The Good, the Bad and the Ugly

It is possible that not everyone is familiar with this post’s title. If not, it was the title of a 1966 epic Spaghetti Western Film directed by Sergio Leone, starring Clint Eastwood, which has entered the English language as an idiomatic expression. Typically used when describing something thoroughly, the respective phrases refer to upsides, downsides and the parts that could, or should have been done better, but were not. I am using it to describe the last month as it relates to the status of my investments.

For those who do recall the movie, scroll down for the so noted best theme tune ever…

The GOOD

A couple of weeks ago, I had lunch with the cofounders of one of the companies I am a fairly significant investor in. It was a great lunch because these are two very sharp, competent founders who are building what I hope will be a very successful exit. All signs are positive, they are methodically building the company which is generating sufficient revenue that there is no need yet for a Series A round.

Another company which was on fumes almost literally has the lead funder secured for their Series A and seem on track in the very difficult and challenging fashion space.  After some consideration and study on my part, panic really, I feel good about a pay to play round (pay-to-play refers to situations where first round investors need to continue making investments in future rounds in order to maintain their current percent of ownership) for a company that has taken longer than ideal to get to Series B but seems to be on a clear, fairly straight road to success at this point.

And finally, had another interesting and enjoyable lunch with managers from the venture fund in which I am a limited partner. They have made the last investment in their initial fund and are about to raise a second much larger fund given their success to date.

The BAD

Two of my companies were raising money with down round valuations and having some issues. One lost the lead investor in the Series A round and had to scramble to gather a group of investors of which I am one, to replace the lead investor. It was a fairly intense time, especially for the co-founders who I greatly respect for their determination, and calmness considering the last-minute loss of the lead investor.

The other company ideally would be raising its Series A but was told to reach certain milestones which required another seed round of notes. As an early investor who had already extended terms for the first note, I was not altogether happy to participate at same level in second round of notes at a down round valuation. Ideally,  I thought I could bring in sufficient investment from the angel group I was a member of. However,  after a long, torturous, Alice down the rabbit hole ordeal, ultimately the investment level fell well short of expectations and therefore I felt obligated to pony up more than I would have liked.  I think the cofounders are sharp and hopefully they will be able to meet the milestones that will enable a Series A but I am more nervous that I would like to be, given the difficulty of the women led companies I have invested in have in getting venture money.

The UGLY

So I have two investments which have failed, one I have taken the tax write off on and the other is being liquidated this year. I have lost between these two investments, over $200,000. I suspect that number will increase which is not surprising given that according to Jason Calacanis, 70% of investments will not succeed and you will likely lose money as an angel investor. But, and the reason I went into angel investing, is the bet on the upside that one or more of my investments will return the 5x or more and overall I will be happy camper.

But I am not at present a happy camper with one investment which is trying to raise a Series A round after well not raising a Series A round, due to unclear factors. Also, the company is pivoting towards being a social impact company with the implied expectation of lower returns as it pursues grant funding for use in developing countries.  I invested in this company because it had a superior product, a simple yet effective patented way to address a problem, and was expected to have an early exit through acquisition by a major U.S. company.

I have enough social impact investments, this was not to be one of them. (See my other posts on this ) So a bit surprised and disappointed in the turn the company has taken, and would have liked to call in my notes which had been extended from the original term date already, but the company is running out of money fast and has no ability to do so.  They hope to raise the Series A is in my opinion doubtful, so this might be another one in the loss column. I really hope I am wrong.

But I didn’t go into angel investing solely to make money, given the risk, there are better ways like real estate investments. I really have enjoyed and learned from founders whose companies I have invested in and it has been a great overall experience with perhaps the exception of the angel group experience this year.