New York Angels Play Fast but Tough in the City’s Startup Scene

6/29/11Follow @arleneweintraub

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sell the company sooner.” That means there are more opportunities for angels to sell. So if the entrepreneurs says they’re looking for an early exit, the angel will say that’s OK. VCs find it hard to do because their numbers are just not in line with that.

X: What’s the process for entrepreneurs pitching their companies to New York Angels?
BC: We have monthly screening meetings. Once they apply to us, we do a quick scan, then we do a screening committee meeting at the beginning of every month. The expectation is we’re going to choose one of the companies to come to a breakfast meeting with us. That breakfast used to be two weeks later, because during non-frothy times, we would spend the next week with the company helping them develop their presentation, so they could make a better impression at the breakfast. But with the need for speed, we may tell them to go directly to the breakfast.

At the breakfast, the presentation is made, then we ask if anyone is interested. Then we go into an immediate review so we can move forward quickly. We’re working hard to be as fast as we can. Then from there, we ask people to start writing checks. Our fastest funding of a company was 78 minutes. We wrote checks immediately.

X: You and I first met at the TechStars Demo Day in New York—one of many business plan competitions held in this city. What do you get out of those presentations?
BC: We’re looking to help foster a smarter, richer startup community. Sometimes there are real jewels coming out of those competitions, as well as out of the university environment. NYU, Columbia, Baruch—New York is a cauldron of business plan competitions. We have funded companies from them. We funded Comixology, which came out of the NYU business plan competition.

X: Do all the startups getting funded in New York signal that we’re in a bubble?
BC: What is a bubble? A bubble doesn’t occur until the wrong people start investing. If angels and VCs are investing, you have to remember that it’s money they’re willing to lose. Bubbles happen when the average Joe on the street starts buying into this it-can’t-go-down theory. We’re nowhere near that.

X: You mean a bubble is when individual investors start buying shares of publicly traded tech companies? What about LinkedIn going public at $45 and skyrocketing to $86 on the first day?
BC: LinkedIn is a great product. I don’t think that’s a good example of a company where irrational exuberance takes over. To some degree Pandora is scarier. GroupMe is scarier. There are no established business models there. That’s where irrational exuberance comes in. You have people pushing these stocks. And when they push too far, it reaches the person on the street, and they catch this wave of enthusiasm. Then you fear a bubble. It’s the wrong people investing for the wrong reasons.

X: Are angels in this city doing a good enough job of distinguishing between great products and me-too ideas?
BC: In New York City, there’s not enough tough love for the entrepreneurs. It’s like you can’t say anything bad to the entrepreneur. I think I want to start a devil’s advocate group. I’ll tell the entrepreneurs, “If you think you have something special come to this group, and we will seriously challenge you.”

X: That’s a great idea.
BC: Our mission wouldn’t be to hurt them. It would be to create a conversation. I think that would be great for New York entrepreneurs.

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