18 Comments

Summary:

Josh Felser and Dave Samuels, successful entrepreneurs recently left the startup world behind for a new role: that of an angel investor. Their fund, FreeStyle Capital invests in interesting Internet startups. A chat with Felser about VCs & stuff startup sounders need to know

About a year ago, Josh Felser, co-founder of the Web 1.0 era music service Spinner.com and more recently, online video service, Grouper, decided to forego being an entrepreneur and instead become an angel investor. He and David Samuel started San Francisco, Calif.-based firm, Freestyle Capital, which is well known for some high-profile investments such as Formspring and SimpleGeo.

Felser stopped by our office for a conversation about recent investing trends and the growing tension between angel investors and venture capitalists. In a freewheeling chat, he talked about the shortcomings of scattershot investing, startups pointlessly abusing the phrase “game mechanics” in their pitch decks and, most importantly, revealed a few things he believes start-ups should know.

Felser, who sold Spinner and Grouper for a total of over $350 million believes a good strategy for angel investing is “less is more,” for this allows him and Samuel to help the companies by focusing more of their energies on their investments. Especially as a recruiter-on-steroids for these companies.

(Video produced by Chris Albrecht.)

More GigaOM video interviews with early stage investors:

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By Om Malik

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  1. As someone who has raised money 5 times I would never, ever take money from a VC that didn’t have either founder or CEO on his resume. And, to make matters more difficult for VC’s, I would not accept an investment unless they also had a very positive exit in their background.

    Not some bs “take out” deal like Aardvark Friendfeed, but a real deal that denoted the fact that they built a real company.

    That’s where my bar is going forward. How many pass this bar? Very few.

    1. whew. i believe i pass the bar.

  2. MyLocator ™ Friday, August 20, 2010

    A portfolio of company investments says everything about the VC. Enjoyed the interview and positive reinforcement.

  3. Very interesting video/interview. A partner and I are in the very early stages of a company and this kind of insight is useful to us.

    1. Don,

      Glad to see this was useful. Hopefully you are successful in your efforts and let us know how things are going for you.

    2. Happy to learn more about what you are building Don. Follow me at twitter.com/joshmedia and i will DM you my email address.

  4. Insightful interview. And its funny because I am guilty of “defending” my startup concept once we receive a rejection. So now I know to just accept it, and move on.

    However, I do have to disagree on the game mechanic comment. There are still some verticals that can benefit from such features. PennyGrabber incorporates such features in an intelligent, and strategic way. Hopefully one day soon you will see how we do it. We just need the funding to launch the platform.

    1. No one likes to be told NO, especially not a driven, passionate relentless entrepreneur.

      I am absolutely a believer in game mechanics and the social benefit it brings to many segments. However, some entrepreneurs are applying game mechanics to purely to facilitate raising capital. Happy to chat with you. follow me on twitter.com/joshmedia. Will DM you my email.

  5. There are a few 100mm + funds (that I have co-invested with) like First Round, True and Polaris that combine many of the qualities that I admire about Angels and larger VCs. I am sure there are more like them with whom I have yet to co-invest.

    1. Josh, I am going to address an issue that you certainly don’t want to address, and that is the “me-too” investor. I think it’s a more insidious problem than the “me-too” companies you worry about.

      I am an angel investor. I also have two exits, the last being close to $400M. I raised $20M to get there, which means my “return on capital” was extraordinary.

      Having been in the industry for more than 15 years, it excites me to see the industry so vibrant, but there are things happening that make me worry.

      A big issue I see is that I call the Poseur Angel. They package themselves as value add, but when you take a hard look at their background will you notice things missing, such as:

      (1) Never been a successful CEO in this or any industry
      (2) Never been through a successful M&A process

      Some run small funds. A founder that works with one of these people is not going to get any help.

      Someone needs to call these people out. There are lots of them. I won’t name names here. I try to counsel founders against working with folks like this.

      1. I dont think being a successful founder CEO is a requirement for being a successful angel but it sure helps in early stage. Angels without this experience can still be effective depending on what the company needs. A partnership-hungry startup might be a great match for an angel with corp dev experience at google.

        It may take a while but the founder market will eventually stamp you with the reputation that you deserve. :)

  6. I have been trying to find an investor for a new type of Wireless T.V. and broadband service in NM and havent been able to discern the real Angels and the fake ones. Alot of the fakes want 7500-15000 to “start”. Can anyone point me in the correct direction?
    Respectfully submitted.
    rick@mountaincomm.us

    1. A real angel doesn’t charge someone a fee. You need to do some homework. Who invested in other companies in your region or industry of interest?

      1. Totally agree with Jasson. Ludicrous that angels and angel orgs are charging fees for startups to present. Screening should be based on merit/potential not cash.

  7. Ashwin Desikan Monday, August 23, 2010

    Excellent video. Josh, Thank you for the insight. Feedback and Advice from experienced folks like you would help wannabes like me a great deal.

    @Om, please keep this series alive via more videos & interviews, probably a section dedicated to start-ups would be nice.

    Any advice on how to approach an angel? Is there a right time? I have been mentally plagued with an idea and been working on it for a while. A feedback from an expert would definitely help to check even if the idea has a market/ potential even though I am convinced. Or is building a business plan and pitching to potential investors the right way to go about this.

  8. Thomas Cornelius Wednesday, August 25, 2010

    can’t agree more with you Josh about the “offer” space. LBS and app developers and many new geo aware sites need to connect to local businesses and embed offers to engage + reward consumers and monetize their aps.

    You can apply the transition from online >>> offline in many ways – which really is the exciting part and where innovation is going to happen, but the medium is still an offer – a gift card, deal or coupon that can be exchanged offline into goods and services.

  9. The video this post talks about is MIA.

  10. Signs of Angel Investing Exuberance: a Tool & a Game: Tech News « Monday, October 18, 2010

    [...] the rise of the super angels jumping into the opportunity of cheaper companies and smaller exits, very real competition with traditional VCs, and training sessions for would-be angels to learn the [...]

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