Tag: Central Texas Angel Network

Tips on Raising Funds from Angel Investors at CTAN Workshop

Rick Timmins, chairman of the Central Texas Angel Network, speaking to a packed house at its workshop during Austin Startup Week.

Rick Timmins, chairman of the Central Texas Angel Network, speaking to a packed house at its workshop during Austin Startup Week.

Reporter with Silicon Hills News

Raising money is really, really hard, said Bob Baughman, co-founder of HUVRData.

“I thought it was hard enough just to develop some great new idea and get the business case, but funding is really hard,” Baughman said.

HUVRData closed in August on $2 million in a Series A funding round from the Central Texas Angel Network, the Houston Angel Network and the Texas HALO Fund. Baughman spoke Tuesday afternoon to a packed house at CTAN’s Entrepreneurs Workshop, a featured event during Austin Startup Week. The event was held at Techstars in downtown Austin.

HUVRData is a data and analytics company that has a fleet of drones with cameras to inspect wind turbines and other commercial properties in the wind, solar and oil and gas industries. It has six employees and is hiring. Its offices are on State Highway 71 on 100 acres.

During his presentation, Baughman joked that he met with investors in coffee shops and the ones who wore flip-flops, T-Shirts and shorts had made a ton of money and were very astute. The interaction level with angels is very different than VCs, Baughman said. The angel investors are actively involved in their investments and they also expect the entrepreneur to know their business and industry and have done a ton of research, he said. The worst thing to do is to try to B.S. the investor during a meeting, he said.

“If you don’t know the answer to something, don’t guess,” Baughman said.

He also advised entrepreneurs to have patience and persistence.

CTAN is one of the most active angel networks in the country, said Rick Timmins, CTAN’s board chairman. CTAN members have invested more than $62 million in 110 companies since 2006. The organization has an angel network with more than 130 members who are accredited investors. CTAN investments are primarily in technology, life sciences and consumer products, food and beverage companies. But the organization will look at deals in any industry.

Last year, CTAN invested $14.6 million in 33 companies with 16 of those new companies and the rest follow on investments in existing portfolio companies, Timmins said. This year, CTAN has invested $10 million so far, he said. The average investment is $450,000, he said. Angel investors do a lot of mentoring and coaching and often take a board seat on the company they invest in, Timmins said.

CTAN has a vetting process to become a portfolio company. The organization recommends entrepreneurs start off attending a meet the angel investors office hours event at Abel’s on the Lake. From there, the entrepreneur can decide whether to apply to CTAN for funding. It costs $250 to apply. CTAN selects approximately ten companies during each funding cycle to pitch to its members. The group then further narrows the companies down to three finalists.

It generally takes ten weeks to raise funds from angel investors, Timmins said. CTAN does extensive due diligence on the company and its founders, he said.

Angel investing is a risky business, Timmins said. But it can be rewarding, he said. Twenty percent of Timmins investments will produce all of the returns on his investment and another 30 percent will give some kind of return and the others will provide no returns, he said. Most of the angel investors invest in companies because they enjoy giving back and helping others, he said.

And most venture capital funds do not invest in seed stage companies, Timmins said. The funding amounts are too small for them, he said. Overall, venture capital funds are shrinking today with less than 500 VC firms nationwide, Timmins said. Meanwhile, the number of angel investors has grown in the last few years, he said.

So what does CTAN like to see in a startup?

Timmins likes to see companies that have revenue and can demonstrate a path to profitability. He also wants the entrepreneurs to show him how they can successfully scale the operations. He looks for great teams, disruptive technology, paying customers and a solid business plan.

John Paulos, a board member with CTAN, also gave a presentation on what he likes to invest in. So far, he has invested in 25 companies and he currently serves on seven boards.

Angel investors like to invest in solid teams, big opportunities that are scalable, products and services that are unique with a plan to sell the product, reasonable valuations and a quality business plan, Paulos said.

“It’s less a plan in the traditional business plan sense, than it is a vision not just of here and there but the milestones and steps in between,” Paulos said.

The entrepreneurs need to be coachable and to listen to advice, Paulos said. The two most important things an entrepreneur has to do are to get funding and hire good people, he said. An entrepreneur needs to communicate and be inspirational, he said.

To be a great entrepreneur, the person has to have a focus and a drive that most people don’t have, Paulos said.

CTAN also doesn’t invest in lifestyle businesses, Paulos said. The startup has to have an exit strategy so investors can get a return on their investment, he said.

CTAN is the Most Active Angel Group Nationwide

slide-16-638-2Texas had 11 percent of all angel group deals in the second quarter of this year, according to the latest Halo Report.
The deals, with a median investment round of $590,000, had pre-money valuations of $2.5 million. And 74 percent of the deals were syndicated.
“When angels co-invest with other types of investors the media deal size is $1.95 million,” according to the report, compiled by Silicon Valley Bank and its partners the Angel Resource Institute and CB Insights.
The Central Texas Angel Network was the most active angel investment group nationwide. The report doesn’t go into detail about the number of deals or dollars invested by CTAN.
Seventy percent of angel group deals in the second quarter were completed outside California and New England, although 36 percent of dollars are invested in these regions,. California led in number of deals, with 17 percent share of angel group investments.
The bulk of the deals focused on Internet, healthcare and mobile companies receiving 71 percent of the investment deals and 79 percent of the dollars, an increase from the first quarter.

Hurt+Harbach Shuts Down

hh-social-media-transparentLast month, a new seed-stage venture capital firm, Hurt+Harbach launched.
This month, it shut down.
Brett Hurt, co-founder of Bazaarvoice and formerly with Austin Ventures, and Jeff Harbach, former executive director of the Central Texas Angel Network, formed the firm aimed at launching more tech companies in Austin. Harbach and Hurt made the announcement to end their firm in separate blog posts.
“Today we’re announcing that Hurt+Harbach is no longer,” Harbach wrote on his blog. “It’s a bittersweet ending. A week ago Brett decided that his hopes and dreams ultimately lie elsewhere, and we agreed that ripping the band-aid off in quick order was best.”
“I’m writing to tell you that I’ve decided not to continue to pursue Hurt+Harbach,” Harbach wrote on his blog. He then wrote that the decision had nothing to do with his partner, Jeff, and that they were “very successful on the fundraising trail.”
“We were approaching our first close with prospective investors but we never actually sent out the final legal paperwork or took any investor capital in,” Hurt wrote. “Facing the prospect of a 10-year fund cycle, with investors counting on me for longer than that (a successful VC will set up multiple 10-year lifecycle funds over the years), made me think more deeply than ever if this is what I was really passionate about doing for the next 10-20 years of my life.”

How to Get Money from VC and Angel Investors

Laura Kilcrease, Brett Hurt, Michele Skelding and Rick Timmins Photo by ©2013, Scott Van Osdol, www.vanosdol.com

Laura Kilcrease, Brett Hurt, Michele Skelding and Rick Timmins Photo by ©2013, Scott Van Osdol, www.vanosdol.com

Founder of Silicon Hills News

Austin has one of the nation’s most active angel networks through the Central Texas Angel Network, known as CTAN.
Last year, CTAN, with 100 members, invested about $8 million in 28 companies, including 13 new companies and 15 portfolio companies.
Every angel investor is doing it because they are passionate, said Michele Skelding, a CTAN member and angel investor.
She spoke at the RISE Lunch & Learn panel Tuesday on Angel & VC Funding at the AT&T Executive Education and Conference Center in Austin.

Michele Skelding photo by ©2013, Scott Van Osdol, www.vanosdol.com

Michele Skelding photo by ©2013, Scott Van Osdol, www.vanosdol.com

Laura Kilcrease, UT McCombs Entrepreneur-in-Residence, moderated the panel, which included Skelding, Brett Hurt, a serial entrepreneur who has founded five companies and is now an angel investor and Rick Timmins, member of CTAN.
Throughout an hour long discussion, the panelists talked about a wide range of topics including what they look for when deciding to make an investment to tips on how to talk to a potential investor.
A startup must have five critical ingredients to build a successful company, said Hurt. He details them on his blog Lucky7.io. They are a solid business plan, a good team, the proper mindset, funding and culture.
While Hurt, 41, spent the first half of his life building companies, he plans to spend the second half helping entrepreneurs make an impact on Austin. His focus is on ideas that can become big businesses. Hurt co-founded Bazaarvoice which is now a $540 million company.
Laura Kilcrease and Brett Hurt photo by ©2013, Scott Van Osdol, www.vanosdol.com

Laura Kilcrease and Brett Hurt photo by ©2013, Scott Van Osdol, www.vanosdol.com

Hurt has met with 200 entrepreneurs in the last six and he says there are people thinking big in Austin and some of them are thinking really big.
“There are some people who are thinking too big,” he said.
He’s only interested in working with companies that have products like Bazaarvoice and HomeAway. The one difference is if he has his Angel hat on he will make an investment in something different like Deep Eddy Vodka. He actually met Clayton Christopher, the founder of Deep Eddy Vodka, through RISE.
“I’m a huge, huge fan of RISE,” Hurt said. “This is one of the best things the city has going.”
If he makes an investment in a company like Deep Eddy and he gets back three times his investment then that’s just fine, he said.
But normally, he wants to see companies that have a clear path to get to $100 million in revenue or $1 billion in revenue.
“Most of the things I see are not close to that,” he said. “Lifestyle businesses are just fine. I’m a think big guy.”
When it comes to writing a check, Timmins looks at four things. The most important thing is the entrepreneur, he said. He looks for leadership qualities, managing skills, the ability to take advice and listening skills.
“It’s about the person or the people running the company,” he said. “Fifty percent of what I look at when I decide to invest is about the entrepreneur…If there are any doubts in my mind, I don’t do it.”
His second criterion for investment is the company’s technology and whether it’s disruptive enough. He’ll often consult experts to help him assess that.
The third thing he looks at is a customer.
“All you need for me to believe this is one paying customer who believes in what you’re doing and what you’re trying to establish,” he said. “The last thing I look at is the business plan.”
The business plan makes up just 10 percent of his decision making process.
“I don’t believe business plans anymore,” he said. “But I want you to go through the exercise…I want you to go through the process of thinking through it.”
As a venture capitalist, Kilcrease looks at two key aspects: the jockey and the team, she said.
“We know the business plan is wrong but it’s giving us an idea of what you’re thinking,” she said. “The next thing I look at is the market.”
The average angel investment is around $275,000 and the average venture capital round is $2 million to $3 million.
“I think the jockey and the market is key,” Kilcrease said. “The very last thing I look at is the technology. An “A team” will be able to rework the technology to the market or pivot as they go along.”
In addition to VCs and Angels, now investors are starting to see a third category called the Super Angel who is funding the gap between seed stage and Series A funding for startups, Kilcrease said. And another funding source is syndication between angel networks across the country, which can provide funding in the $1 million to $3 million range, she said.
“Don’t just think about angels as a $50,000 check,” she said.
Mentorship that a company gets is more important than the amount of money they receive, Hurt said.
“A business needs capital and mentorship,” he said. “It’s like a marriage. You can take money from angels and it can be your worst nightmare. It’s got to be the right fit.”
CTAN has five funding cycles through the year, said Skelding. And CTAN added office hours as a more informal way to get to know the angel investors and for entrepreneurs to discuss their ideas, she said. One big mistake entrepreneurs make is that they are just not prepared to pitch to investors.
“You’ve got to learn how to speak to an investor,” Skelding said. “They’ve seen thousands of deals.”
Entrepreneurs need to serve up their ideas in a way that is quick and interesting, she said.
Angels will invest in any type of businesses, Kilcrease said.
“If you get the right angel there’s almost no area they won’t consider,” she said. Whereas, VCs have specialized areas they invest in, she said.
Since 2009, Timmins has invested in 24 companies and only one has a chance to be public, he said.
In response to a question about the single biggest mistake people make in their pitch, Hurt said that entrepreneurs go into the VC or Angel pitch and they show a hockey stick growth slide that they don’t believe in.
“Set expectations you think you can meet,” he said.
Rick Timmins photo by ©2013, Scott Van Osdol, www.vanosdol.com

Rick Timmins photo by ©2013, Scott Van Osdol, www.vanosdol.com

Timmins echoed that sentiment saying that entrepreneurs need to set realistic expectations and achieve them.
“If you don’t want the pressure of being accountable then be like my parents and don’t ever raise money,” Hurt said. His dad created a halogen fishing light but turned down an offer from Wal-Mart because he wanted to keep his business simple.
Another audience member asked about when to take additional funding for her business.
“Only take the amount of money that will add value to get you to the next level,” Kilcrease said.

AuManil Wins the Austin Startup Fast Pitch Competition at SXSW

Founder of Silicon Hills News

Bart Bohn with AuManil pitching at the Austin Fast Pitch competition at #SXSW

Bart Bohn with AuManil pitching at the Austin Fast Pitch competition at #SXSW

The free to play model dominates the multi-billion dollar video game industry.
So a lot of game makers capitalize on that by selling things to players in the game to make money.
AuManil, which creates software to manage the customer relationship market for video games, wants to make sure the game makers capture the most revenue possible.
AuManil won the Austin Startup Fast Pitch competition Saturday afternoon. The Austin Technology Incubator and the Central Texas Angel Network sponsored the event in the Greater Austin Chamber of Commerce’s offices at South by Southwest Interactive.
It was a close race said Kyle Cox, director of wireless at the Austin Technology Incubator. He reported that AuManil won with 74 out of a possible 100 points. It was just two points in front of the next competitor, he said.
The other companies presenting included Circle Media, Dejaset, Ridescout and Tenduit.
As the winner of the competition, Bohn received a free entry into a funding cycle for CTAN and a six-month membership into the ATI portfolio.
Five Austin-based startups pitched to a panel of judges including John Stockton with Mayfield Fund, Krishna Srinivasan with Live Oak Venture, Bril Flint, chairman of CTAN and Pat Noonan with Austin Ventures.
“We’re AuManil, CRM for Whales,” Bohn told the panel as the first company to pitch.
Bohn explained that 70 percent of a video game’s revenue comes from whales or big fans, 20 percent from dolphins, moderately engaged fans, and 10 percent from minnows, fans that aren’t that engaged. AuManil’s software targets whales and allows the video game makers to use analytics to cater to their best customers.
“We’re taking game play data and mixing it with predicative and social analytics – acquiring, converting, retaining and migration from game to game to game,” Bohn said.
The company already has four games under management with its first product that targets increasing repeat business from engaged customers.
AuManil is seeking a $500,000 seed round of investment and already has 40 percent committed, Bohn said.
“We bring the measure to unmeasured media,” said Mark Piening of Circle Media. His company focuses on measuring brand engagement at events.
“We want to help brands understand what audiences want,” he said. It has created a software program that includes an “audience intelligence dashboard” that gives brands insights into consumer engagement.
Matt Peterson, founder and CEO of Dejaset, pitched his music app for bands to produce and sell live performances of songs to consumers. Dejaset is capturing more than 100 live performances in the next 10 days at SXSW. With the Dejaset app, bands can make their recordings available instantly for consumers to buy. Dejaset expects to have up to 3,000 artists signed up by this summer. The company takes a 50 percent cut of each song sold and provides a 10 percent cut to the venue hosting the band.
Ridescout aggregates transportation available to consumers in real time, said Jospeh Kopser, the company’s founder.
“Aggregation is the way of the future” Kopser said.
Kayak is focused on airlines and hotels and Ridescout is focused on transportation, Kopser said. It gets real time feeds of availability from pedicabs and other drivers that self report. It does not include services like Sidecar, which are not legally approved by the city of Austin, he said. The app also enables friends to get rides from friends for free, he said.
Lastly, Dave Perry, CEO of Tenduit, pitched the company that makes datacenters “more reliable and more efficient” with its software.
“Data centers suck,” Perry said. They require more energy than the entire airline industry, he said.
But most data centers operate at 50 percent or less of their capacity, Perry said. That’s due to lack of effective tools to manage all the computer servers inside, he said.
“It’s a huge problem and Tenduit is going to be part of that solution that makes that problem go away,” Perry said. The company raised $1.3 million in a seed round from friends and family and is seeking a $3 million Series A funding round to scale up sales and marketing, software development and operations.

CTAN’s Bril Flint Advises Entrepreneurs on Angel Investing

Bril Flint, angel investor, speaks with a woman who attended his “Money Talks” speech.

Founder of Silicon Hills News

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.

VolunteerSpot Lands $1.5 Million Investment

VolunteerSpot, which creates tools for moms, nonprofit organizers and others to coordinate volunteers, has received $1.5 million.
ff Venture Capital of New York led the investment along with the Central Texas Angel Network, Nebraska Angel network, Angel List and Baylor Angel Network.
The Austin-based startup plans to use the funds for marketing and to double its user base from 1.5 million to 3 million this fall when kids go back to school.
“VolunteerSpot makes giving of your time, talent and money easy for our legion of power moms, teachers and community coordinators who drive the lion share of volunteer activities in this country,” VolunteerSpot CEO, Karen Bantuveris said in a news release.
“VolunteerSpot has tapped into a highly desirable demographic and created an accessible solution to a long-time vexing problem,” John Frankel of ff Venture Capital said in a news release. “ff Venture Capital appreciates VolunteerSpot’s unique approach to both the mom-focused and cause-marketing markets and sees huge potential in their business.”

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