Todd Horton, cofounder of a Cambridge start-up that letscustomers send instant gifts via cellphone, had just finished a five-minute pitch for funding to a roomful of angel investors, wealthyindividuals interested in backing young technology companies. Thewary audience peppered him with hardball questions about hisbusiness plan, his technology, and his firm, KangoGift.
Then Bill Warner stood up.
"Basically he said, `I'm in,' " Horton recalled last week. "`I'll invest.' "
Warner is among a new breed of investors who dare to go whereordinary angels won't. Known as "super angels," these wealthybackers - many of whom made their money launching and building techfirms - are filling a gap in the state's economy, investing in theearliest and riskiest stages of start-ups, when traditional angelscan't and large venture capital firms won't.
An idea that first began in California's Silicon Valley, superangels get involved in promising new companies when they are stilltoo small and untried to attract venture capital. But super angelstake a more aggressive and systematic approach than plain angels,investing more money, more often. Where a traditional angel mightback one or two start-ups a year, super angels will get behind asmany as 20, investing anywhere from $25,000 to $250,000 in each one.
Warner, for example, has backed five companies in the past twomonths alone, providing an average of $25,000 to entrepreneursworking on instant gifts, tools for software developers, andwearable sensors. His goal, he said, is to invest in 10 companiesthis year, 40 by the end of 2013.
"I used to be a classic angel, but last spring I decided I wantedto fund more start-ups, and do it faster," said Warner, who hasfounded two companies including video editing firm Avid TechnologyInc. of Burlington. "It usually takes just one meeting, and I'lltell you `yes,' or `not for me.' If it's yes, I'll print out a termsheet right on the spot and we can get going."
Behind the super angel phenomenon are technological advances thatmake it less costly to launch Internet and digital media firms. Forexample, where start-ups might have once needed to spend tens ofthousands of dollars on servers and equipment, "cloud" or remotecomputing provides them access to computing power and storage at afraction of the cost.
For investors like Warner, that means they can back morecompanies. Roughly a dozen other Boston-area investors are thinkingalong the same lines. They include established super angels likeDharmesh Shah, cofounder of Web marketing company HubSpot Inc. andinvestor in a dozen local start-ups, as well as new players, such asformer Microsoft executives Katie Rae and Reed Sturtevant; Boston-based entrepreneur Nicole Stata; and former Internet advertisingexecutive Jennifer Lum.
The result: a new source of funding for Boston entrepreneurs.Established venture firms typically cannot justify investments under$10 million, too much to lavish on unproven companies, said BillAulet, senior lecturer at MIT's Sloan School of Management andmanaging director of the MIT Entrepreneurship Center. Super angelsfill the funding vacuum by investing smaller amounts in lean, youngcompanies.
"Super angels have emerged as a viable option for many start-ups," Aulet said. "And the more options that entrepreneurs have, thebetter it is for the whole economy."
Warner's interest in super angels was sparked last year when henoticed the movement growing in Silicon Valley. What appealed to himwas the impact the fast-moving investors were having. Dozens ofsuper angel investors, most veterans of the Bay Area tech scene,were backing scores of companies, helping to accelerate growth,innovation, and job openings.
Last spring, Warner flew to California to meet several prominentsuper angels, such as Reid Hoffman, a cofounder of the LinkedInsocial network, and Aydin Senkut, a former Google Inc. executive.Their message to Warner: "Just do it."
Warner, 55, is a pioneer of digital video editing who in 1987founded Avid Technology, which sells editing software for film andtelevision. Later, Warner marshaled speech recognition technology tocreate Wildfire Communications Inc., which was sold in 2000. Sincethen, Warner has split his time between funding nonprofits, helpingentrepreneurs, and investing in multiple start-ups.
Today, Warner works out of a small office in the far corner ofthe Cambridge Coworking Center, a communal space available toentrepreneurs in Kendall Square's Cambridge Innovation Center.
Warner chose this location so he could walk through the roomsseveral times each day, maximizing his interactions with the youngentrepreneurs hunched over laptops. Over the past few years, he hasinvested in five companies based in the Coworking Center.
Warner is taking a different approach than the one followed inSilicon Valley, where super angels focus on narrow technologicalniches in which they have had success launching their own companies.For Warner, that would be digital video and voice recognition.
But Warner prefers to work with a variety of entrepreneurs andtechnologies, an approach, he said, that is more in tune withBoston's technology ecosystem, which encompasses everything fromrobotics to complex software systems.
"Our strength in Boston is our diversity," he said. "We're goodat a wider range of technologies than the West Coast. That's anadvantage I want to press."
Like most venture and angel investors, Warner makes money bytaking shares in the company in return for his investment. If thecompany is sold, or sells stock in an initial public offering, thepayoff can be significant. But for Warner, it's not only aboutmoney: It's also about working with young entrepreneurs to get theirideas off the ground quickly.
Horton, of KangoGift, is still marveling at how fast Warnerworks. Within an hour of making his presentation during theinvestor event in Kendall Square last fall, he and Warner werehuddling at the cocktail reception that followed the presentations,finalizing the broad terms of a deal that included $25,000 fromWarner.
"It was exhilarating, exciting," said Horton.
Warner is also excited by the impact that a growing corps ofsuper angels could have on Boston's entrepreneurial community. Whichis why, although he's investing at an increasing clip, he's notinterested in graduating to venture capitalist. "Super angel," hesaid, feels right.
"I love the idea of sitting down with an entrepreneur and gettinga sense of what he or she wants to do," he added. "Then if it's agood idea, I can say, `OK, I'm in. Let's move.' "
D.C. Denison can be reached at denison@globe.com.
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