A gathering of angels can be and hard find. You don’t often find groups of angels — financiers who help fund startup businesses — together in a formal setting. “It’s usually a more informal process, someone who knows someone who can put you in touch,” says Donald Frawley.
Frawley, a member of the board of the New Jersey Entrepreneurial Network, is an expert at finding angels and has been helping entrepreneurs meet potential investors for several years. NJEN will present “A Gathering of Angels: A Roundtable with Seven Angel Funding Groups,” on Wednesday, June 3, at noon at the Princeton Marriott. Cost: $55. Register at www.njen.com.
Angel groups that will be represented at the June meeting are include Delaware Crossing Investor Group, Golden Seeds, JumpStart NJ Angel Network, Keiretsu Forum, Mid-Atlantic Growth Fund, Robin Hood Ventures, and Tri-State Private Investors Network. Keiretsu, which is new to NJEN, is one of the largest angel networks, with 17 chapters and 750 investors.
The meeting will include a combination of question and answer time as well as a “reverse venture fair format,” in which entrepreneurs will be able to meet individually with each of the representatives.
Frawley suggests that entrepreneurs come prepared to present their executive summaries to “the people who can write you a check.”
Angel investors fund more businesses, and at earlier stages, than venture capitalists. The organization of angels into groups, as opposed to acting only as individual investors, is a relatively recent development that solves a lot of problems for both startup companies and the angels themselves, explains Frawley. First, the angels become easier to find, and second, the groups enable the investors to pool their resources and invest more money in a greater number of deserving startups.
“When we started these meetings in 1990 or 1991 we were about the only game in town, the only place entrepreneurs could go to get information, meet potential investors, and just network,” Frawley says of NJEN. “Now, there are a lot of options for entrepreneurs in New Jersey. You could go to a meeting every week if you wanted.”
The board members noticed a drop in meeting attendance about two years ago. “We went from 50 or 60 people at a meeting to about 20. That’s not networking, that’s a social organization,” he says. The board decided to take some time off and rethink the structure of NJEN. After a six-month hiatus, the group returned in January with a new schedule and a new format.
“We looked at past events and realized that the most successful were when the people who have actually done what we are talking about are the speakers,” Frawley says. “If we are talking about how to attract venture capital we have a venture capitalist speak, not a consultant. If we are talking about how to sell a business, our speaker is someone who has actually sold his business.”
Frawley himself is a business and corporate attorney who became involved in the organization because of his work with entrepreneurs. He received his bachelor’s from Lehigh University and a J.D. from Georgetown in 1973. He spent several years with Smith Stratton in Princeton before opening his own practice in 1998 in Morristown. He is still a consultant with Stevens and Lee, the firm that acquired Smith Stratton.
After so many years of working to connect entrepreneurs with angel investors, Frawley has several suggestions on how to make a presentation to a potential investor.
The right product. “The number one piece of advice I can give is to have a good product,” he says. “Make sure that your product is something that someone wants to buy.” He mentions working with an entrepreneur at a business incubator who had developed a method to increase the amount of pure oxygen generated by a portable oxygen generator such as those used by people with lung disease. “I asked him if his product was cheaper than what was already available on the market. He said no, it was better and so it cost more. I asked him if people wanted purer oxygen than they currently had and he didn’t know.”
The moral, says Frawley, is that while it may be possible to build not just a better mousetrap, but the best mousetrap, if no one wants it, it won’t sell. “Nine out of ten new technologies will work. The important question is does anyone want to buy it? There has to be a demand for a product, and you have to show your potential investors that demand,” he says.
Boil it down. One of the most common mistakes new entrepreneurs make when meeting with investors is to hand out too much information too early. “Boil it down to a one-page executive summary,” says Frawley. The summary should include what the company does, any customers or potential customers who are interested in the product, and how much money is needed. “If the investors want more information, they’ll ask for it later,” he explains.
“So many entrepreneurs tell me they just can’t do it in one page. They are so in love with every nook and cranny of their process. They are sure the investors must know every detail of how something works.”
It is difficult to stand back and look at your own business objectively, but presenting a summary that is too detailed can actually take you out of the running with many potential investors. Investors often have so many summaries to study that if their attention is not captured in the one page, the summary will be cut in the first round. “If an investor has 10 summaries to look, and eight are one page and two are longer, those two will be the first to go in the wastebasket,” he says.
Find the right investor. Finally, Frawley says, it is important for entrepreneurs to do some research before approaching an investor. “Don’t waste someone’s time by asking them to invest in an area they are not interested in,” says Frawley. “If they invest in medical products and you have software you are wasting their time.”