Mark LaRosa is the founder of QuotaCrush. Started as a blog on sales techniques for start-ups, QuotaCrush now provides outsourced sales consulting and services to several start-ups, incubators, and universities. Mark also plays an active, key role at Angelsoft, where he was also previously the VP, Sales.  Angelsoft provides software that helps angel and venture capital investors manage their investments.

In Part 1, Mark talks about how when, where and from whom to raise an angel round of financing and the pros and cons of professional angels vs. friends, family and wealthy individuals.

Sean: I’m here with Mark LaRosa, from QuotaCrush. So Mark, tell us a little bit about you.

Mark: So, I’m the founder of QuotaCrush and I founded it about 18 months ago, although I ran it as a blog – just a blog about sales – for about a year before that.  It’s really about advice for salespeople and sales managers within organizations that are startups.  That’s what the blog mostly is about, and what I’ve done is extend that to be a consulting company for startups. I’m working, right now, with about four different startups as their acting VP of sales, and essentially helping them develop their sales strategy, move their sales strategy, ultimately get their product out there in a more sellable way.

Sean: Before QuotaCrush you were VP of Sales at Angelsoft which, of course, was started by David Rose from New York Angels.  So, and you’ve done a couple other startups in your life; both good and bad results…

Mark: Yeah. (chuckles)

Sean: So, if there’s two things that I could ask you today, one would be:  I guess, what advice would you have for a couple of founders in a garage about from whom to raise money? How much and when?

Mark: Yeah.  So I can tell you that you should …don’t just raise money for money’s sake. You want to get money because it’s time, because you need to expand out your business, and you want to hold that off as long as you can. So if you can do anything with bootstrapping or friends and family or if you’ve got a contract and you can take that to a bank and get a loan based off of that contract, that’s the better way to go. And then when you do ultimately get money, you want to make sure that’s smart money. It’s not just money for money’s sake.  Somebody that can help you that’s going to understand your vision that’s going to help you carry your vision that maybe can take you and give you advice. So that may be waiting until the VC rounds that may be some angel money. But you really have got to make sure that you’re getting a partner when you get that money.

Sean: So if you think about angel money, you have friends and family and fools – [inaudible] friends and family and fools – and then, sort of, professional angel communities, which is what Angelsoft tries to harness both for that community as well as entrepreneurs trying to access, right? There’s clearly pros and cons to both.

Mark: That’s right.

Sean: You just mentioned one pro for professional angels, assuming they have been an entrepreneur before and now are investing; they can give you lots of advice. What would be a con of raising money from a professional angel versus, you know, a [inaudible] guy?…

Mark: Yeah, so, with a lot of the professional angle groups, it can add some complexity to the deal. You know, with friends and family, a lot of times you getting an in and they’re just giving you the money and it will be convertible at some point. You know when you get into a professional angel group a lot of times you get into the same situation you get into with VC’s where you’re going to go through an entire round and spend up to $50,000 trying to get lawyers to close this deal and it may take a very, very long time because – we always call it, you know – “you’re herding cats”  because you’ve got all of these individual people that are making their own decisions and you’re trying to bring them together. And there’s a lot of work that you have to do to bring these angels together even though they’re a part of a professional group. And you will also find that a lot of the professional angel groups – not New York Angels and a lot of these real professional angel groups – but there’s a lot of angel groups out there that do a lot of looking at deals but they don’t actually do a lot of actual investing. So you will spend a lot of time working with these guys and you actually won’t get money in the end. So you need to look really towards the real professional organizations. You know, like right in New York here we have the New York Angels, we have Golden Seeds, you know, a lot of really great angel groups, and those are the ones that you should be making sure that if you’re going to go the angel  group route that you’re sticking with those types of groups.

Sean: Top-tier? Reputable?…

Mark: Exactly.

In Part 2 Mark gives startups some advice on how and when to think about sales.  It will be published on Friday.

Do you agree/disagree with Mark’s advice around how, when and from whom to raise angel money?  Share your opinion in the comments!

Jeff Stewart if the founder and CEO of UrgentCareer, Founder and Chairman of Mimeo, angle investor in several New York based startups and himself is on his sixth startup in New York City.

We talk about UrgentCareer, Mimeo, why he chose New York as the city in which to start six companies and what Jeff looks for in an investment as an angel investor.

[Note to self - make sure the interviewee is facing the camera!]

Sean: So we’re here with Jeff Stewart, CEO and Founder of UrgentCareer and, actually, serial-entrepreneur. Jeff why don’t you do the honors of telling us a little bit more about yourself than I’d remember.

Jeff: So I’m an inventor, angel investor and a big advocate for New York as a great place to start a company.

Sean: Yeah. So you’re currently the founder and CEO of a company called UrgentCareer. Can you tell us a little bit about that?

Jeff: Sure. UrgentCareer is developing a new technology for finding, screening, and assessing salespeople. We’re using computational linguistics to essentially categorize salespeople and figure out what type of salesperson will succeed in which role. So, we do that by recording a conversation, transcribing the conversation, and then algorithmically analyzing that with the hopes of eventually being able to successfully categorize the different types of salespeople.

Sean: So who’s the ideal customer for UrgentCareer?

Jeff: Today we work with – as the technology is still evolving –we work mainly with venture-backed, fast-growth startups. Although, more and more we find ourselves working with large corporations who have substantial sales organizations and, like so many companies, understand that getting great sales people is critically important.

Sean: So any founder or startup here in New York – or anywhere – should call you if they’re thinking about building a sales team and don’t want to make lots of mistakes doing it?

Jeff: Well, as we built out the technology we realized we needed to have access to a steady stream of data and the best way to do that was to actually build out a world-class sales recruiting organization. So, we’ve created the capability of finding exceptional sales talent. So, yes, if you’re looking to find exceptional sales talent, we can do that.

Sean: And so Mimeo was the other, kind of, the last big company. Do you want to talk quickly about Mimeo here …

Jeff: Sure, sure. Mimeo is also based in New York. We are an internet-based print service. We take digital documents, literally from your computer, hit “print,” it goes to our state of the art production facility in Memphis, TN, gets produced and it can be Fed-Ex’ed anywhere Fed-Ex delivers. It’s usually faster, easier and certainly a lot more convenient for document production.

Sean: So this is, you said I think, number six, that UrgentCareer is going to be your sixth startup in New York. Why New York, why not the [Silicon] Valley? Why do you choose here for home for all of your companies?

Jeff: Well the Silicon Valley is absolutely amazing, it’s a very special place for startups, but I think more and more you’ll see New York as the number two place on the planet for startups. The reason for that is talent. There’s a vast reservoir of talent here in New York and we’re able to attract talent from all over the world. There’s customers, there’s actually about 150 billion-dollar plus companies that have substantial presences here in New York…

[INTERRUPTION]

Jeff: …There’s about 150 billion-dollar plus revenue companies who have substantial representations here in New York. Also it’s an international city and there’s a great startup community, including second and third time entrepreneurs who are now actively involved in a new wave of startups.

Sean: You said to me earlier that you think New York is going to be bigger than the [Silicon] Valley…in terms of being able to invest. Why is that? Why would New York be a better place?

Jeff:  Well, I think, again Silicon Valley is incredible and has very robust seed and angel stage investment… and even more important, experienced entrepreneurs who can contribute advice as part of that investment. But New York has an extremely high density of qualified investors with deep industry expertise across a wide range of industries and can have a lot to bring to the table. As far as a reservoir of potential angel investors, New York actually surpasses the West Coast as far as the number of potential angel investors. And I think, at least what I’m seeing as an angel investor is more and more qualified investors saying, “How do I get involved in this asset class?” It’s one of the few asset classes left that – thanks to the proliferation of derivatives – is still uncorrelated. So it’s a good performing asset class, it’s uncorrelated, and it’s fun. You roll up your sleeves and you contribute more than just the investment. A lot of the times you can bring important domain expertise to the table which helps the company out.

Sean: So you’ve invested yourself in multiple companies in New York and elsewhere. What do you look for in an angel investment?

Jeff: Well, I like to get involved…

Sean: Who should come see you?

Jeff:  I like to get involved very early, so at that stage it’s a lot about the management team, or the partial management team, if you will. Also, I’m a geek at heart. I’m very interested in technology, so I like to see that there is technical lead and that there’s some depth there. And I look for the ability to move quick and execute quick. I think world-class startups are built through fast iterations and, you know, in some cases, lots of mistakes but the ability to make their mistake learn from it and move from there to the next level.

Sean: Do you have a syndicate of friends and fellow investors that you push your portfolio of companies out to once you’ve made a choice to invest?

Jeff: Oh, absolutely. I think… I do angel investing as a team activity.  You know, there’s just not enough money being put to work to dig as deep as a professional VC would, so you have to rely on a team, if you will, to dig in and do the due diligence. And then also the amount of the investing, you have to rely on a team to make sure that there’s enough money being put to work that it can take the company to the next level. So I think that most successful angel investors co-invest with other angels, and I think that’s in the benefit of the, too, because you get diverse perspectives and it’s healthy for the entrepreneur.

Sean: So any other words of wisdom you’d like to leave behind for some aspiring entrepreneur that wants to say in five or ten years that they’ve been successful six times over?

Jeff: I think it’s… starting companies is a lot of work.  It’s not for everyone, but it’s extremely rewarding and you learn a lot quickly. And I encourage anyone who’s looking to do it to do it.

Sean: You know, six times in, you have enough experience, do you still need to do the 80 hour work weeks or can you be more efficient at it?

Jeff: Yeah, I think you can be a little more efficient, but I think that there’s certain phases that the company goes through that there’s no short-cut. It just takes a lot of work.

Sean: And it needs the founder.

Jeff: And it needs the president, yeah.

Sean:  Well, Jeff thanks for sitting with us today.

Jeff: My pleasure.

“Editors Note: This piece was originally published by Brad Hargreaves on March 28, 2010. I wish I had time to do this type of cool data crunching, but since I don’t I’m reblogging it with his permission here.”

Lots of you enjoyed my post a few weeks ago on buzz and fund size among NYC venture firms. But why not take it further? Why not use all the data in Crunchbase of financings of NYC companies over the past five years?

So that’s what we did. And we got data for 814 venture financings since March 2005 worth a total of $3.1 billion. We were careful to exclude angel and strategic investors, since data around those deals are poor and would make the results harder to parse.

To start, let’s look at all venture firms that have completed over 7 financings of NYC-based companies in the past 5 years. Here, you can see how they stack up based on number of deals done:

Keep in mind that there’s a long tail here — this chart represents 300 total financing events, only 37% of all the venture financings of NYC-based companies in Crunchbase. The rest of financings were done by other firms.

But this is just parsed by the number of financings — with no thought given to the size of the deals. Thus, let’s look at the (relative) deal size by the firms listed above when investing in NYC companies:

You’ll probably notice that there aren’t any labels on the Y-axis. In brief, I don’t trust the absolute data here. It’s often impossible to distinguish the relative contributions of investors in a syndicated deal. For example, if Union Square does a $1 MM seed deal, there isn’t any ambiguity there. But if the company’s next round is a $10 MM round syndicated among two growth capital firms and Union Square, there’s no way to really know how much each firm invested. However, it is probably safe to say that the growth capital firms do bigger deals than Union Square, since they first joined the syndicate at a later (bigger) round. Thus, the relative data is accurate, but the absolute numbers are highly questionable.

Since we selected these financings based on the zip code of the funded company’s headquarters, we can drill down a bit further and draw some really interesting conclusions. Specifically, where are funded companies? The following map looks at two factors: the number of financings in the zip code (the color of the dot) and the total amount of venture money invested in the zip code (the size of the dot):

There are certainly some surprising things here, at least to me. This entire map seems to be shifted a bit further north than I expected; are there really that many well-funded startups in Murray Hill? I also expected to see a bigger presence in TriBeCa.

There’s a lot of data here, and I’m sure there will be follow-up posts — especially as we dive into the data on the types of companies that are receiving this financing.

Brad’s original writing can be found here.

Part 1 of my interview with Charlie O’Donnell above and below focuses on financing startups, pros and cons of incubators like TechStarts and YCombinator, and First Round’s own investment criteria.

Part 2 focuses on why New York is a great place to start a company and how the early stage funding gap in New York has largely been closed.

Part 3 focuses on Charlie’s upcoming launch of the New York chapter of The Open Angel Forum, and First Round’s most recent investment in Backupify

Transcript: Charlie O’Donnell Interview Part 1 of 3:

Sean: We’re here with Charlie O’Donnell from First Round Capital, Charlie thanks for being here.

Charlie: No problem.

Sean: Maybe you can just tell us, as a way to get started, just about First Round, and you know what you guys are up to.

Charlie: Sure. So, we’re very properly named. First Round Capital, we like to do investments as early as possible. So I think people like to sort of think of us as a seed or angel stage investor that’s typically what we encounter [with] a lot of the companies we meet with. But at the same time we can follow on and were a hundred twenty-five-ish million dollar fund, and you know can do some larger amounts as well.

Sean: And you’re fund is based out of Philadelphia?

Charlie: Yes

Sean: But you guys are opening an office here in New York and [you] have one in the Valley as well right?

Charlie: Yea, so we got a couple of partners in Philly. Rob Hayes is out in San Francisco with a team there. Josh Kopelman and Chris Fralic work out of Philly office. Howard Morgan works out of everywhere. He spends quite a fair bit of time in New York, and we’ll be sort of needing our New York office, which will be open hopefully by the end of the month if not the first week of March right in Union Square.

Sean: I saw the photos on your blog and posted it as well, where exactly is the office?

Charlie: So it’s right in Union Square. It’s 200 Park [Ave] South, which is the north end of the park right across the street from the W. So great location, well worth the wait, and we’re excited about it.

Sean: Awesome, so what’s your sweet spot in terms of the amount that you like to invest?

Charlie: So I think our average, at least in New York, our average deal size has been right around six hundred grand. But that’s kind of a mix between, we’ve kind of done some smaller initial amounts and some larger initial amounts. I guess it depends on whether or not were part of a company’s initial angel ground. We like to have the opportunity to look at that. Sometimes companies come to us after they’ve raised five hundred friends and family have been looking to do two million dollar ground or something like that. We’ll certainly take a look at those too, but I think where we feel we have the most value is in the very early stages of a company. The product development cycle. You know, really focusing in on where the most value is going to be created in a company.  [And] helping companies get to a venture round.

Sean: So what do you look at, besides being early stage, what do you look for [in an investment]? What are you guys focused on? In terms of what’s your decision making criteria?

Charlie: I think a lot of it is trying to figure out you know where the value inflection points are. You know, when somebody comes in and says you know we’re raising a five hundred million dollar, uh, five hundred thousand dollar round, my number one question is ok where does this get you. And the answer shouldn’t be a year, because that doesn’t mean anything I can’t buy a year. But uh, and I am quite sure you can spend the money in year but does it lead you to a place where significant value is being created? So, if you’re in the local market, does it get you to five cities, is five cities meaningful for you as a company? Why is that? You know does it get you a certain product that you think is a viable product as a company. That’s really important, you want to see really, really high leverage for that amount of money whatever it is that you’re raising. I think obviously scalability. Um, I think the number one thing I’ve seen missing from most pitches is customer acquisition. Um, how do you, how will people find out about this? Can you efficiently acquire customers? And where are they and how are they going to encounter you’re application, and figure out that you even exist. I was just talking to an entrepreneur the other day who said okay when they come to our site. I said wait wait, they don’t know you. How do they even figure out that you exist, so that’s really important.

Sean: What about team?

Charlie: Team is critical. But team is sort of an interesting thing because you know a lot of the folks that we’ve backed haven’t necessarily been veterans of eight start ups before. And you know so I think, for me personally I like to see a good match between the product and market and the skill set of the entrepreneur. So if this is a product that really, really needs a strong hit the ground running kind of sales team, and this in the DNA of the entrepreneur, and you feel like this is the right person to execute that kind of plan, that’s really important. I talked to a company not too long ago who was really going to depend a lot on search traffic, and that’s something I think is really important to have in the DNA of the founders, to think about. You know how do you make a well-structured, search-friendly site. And you know I think at the early stage we’re playing in there’s going to be missing parts to the team. I don’t think we ‘re necessarily looking for complete teams. But, knowing that the pieces that are in place are really strong pieces is important.

Sean: What do think about these mentor programs like YCombinator and Techstars, and you know what do you think about them in general and how do you guys sort of compare?

Charlie: Well so I think there’s a very wide range right. I think TechStars and YCombinator have clearly taken a lead and those fall into a category of incubator programs. They come with money, and…which is always good. Because if you can get teams to focus on something for a particular period of time, put a little money in their pocket, I think that helps attract people to it. I think it gives good incentives, on you know on the part of the people running the team. There are other kind of incubator programs that are focused on helping people get financing. I think those are tough. I would love to see more of those programs focus on helping startups build great companies, cause at the end of the day great companies get funded not great pitches. You can have the best pitch in the world, if you don’t have a great company and a big market it’s gonna really be hard. And at the same time I think any investor worth their salt can see through a bad pitch to a good product. Sometimes you just don’t have that front man as part of, or whatever, as part of the team. And so I think a lot of focus should be shifted from, I mean not everybody needs to raise venture funding. I probably tell more people not to raise money or to raise smaller amounts of money. Or to go out and just start generating revenues, that’s the best form of financing there is. Financing that doesn’t come with ownership attached to it.

Sean: The model seems to be, you know if you read through the lines, they put in ten to twenty thousand dollars [and] they get five to seven percent of the company. You think that’s a fair deal?

Charlie: I think it depends. You know I think there are some instances where it could be two college kids working over the summer and this is maybe the only way that they will ever be able to access any capital, and you know the kind of networks that folks like TechStars and Y Combinator could bring.  So I think that’s very valuable to them in that situation. But if you come out of an industry, you’ve made really good contacts, I sort of feel like most people should be able to raise, through their own social capital, a couple hundred grand of angel financing to get something off the ground. Because I started to think, if you don’t have good industry experience somewhere and haven’t been connected to successful people, where did you get the idea that this was a good idea. I think a lot of people when they start their businesses they’re working somewhere for a little while. I think that’s when they see the opportunity in markets. It really depends on what the entrepreneurs looking for.