The CEO/founder must be coachable. An arrogant or know-it-all founder can doom the business as he or she will not be receptive to coaching and will alienate other team members as well as customers, prospects, investors and other collaborators. The whole team must have a strong work ethic, drive and shared vision. The team must have deep expertise in the product or service, equally deep expertise in the market and competition within the market segment, and know what it will take to succeed. I look for a balance of technical wizardry and high-level business know-how. It’s critical that each person on the team have humility and ability to self-reflect. These are traits that enable success and foster diverse thinking. Team members must work well together to reach a high level of performance.
As part of my series about “5 Things I Need To See Before Making A VC/Angel Investment” I had the pleasure of interviewing Marjorie Radlo-Zandi. Marjorie Radlo-Zandi is an experienced angel investor, mentor and consultant who focuses on investing and mentoring early-stage companies in life sciences, diagnostics, software/IT, clean technology, food/beverage/ag and related food related technologies, with a special interest in impact investing. Marjorie invests and mentors primarily through Launchpad Venture Group and Branch Venture Group. Launchpad Venture Group is the most active angel investment group in the Northeast and top three-ranked group in the U.S. Launchpad invests in life sciences, diagnostics, medical devices, software / IT, ed-tech, web and e-commerce, media and social media, and clean technology. Branch Venture Group invests nationwide in start-ups in the food/beverage/ag CPG and related technology space. Marjorie also is a mentor for Harvard Undergraduate Capital Partners and a member of the Venture Mentoring Network at Northeastern University. She is a frequent and in-demand panelist and speaker on start-ups and scaling for growth.
Thank you so much for joining us Marjorie! What is your “backstory”?
Entrepreneurship is in my blood. I come from a family of entrepreneurs — we are an accomplished yet independent group! At 19 years old, I established the first sailing program in my college town. From there, whether in New York City, Silicon Valley or Boston, I have been responsible for expanding the growth of new technologies to be used throughout the world.
I grew the multiple-product company I led to expansion in over 100 countries using angel funds, and sold it to a 2 billion dollar player. I am paying it forward through both mentoring and capital to assist other entrepreneurs achieve their goals and bring new technologies and products to market.
Can you share a story of your most successful Angel or VC investment? What was its lesson?
I have many successful angel investments in a range of sectors. The one I wish to highlight is Torigen Pharmaceuticals www.torigen.com, a startup in the companion animal immuno- oncology space, This is an attractive and lucrative space due to the increasing importance and growth of personalized medicine.
I initially invested in this company with both my head and heart while my standard poodle Sabrina developed cancer, (too late for Torigen’s treatments). If I had known about this company earlier, Sabrina would likely be alive today. Torigen uses a dog’s own tumor cells to create a personalized immunotherapy. It’s highly effective, kind to animals, easy to administer and is a fraction of the cost of chemotherapy and radiation.
Torigen was also named the 2018 Animal Health Innovation at the Kansas City Animal Health Investment Forum. In fact its founder and CEO, Ashley Kalinaukas, was recently named to the 30 under 30 In Science 2020 by Forbes Magazine http://bit.ly/2LAedT2. She was also honored as the 2019 Entrepreneur of the Year in the Scalable Venture Category by CT Entrepreneur Awards http://bit.ly/2sTIKoc.
The main lesson about this investment is the absolute importance of not only the product, market, advisors, plan and potential exit, but the exemplary coachability of the founder/CEO. Ashley is outstanding in this area.
Can you share a story of an Angel or VC funding failure of yours? What was its lesson?
Very early on in angel investing I invested in a startup with a terrific plan and SaaS platform, market, stellar advisory board, and team with a non-coachable CEO/Founder who was related to one of the key board members. The CEO/Founder’s challenge was his inability to take advice. He thought he knew better. It was a good lesson in the huge importance of coachability and leadership in a CEO/Founder: in the end it’s about the people and leadership regardless of whether they have the best product/service/plans/markets. Eventually, although quite promising, this venture did not succeed.
Is there a company that you turned down, but now regret? Can you share the story? What lesson did you learn from that story?
I neglected to invest in a successful company in the clean tech space with an early on patent challenge from a less than stellar competitor, which the company successfully resolved. Lesson learned: dig really deep into any potential challenge (in this case a patent challenge), to see whether it could be a game changer.
How have you used your success to bring goodness to the world?
I am committed and have acted to bring the capital, expertise and inspiration of entrepreneurship to all communities and countries both in the developed and developing world. I want to highlight two companies I invested in around this mission. In both cases, I was one of their early investors.
The first company is Workaround. CEO Wafaa Arbush of Workaround Online www.workaround.online gives refugees worldwide an opportunity to earn money by using their skills in data annotation and other data functions. All they need is a laptop!
Waku is the second company. Waku is an herbal infusion beverage made from herbs and flowers sourced in the Andes Mountains. CEO Juan Giraldo of Waku https://livewaku.com leads the company in bringing this traditional Andes drink to North America while helping rural farmers in Ecuador.
What are your “5 things I need to see before making a VC/Angel investment” and why. Please share a story or example for each.
- Solid Financials & Projections — Numbers are not secondary to new technology or new product offerings. Knowing one’s numbers is key (for example top line revenue, gross margin and net profit margin), and so is offering a realistic mid level 5-year projection including P&L. It is important to show some traction both as it relates to product and sales and proof of the company’s unique offerings within a total addressable market (which should be sizeable). I have seen too many unrealistically high projections. This signals you’re not completely credible. You want to avoid this at all costs. For example one company that presented to me showed $100,000 in sales in year one, then $10,000,000 in year two, and $100,000,000 in year three, although possible this is highly unlikely and will be seen as such.
- Team — — The CEO/founder must be coachable. An arrogant or know-it-all founder can doom the business as he or she will not be receptive to coaching and will alienate other team members as well as customers, prospects, investors and other collaborators. The whole team must have a strong work ethic, drive and shared vision. The team must have deep expertise in the product or service, equally deep expertise in the market and competition within the market segment, and know what it will take to succeed. I look for a balance of technical wizardry and high-level business know-how. It’s critical that each person on the team have humility and ability to self-reflect. These are traits that enable success and foster diverse thinking. Team members must work well together to reach a high level of performance.
- Realistic Valuation — — Valuations on the outer edge of reasonable within a market, will likely not be considered. I have seen many terrific companies not get the traction they deserve due to an unrealistically high valuation. For example, a valuation of $50 million dollars with $250,000 in sales with 5 employees with no patent issued will usually not hold water.
- Potential Exits and multiples of similar companies — Its important to show multiples of companies in a similar space and the exits (examples 7X sales or 10X EBIDA) they incurred. Highlight prospective organizations that are potentials for acquiring the company. Remember, investors invest for a return on capital. I have seen many pitches in which the founders seem unaware that investors expect an exit.
- Respect . Not all investors know the market that your company operates in. Be considerate of each investor’s questions and act with knowledge and humility when you speak. Be prepared and anticipate questions that may come up — give sufficient detail and keep the response on the short side. You don’t gain points from being long-winded. Arrogance doesn’t play well when seeking investment; I have seen this be a deal breaker in instances where a CEO is seen as non–coachable.
You are a person of great influence. If you could inspire a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger. 🙂
I am committed to inspiring entrepreneurship and have acted to bring the capital, expertise, to all communities and countries, in particular those challenged by chronic poverty and conflict. Whether in the US or globally, often communities that are challenged with poverty lack the capital, network and expertise to start enterprises. Therefore, I would encourage investors to look at and mentor companies that deliver a substantial social and/or environmental impact and sound financial return (double/triple bottom line).
Some of the biggest names in Business, VC funding, Sports, and Entertainment read this column. Is there a person in the world, or in the US whom you would love to have a private breakfast or lunch with, and why? He or she might see this. 🙂
Sir Richard Branson
He is the forward thinking founder of Virgin Group Ltd. which incompasses numerous entities under the Virgin brand. He founded or invested in numerous companies. I’m inspired by his profound vision and creativity, positivity, love for nature and humility.
This was really meaningful! Thank you so much for your time.