NYA Member Spotlight — Michael Costa
Member Spotlight
This month we interview NYA member Michael Costa. Michael has been a member of New York Angels for the past 4 years and has been a member of other leading Angel Groups
Michael Costa - New York Angel
What is one of the best investments you made with the NYA?
I learned from Brian Cohen (NYA Chairman Emeritus) that the business angel investors are in is “the business of exits.” While I have had one partial exit, its too soon to say which is the best investment. But three years ago I invested in a SaaS HR tech platform giving employers one end-to-end solution to manage diversity hiring. It was a perfect example of a good investment in a company doing “good work.” The renewed focus on DEI across corporate America thanks to BLM accelerated that company’s growth in a way few angels could have anticipated at the time of investment. With the pending Series A at a post money valuation of nearly 13x the initial investment, everything looks good on paper. However, it’s still not an exit!
What first attracted you to join a formal network for Angel Investors?
I spent 2017 at Stanford as a fellow in its Distinguished Careers Institute (a fancy name for a group of folks who return to academia after long professional careers to figure out what to do next). There I was immersed in the Silicon Valley startup ecosystem and even tried with a couple of other Fellows to launch a startup. While there I was introduced to the SV chapter of Keiretsu and upon returning to NY joined its chapter here. Realizing I was a better investor and mentor than an entrepreneur I spent a year with Keiretsu and then discovered NYA. NYA has been phenomenal in terms of investment opportunities and members with an incredible willingness to share their expertise and roll up their sleeves!
What did you do before you were an investor and how has that experience shaped your own investment thesis?
I spent 20+ years as an M&A banker to Tech, Media and Telecom companies and then almost 10 years as a board member of publicly traded Scripps Networks (HGTV & Food Network). Over that span I saw the tremendous power and value creation of start ups disrupting legacy companies in those industries. Investing and mentoring disrupters is both more challenging and more rewarding than “defending” legacy companies from disrupters.
What can founders expect from the Angel investor/founder relationship?
There really is a wide range of things founders can expect from an angel investor, but at the end of the day it rests on the angel investor to build a meaningful relationship with the founder and invest more than just money. The best angel/founder relationships I have seen is where the angel investor has deep domain expertise in the founder’s business and trusted relationships in that ecosystem he/she is willing to share with the founder.
What do you look for in a pitch? In a founder?
For me, the best pitches identify a well defined problem first and then a viable business plan that solves that problem perhaps 10x better than existing solutions. And the founder is someone who has deep domain expertise in the problem area and a real passion for solving the problem, usually because the founder has personal experience/frustration with that very problem.
How do you spot a good founder?
Initial impressions do matter but it is nearly impossible to make a meaningful assessment of a founder after a 10 minute pitch. I often find working with founders long before they pitch, seeing how they pivot and then taking a deep dive with them post pitch is the only way to even begin to spot a good founder.
What makes a good Angel investor?
Domain expertise is critical although the beauty of NYA is that there is domain expertise in virtually any sector. Including some EQ assessment of the founder and his/her team is just as critical. Knowledge of deal structure/terms/valuation is important, but don’t let that “tail wag the dog.”
What advice would you give a founder who is about to apply for funding at NYA?
My advice would be it may be too late if they are “about to apply”. My advice would be long before then, connect with an NYA member who has domain expertise in the founder’s startup. Build a relationship with that member. Let that member be a sponsor when you pitch to NYA.
What advice would you give to founders who have never fundraised before and do not have strong connections to Angel investors?
There are endless incubators/accelerators/co-working spaces/pitch competitions where founders can begin to build a network of mentors and potential angel investors. I’ve mentored at a couple of Techstars’ Accelerators and see how effective that platform can be for founders.
Have you noticed any investment trends happening now that the economy is opening back up?
Aside from rapidly escalating valuations, and maybe the cause of it, the amount of capital that has come into the pre seed and seed stage from VCs and micro VCs has been staggering. To a certain extent that has meant angel investors are being disinter-mediated. That places even more of a premium on angel investing groups like NYA re-examining how to source deals.
What’s the benefit to YOU, as an investor, of collaborating with other Angels on investments?
For me, collaborating with other Angles has a “triple bottom line”: (1) building meaningful relationships with smart, dedicated people; (2) being highly engaged on an analytical and intellectual level; and (3) having successful exits!
What can a founder do to help facilitate a final investment decision?
For a founder I would say being prepared, transparent and realistic really facilitates moving NYA members to an investment decision. If the deal lead wants to invest, let that deal lead be an advocate within NYA. And try to take the deal lead’s guidance on timing and when to call for a final commitment.
What do you think your strength is as an investor and member of the New York Angels?
I truly love to collaborate with other members and enjoy sharing whatever domain expertise I have in the digital media/audience monetization space. As a former banker and lawyer I probably have a skill set in analyzing and negotiating deal terms/term sheets/deal docs. And as a member of the Membership Committee, I can help determine if a potential member would be a good fit, and if he/she is, facilitate the process of becoming an active NYA member.
What lessons have you learned as an Angel Investor?
Seeing the power of diversity thru my investment in the HR Tech company, I took a keen interest in trying to source underrepresented entrepreneurs. Fortunately there were a number of other NYA members who had a similar interest and we have been able to source and mentor underrepresented entrepreneurs and bring a handful of them to NYA for consideration by members.
