“We want to know why it doesn’t work, tell us the risks.” Todd Belfer
I sat down with Patrick Armstrong, Vice President and Co-Founder of JDA Investments (US), Inc. and Todd Belfer, Managing Partner of Canal Partners to learn more about how to pitch to an Arizona Angel, identify the red flags in ones’ pitch deck and share mistakes they’ve made as entrepreneurs along the way.
Canal Partners started about five years ago with Todd Belfer and Jim Armstrong. Together with Patrick, they provide professional capital and experience to entrepreneurs and startup companies in Arizona. The capital ranges, on a per company basis, from $500,000-5M, with a sweet spot being $1-2M. They are specifically looking for companies that disrupt an old-line industry and enhance the way that sector does business. Most of their investments have a current revenue stream averaging $1M, give or take, and they want to be the first professional money in that startup. Most importantly, the product or service has to be scalable.
If a startup was to get a meeting through a referral from an existing portfolio company or contact, they will be on the look out for these red flags within the pitch deck:
*The Founders are playing in an unfamiliar space
*The product/service hasn’t been tested or customer validated
*The team doesn’t have someone as an expert in the field
*An unrealistic Cap Table
*Unrealistic expectations
*A hockey stick projection
*Hiding the risks
For any startup, Founders need to know going into it that the odds of getting funded are slim as 1:400 venture pitches receives funding, Armstrong and Belfer explain. Find more advice on the pitch deck during our interview.
Team genetics was another key factor Canal Partners considers when investing in a startup. They also elaborated on why it’s important to get your “A list player” on board and not to skimp on your team.
What mistakes have they made as an entrepreneur? “Not being well capitalized,” Belfer said, “…we always ran out of money.” So for startups, “…ask for more money than you need and know it will take long to produce the revenue you want to produce…and it’s all about people.”
Make sure to stay past the credits as I challenged these guys to an ‘80s video game-see if I took their money or not.
Watch the video on our AZ Tech Beat TV Channel or below.
[youtube]http://www.youtube.com/watch?v=pIkPT_zZuz0[/youtube]
