Looking for the right angel to invest in a start-up company is as individual as each company and each angel, says Paul Lewis, a serial entrepreneur who now “makes a hobby” of investing and mentoring other start-up companies.
“Every angel has his own set of rules, his own idea of what he is looking for. Some are into biotech, some are technology, some consumer products,” says Lewis. He will speak on “the must-haves and must-not-haves” that angel investors are looking for when choosing companies to invest in at the next meeting of the Venture Association New Jersey on Tuesday, September 22, at 11:30 a.m. at the Marriott Hanover in Whippany. Cost: $75. For reservations or more information call 973-631-5680.
Lewis, who lives in Hunterdon County, understands a lot about start-ups. He formed his first company while still in college at Fairleigh Dickinson University, where he graduated with a bachelor’s degree in computer science in 1987. “Basically, I was learning to develop software in school and every homework assignment I turned in I also sold to a business,” he says.
On graduating he had no clue where to look for a job, but as he put together his resume “it dawned on me that I had already had a company with several employees and a million-dollar revenue. I just took it from there,” he says.
Lewis’ second venture, Getgo-Mail.com, raised sufficient capital to build a fully functional unified messaging device based on patented intellectual property before going public. He then became president and CEO of CardXX, a technical manufacturing company that used its patented process to build the world’s first NIST Level-3 rated smart RFID credit card. He also founded PG Lewis & Associates, which became a national leader in computer forensics and was involved in many sensational litigation matters before being joining a Fortune 500 company in 2006.
Lewis has appeared regularly on CNBC’s “The Big Idea” with Donny Deutsch as the angel investor, on CNBC’s “On The Money” with Carmen Wong Ulrich, and on MSNBC’s “Your Business” with J.J. Ramberg. He has also published a number of articles on entrepreneurship and investing. He is a former member of Cisco Systems’ Steering Committee and Novell’s Advisory Board.
Filling a Need. These days Lewis devotes his time to mentoring new entrepreneurs. He focuses on companies that are developing software, particularly service solutions, or those that manufacture unique consumer products. “I’m looking for unique products that can be manufactured cheaply, and which solve a problem for the user,” he says. Products aimed at young parents are a good example.
“Parents who have seen a problem and come up with a solution to fix it are a great example of what I’m looking for,” he says. They are driven not just to make money, but to help other people solve a problem.
Understanding revenue streams. A great idea is not the only thing that is needed to develop a profitable company. “I get approached all the time by people who have a great idea but also have no clue how to turn that idea into revenue. I’m looking for a return on an investment,” he explains.
Most entrepreneurs start out with knowledge in their field and the product they plan to develop, but that doesn’t mean that they have a vast experience in business, or understand areas such as marketing, says Lewis. While it is great to “have some idea of basic business skills,” it is even more important, he claims, for the new entrepreneur to have street smarts. “They have to know how things operate, and what making a profit means,” he explains. “They have to know what the bottom line is and an understanding of how to turn their idea into a viable business. That’s the first step.”
That means looking at the hidden costs of business and learning exactly how much it will cost to make an item. “If it costs X to make you must be able to sell it for more than X to make a profit,” says Lewis. While that seems as obvious as the basic math that it is, he says that he is constantly surprised by how many people approach him without that knowledge. “I’ve had people come up to me with a great product they can sell for $29, but it costs $1,000 to make. It’s never going to work,” he says.
But he tries not to discourage anyone who comes to him. “I want to encourage them to keep trying. If the idea is impossible, I tell them to go back to the drawing board. Sometimes it takes a few ideas to find the right one,” he adds.
Passion for business. The drive to go back to the drawing board even when an idea has failed is one of the marks of a true entrepreneur, says Lewis. “You have to have a passion for your business. Owning a business is not like working for someone else. It’s more than a job, it’s a lifestyle. You don’t leave it at the office on the weekends and forget about it until Monday morning. You think about it all day and all night. It affects your sleep and your family life.”
That’s the passion that makes the difference between a successful start-up and one that fails within a few years. “You’ve got to have that mindset, you’ve got to always be turned on. You’ve got to be 100 percent sure that you will be successful in carrying out your dream of creating something out of nothing.”