NYA Member Spotlight — Mike Brennan
Member Spotlight
This month we interview NYA member Mike Brennan. In a varied career Mike has worked as an executive in Europe, Latin America, Asia as well as North America primarily in the print and direct mail industry. He has been been a member of New York Angels for the past seven years and uses this experience both to evaluate and support the companies he invests in.
Mike Brennan - New York Angel
What first attracted you to join New York Angels?
One of my former bosses was a member of the NYA. At our “what do I do now that I’ve retired” lunch, he suggested I attend a screening session. I had been through the fund raising grind in 1983 when angel networks like NYA did not exist and was surprised at how formal the process had become in the intervening years. I took entrepreneurship courses in business school, and while my own start up experience ended in 1987, my corporate roles always involved some focus on new products or acquisitions. NYA was a perfect place to test my desire to take financial risk without upending my life, and help others in the process.
What did you do before you were an angel investor?
My career was primarily in the print and direct mail (now DTC) industry with Reader’s Digest. In retirement, I consulted for print media companies (remember Newsweek and Time Inc?) and for Direct Wines, a very large DTC wine business. Finally, I was the chairman of a small Canadian public company, AlarmForce, that sold residential alarm systems directly to consumers. In the early 80’s I was the co-founder of a software company that eventually went public long after my departure. Great experience but not very financially rewarding.
What do you believe founders expect from the Angel investor/founder relationship?
In a word: “HELP!”. Help in the form of advice, introductions to contacts, and an empathetic listener. Specifically, I spend time on the financial models and metrics and try to assess their reasonableness. And I focus on priorities: what does the CEO/Founder need to achieve in the next year to ensure a viable business.
What do you look for in a pitch? In a founder?
In a pitch, several things: 1) a succinct definition of the business. It’s surprising how many founders cannot simply describe what their company does. 2) size of the market and competition. I’m trying to determine how big a company the entrepreneur can build without resorting to unreasonable (e.g. market share) assumptions. 3) margins. Is there enough gross profit to support reasonable SG & A expenses? 4) traction (sales).
In a founder: 1) personal characteristics such as maturity, integrity, passion, ability to present (a surrogate for ability to raise funds) and ability to answer questions intelligently and directly. 2) a good grasp of the financial/other KPIs that drive business performance. 3) leadership, as evidenced by the team that surrounds him or her.
How do you spot a good founder?
Not without some work. You simply can’t tell much in 15 minutes of screening. You can learn more after talking to customers (B2B), vendors, other investors, and asking a lot of questions. Of course, former start up and successful exit experience is a good indicator, but really not sufficient and sometimes not even relevant.
What advice would you give a founder who is about to apply for funding at NYA?
1) Prune the pitch deck. It shouldn’t be too wordy or people won’t read it. You know more about the business than anyone in the room so talk through the slides but don’t fill them full of words. 2) Value the business on the low side. You are much more likely to win investments and won’t appear to be greedy/arrogant. 3) Describe the business — succinctly — up front, including how you make money. 4) Briefly touch all the bases: business description, USP or what ensures your business will successfully compete, team, market, competition, forecast, deal terms, how you will scale.
What advice would you give to new founders trying to find investment?
Find a mentor somewhere who can help prepare you for the fundraising process. Join an accelerator. Join a local innovation group. There is lots of online help in preparing presentations and describing the process. In the end, you must be yourself.
What makes a good Angel investor?
Curiosity, analytical ability, being a good listener (especially when the subject matter experts in the room are asking questions), investing discipline in following your own investment criteria, no belief in FOMO. And at some level, obtaining joy in taking a financial risk to help an entrepreneur achieve success.
What is one of the best investments you made with the NYA?
Hopefully the best investment is still to come! Seriously, I have invested in 12 companies, through many rounds, and many others through the NYA Funds. No home runs, although modest gains in two companies. All the companies are still active and have the potential to provide a good return. I think one or two may be 8x-10x returns, but most will be modest gains, if that. However, a couple of angel investments have led to deeper dives in some vertical markets like programmatic advertising and diabetes. This research has led me to make other investments that have been very successful.
What benefits do you see being part of an investment group?
Obviously, weighing different points of view on what constitutes success and where the entrepreneur has got it right or wrong. If the others are experts, then their opinions carry more weight. All the research shows that when presented with the same information, small groups make better decisions than individuals.
What do you think your strength is as an investor and member of the New York Angels?
I’m a pretty good listener and am willing to slog through financial models, cap tables and competitive offerings. I don’t have the subject matter expertise of many of the others in the group, but try focus on what needs to happen to achieve success, make sure the CEO agrees, and has a plan to fill in the holes with critical talent to execute.
Have you noticed any investment trends happening now that the economy is opening back up?
Valuations have crept higher and we do see businesses with higher revenues and more traction than we did seven years ago. There are fewer ideas in the embryonic stages without even an MVP. There is a bit more diversity in the founders. The verticals shift as trends come and go. So today there are more crypto and cannabis deals than ad-tech, for instance. But, in general, the issues and the process are the same.
