The MIT Venture Lab in Seattle last night ended with a round table Q&A that was more interesting than the general conversation. While it is great to learn about the Alliance of Angels, or the Tacoma Angel Fund, Angel funds for Energy, and Angel funds that do mico-loans, what is more interesting is learning about the state of the business today. Here is what I picked up from the meeting last night.

Time to get money – if you jump through all the hoops, you do everything right, and you make a big splash with your company it will take anywhere from 9 to 18 months to get your round of Angel investment here in Seattle. If you are running a company, you need to know and start planning 18 months out from zero dollars in the bank to ensure that continuity continues with your company.

Capital Markets are tightening – all the angels at the table mentioned that the market is tightening; getting money is not going to be easy right now. With the credit crunch and problems with investment banking, this is going to add to the time to get money, and people will be doing “due diligence” in relationship to how viable they think your business is. Depending on the Angel fund you go with, and how they evaluate risk, it is going to be best to know all the angel funds in the area. What one angel considers undue risk, another might consider a deal. It all depends on how the angel fund looks at risk, and what their access looks like for getting capital in the current market.

You have to pay for the pleasure – much like many things people do, you have to pay to get the attention from the Angel funds here. Your price for entry into the club can range from 150 dollars to over 1000 dollars depending on which fund you go with.

Angel Soft – Software. There is a package of software called Angel Soft that most of the Angel fund groups here work with. The standardization of application processes using the platform for both Angels and VC’s does two things. One it makes a great way to standardize the business and homogenize the process. The down side is that you still will need to customize the presentation and the data for each company. It would be easy to fall into the trap of doing a one size fits all presentation and data using standardization of the process. Most of the time one size does not fit all when someone is talking about money.

Emotional Involvement – The table was talking about the emotional involvement that Angels have with their companies. This is another good/bad kind of issue. Good if you can make an emotional commitment, bad if your business decisions are tainted by good feeling data fudging emotional decisions. You have to have a commitment, you have to be involved, and you have to be enthusiastic, but when the numbers are the numbers, no amount of wishful good feeling thinking or emotional involvement is going to change the fact that the business might not be viable.

Angels Talk – they talk to each other, not necessarily about the companies that they do put money into, but they do talk about the companies that are around them. They meet, they talk, and they share stories. So you have to manage the Angel discussions that you have thinking that you speak to one, many will talk without you being there. Those back room conversations if you go to all the Angel funds in town can help or hinder your quest for funding. If you blow it with one, that does not mean you have blown it with the others. But if you go on a rampage against one, you take on all the angel investors in Seattle. This is not a tenable place to be if you are planning on hitting all the angel funds in town. Relationship management here is going to be important, you might speak to one group at a time, but they will compare notes.

Angels share information back with you – if you fail to get their attention, all the angel funds in town will send you back pages of notes on things to improve. Just because you got told “No” once does not mean you should not fix your pitch and try again. The angel group brought up many examples of people who flamed out the first time, got their act in order in relationship to the notes given back, and try again. Actually the angels seemed to respect folks that were willing to fix things rather than go on down the same tired road and not fixing flaws in the pitch.

They want preferred shares – don’t offer them anything but high value shares. If you offer an angel common stock they will walk away.

Use a lawyer – always use a lawyer to help you put through your pitch. They are seeing a number of companies come through that have not used a lawyer, and their pitches are pretty bad in terms of what the Angel investor gets back. This has lead to dead deals.

The Q&A covered all those topics, and those are just the highlights. If you are going for Angel funds here in Seattle, then these are things you want to know about. Learn Angel Soft as well, but make sure you customize your pitch. Each angel fund looks for something slightly different, and has different ways of operating even if they are standardizing on the Angel Soft platform. All of this is worth knowing.

Tags: angel, fund, vc, seattle, funding, angel soft, market, capital, tightening, money, funding