Entrepreneurship@Cornell Celebration 2012
Angel Investing – Heaven or Hell?
Panelists shared their experiences as investors and discussed how angel investing has changed in recent years during their discussion, “Angel Investing: Heaven or Hell?” The event, sponsored by Johnson’s Entrepreneurship and Innovation Institute, took place at Sage Hall on April 20 as part of Entrepreneurship@Cornell Celebration 2012.
Panelists included 2012 Entrepreneur of the Year John Alexander ’74, MBA ’76, founder of CBORD Group Inc.; Skip Besthoff ’99, general partner at Castile Ventures; Scott Belsky ’02, founder and CEO of Behance; and Steve Gal, visiting associate professor of clinical entrepreneurship at Johnson. The talk began with a discussion of what each panelist looks for in potential investments.
“I let the Cayuga Venture Fund do the hard work,” joked Alexander, who is also a partner in the Cayuga Venture Fund. “They give me the opportunity to cherry-pick my investments,” he says.
Belsky explained that he enjoys working with, and investing in, companies that are at the intersection of technology and creativity, citing his past investments, Pinterest and Uber. “The most important deciding factor is: ‘Can I learn something from this company I’m potentially investing in?’” he said.
Personality is extremely important to self-proclaimed “ad-hoc” investor Gal, who said he doesn’t go out and look for investments, but that they “just happen.” Gal often finds himself investing in the person before the business.
As an investor, seeing eye-to-eye with an entrepreneur is a key factor for Besthoff. “If expectations and incentives are aligned, then it usually works out,” he said.
The panelists also discussed the challenges they sometimes face as investors. “You can’t be the person that always sees the best in everyone,” Alexander explains. “I love to hear entrepreneurial stories but you really have to be selective, because you can’t help everyone,” he says.
Angel investing has almost become a professional business, said Besthoff, and like many other markets, it has become more institutionalized. “You have professional angels now and they do like a deal a week. That’s a lot,” he said.
The democratization of investing is another trend the panelists have noticed. Belsky spoke of a group of entrepreneurs who wanted to make a watch that would sync with cell phones: When they couldn’t get an angel to make an investment, they turned to Kickstarter, a website that serves as a funding platform for creative projects. Kickstarter enables anyone to contribute small amounts of money — as little as five dollars — to fund a selection of projects. The watch company got the necessary funding within a few months, without support from angels or venture capitalists.
“In this model, instead of getting investments from people who can capitalize from an equity standpoint, entrepreneurs are going to capitalize on demand from a consumer standpoint,” Belsky said.
“There are lots of ways to get funding now, and this is certainly positive from an entrepreneur’s standpoint,” Gal said.
The group was asked to address some of the differences between angel investors and venture capitalists, and the general consensus was that angel investing is much more personal.
“When you’re dealing with venture capitalists as an entrepreneur,” Besthoff says, “there is comfort because you know the venture capitalist’s intentions. They are just working for the fund and want financial return. Angels can have different incentives.”
“It’s not about ‘Can I make money off of you?’” Gal adds, “but, ‘Can we make a lot of money together?’ I want to push them to succeed so we can both succeed.”
Maria Minsker ’13 is a student intern in Marketing and Communications at Johnson.