DAVID HEMENWAY ‒ NYA MEMBER SPOTLIGHT
David Hemenway has been a New York Angel member for 12 years. Before becoming an angel investor, he started his first business out of college, and he successfully bootstrapped three businesses to successful exits. David also built The Persuase Sales and Marketing Training Program for Entrepreneurs, Professionals and Fundraisers and he now is the Founder and host of The Angel Nest Podcast, which focuses on how entrepreneurs partner with investors to build great companies.
How did you choose to work with New York Angels?
I started my first business right out of college, and when I was looking for funding, there were no angel investor groups back then. Sometimes there would be individuals who might invest in small businesses, but there were no formal groups that you could go to for funding. So, when I fundraised when I was launching my first business, I couldn’t just go ask for money. I actually started my business by sending my first client an early invoice and hoped they would pay it. Fortunately they did, so I ended up starting my business on $5,000 of my client’s money. I built that company up over 15 years and sold it. Then, I really wanted to help other founders who would face some of the same struggles that I had gone through, so I started a sales and marketing consulting business. Although I worked with a wide range of clients, I noticed that all of my clients needed to raise money, so that's why I became an angel investor.
New York Angels was a natural choice for me as the clear leader in angel investing. They were very generous by welcoming me with open arms since I was very new to angel investing in those days. It has been a tremendous experience, and I have learned a lot and had a lot of fun. I also fortunately have had some successful outcomes.
What has been your most memorable experience as a New York Angel?
When I started at NYA, my fellow angels, who had much more experience than I did, told me that everything depends on the founder. At the time, I really didn't believe what they said because I was a founder, and I didn't think that I had any particular talent. As a founder, I had a great idea combined with a little wind at my back, so I really felt like it was much more important to find a good concept in order to be a successful entrepreneur.
But I learned very early on in one of my first investments, it is really all about the founder and the founding team. I invested in a software company that had a great product for social media. The idea was to enhance people's performance and their identity on social media, and truthfully, it was a little bit ahead of its time. Well, it turned out they couldn’t find a market. 6-8 months after we invested, the company was really in trouble. But, the founder was incredibly smart and committed, and he found additional investors which he used to enhance the technology. He sold the business to AOL in two years. That's when I realized that the most important element of any investment really is the founder, the CEO of the founding team, and the character of the people that you're doing business with.
What do you look for when you are investing in a company?
I look for a great team, referencing my earlier comment that it's all really about the CEO. At the beginning of any investment, there's no way to know what will happen. The only thing you know for certain is that things will not turn out as you plan. Hopefully, there will be a lot better outcome, but you know there are going to be many twists and turns in the road. That's when the character of the people that you're in business with really makes the difference between a successful and failure.
What do founders like most about working with you?
They know that I've been a founder – I know what it's like to struggle, and I know what it's like to take a business from square one. I used to have a folding card table in the corner of my office because we didn't have any furniture, and my employees started calling it the Executive Card Table. I would sit at that table and try to round up business. I think there is something about that experience that really tunes you into what it's like to start a business from scratch, and founders have told me that they appreciate the fact that I've been through that and that I can identify with their pain. I really enjoy working with the founders because it's wonderful to see people succeed. If you can play a small part in helping them succeed, in addition to having a successful investment, that's the best part of angel investing.
What differentiates companies that you see at Screening versus those who make it through to Due Diligence?
Mostly they have well-thought-out sales and marketing plans. I always see that the difference between successful companies and companies with great products that may not be successful as quickly is a really well thought out, well-planned and well-financed sales and marketing campaign.
What advice would you give founders who are starting to fundraise?
Most importantly, founders should look at the potential investment from their investor's perspective. It's natural that founders are going to be excited about their product or service. But it's also really important in any sales process – and fundraising is definitely a sales process – to look at it from the perspective of the person that you're selling to and ask, “What do they want to get out of this? What do they expect you to have done to show that you are going be good stewards of their capital? What have you done to show that you have really thought out your business plan very well?” Many times founders think that we know things that they know, simply because they think everybody knows, and we don't necessarily know. One of the most difficult things about angel investing is your evaluating areas you’re not familiar with. You learn a lot, – so it’s also one of the most wonderful things – because you're always looking at different verticals and learning about different businesses. There's an education process, and it's really helpful if the founders can supply you with all the information you need to look at it from your perspective. When a founder can ask themselves if they were going to invest in a business like this, what would I want to hear? When they can articulate that to us, it makes our job a lot easier.
When you look at your past investments, what advice would you give founders to deliver a successful exit?
My most successful founders have always been humble, frugal, and persistent. Persistence is probably the single most important thing to be able to go back over and over again and not accept rejection, to be able to overcome that, and then convince prospects that you have something of value. The marketplace will eventually recognize and reward you for it, but you have to be persistent, and you have to put it in terms the marketplace can understand. Sometimes that takes a long time.
What advice do you have for newer NYA members?
New angel investors should go slowly and learn because angel investing is definitely a marathon. I think the longer you do it the better you get at it. Sometimes there's an inclination for new angels when they start to make a lot of investments quickly. Instead, it's important to pace yourself a little bit because with every investment you make you become smarter and you get better at it.
