Thoughts from an angel investor

As a group of over 65 angel investors, we can be fairly diverse in our backgrounds, perspectives and how we each approach angel investing. So I thought it would be fun and maybe a bit insightful to share some perspectives from individuals in our group.  Recently I sat down with Peter Bleleyben to chat about his approach to angel investing.  Peter earned degrees in business and computer science, started his career at BCG before founding Microfinancial in 1987.  Microfinancial provides leases for small equipment and is listed on NASDAQ.

Highlights of our chat:

His thinking is heavily influenced by his company experience: his angel investors, after 5 years, started to receive quarterly dividends that within less than two years had paid back all dollars invested — and at the public exit 5 years later provided and additional ~70x return

Angel investing along with VC and PE fund investing was at one stage a core part of Peter’s asset allocation approach….….however this has changed over the last few years, where angel investing is now more about the intellectual challenge and enjoyment that comes from backing interesting entrepreneurs

Peter’s initial investment size tends to be around $25k and he reserves $50k for a couple of rounds of follows.  In his words, “its very rare that companies never come back for additional money, so I expect to at least be doubling my initial investment”.  With a recognition that he was atypical “lucky” with his first half dozen angel investments he decided that he would need many horses running — and with exits happening far enough apart over time he lowered his individual investment dollars, but is doing more deals. He does not really like to have more than $100,000 in any one company

#1 evaluation criteria for Peter is the team.  Specifically:

  • Peter looks at the team’s business acumen
  • Peter has a strong preference for backing entrepreneurs who have had some general management experience. It doesn’t really matter whether this has been learned in a startup or larger corporate environment.  The key, in his view, is “smart business sense” eg do you know how to segment a market, how to do pricing, how to run a sales force…..in other words, do you know how to build a business?
  • An alternative is a situation where the creative entrepreneur steps aside early in the game and a ‘professional business trained team ‘takes’ over to take the seedling that has some traction and makes a ‘business’ out of it
  • A strong preference for entrepreneurs who have an intuitive understanding about the value of money and how to spend it.

Favors an approach that involves growing organically rather than “throwing money at problems”.  Prefers companies get to profitability asap which then provides many more options in terms of exit and timing on raising more money — and therefore tends to shy away from ‘land grab businesses’.  2 of his 3 high return investments (plus his own venture) became profitable very quickly and did not need much additional financing: The original group of investors not only stayed in control, they never “had to”’ sell and they stayed in control of their destiny

Likes business opportunities that are ‘nichy’ in nature, can become financially successful under the radar screen, are not super high techie, but use technology as a core part of the strategic approach of the total value add that is provided to customers. He prefers to invest in ‘new superior approaches ‘to existing markets’ over ‘Nobel-prize’ worthy really complicated new technology developments

He shies away from /markets/opportunities where ‘everybody’ is talking, reading, discussing in public the new megatrends and opportunities and where millions of VC- dollars getting invested in — and he is in nature a contrarian

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