Given that we are now in a major economic down-cycle (to put it mildly), raising money for a startup is likely to get a lot harder. But the broad consensus I am picking up on is that private seed investors will become more important for early stage startups. Why? Because if your are an individual with a pot of cash, you are not going to look to the stock market to bring you high returns any more. So there is an argument to say that you could, instead, put it into a potentially high-growth tech startup. You just have to find that company. The other issue is that VC firms will be more interested in later stage companies, plus drive valuations lower, and cherry-picking the startups they want to work with. So Angels will be more important in this current market.
To that end, I am starting a regular feature, called “Send me an Angel”. This will profile Angel investors in the tech space and ask them a set of questions about their approach to investing. I won’t be publishing their contact details as a rule, unless they are happy for this to happen. Why? Because these people are being generous enough to lay out for you their investment strategy. They don’t want to get spammed. However, I guess if you can find them the rest is up to you…
Our first Angel is Michael Smith, founder of Firebox.com and CEO of MindCandy
Official Bio:
In his early twenties Michael co-founded the online retailer, firebox.com. The first product firebox designed was The Shot Glass Chess Set, an unusual fusion of chess and alcohol. The bizarre game became an instant best-seller and stimulated the rapid growth of the company. firebox.com recently featured in 13th place on the Sunday Times Fast Track list of fastest growing companies in Britain. Not content with this business success, Michael launched Mind Candy in 2003, a developer on online reality games. Their first project Perplex City began soon after. Perplex City was a hit right up to February 2007 when the lost ‘cube’ was finally found. Michael is now taking Mind Candy in a completely different direction in the form of monsters! The new groundbreaking website allows children to adopt a pet monster on-line and learn and interact with other Moshi Monster owners.
1. What range of investments will you make in a startup? £50-100K? £100-200K, etc?
Sub £50k
2. What sectors will you definitely invest in right now? E,g, Consumer or Enterprise etc?
Consumer internet is where i’ve made all my investments to date. Anything I’d personally use is a big plus.
3. What sectors will you definitely not invest in right now?
Anything I don’t understand or am not excited by.
4. Outside of investment, what “value add” do do you think you bring to a young company or early stage team, e.g. is it you expertise, network, what?
Experience from a decade of running different web businesses and a strong US and UK network.
5. What combination of elements do you look for in the companies you choose to invest in? For instance do you look for people who have a sense of fun, and/or a great team, or an idea relevant to your own experience? What?
All my investments to date have been in friend’s businesses. I like investing in people I know, respect and trust. I don’t have time to review pitches from people I’ve never met before.
6. Do participate in syndicates/networks or in a round with bigger VCs, or do you “go at it alone”?
No preference.
7. How long do you foresee investing in a company for? 2 years? 5 years? What?
No set timescales
8. How has the current financial crisis affected your investment outlook? What’s your “runway” these days? (Runway is the length of time before the cash runs out before revenue kicks in to a startup).
Not changed things dramatically for me. Still very bullish on the web. Still believe there are huge opportunities out there. Deals are being priced a little more realistically now.
9. What level of involvement are you most comfortable being solicited for?
Very, very minimal. Am extremely busy with day job at Mind Candy so definitely not looking for board seats or deep involvement
10. What’s the “The Perfect Pitch” for you?
Someone I know pitching me on a business that I get instantly and could see my self personally using.