business model. I like that deal too because it’s one of the first deals we’ve sponsored that syndicated nationally. It just wasn’t Texas angel investors. We had investors from Nebraska and the East coast. I think that’s an emerging trend we’re going to start seeing of nationally syndicated deals.
Q. What are angel investors looking for right now?
A. Every angel has their own kind of playground they like to go to. And so I’ll answer more and less for myself and maybe as CTAN as a group. I like to diversify. I like a lot of different businesses. So I like mobile just because the growth potential is so enormous. I’ve done medical device deals. That’s one of the most common deal categories that any angel group invests in. Because there is a lot of money and opportunity in medical and healthcare related businesses. Good software – good enterprise software I think still has opportunities. I like Austin because there’s some good food deals. Whole Foods is very supportive of new startups and interesting new food products. They’ll distribute the products regionally to see how they do. And music is big here too. We probably see more music related deals than most angel groups because of the music interests here in town.
Q. Do you think there is a tech bubble?
A. Not really I think these things run in cycles. We see ups and downs and the average valuations that companies are asking for is cyclical.