As president of Maverick Angels, Bill Barber is helping drive the Thousand Oaks-based investor network toward a global arena, keeping the organization on a steady growth trajectory even after suffering the loss of its founder, John Dilts, who died in August. A recent alliance with Intesa Sanpaolo, Italy’s largest bank, is helping Maverick Angels grow its network of investors in Milan, and increased collaboration with other groups is now allowing deals to be presented to investors throughout the U.S. and Europe. Maverick Angels is continuing to build upon its education component holding mandatory boot camps to train entrepreneurs on how best to present their companies and create a strategy for growth, and is also looking to better fill the gap in the current funding environment by bringing in a venture capital fund as a member of Maverick Angels. An entrepreneur himself who sought funding for his own companies multiple times in the past and is now an angel investor, Barber understands the disconnects that occur when budding entrepreneurs present their projects to investors. He is the founder and former CEO of DVDPlay which was sold to NCR for the automated physical distribution of DVD rentals through networked kiosks now branded as, “Blockbuster Express.” Currently he is the co-founder and CEO of ISOmatrix, Inc, focused on business management consulting and environmental management. As an early employee of Amgen, he was part of the scientific staff in Biology, Biochemistry, Medicinal Chemistry, and Combinatorial Chemistry. Question: With the recent passing of founder John Dilts what challenges do the Maverick Angels face? Answer: Certainly the biggest challenge is that John was just a very important person, friend and connector inside of that group and so that was a huge loss from a personal and professional perspective; a big loss for everybody, certainly everybody inside this angel investment community and inside the business development community in Southern California, so we definitely struggled with how we move forward without him. The good news about what he had built with us is that we’d been working for the last four years building processes that were really more focused on the group itself as opposed to one individual and so those pieces were in place. Maverick Angels is the set of processes that is run by the group. So from that perspective we actually have a pretty solid foundation that is able to move forward and that’s a real testament to his work – to the fact that he reached out to the group to help build that set of processes. Q: What direction is Maverick Angels taking now? A: We’re certainly growing in all the different areas that we had originally been working on with John; we’re growing our membership which adds greater capacity to fund companies and to help companies; we’re adding new sponsor resources, and we’re at the beginning part of a process of raising a venture capital fund that would allow us to expand our capacity from an investment perspective. Q: How would that VC fund co-exist with what is in place now? A: It would be structured very similar to most venture capital funds other than the fact that it would operate as a member of Maverick Angels. That would be the key differentiator. Angel investors use the processes that we have in place at Maverick Angels as a way to more efficiently screen, educate and value the companies that we see so it’s really a deal flow generator for investors. As a venture capital fund we can look at that deal flow the same way an angel investor would look at that deal flow. Q: Would you bring in outside VCs or would you start your own? A: We have the ability to do both and that’s kind of interesting because certain funds may have an interest in the deal flow we work with and certainly we have an interest in sharing certain deals that need additional funding capacity with specific venture capital firms so there’s a lot of good synergies that are possible through that connection. Q: Why is the Maverick Angels investor network unique and successful? A: I would point to the educational components as being the key differentiator. I think we’ve really spent quite a bit of time modeling successful entrepreneurs, that’s what John Dilts did specifically, was really look at what successful entrepreneurs have in common and we’ve build our educational components around that. We run a professional training organization and we require the companies that come to present in front of Maverick Angels to successfully participate in that educational component, and because of that requirement it improves and solidifies the deal flow before our investors even look at it. And it’s really part of our filtering process as well. It helps us really identify companies that are capable of being as successful as we need them to be to be an interesting investment. Q: How many investors are in Maverick Angels? A: Hundreds at this point across the globe, but locally we have right now a little more than 30 members. We have a chapter now in Utah and then we have a new network in Europe so we’re growing as we speak. Q: Maverick Angels charges entrepreneurs a fee for education, guidance and introductions to investors, why did you choose this as your business model? A: There are a couple different reasons for it. We really charge for our educational components and that is really the focus. We’ve broken up the fees so it’s a relatively small fee up front to get through the educational components, to see if that company is capable of moving forward, and during that process there are no additional charges until they really get to the point of having access to the larger network (and our network is not just local, when somebody presents in front of us here the opportunity for that company to be viewed by our entire international community is then accessible). So we do have a fee for that. Also, the fees in many ways act as a significant seriousness filter and that’s more important than you would think. Q: Through this for-profit model are you applying some of these entrepreneurial components into the organization itself? A: It’s part of our model. One of the key differences in the way we operate is we are a professional organization, were professionally managed, it’s not a volunteer organization, and that’s important too because I think that impacts the quality of our processes as well as the output to the members. It’s my job to make the members as successful as possible and to support them I have to make sure that we support the entrepreneurs as best we can. The educational component is critical, we know that, and we make sure that’s a requirement to come through our system and so we do charge for it. When we call ourselves in our little byline that we’re the next generation angel investment network it’s because we’re entrepreneurial internally as well. We run our specific group as a professional organization, it’s for profit, and it’s focused on providing the best value for what we do. Q: What do successful entrepreneurs have in common? A: Certainly there are coachability elements that are incredibly critical. Any angel group, any investor, will tell you that coachability is a key component for success, the ability to listen to the experience around you and understand how to take advantage of those experience sets. Another key piece of the puzzle is just the personal mindset, the ability to understand what failure is but not accept it. It’s kind of a difficult thing to state, it’s the individual who is capable of falling and getting back up, for every step backwards that they take inside of their project they can take two steps forward, that’s a key component that comes from the ability to not be afraid of that failure and not underestimate the learning power of those types of experiences. The other thing is being capable of hiring up, that’s one of the key aspects we see over and over and over, the ability to look for people smarter than yourself to fill out your resource requirements. Q: How many companies have been funded this year? A: I can tell you in the last six months we’ve funded five companies. On an annual basis we’re funding somewhere in the range of 10-12 companies. We’re seeing about 40 companies a year or so at our highest level of presentation, which is our arena meeting. We’ll see hundreds of companies, maybe a thousand companies, starting at the application process every year; then approximately 40-45 companies present; and the last couple of years the average has been between 9 and 12 companies a year will get funded. Now we’re funding at a little faster pace right now. Q: How much has been invested? A: Typical investments happen anywhere between $100,000 and $2 million per deal. It’s pretty common to see individual investors putting in between $25K and $100K on any one particular deal individually. Q: How many proposals are you examining each week? A: We’ll examine anywhere between 40-100 deals each month that come in through the basic application process. There’s quite a bit of filtering going on. Q: How has the number of applications been impacted by the economy? A: It’s gone up. Most angel and venture capital investors have seen those numbers go up because as debt becomes more difficult to obtain angel and venture capital investment gets more attractive to early stage entrepreneurs. Typically bank debt is the cheapest kind of debt that you can get other than maybe a grant or specific types of funding that don’t have maybe the same interest rate stipulations, but bank debt has historically been the cheap money. Venture capital, and angel investment is significantly more expensive. Q: How are the Maverick Angels filling the funding gap in the current economy? A: Angels and specifically that slice of the funding continuum that’s called angel investment has grown especially over the last two years and particularly in the last year as those other sources of capital got more difficult to obtain. Venture capital has actually contracted a little bit, Angel financing has actually expanded a little bit and because of it the lines have been a little bit blurred between where the historical delineations between angel and venture capital funding have been. So as those lines have blurred angel investors have kind of spread their investments through a larger swath. Now angels are reaching down to invest in deals earlier in sometimes smaller deals but they’re also reaching up to kind of fill that gap where venture capital used to be. Q: What about second round financing? A: Second round is a tough piece right now. When you look at the overall investment market and the lifecycle of a company, the most difficult space for a company to be in is looking for that second round of funding. Especially when it falls between the $2 million or $3 million top end of angel financing and what historically has been the bottom end of the venture capital world which starts at the $5 million and up. Q: How has the economy impacted the group? A: 2009 was a difficult year for anybody either trying to raise capital or trying to place capital, there were just so many significant unknowns that I think everybody just took a deep breath and held it for 12 months. We still had investments going out the door within Mavericks which was great, but definitely not at the same pace we had previously and certainly the pace now is quickening. So it’s very positive from both our processes and improving the deal flow and the quality of the deals that we see but also just the investors finding deals that look very promising and putting money behind them. In the last five to six months it’s really picked up. Q: Do you think the same is true for VC? That the pace is quickening? A: I think eventually it will be the same but VC has another issue and that is that in the last couple of years after a bad economy raising a fund in venture capital is very difficult. If during a down economy you’re putting your reserves to work on deals that you had previously invested in, many venture capital firms are finding themselves kind of at the back end of their limits for those investments and right now it’s difficult to bring limited partners into new funds. So I think there will be at least a little bit longer of a path back to high activity. Q: Tell me about the international component of the investor group? A: The international component is actually really interesting. We are in Europe at the request of a major bank, Intesa Sanpaolo, in Italy. Our effort out there is to educate and stimulate innovation in entrepreneurship and we look at that as really being a driving force of the economy and so does the bank. This is centered in Milan, Italy, Intesa Sanpaolo is the biggest bank in Italy and I think it’s the fourth largest in Europe and it’s in their best interest to see companies grow and succeed and the idea of stimulating innovation, stimulating entrepreneurship, helping them teach the entrepreneurial ecosystem to this larger business community is very powerful. It’s a very exciting component to be involved in. It really gives us a global platform, it gives European companies a connection here to the U.S. which is also very positive, and so there’s a lot of different connection points that we are able to make there, from European investors and U.S. investors to European companies and U.S. companies and cross pollinating within different industries is all every exciting. Q: What are angel investors looking for these days? A: We’re certainly looking for companies that have that mixture of large potential ROI as well as transformational products and services. We’re looking for exciting companies, they may be technology, they may be retail, they may be real estate, they may be biotech, clean tech, certainly there are segments of the market that individual investors are particularly excited about – of course cleantech being one of those spaces that’s very interesting right now to a lot of us – but we’re looking in all different markets for good entrepreneurs that are capable of being successful inside of this larger entrepreneurial ecosystem. Q: What are the biggest mistakes entrepreneurs make when seeking funding? A: One of the mistakes is expecting that raising capital is easy. One of the biggest mistakes is thinking that when you raise a little bit of capital that you’re done. In many cases we’ve seen entrepreneurs feel that when they’ve successfully raised the first amount of capital that they need to get started on their fundraising, that the rest will just flow in. But the funding part of it as an entrepreneur becomes a full time job and you have to work it like a job. Bill Barber Title: President, Maverick Angelsage: 46education: Aquatic Biology from UCSB, MBA from Univ. of Coloradocareer turining point: Starting first company in 1998 after 10 years at Amgen.Personal: Married, two children
Angels Taking Wing
