Inside the Head of an Angel

CresaPartners recently cohosted the October 10th, 2007 iBreakfast’s Venture Capital Outlook featuring Idealab & First Round Capital’s Howard Morgan, New York Angels & Rose Tech Ventures’ David Rose and Newforth Partners’ Robert Hoffer.

Rose Buds

Rose began by observing that there are relative few truly new concepts, but offered some personal platitudes he invokes in making investment decisions:

Invest in the jockey, not the horse - this is commonly heard from venture capitalists and Rose suggests that it is rarely about the business plan. All business plans are bound to change and the successful entrepreneur must be adaptable.

The venture concept must be scalable - monetizing purely content plays is difficult as people want free content. An advertising model must be scalable. The best models are “platforms” which allow the company to scale and offer other services besides content.

Additionally, the venture concept must be monetizable and saleable.

M&A Perspective

Hoffer’s forte is investing in the “Digital Media Value Chain” and he suggested that the mpeg4 will drive all future media. Hoffer emphasized that in the current climate, limited partners returns come from merger & acquisition activities rather than from successful initial public offerings. He suggested that the last money “in” to an investment provides the greatest opportunity for returns and suggested that the valuation process can be a competitive tactic by investors to minimize the position of early investors.

Idealab’s Ideas

Howard Morgan discussed the two stages of venture capital investing: 1) too early and 2) way too early. (In fact, he writes a blog on the topic, titled www.waytooearly.com). Morgan looks for the six “P’s” from a venture investment opportunity: 1) people, 2) product, 3) plan, 4) profits, 5) passion and 6) persistence. Morgan also emphasized the important distinction between product users and product customers.

Future Bets

As far as trends for the future, some of the concepts discussed included:

• The office of the future - technology will take the place of travel;
• The concept of the “living room” - doesn’t exist any longer;
• Second World-type virtual domains and avatars will continue to grow;
• Radio - is on the rebound and growth will be driven by podcasting;
• Movies - can’t compete with video game new releases.

All in all, another great discussion organized and moderated by Alan Brody of iBreakfast. See you next month!

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