Years ago, I met an angel investor who had a unique approach to investing in start-up companies. I was intrigued, mesmerized and awed by his description of creating opportunity for investors and entrepreneurs - he was more eloquent than any orator I have ever heard speak about what makes America great. He is and was the inspiration for our involvement in many of our early-stage companies that have gone public over the past 10 years and for those we now incubate at Alliance Acquisitions. This is a tidbit of that story.
Back in 2001, I was involved in a wireless start-up company that suffered the same fate as so many dot-com start-ups did in those days. Not only were we a dot-com company but our technology was telecom-centric and in early 2001, the telecom industry suffered the same fate as the dot-com world so we got hit with a double whammy of bad news, only to be trumped entirely by 9/11. In 2002, I met an angel investor named Jim who set me on a path that would change my life forever as well as have a tremendous impact on the lives of several hundred people around me. Jim would probably prefer I call him by some other name here and would most definitely not want me to use his last name so he can keep his anonimity. That's how Jim likes to be - low-key, out of the spotlight, the man behind the curtain, the conductor just below the stage. But make no mistake about it - Jim is bigger than life and completely focussed on increasing wealth for himself and for his investors. We have embraced much of his philosophy because it resonates so deeply within us.
One of my closest friends, who was an investor in my wireless company, introduced me to Jim because of Jim's interest in start-up companies with intellectual property aimed at a large potential market. I'll never forget that first meeting for breakfast in early 2002 at Junior's Deli in Westwood, CA. Junior's has been around for over 50 years and is a great meeting spot for business meals. It's Los Angeles breakfast meeting at its finest! Many deals have been made in the vinyl booths by the window at Junior's - book deals, movie deals, investments, banking arrangements - all have been made over egg scrambles, onion bagels with lox and cream cheese, matzah brie, and pickles. On that fateful day in 2002, I was enjoying an omelette and was giving Jim and Bryan an overview of my company and why I was looking for an angel investment to help us launch our product on a large scale. Our company had the ability (and a couple of patents in the space) to track GPS devices on any wired or wireless terminal. While that may not sound like such a big deal in 2011, trust me when I say that tracking a Garmin GPS device on a 2002 cellphone that was grayscale and only had 4 lines of text was a very impressive feat. We were creating location-based services before anyone knew what that meant - today, Facebook, Twitter and Foursquare are STILL trying to figure out how to monetize location-based activities. We had solved that over 10 years ago.
After I was done speaking, I felt pretty good, a little smug even. I had obviously wowed Jim and he was genuinely interested in participating "in some meaningful way" to make our dreams a reality. So after hearing me tell my story, Jim began to tell me his. But he told it in such a way that I was hooked from the beginning. He explained to me MY business from the eyes of an investor. And not just my business, but my execution strategy and my exit strategy. I have come to realize over the years that if every CEO could understand and get the exit strategies of their investors, they would view and build their businesses in an entirely different manner. Jim described to me the kind of investor that would like my business - the doctor, the lawyer, the accountant, the professional with disposable income and discretionary capital looking for a way to build wealth. Accredited investors who don't get a chance at pre-IPO investment opportunities because they don't quite have the portfolio size or a C_O-level position or a friendship with a broker who would otherwise throw them a bone and let them in on the next Microsoft or Apple or Google. By the way, there are A LOT of those people around.
Jim poo-pooed a lot of what financial advisors tell us, that we should measure our risk tolerance and build a balanced portfolio of investments that should include real estate. The problem with real estate, he said, was simply that it was boring! At one time, owning land was a sign of wealth and power but that was probably several hundred years ago. Today, nobody who builds a real estate portfolio is ever really excited about their investment picture. Sure, they can drive by a building and see people inside but noone watches the daily ebb and flow of mortgage rates and gets a thrill out of it! Not only that, but America was founded out of a search for independence, built on a survivalist mentality, grew on ingenuity and innovation, and in order to maintain its leadership position in the world, must have leaders with a never say die mentality and a whatever-it-takes-to-win perspective. To the rest of the world, America is still a start-up. And start-ups are all American! (When Jim finished this part of his story, I expected the Star Spangled Banner to come blaring through the loudspeakers at Junior's and a marching band and color guard to be at the front door.) Start-up companies are where opportunity exists. Early-stage companies are led by passionate leaders who sleep at their desks, work on weekends, lose their voices from pitching their product line over and over and over to anyone who will listen. But start-up companies change the world. IBM didn't change the world. Facebook has. Isn't THAT what America is all about?
I've come to appreciate a few things from that fateful meeting but one thing that has driven me over these past 10 years is the understanding that entrepreneurs and investors want the same thing - exciting opportunities that can have an impact on the world and whose value appreciates, creating wealth for so many. Instead of watching mortgage rates, our investors want to look at their stock portfolios and see the movements and yes, they can really get excited when they see their investment portfolio show green or if one of their companies has a run on the market. Decisions to buy more or sell are in their hands - they can control the highs of the wins and the lows of the losses and they can achieve wealth in a relatively short period of time. The entrepreneurs/CEOs/Management of those companies also get excited about having an investor base made up of fans and supporters who root them on day in and day out. Yes, investors can be fickle if the company doesn't perform but trust me, CEOs of our public companies WANT their stock price to reflect what's possible for their shareholders - they want to have happy shareholders and they are just as driven to create wealth for their supporters because those folks invested in a dream and a plan. That doctor, lawyer, accountant and professional can build true, attainable wealth through this investment but that's not all. They can also tell the story. Forever. It's their fishing trip story - the one investment that made them look (and feel) like the smartest investor in the world. Real estate invesments, IRAs, Pension Funds...they don't provide that thrill, that excitement, that pride. Noone ever brags about their actuarial tables or life insurance policies. But you do hear about the guy who was a first-round investor in Dell or employee number 11 at eToys.
At the end of the day, as Jim so eloquently put it, everybody has their own vision of achieving their American dream - we just hope to create one path to get there. One thing's for sure: It's definitely not boring!
-Brian
PS - For a variety of reasons, Jim ended up not investing in my wireless company. That's a story for another time...