March 8th, 2010
OEN’s Angel Oregon 2010 and the state of startups and capital in Portland from Carolynn Duncan of Portland Ten
[Editor's note: Thanks to Carolynn Duncan, Director, Portland Ten, for her assistance in covering OEN's Angel Oregon, last week. Her recap and insights follow.]
This year, I was invited to attend OEN’s Angel Oregon, chaired by Angela Jackson, and the Oregon Entrepreneurs’ Network, and to write a guest article highlighting the experience. My hope is that you’ll get a quick download of the day’s events and outcomes, a taste for what the experience of being at OEN’s Angel Oregon is like from a blend of perspectives, a status update on Portland’s startup scene, and finally, that you consider attending and/or participating as an entrepreneur or investor at next year’s event.
For OEN’s Angel Oregon 2010, 48 companies applied, with 15 final presenting companies: Second Porch; DeltaPoint; Fuez; Coherence Resources; Matradee; Copa di Vino; ActiveTrak; Athletepath; Enjoy Life (Divina Sangria); Gamma Therapeutics; Green Goose; Kablooshie; MobSpot; My Home Details; and Zubeo.
Notable to OEN’s Angel Oregon 2010, is the introduction of a $25,000 Seed-stage track for earlier stage startups, and participation from Portland Development Commission and Willamette University Angel Fund (run by MBA students), both co-investing in the $195,000 investment pool.
As for the live experience of attending, let’s just say that private equity conferences are not your mother’s barcamp. Typical attendees include hopeful entrepreneurs, seasoned investors, and a variety of participants in the startup/venture community– incubators, government officials, press, lawyers, accountants, etc., and as such, crisp, dark-colored power suits are a dress code minimum.
My first private equity conference, which I attended as a bootstrapping tech startup founder, provided perspective shifts such as meeting individuals at the coffee bar who introduce themselves, “I’m from X fund; we currently have $785 million dollars under management.” Those interactions give entrepreneurs a useful reminder that the economics of the established business world operate on a much larger scale reality than does a classic garage-based startup, and yet, responding, “I’m from X startup, we have no revenue, no product, not much ramen left, and no hope anymore, thanks, ” makes for interesting conversation dynamics.
For a first time presenter, giving a public investment pitch can be nerve-wracking, not that most entrepreneurs admit it. Founders are hard on themselves before and afterward, critiquing every statement, rehearsing endlessly for perfection, clarity, articulation, and ultimately, to convince and win the investment. Whereas award winners leave with $25,000-$170,000 to take the business to the next level, everyone else walks off the stage, visibly let down, though true to entrepreneurial spirit, already parsing through which backup options they’ll deploy while continuing to look for needed resources for the business.
Ken Westin, founder of ActiveTrak, a software product that tracks stolen electronic devices, is a third-time presenter at OEN’s Angel Oregon, and attributes much of his company’s progress to the process and help from other entrepreneurs, peers, and mentors in the startup community along the way. “What Portland lacks in venture capital, it makes up for in community,” said Westin, who brought the house down, closing his presentation with, “We’re not just a technology company, we’re super heroes”.
Particularly where investment stakes are involved, and in the case of OEN’s Angel Oregon, $195,000, Jackson and her steering committee spent months orchestrating the application and due diligence processes, coaching and streamlining candidates presentation materials and investment pitches, marketing the conference, hosting pre-and-post banquets and social hours, not to mention general event set up/take down.
Investors met weekly prior to the conference, holding due diligence sessions for 3-4 hours, evaluating companies’ potential and current status in management, market, product development, financial projections, and exit strategy. Finalists prepared formal pitches as well as a demo/exhibition booth to display the product, with executive summaries distributed to all conference attendees.
OEN’s Angel Oregon also included a keynote presentation from Rob Wiltbank, PhD., Willamette University, who covered investment stats from previous OEN’s Angel Oregon investments as well as angel investing in general. Regarding OEN’s Angel Oregon’s track record, “33 finalists have generated $85 million in revenue, attracted $67.5 million in investments, had two favorable exits and employed almost 550 people.” In addition, Wiltbank commented that while due diligence efforts are disliked equally by entrepreneurs and investors, doing a minimum of 20 hours of investigative homework on a potential investment can decrease the failure rate of an investment choice from 60% to 40%, with additional due diligence lowering the overall failure rate down to an overall 35%. (If you consider an average angel deal to be approximately $200,000, according to Wiltbank’s statement, doing 20 hours of effort provides a potential $10,000/per hour in saved investment risk.)
But for those entrepreneurs who guesstimate that it is easier or faster to raise capital in lieu of generating revenue to keep the lights on during the early startup phases, Wiltbank commented that running a sales cycle requires an equal amount of time/effort as does fundraising cycle. Said Wiltbank, “If you have to raise capital to keep the company alive, it probably means you don’t have customers. And if there aren’t any customers, then what do you have?”
By the afternoon, attendees-at-large begin critiquing startups as ruthlessly as fund managers; “There’s no way they can make it to $150 million by year 3, not with their current sales pipeline, or with advertising as the sole source of revenue…!” As such, OEN’s Angel Oregon provides the People’s Choice selection, which incorporates the use of text voting, and allows audience members to vote for their favorite company, with results and percentage rankings visible on double large screens at the front of the hall. This year’s People’s Choice winner was MobSpot, cofounded by Benjamin Jacobsen, Justin Heikkinen, and Chris Wesley, launching this Monday and presenting at the upcoming SXSW.
Finally, after deliberating privately, the investment committee returned to the ballroom and finalists were called up to the stage, with DeltaPoint, Inc., founded by Richard Lazar, Lyman Potts, David Nason, and Tony Scaduto, for the Launched Stage track, winning a $170,000 investment; and Enjoy Life, LLC, founded by Maria Corbinos and Magdy Salama, for the Seed Stage track, winning a $25,000 investment.
Closing out the day’s event, Jackson thanked her staff and passed the torch on (literally, a brightly colored cloth torch), to Jim Huston, of Blueprint Ventures, who will chair OEN’s Angel Oregon 2011, and attendees participated in a closing social hour.
So my overall thoughts after attending OEN’s Angel Oregon?
First, that the startup ecosystem in Portland, and the state of Oregon, is no longer in the stagnant zone we felt we were in 12-18 months ago. We have become energized; things have been and are changing, and seeing the climate at OEN’s Angel Oregon definitely confirmed this.
I left with an increased appreciation for the macro ecosystem of entrepreneurship: seeing the fundraising process at a glance; the careful analysis by the investment team, the angst of founders struggling to rustle up the necessary funds to move the business forward; all of the many, many individuals and organizations available to assist Portland startups now and ongoing, whether or not they have or can even qualify for funding currently.
Even a quick review of some of the attending and/or sponsoring organizations: OEN, PDC, OTBC, Willamette University, PSU-BA, Babson Graduate School of Business, SwellPath, Jive, Blueprint Ventures, Lane Powell, Ater Wynne, OnPR, Morgan Stanley, White & Lee, Oregon Business Magazine, University of Oregon, Davis Wright Tremaine, eROI, Starveups, NedSpace, Portland Ten, Silicon Valley Bank, Stoel Rives, Capybara, Madrona Venture Group, and many, many others… they’re available to entrepreneurs, to assist startups in getting up and running.
So, if you’re starting a business, or thinking about starting a business, here are my two takeaways for you: 1) Consider applying for OEN’s Angel Oregon next year, and let the screening process assist you in streamlining your efforts; and 2) If you’re not already engaging with some of the organizations listed above, get connected, and get going! If you get focused now, by the time applications open for next year’s event, you will have accomplished significant developmental milestones (team assembled, prototype built, first revenues in), and as such, you may even be a serious contender for OEN’s Angel Oregon 2011.