Building an Angel Investing Movement: SDAC

It was a warm day, as most days are like in San Diego, and we are deep in conversation about Angel investing groups, individuals, education, and movements. San Diego has a vibrant startup ecosystem with talent from the university systems, resources for acceleration of startup ideas by coworking spaces, incubators and accelerators, capital from one of the largest angel groups in the USA, and VCs interested in the tech and biotech buzz of later stage deals. The startup scene is filled with mentors, advisors and advocates all knowing and feeling the upward momentum of bright ideas making huge waves of impact and momentum for the entire community to cash out huge in an exit. It feels like a collective win when a startup hang tens and finally makes it down the big wave slope to a smooth sailing success.

But there are valleys in these peaks, “valleys of death” primarily in the seed stage of startup growth. Angel investors are the bridge in that valley and San Diego has a volume of them - or does it? There is wealth that is untapped in San Diego in back roads of Rancho Santa Fe - or is there? People are risk averse to write their first check in San Diego because of the high cost of living & uncertainty of markets - or are they?

The hypothesis: there is enough capital in San Diego to fund a new type of investment vehicle to activate new angel investors and reignite existing Angel investors to invest in San Diego vibrant startups.

The cast of rule breakers, visionaries & just good people focused on impact: SDAC Fund I

As good rule breakers, my dear colleague, Mysty Rusk, and myself knew there was more to this San Diego ecosystem that could be built. Mysty had launched and scaled a successful investment event fund and conference in San Luis Obispo in 2018, the Central California Angel Conference. She has done more economic development not only in San Diego, but in all of California, and along the west coast, to launch mini nations!!!!!! A force of nature!!!!! Mysty is the Director of The Brink, SBDC. She was the one with the structure, the plan, the vision. She recruited me to be her inaugural fund manager for SDAC Fund I. An honor of epic proportions.

The socratic method of teaching & igniting intellectual conversations is enlightening .... this is what John Sechrest brought to the launch. A builder, a visionary, a servant leader who has launched the Seattle Angel Conference and has successfully repeated it with huge success for over 8 years!

Then there was the realist, I call him the rock, Will Fowler, founder of Signal Rock Capital, who had a ton of automation and knowledge in setting up funds and making it easy for investors to sign up. His methods are solid and his integrity and drive to help investors & entrepreneurs understand the ins and outs of fund management & fundraising made for the BEST person for making the EXPERIENCE seamless and effective.

A community formed of genuine people who care a whole heck of a lot about San Diego, from all walks of life, a TEDx-loving mom of 4, a wicked smart biotech executive, a leadership coach who could identify builders of companies like no other, a southern tech giant, a knowledge-sealing first time investor destined for fund manager status, a warm lawyer who cares deeply about his baby angels, a rose with a heart of gold who opened her offices for groups to meet now for an entire year, 3 married couples, a doctor turned MBA, a financial wizard, and so many more. This motley crew of investors who wanted to learn, invest and impact their community. We found our tribe, through learning and growing our own way, we persisted.

The investment: $200K, winner-take-all

This group of 35 angels, met every week for about 12 weeks to decide on the winner. The process was a learning process for all of us doing it for the first time. As the fund manager, I was learning as I was leading and the group gave me grace and energy to persevere. I am eternally grateful.

These are the stats:

The SDAC process (in a nutshell) in 2019:

1. 90 Companies applied - using the Gust platform.
2. Investors reviewed a subset of all applications on Gust and discussed all the pros and cons of startups prepped by The Brink (partnership with the #1 acclerator in San Diego was crucial). All investors shared their ratings on the community platform, asked questions during in-person meetings and expertise was shared from the diversity of angels in the room.
3. Startups were selected down from 90 to 30 companies as quarterfinalists; from apps to biotech to cleantech to consumer products to SAAS.
4. Quarterfinalist companies delivered 3 min pitches to the group of angels over a couple of days. All 30 Quarterfinalists pitched to the investors to better communicate their competitive advantage and networked prior to the pitches with the investors to talk investor thesis', market trends and product development. Gust profiles were polished (mainly improving the information about team & product-market fit). 
5. Quarterfinalists were rated again on Gust, discussed in our in-person angel meetings and coffee meetings were had to gain insight. The 30 quarterfinalists were narrowed to top 12 semifinalists by voting by all funders in the SDAC Fund I.
6. The top 12 Semifinalists were picked & asked to present 10-min pitches to the angels along with a group of Octane mentors/advisors who used the LaunchPad scorecard, a "Strengthened Capital Funding Strategy" to give concrete feedback to the entrepreneurs based on a database of successful fundraising startup founders.
7. Semifinalists were rated again on Gust, discussed in our in-person meetings, and the Finalists were picked.
8. The top 7 Finalists picked were invited to pitch at our LARGE capstone event, the San Diego Angel Conference, on Friday, March 15, where the San Diego ecosystem was invited to attend and celebrate the inaugural event.
9. The 35 angel investors who had either 1-2 units in the fund, then went into a room, discussed the finalists and voted for their top startups.
10. Aquacycl, founded by Orianna Bretschger, a cleantech startup, won the $200K investment from our SDAC Fund I and won the audience choice award. Aquacycl was co-founded in 2016 by CEO Orianna Bretschger, Vice President of R&D Sofia Babanova and Vice President of Hardware and Manufacturing Ryoji Naito. Aquacycl provides technology for onsite wastewater treatment plants that operate at 50%-95% lower costs than incumbent technologies.
11. REALITY CHECK: Investors have had at least 10 touchpoints with each finalist through the SDAC process. At this point, investors would have, for each finalist, (1) reviewed the Gust profile at least 4 times, (2) rated the startup on Gust and read other investor ratings, (3) watched a 2-3 minute pitch, (4) listened to a 10 min pitch, (5) experienced a final public pitch, (6) discussed in 4-5 meetings the red and green flags for investing in, (7) read a due diligence report, (8) listened to a presentation about the red/green/yellow flags due diligence summary from the DD leads, (9) experienced the coachability quotient of each founder by how the entrepreneur communicated with investors & pivoted accordingly & (1) and possibly met for coffee with
12. Then, two weeks later, the SDAC Fund I angels decided to invest in 2 other companies through 2 SPVs: Dr. Julie Collens, founder of Vivid Genomics and Patrick Henry, founder of Gro Guru.

The recommendation.

If you want to get this event in your city, contact Mysty, she is doing it in Las Vegas and Alaska!! and knowing her ... in many more states and cities.

For those who are aspiring angel investors, from the many years of investing myself and shepherding many women angel,s there are 12 steps to do that are super low risk (angel investors need to embrace risk, know their own risk tolerance & learn how to evaluate risk):

1. Embrace the startup ecosystem
2. Embrace a startup mindset
3. Role up your sleeves as an advisor or mentor in a startup or startups
4. Get your hands dirty in the angel investing landscape
5. Learn & read a ton
6. Learn to become more risk loving (maybe that’s in what you won’t invest in because of not having the industry experience or what you will invest in because of your professional experience)
7. Start developing your investor thesis
8. Find other angels to "coffee" with
9. Join the ACA, Angel Capital Association
10. Find your tribe
11. Review a ton of decks to just get that out of your system
12. PUT MONEY DOWN (just a bit $5,000 - $10,000) on a startup or deal that is as desirable as possible within your investment thesis ... and this is where SDAC COMES IN

SDAC does this in one place, with one community and in your local ecosystem. GENIUS!

Since the SDAC's core belief is to raise aspiring angel investors into being true investors or raise funds of their own, investors are walking through what a typical progression of investor relations.

Take Action!

Learn a ton, embrace the startup buzz, get plugged in, get a coffee card because you will be doing a ton of coffee meetings. Stay hungry to impact your ecosystem in a concrete way. Enjoy the ride!

Join us at our event on March 28, 2020. Anyone looking to attend may purchase tickets at https://www.sandiego.edu/sdac/.