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.

I was at an event last week where a panel of professional angel investors talked about what they look for in investments.  By professional I mean this is what these people spend the vast majority of their time doing to make money.  I am not talking about a successful entrepreneur who sold his/her company and is investing in other startups on the side while they spend most of their time starting another company or even sailing around the world.  I would define these types of angels as private investors. Dharmesh Shar from OnStartups puts these into folks into the “fools” category in his post on the subject. There is a very big distinction between the later, very typical kind of angel, and the former one I am writing about today. Ok, now that I have cleared that up, let’s get back to my night out that prompted this post.

At end end of introducing themselves to the audience, a local startup came up and gave their pitch, at which point the angels did their usual Q & A.  It was fairly representative of the alien-like anal probe an entrepreneur can expect when pitching  a group of professional angels, albeit a little more dramatized for the audience’s benefit.  One of the panelists was from a reputable early stage firm. Another was from a reputable angel group. I had never heard of the other four, but most had done well as entrepreneurs, even if 20+ years ago. I don’t have enough data points from a two hour session to say if they were good or bad people.  All I do know is I walked out of that event feeling like I wanted nothing to do with raising money from professional angel investors.

Below is a list of what I started to define as the most important pros and cons of raising money from friends, family and fools (don’t look at me, I didn’t make this term up), which include wealthy people you know, vs. professional angels. These lists are by no means exhaustive, but are the ones I have found to matter most:

Professional Angels:

Pros

• They actually have money and are in the market to invest.  In theory, they need less education and time to make a decision.
• If successful themselves, they may also be looking to give back and are committed to spending time as well as money.
• If active, they have friends that can invest and/or a network that can open lots of doors for you.
• If they are high-profile or “celebrity” (in the TechCrunch sense of the word, not the tabloid sense) they can add a little credibility to your startup.

Cons

• They are probably overwhelmed with opportunities, so getting in touch and/or getting mind share is far more difficult. They might also have an air of superiority about them or just be down right arrogant.
• Because they hear so many ideas and pitches they start to become jaded and even immune to good ideas, enthusiasm, passion, talent, etc.
• They think they know how to value an early stage company, so they are likely to force you to put a valuation on the seed round. This will likely cost the founders a bigger stake in the company.  Depending on the terms, it could also negatively impact or even derail future rounds.
• They are invested in multiple companies, and so might not have very much time for you.

Friends, Family & Fools

Pros

• Easy access.
• You know and trust each other and/or can easily get references.
• They are more likely to write you a check on the spot without lots of formalities.
• They have alot less opportunity to invest in new companies, so you may be doing them as much of a favor as they are doing for you.
• If they have relevant experience they likely have a lot more time to spend with you if they are not invested in multiple companies like professional angels.
• They are more likely to take convertible debt, or debt that is convertible to stock at a discount to the first VC round. This is great because they get a discount for the extra risk and everyone avoids a bunch of inexperienced people putting a valuation on a company too early. It also gives you an opportunity to create more value and increase the first valuation.

Cons

• You have to live with these people for the rest of your life. Worse, you may lose some of them along the way. Startups are risky roller coaster rides. Are you prepared to bring them along for the ride and/or lose their savings?
• There is more up front and ongoing education and hand-holding since they are not professional investors, might not have the stomach for it, don’t know what questions to ask and/or how to measure success.
• Depending on how wealthy your friends and family are, you may need alot more of them to fill out your seed round, which consumes valuable time and energy.
• They may or may not be as connected or plugged in as a professional angel and therefore able to open as many doors for you.

It is very important to note that these two groups are not mutually exclusive.  For example, “smart-money” can just as easily come from your friends and family as from professional angels depending on how good a job you did building out your network.  I always abide by the saying “when you need a friend, it’s already too late to make one.”

The happy medium I came to was to  raise money from a blend of experienced entrepreneurs that aren’t professional angels for “smart-money” as well as wealthy individuals regardless of background to fill out the round.

Regardless of what kinds of angels you get, here are a few basic requirements I live by that will help keep you guilt and pain free:

• Don’t let anyone invest money that would change their lifestyle. If they will miss it, you don’t want it.
• Don’t ever, ever assume personal liability for paying it back if the company doesn’t succeed. This is an investment, not a loan. Failing is hard enough without owing people money for the next 30 years.
• If they are high maintenance and/or you don’t like them as people, don’t let them invest no matter how much you need the money. They will make you miserable and its just not worth it.
• Assign a minimum investment amount that will keep you under 10-15 investors and stick to it. The more investors you have the more of your valuable time you will spend up front and over the course of growing the company.

[update] Final thought, you don’t need to use your angel round to get good people that can give you good advice. You can always take a bunch of money from rich people and get your advice by surrounding yourself with lots of other smart people. For example, you can and should build an advisory board of the people that can ask the questions you don’t know to ask and answer the questions you can’t answer. Give them a little stock and the privilege of being on your select advisory board and voila, you have your circle of trust (panel of experts).

Break-a-leg!

Part 3 in this series focuses on Charlie’s upcoming launch of the New York chapter of The Open Angel Forum and gives a key piece of advice to anyone thinking about starting a company.

Sean: Tell me a little bit about the [Open] Angle Forum I know you’re bringing it to New York soon so interesting to hear about it.

Charlie: So the Open Angel Forum that started a few months ago. I actually posted something a little before Jason [Calacanis], but Jason kind of has this much bigger megaphone than I do. So I think there are a lot of folks that basically make money-brokering introductions between startups and angel investors, which isn’t necessarily a bad thing I just don’t think it needs to exist. I think this is something that the community should be able to get together and do, you know, on its own without necessarily charging the entrepreneur, who by the way has the shallowest pocket out of the whole bunch. And so I think we realized that…and at the same time these weren’t necessarily the folks who had the best connections to angels and sort of financing too, you know. I don’t necessarily get my best deals by going to a conference where somebody paid a thousand dollars to go. In fact, I don’t necessarily want to find an entrepreneur who decided it was a good use of their own personal capital to spend a thousand dollars to get to me. I’m pretty accessible, and I think most investors generally are. We may have overstuffed inboxes that may take a couple times to get through, but we’re paid to find good deals and we have to look at a lot of deals. So, you know, the open angel forum basically, you know, it’s set up a as a dinner, you know really sort of relaxed, sort of intimate setting, smaller. We’ll take six or seven companies and, you know, introduce them to about a dozen angels. We’ll have some sponsors there, you know, who basically, you know, pay for the whole thing. But a much better way, I think, to interact in a small setting basis, and this is something we hope to do, you know, a couple times a year. I think the day is April 8^th. I should know that off the top of my head we just moved it. But we’ll take applications up until about, I think a week or two beforehand. So I think it’s definitely worth applying if you’re going through angel financing, and so far it’s been a success. They’ve done it in L.A. and Boulder, and companies definitely have gotten financing from it.

Sean: The model is, so you have sponsors to help pay for the event but also the angel investors pay [to attend] as well?

Charlie: No

Sean: It’s the sponsors?

Charlie: Yea…so there’s you know whether it’s a lawyer or a recruiter or somebody, you know, along those lines, but no the angel investors don’t get charged either. So both sides that need and want to connect  [are] as seamlessly as possible, there’s no barriers to them necessarily participating.

Sean: So you posted a week ago in your blog, any takers yet?

Charlie: A bunch. Yea. No I very quickly looked at the spreadsheet and it was like very overwhelming. So, I know I don’t have to think about it, you know, until we sort of make the decisions later on. But there’s a lot of interested folks.

Sean: How do you pick?

Charlie: It’s tough, you know. I think one thing we definitely are counting on is a little bit of diversity. So there’s a couple folks that I talked to that I thought had interesting models that would make for a nice mix. You know we didn’t want necessarily six or ten people doing the same type of thing. I think, you know, different judges may have their criteria, but I would love to see somebody who had a really great idea, might not otherwise be as tapped in as some other folks to this community. You know, probably, maybe less likely to pick somebody who would have gotten to these people otherwise.

Sean: And can you say who the angels are?

Charlie: We’re still trying to figure that out actually. There’s a whole bunch of people, and in fact, I think one of the big questions is who’s an angel? Right? You know look at somebody like Rodger Aaronberg who [has starting his own fund], and will still make angel size investments. There’s a number of VCs who want to come who want to make angel size investments. And that’s, it’s kind of a tough call. I think, you know, a piece of feedback, and I’ve had a debate with a lot of folks about this, is you should try and get people whose main job and main routine it is to make these kinds of investments. Where you’re finding somebody who does this by exception, I think it’s tougher for you to get that kind of time. They’re not as used to dealing with companies at this sort of stage. So, you know, were looking for people who are active, can write checks. And that’s the worst part about some of these forums where you pay money. Half the people I know haven’t written a check in two years and the entrepreneur sort of feels like it’s a waste. So there are a bunch of active people in New York that will get invites, and will all be a matter of sort of scheduling.

Sean:  If you were to give some advice…so it sounds like we both agree New York’s a great place to start a company, plenty of money, plenty of customers here. You don’t need to be on the left coast. You don’t need to have a Stanford MBA or degree. Anything else you would suggest to someone thinking about starting a company?

Charlie: I think, really, one important thing to keep in mind is…I think VCs and angels are seen as people who take risk, and actually I think if you really want to get an investment taking as much risk off the table to think about…There’s a couple of things. I think you know we look at team, we look at product, and you know, you look at market. And product…you’re never gonna have all three of those things.  But, you know, if you have the most experienced team ever, a product that’s already in the market and getting traction, and a huge market, well that’s a real and concern, that’s a late stage investment. On an early stage for a seed you might have an unproved team, with an interesting product, and a big market.  And you sort of have to pick and choose, you know which, which missing piece you’re basically gonna have your bet on. The more of those pieces that are question marks the tougher it is to kind of get there. So if you know you’re missing key motors of your team and you don’t have the right product, but it’s a big market, you know, what can you do to take some of those pieces of risk off the table? Can you bootstrap your way to an interesting product? Can you validate the market with a customer, you know, a couple of customers who are willing to buy it or even invest in the product? You know, try to take as much risk off the table as possible, you know, I think is a key piece of advice.

Startup SeatGeek, who’s site forecasts event tickets prices to help you know exactly when and where to buy,  raised between $500k and $1M in a Series A financing according to TechCrunch.

Made in NYC, SeatGeek’s offices are located in the heart of Silicon Alley at 447 Broadway and the round was lead by four NYC angel investors: Sunil Hirani (founder of Creditex, an online derivatives market that was acquired for $625M in 2008), Mark Wachen (founder of Optimost, an enterprise multivariate testing app acquired for $52M three years ago), Arie Abecassis (former President of MindFire) and Allen Levinson (former MD of Moody’s KMV).  SeatGeek was previously incubated in and received a seed round of $20k from Philly based DreamIt Ventures.

SeatGeek is basically a vertical search engine that searches hundreds of secondary market websites every day to aggregate all the information relevant to event ticket pricing, including ticket list prices, days of week and even the weather.  It crunches that info into predictive pricing intelligence and layers that on top of listings and interactive seating charts to give you a comprehensive listing service that is also smart enough to tell when and where to buy to get the best deal. If you are too lazy or busy to keep checking back on the site, SeatGeek will send you alerts when tickets hit what their systems deems the lowest price.

So how does SeatGeek make money? Buyers can use the service for free and tickets brokers and other sellers get a premium (aka paid) service. SeatGeek also gets 7 to 10% of ticket sales where it has affiliate relationships with ticket brokers. They’re also preparing the roll-out of a ‘ticket insurance’ product, where users get compensated if SeatGeek doesn’t provide accurate forecasts.

SeatGeek has forecasts for about 5,000 events and claims a 82% forecast accuracy rate for all new events, which uses a database of historical ticket prices that has grown to over 11 million sales in the past few months.

SeatGeek was founded by Josh Groetzinger and Russ D’Souza, who also co-founded Scribnia and Evolving Vox together.  Assuming they didn’t raise any additional funding between the round from DreamIt and this A round, Josh and Russ have accomplished quite a bit with very little. It will be interesting to see how far they get with this next traunch of funding, most of which they plan to use for hiring. Not surprisingly, it looks like most of the hiring will be focused on hiring engineers from the New York tech community by the looks of the open positions posted on their jobs page!

Our prediction for SeatGeek? Chances are it gets scoped up by one of the leading online ticket sites like TicketMaster or StubHub within a year or two. Only time will tell how accurate our predictions are!