ELAINE GILDE ‒ NYA MEMBER SPOTLIGHT
Elaine Gilde is one of the original 20 members of New York Angels. Elaine has been a New York Angels Board Member for the past eight years and led its membership committee and certain strategic initiatives, including co-administering NYA's sidecar investment funds. Elaine began her career as a strategy consultant at McKinsey. Prior to angel investing, she was a managing director at a private equity firm and led merchant banking transactions as an investment banker. Elaine has been on the boards of nonprofits seeking to move women onto corporate boards and into senior leadership roles in corporations and in the political sphere. Elaine holds an A.B. from Harvard College and an M.B.A. from Harvard Business School.
How did you meet New York Angels? Why did you choose NYA?
Prior to NYA, there was angel activity in NYC run by the New York New Media Association. After the dotcom bubble burst (2002 or so), NYNMA was dissolved. David Rose, NYA’s Founding Chairman, led the process of creating an independent angel group which we know today as New York Angels. I served as a founding board member. NYA quickly became a vibrant, collegial and highly respected leader in angel investing. Of the original 20 members, I was one of two women – the other was Esther Dyson, a well-known figure in the technology industry. Over the years, NYA has grown to 140 members with strong professional backgrounds, skill sets and varied expertise.
What has been your most memorable experience as a New York Angel?
There was one deal that really stands out because of how it has unfolded. One of my NYA colleagues shared the business plan for this Fintech company and said he had known the founder for many years. The company had demonstrated early traction and the product looked very distinctive and unique. While my colleague suggested that the founder should pitch to NYA when the product had secured more customers, I disagreed. I said, “No, you know the founder, and it is clear the founder and the product have significant potential.” The company, CloudFrame, automates the transformation of outdated COBOL applications into cloud-native applications, dramatically reducing operating costs and increasing efficiency. The company also had recently secured its first customer, which was a major Fortune 500 company. After further conversations, the founder applied to NYA. A team of NYA members provided solid guidance and came together to lead an initial seed round. As the investment was coming together, CloudFrame was selected as one of ten companies to join the New York’s FinTech Innovation Lab, where they were mentored by experienced CIOs and tech executives of major financial institutions. Then, two and one-half years later, CloudFrame completed a Series A at a significantly higher valuation led by a major investment firm. This story will become even more memorable when there’s an exit. The product has been refined, the team expanded, customers added, and value is being created.…but this only counts when there is a cash exit. I never count my chickens before they hatch.
What do you look for when you are investing in a company?
When I make an investment, the question that I ask myself is: Are we betting on the jockey, or are we betting on the horse? For me, it’s the jockey that is paramount. You could have the best conceptual business plan that looks almost perfectly written, and that’s not enough to survive. You need a founder who has: 1) an understanding of the business, 2) tenacity, and 3) adaptability.
I often hear people use the word coachable to describe the ideal founder, and while I agree it is an accurate word, I don't think it entirely captures what is important to me in a founder. The founder needs to be able to be given input; take in that input; absorb the input; absorb all sorts of events that are happening in the outside world; and then ultimately be able to adapt. I prioritize the ability to be adaptable over coachable. The founder needs a short-term focus to secure customers and close deals quickly, as well as a vision for the company in the long-term to weather the obstacles that emerge over time.
What do founders like most about working with you?
Founders like that I can help connect the dots. I can look at a plan and discuss with the founder the issues that they have identified and are managing, but even more importantly, I can identify potential issues and opportunities that they have not yet considered. I also vary my approach depending on the investment. In some investments, I may write a check and join a conference call once or twice a year, as long as there are other experienced investors in the deal who are involved. In other cases, I may be more directly involved in the company as a board member or observer.
What differentiates companies that you see at Screening versus those who make it through Investment?
At Screening, a seemingly great company may have the perfect, well-rehearsed 10-minute presentation. The slides may include some impressive data on potential customers and expected revenues in Years 1-5. In Screening, companies often only have time to answer a few questions from NYA members. After Screening, we go through Discovery (an early diligence process) and spend a few hours with the founder(s) to learn more about the product and team. We ask more in-depth questions and have conversations that dive into specifics like: Where are you sourcing customers coming from? What is the basis for your pricing – per user? an annual license? physical product? We learn a great deal in this process. We may find that some companies would make a great lifestyle business: a company may deliver a few million in revenue but would not be a great investment because there is not strong exit potential. From Discovery, companies then move on to Due Diligence where we work with the founder(s) to verify critical information, assess the risks of investment, and refine the valuation and deal specifics.
What advice would you give founders who are starting to fundraise?
Fundraising is much more difficult than many founders initially think. Fundraising is especially challenging in today’s environment when there has been a dramatic reevaluation of valuations and investors are becoming more risk averse. That being said, my advice today is no different than what it was six months ago. Founders need to be realistic about valuations, how long it will take to pull money together, and go beyond just creating a great pitch deck. Investors need to see a strong team, a minimally viable product and preferably 1-2 referenceable, early customers. It used to be easier to raise money behind a brilliant idea, but today’s reality requires more of the tangible elements of a business demonstrating potential success.
When you look at your past investments, what do you think is most critical for founders to be able to deliver a successful exit?
Within my NYA investment portfolio, I had four exits in 2022. It was a great year to have cash exits since this counterbalanced what was going on in the public financial markets. The reality is that it can take 8-10 years on average to build a company of significant value, so there have been other years where I have had no exits. Each of the exits had their own story to reach an exit. One entrepreneur had a product with amazing potential, generated early revenues and attracted the attention of a major industry player. This was a relatively quick exit at a big multiple. Another company that I had invested in many years ago had replaced its founder with a new CEO, delivered significant revenues and was acquired by a PE firm to become a platform to build around the core business. While this exit was not quick, it was a solid rate over the investment period. One of the most personally satisfying exits was a company that I worked with closely. They had a great product and a female CEO who had built successful businesses in the past, but due to the pandemic the company had challenges delivering top line revenue. The external environment was problematic. With the tenacity of the management team, they were able to pull off an exit with a modest rate of return.
How has the landscape changed for female angel investors and founders since you entered the industry?
I am encouraged that the world is improving for women in technology and business. I was naive decades ago when I finished school and entered a complex business environment. We’re finally seeing the emergence of a strong generation of women in tech and business. While we have been seeing more women building startups successfully, it is very sad when I look at the industry statistics on the percentage of capital flowing into female founded businesses. That is also true of underrepresented minorities, generally. Less than 2% of the nation’s venture capital is allocated to female founded businesses. New York Angels as a group has significantly outpaced the average – 30% of the companies that NYA members funded in 2022 had a woman or underrepresented minority on their leadership team. I would love to see more women and diverse members in New York Angels. We are making progress.
