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Venture Capital: What it takes to be an angel (investor), and to get a blessing

If it takes fortitude to be an entrepreneur, it arguably takes even more to be an angel investor -- a high-gamble endeavor for those with deep pockets and an appetite for risk.

Joe Herbst is active with Robin Hood Ventures, an angel consortium based at the University City Science Center. At a recent "Coffee & Capital" event at the Science Center’s Quorum, he shared his thoughts on what it takes to be a successful angel -- and what it takes to get a blessing.

Herbst is one of 40 Robin Hood members who meet monthly at Quorum to consider pitches. Founded in 1999, the group has invested in over 50 companies; Herbst, an active angel since 2004, has 20 companies in his personal, early-stage technology portfolio. (Robin Hood members invest individually, not as a group.)

What drives Herbst and his fellow angels? His personal motivation is the potential for higher returns. (Members typically look for at least a 20 percent return on investment.) As for the group, "Robin Hood invests in companies in the Philadelphia region," he explains. "I believe it is important to support rapid-growth, early-stage businesses to retain talent and create good paying jobs in the local community."

The organization's investors usually focus on capital-efficient, business-to-business companies in the technology sector. They typically make about six new investments per year -- ranging from $150,000 to $400,000 -- and aim to exit profitably within about eight years.

They look for enterprises that are scalable and have already demonstrated a market for their product or service.

"We like to see a product running -- not a prototype or a test... -- that has been bought, paid for and re-bought," says Herbst. The members also look for an entrepreneur who has invested some of his/her personal money and demonstrates "deep domain knowledge: Someone who has lived and breathed in that industry for a decade and has seen problems that are not getting solved."

Still, there are exceptions. Herbst cites LuxTech, an LED lighting company whose young CEO pitched three times to Robin Hood before winning funding.

Robin Hood's success stories include the sales of Locus Energy to Genscape, LiveLOOK to Oracle and Novira Therapeutics to Johnson & Johnson. 

Still, according Herbst, "We have more losers than winners. That’s why we spread it around. And the winners have to be big winners."

WRITER IN RESIDENCE is a partnership between the University City Science Center and Flying Kite Media that embeds a reporter on-site at 3711 Market Street. The resulting coverage will provide an inside look at the most intriguing companies, discoveries and technological innovations coming out of this essential Philadelphia institution.
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