Archive for May, 2006

Earth Angel

I joined an organization focused on sustainable angel investing called Investor’s Circle. Their motto is patient capital for a sustainable future. They recognize that there are great businesses in development that can’t show the spike returns needed to get the attention of traditional capital, yet are worthy businesses that will still return a decent profit and make the world a better place if they succeed.

The day before the conference they hosted a overview seminar on Angel Investing developed by the Kauffman foundation. It was hugely helpful, and yet just tantalizing at the same time. There are so many issues to go in depth on, we spent 20 minutes just talking about dilution but really didn’t get much more into term sheets. It’s true that as a small angel I may not get much opportunity to negotiate term sheets anyway, but I figure that the one element of risk I have the most control of is maximizing how well my investments are likely to treat their small investors down the road. What’s their communication strategy? What are my information rights? How quickly will they sell me (and themselves) out for VC money if they get in a crunch? That was an interesting angle – the emphasis folks put on thinking hard about future rounds of funding that will need to come. Where will those come from? Better to have more investors early in the deal who can pony up later than be greedy and end up high-and-dry. At the conference itself I spoke to an investor who wrote into the term sheet (or got a side letter) an agreement that the company would participate in annual sustainability reviews. That process has modified over time but that’s an interesting goal to think about as we get better in measuring non-financial measures.

Fortunately for the information-starved such as myself they pointed us at some future resources:

There’s an organization called the Venture Capital Institute that offers week-long seminars in VC investing. The next one is September 25-28th of this year.

They recommended many books. There’s a list on the Angel Capital Education Foundation website under “resources.” I myself ordered:
• May, John and O’Halloran, Elizabeth F., State of the Art: An Executive Briefing on Cutting-Edge Practices in American Angel Investing, Charlottesville, VA: Darden Business Publishing, University of Virginia, 2003. (reference cribbed from the ACEF website)
I chose that one because John May was one of the presenters and, like myself, he’s a Northern Virginian (though I ‘spose after 12 years I’m pretty much a Seattle-ite now). I don’t normally think of NoVa as having a culture, but for a complete stranger, he seemed familiar in a way I can only attribute to that. He still lives there.

They also recommended the National Venture Capital Association’s website where they have posted model investing documents like a term sheets and an investor rights agreement. The goal of the model documents is to show neutral terms.

At some point in the week someone tossed out a reference to Innovest which I was inspired to write down. Surfing it up I find www.innovestgroup.com which is a investing and research firm that specializes in environmental and socially responsible investment. Their publications page has tantalizing reports like “The Eco-Efficiency Premium Puzzle” and “Climate Change and the Financial Services Industry”. According to their website, they do the research to support The Carbon Disclosure Project.

For Entrepeneurs – the handed out a book to all the attendees of the Venture Fair:
Investors in Your Backyard: How to Raise Business Capital from the People You Know, I’m guessing it’s the book by Asheesh Advani.

At lunch the last day our speaker was Carlo Petrini, the president of Slow Food International and a former Time Magazine Hero of 2004. He spoke in Italian with a translator and he was amazing. He commented on the irony of us having lunch “together” but he wasn’t getting to eat, and how American it was to cram in a talk over a quick lunch. The bulk of his talk was a really meaningful speech about how global food production has turned into a competitive war with nature to maximize production. At the same time we’re overproducing and overeating in so many parts of the world. His recommendation is to not finance large scale organic production, not finance consumption but seek ways to finance harmony. Hearing this I felt a resonance with a speaker we had just had last intensive at BGI, John Eherenfeld, who was encouraging us to think of businesses that help bring people into presence. Mr Petrini suggested that the first Renaissance had been about beauty and this next Renaissance will be about food and our relationship to it. He stressed the creation of a new economy of harmony, that harmony is fundamentally an economic goal and pursuing it means we have to avoid externalized costs like poor quality health and poor quality personal relationships.

Thank you Libba for connecting me to Investor’s Circle, thank you Investor’s Circle for being. I look forward to being more with you.

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