Angel capital and the HotorNot approach

I have seldom moderated a panel with better-qualified members than this:

• Andy Bechtolsheim. Andy has a heart-stopping track record. First, he was a co-founder of Sun Microsystems. Then he founded Granite Systems (gigabit Ethernet switches) which Cisco bought. Then he founded Kealia (server technology) which Sun bought. He is an angel investor in Magma Design Automation (electronic design automation). Oh yeah, he was also the first investor in Google when he wrote a check for Larry and Sergei in 1998—before they had a bank account to deposit it in. To put it mildly, he the uber angel investor of angel investors. He is currently the chief architect of Sun.
• Ron Conway. Ron is the "godfather of Silicon Valley." He is the former managing partner of Angel Investors LP. He has invested in over 500 startups and has personal investments in RockYou, Twitter, Plaxo, Digg, and DanceJam. He is also an advisor to FaceBook. Oh yeah, he was also an early investor in Google.
• Dr. Ian Sobieski. Ian is a founder and managing director of the Band of Angels Fund. This is a $50 million fund that receives approximately 100 pitches per month. A screening committee then selects three companies to present at the Band's monthly meeting. The Band has invested in 240 companies and has had more than forty profitable acquisition exits and nine IPOs.

The Global Technology Symposium hosted the panel on February 1, 2008 in Palo Alto, California. The panel's premise was simple: Why bother impressing venture capitalists when (a) it takes less money to start a company and (b) there are plenty of angels who will fund early-stage deals? Here are some of highlights:

• You can't reach these angels by sending them an email out of the blue.
• They want to read a one-page executive summary and not much more.
• They decide whether they like a company in the first thirty seconds— think HotorNot, not eHarmony.
• They don't rely upon business plans for due diligence.
• They seldom serve on boards or do "heavy lifting" for a company.

By contrast, most entrepreneurs are sending long emails with big attachments to angels they don't know; they are sweating over long business plans and fifty-slide PowerPoint presentations; and they're looking for "value-add" investors who will mentor them. This is all wrong—if you don't believe me, watch the video. Even if you do believe me, you should watch the panel anyway just to hear Andy's decision-making process for writing a check to Google.