The Seattle Angel Conference finale was nothing short of amazing. The fact that John Sechrest has been able to slowly grow a new early stage investment mechanism like this says a lot about John and the economic environment here in Seattle. The group of investors is slowly growing and the quality of companies coming into the conference continues to increase making it harder and harder for the growing pool of investors to pick the best ones. My experience through the process is well documented here on my blog. If you are considering participating in a future round or are interested in starting an investment group like this in your city you should go read these posts.
There were many great things about the process and a few things that could be improved with the process. The largest improvement would be more proactive training of the new angels. Here is a photo of Rob Wiltbank giving a talk on Angel Investing at the conference. For a lot of the new angel investors, his thoughts were new information that was coming at the end of the formation of their angel investing thesis. Had they been spoon fed this information earlier in the selection process, it would have been easier for a lot of folks to apply the information to the decisions they were making. Getting more proactive access to this kind of information would have been a big improvement as many were in the very early stages of formulating their own ideas about what angel investing is and how they should evaluate the companies in relation to an overall portfolio.
Of course I shared information - much of it in the form of blog posts on my blog. Many of the investors didn't have a solid framework to view the investment decision and by the time we entered the penthouse suite of HUB Seattle, the thoughts around what would make a good investment were fairly recently formed for many of the investors. In fact, one investor asked during the final voting session for some insight into what the more experienced angel investors thought as a way to learn from them and see if their newly formed investment thesis was spot on or in need of some work.
John worked hard to encourage independent pursuits of the information needed to form a good idea of what makes angel investing work. Many of the angels in the group have made many other decisions in their lives with much more money at stake which puts a false sense of confidence around their ability to invest well in a situation like this. For the next conference (coming up in just a few months) I will take a more proactive role in the training aspect for new angels.
At the end of the day, the top two companies that were in the running in the room at the conference were the right two companies. One with a lot of potential and a long way to go, the other a solid investment that would grow the investment at a slower pace but with darn near guaranteed returns. The group selected Daily Dollar as the winner. With Morgan behind the wheel, the investors felt confident that she would continue to pull the right players onto the team and drive for execution to rid consumers of the burden of paper receipts and improve the ability of retailers to offer products that consumers want to buy on their shopping trips. As one of the investors in SAC III, I am excited to see where Morgan takes us.
I am also excited about a couple of the side conversations I am having with some of the companies that came through and were dropped from the group investment. I found that some of the companies were in areas that enough of the investors didn't want to be in or didn't understand well enough that they were dropped despite what I saw as high potential and requiring a second look for an investment.
Selecting this high quality of companies though does say a lot about the training for the investors that did take place. The experience of defining which companies the group wanted to invest in the most was valuable experience for everyone. In fact, I thought the experience so valuable (even as an experienced investor) that I brought my son to the actual conference so that he could meet some of the teams and investors, watch the pitches, and think through his own ideas about what would make a good company and investment. At the end of the conference he couldn't help but compare the whole thing to Shark Tank as I've found a lot of new investors and friends I tell about the process do. The interesting thing is that the companies pitching weren't making the same connection and didn't say they felt like they were in the shark tank.
Beyond the high quality of the learning through doing, the connections made with other investors was great. The other investors are all smart investors that are worth knowing and several have become friends and people I would consider engaging in other business activities with. This final component of the process that was very well done was the due diligence process. The teams were all motivated, the framework for thinking about due diligence was clear and concise, and the process of actually doing the interviews with management, advisors, customers, partners, and competitors was highly valuable. Investing in much larger, well established, publicly traded companies leaves out a lot of this as the management team and advisors simply aren't accessible for interviews when you are investing at my level.
I am definitely looking forward to SAC IV and I encourage you to come take part to grow the Seattle startup community. In the meantime - go sign up at Daily Dollar!!