Six Angel Investors Share Lessons of Wins & Losses at Zino Society Investment Forum

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for that kind of business just died, and it would have required subsequent funding.” The company closed down, McCann said, but “they did a good job of communicating. It was a great idea, the [business] was proven to work, but it was just too young in its cycle.” Ultimately, he said, “we didn’t lose 100 percent, just 99 and a half percent. But that half percent means a lot, because it means that there was some ethics there. They came to a point where they could have dug the company deeper into the hole, and they decided to pay the bills and return some money back to the shareholders. I got a check for less than $1000, but that check was meaningful.”

—Gregg Bennett talked about what attracted him to Bellevue, WA-based Coinstar. “It was a paradigm deal—no one had thought about it, I hadn’t thought about it,” Bennett said. “I had a sock drawer full of coins at home—it was a need I could relate to.” The fact that the startup’s team included three MBAs, two with previous startup experience, and a first-class CEO sealed the deal, Bennett added. “That ended up being a good investment. It ended up being six- or seven-X in 18 months.”

—Brad Harlow listed Bellevue, WA-based ultrasound developer PhysioSonics in his win column. Involved from the very beginning—Harlow has served both on the board, and as CEO for two years—he attributed the success of the still young startup to a strong team of people who were interested in building a company, and not an exit strategy. “In some cases you need to make sure the jockey is brining an entire team with them, that is the horse, the trailer, and the guy that drives the truck,” Harlow said. “I was never worried about where will we sell this and how will we get out.”

—Charles Finkelstein reiterated the need for strong leadership at the startup level. He described (but did not name) a company that made him “feel like such a fool” in retrospect. “I saw signs that the CEO was a lunatic,” he said. “Part of the CEO’s lunacy actually helped him become an evangelist for the product—the product was gaining strength, so for a while no one cared that a total lunatic was running the show.” The lesson, he said, is to live and learn. “It’s kind of a heartbreaking story, but man, I should have known better than that.”

—Byron McCann provided a mnemonic device for use in evaluating potential investments. “The test I use is what I call ‘torque’—you want to get it tight enough so it doesn’t loosen, but you don’t want to get it too tight so you strip the bolt,” he said. “Torque,” McCann explained, stands for traction, opportunity, relationship, quality, uniqueness, and execution. “Does the product have traction with customers? Is the opportunity worthwhile? Is it big enough? Meaningful enough? Is the risk-reward tradeoff enough? Is this a relationship that you want to be in through thick and thin? What’s the mindset of the team—will they do it right, and do it right the first time? Is it unique in the sense that it’s disruptive within in the industry? Is there an execution toward excellence?”

—Gregg Bennett summed up the current climate with a twist on the old jockey-versus-horse metaphor. “Most people are looking for the jockey not the horse, and I’m saying today there are enough good deals out there that you can find a good jockey and a good horse,” he said. “You shouldn’t compromise—you should get both.”

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