Before getting involved with the women’s angel investing group Golden Seeds, former Wall Streeter Peggy Wallace was “fascinated by the question of where was the female Warren Buffet, of why we don’t read about famous women investors.”
She connected with Golden Seeds founder Stephanie Newby (who’s now at an interim CEO job at Boston-based Crimson Hexagon) around 2005 as she was forming the angel group, and later became one of the partners on its first fund, which closed at $3.8 million in 2008.
Wallace is now a managing director of the group, and is one of the eight partners in Golden Seeds’ $26.5 million second fund, which closed in late 2011.
At the time of Golden Seeds’ founding, Wallace says, “there were not that many women angels in the angel groups. To me it was an entire asset class that women were not participating in.”
Golden Seeds’ network now runs at least 260 members deep across New York, Boston, Dallas and San Francisco/Silicon Valley. Wallace describes Golden Seeds’ investment model as a hybrid one, in that it operates the angel network and co-invests from its own fund, which is raised largely from high net-worth individuals.
Angels in each city can source and select deals, and Golden Seeds invests out of its fund alongside those individuals. And earlier this year, the group was selected to manage $4 million for the state of New York, as part of its Innovate New York Fund.
I chatted with Wallace to get a sense of how Golden Seeds functions across its different locations, what it looks for in companies, and what trends are catching its eye. Read on for her insights.
Xconomy: How does Golden Seeds work with its members?
Peggy Wallace: We felt that we weren’t able to go out and attract women angel investors; we had to help them become angel investors. So we operate a knowledge institute, where we find people who have had the corporate careers, entrepreneurs, and scientists, and we teach them the skills you need to become an investor.
In the early days we had to spend a lot of time syndicating our deals through angel investors, but we found that keeps the CEO away from the business and out raising money. Early on we realized we need to have more capital so the fundraising process is quicker. We co-invest [with the fund], and we’re able to shortcut some of the syndication. We can augment the angel investing activity with the capital on funds. It’s a new model.
X: How do you work across your across different locations?
PW: The way we can grow and scale is we built a process. We’re spread across four cities. You can only do this with process and with systems that work. And that’s what we’re really known for.
We have screenings, forums, and office hours in these cities. We’re all communicating and reviewing applications, and run a system to do this. We can create deal memos and put people on board seats. We provide tremendous post-investment support.
We provide deal support out of New York City on every deal that’s going into deal mode after a forum. That includes a deal director, which is a person who helps the lead investor coordinate the process, oversee term sheets and documents, and do all the administrative stuff associated with closing a deal.
X: How do you source deals?
PW: We’re engaging a lot more entrepreneurs through office hours. Our niche is women; a company must have women in a C-level position. We invest in consumer, tech, and life sciences, and are geography agnostic.
Because of that we see a really large deal flow. Most groups, if they see a company with a woman in it, they will refer it to us. We’re out there on the scene, so to speak, as much as possible. Our members are judging at events and networking with entrepreneurs. We go to as many things as we can.
The newest thing has been holding office hours in these cities. They’re casual settings, not a screening. They create an environment where we can meet with entrepreneurs and discuss the company very informally.
X: What does your deal volume look like?
PW: We’re doing 10 to 12 new deals a year and between eight and 12 follow-on deals. We’re closing deals almost every month. We’re very, very active.
X: Do you see certain sectors more prominent in certain places?
PW: I think it’s pretty uniform. You see a little bit more consumer facing e-commerce out of New York sometimes. But everything is incorporating technology in some interesting way. I hate to generalize.
We’re very focused on life sciences and like to that to be about a third of the portfolio, with a preference to devices and diagnostics. All of the markets are fun markets for life sciences.
X: Are there big startup trends that are catching your eye right now?
PW: Everybody is looking at mobile as an opportunity. One of the thigns I really believe is our companies come out of very profound recognition of an unmet need by a consumer or business. We have these “a ha” moments from every one of our CEOs. They don’t start as tech looking for an applications; they always start as a problem that you then find a solution for. It really resonates; some need, some moment where they just had to fix something.
We just did a life sciences deal where the CEO is a software engineer. She took time off to care for her aging parents, and is now leading a life sciences company because of something she was experiencing and witnessing. She completely committed her life to a family of patents around something she experienced as a human being.
X: What’s the focus for Golden Seeds in the next year?
PW: It’s really to leverage the talent of our network to help these companies succeed. That’s the biggest push thematically. We’re really working on doing everything we can to support the companies with our skill set and network.
We’re always seeking to grow our membership; our role is trying to solve the capital issue here. We’re also looking to expand the knowledge institute. We think it’s key for investors to know what they’re doing and have a solid knowledge background. It’s really about perfecting the process and bringing that to bear on the companies.