I first met David Rose about three years ago at the Angel Capital Association meeting in New York. As a premier speaker he captured the attention of the audience with his views on angel investing and the direction the industry was moving. He will be coming to Austin for the Central Texas Funding Symposium to give the keynote. As for background, I learned the following:
They have 75 members including both individual and corporate members. They have more applicants than places available so they have a waiting list. Corporate members or VCs constitute about 10% of their membership. They limit membership because there are only a certain number of people one can relate to. At a certain point, the group gets so large the group loses the ability to know each other.
They are a member managed group. Each member writes their own check for each deal. It’s not a fund. As a condition of membership, each member must pay a membership fee and also must invest $100K per year. Also, members must attend at least a majority of the meetings. Also, members must participate in screening and deal follow up sessions. They have 5 to 10 people churn each year.
They get 400 plans a year to review. They charge $150 per application primarily as a screening mechanism. They invest about $9M to $10M a year based on their own investments and those of follow on VC investments. They originally had a trade organization called New York New Media association which later morphed into the current New York Angels network in 2004. They are just now starting to see exits in their deals which normally take 5 to 7 years. Their first positive exit last year was Sign Story which sold to CBS for $71M.
David Rose was the driving force behind Angelsoft a software tool used to manage angel groups and their dealflow. He came up with the idea when he started the group and found there were no tools out there on the market to help manage the group. At that time some groups had developed their own internal custom software. Some used Yahoo groups to coordinate the effort while others just used email. David ran focus groups to identify the needs of angel groups and found a common thread among them. He used the initial beta version of the software they developed to support their own angel network and later offered it to other groups. The revenue model focuses on advertising and sponsorship. The software facilitates the syndication of deals by letting one group forward all the deal documents to another group for potential additional investment.
Angelsoft is currently used by over 250 angel groups which is about 30% of all angel groups worldwide. Because it’s the standard software tool used by angel groups they can aggregate information about the startup industry although they don’t have access to individual plans or information. They receive about 1000 plans per month in the system worldwide and they see 10 to 15 new angel groups join each month. Most angel investing is in the US with a growing interest in Europe.
Future plans for Angelsoft include adding background checks on submitted applications, escrowing services for the funding process, and sharing domain expertise from one group to the next. They also plan to add video conferencing and video feed capability later this year. It’s becoming a platform for social networking among angels.