Angel Profile

Building the Team Approach to Angel Investing 

by Frank Szivos, Editor Angel Investor News

John May is changing angel investing from a lonely and high-risk venture into a team sport. In his model, angel investors band together to pool their money and invest together in early-stage companies. However, group investing is hardly a new tack. But May, the president of New Vantage, an angel club management firm, takes it a step further. He’s breaking the mold of asking wealthy investors to fork over money and sit back while the fund manager does all the work. Not in May’s model.  

He asks private investors not only to commit their money but also their experience, time and business expertise to select the most attractive investment opportunities. “There’s strength in numbers of angels,” May said. “Instead of an angel being a Lone Ranger, they can aggregate resources and their experience. We don’t just want their money and expect them to go away. These investors are talented entrepreneurs who can provide brainpower, time and contacts.”  

His angel investing model works this way: A minimum of 50 angel investors per club each pays in an equal amount from $100,000 - $150,000 depending on the club. The club meets monthly to hear presentations from perspective companies to invest in. The club management carefully screens all presenting entrepreneurs who are invited to make their pitch at an angel club meetings.  

After the presentation, all members discuss the company’s merits and share the due diligence on the companies under consideration. Each angel club member has an equal vote to invest or decline a company’s request for funding. The angel clubs typically invest between $250,000 and $1 million in individual businesses and typically co-invest with venture capital companies.

A major advantage to May’s private investing model is security in numbers and expertise. An angel club has a bigger bankroll and resources than a lone investor that offers members less risk in making deals. His model also relies on the talents of club members. Their input and intelligent investing make the whole thing work. So far, May’s angel investor model has found fertile ground in the Washington D.C. area. None of the clubs’ portfolio companies have gone public or been acquired yet, so it’s too early to tell how profitable the angel club model will be. But the dramatic growth in the numbers of clubs indicates that many private investors have faith in this model. May, who managed venture funds for more than 20 years, knows private equity. He has co-authored a book, “Every Business Needs an Angel,” Crown 

Over the last two years, he and cashed-out entrepreneur Cal Simmons rolled out three clubs (the Dinner Club, the Washington Dinner Club and the eMedia Club with $23 million under management. In that span, the clubs have undertaken 16 total transactions. May also advises a fourth club – WomenAngels.net. which has a robust membership of 85 women private investors.

After honing his angel investor model in Washington D.C., he’s taken his private investing model on the road. His firm, New Vantage, has supported the launch of an angel club in Richmond, Va. and his latest is the Connecticut Launch Club. May partnered with Trautman Wasserman of New York to manage the Connecticut Club. NVG has plans for more clubs in the Northeast, Texas and the Midwest. May has handpicked his spots to found angel clubs based on thee basic criteria:

A fertile environment of high-tech companies in the immediate location of the angel club;

Plenty of private investors with the necessary funding;

Active Venture Capital firms in the areas. 

May points out that angel clubs often partner with venture capital firms. May’s angel clubs draw perspective deals in three basic ways from angel club members who introduce screened entrepreneurs, referrals from venture capital firms and word of mouth. New Vantage provides administrative services to the Washington area clubs:

Finding Candidates.

Networking with entrepreneurs and co-investors.

Handling all administrative costs, including accounting and tax statements .  

As the manager, New Vantage gets 15% of all profits from the money invested and 15% of the profits from members who wish to make side-by-side investments with the angel club. “We act as the general partner, but we take all the friction out of the process for them [angel club members],” May said. May believes his model can work in many areas of the country. In fact, he foresees a national network of clubs that can piggyback on certain deals, share due diligence and build a community of like-minded investors. He believes private equity can become a critical component of wealthy investors’ well-rounded portfolios. “The angel clubs can be a lot of fun for private investors and quite profitable,” Mays said. “It’s a more efficient way to form a partnership to invest in young companies.”   

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