Lesson:Entrepreneur Turned Angel Investor with Josh Felser

Step #2 Freestylin' How Josh and his team identify a good investment

So, Dave and I have been working together for 15 years. So, entrepreneurs who want active, it's going to sound self-serving. Active, energetic, experienced, successful founders who are now investing will want us.

But what we aren't, we aren't wallflowers sitting in the background passively watching what you do. You have to want our active engagement because we've been through it. Our first company we started with Spinner. It was a rocket ship from the second we started it all the way to its sale. We sold it to AOL for $320 million. It was a fantastic, it wasn't stress-free but it was an amazing, happy ride all the way.

Grouper, the second company we started was not. We launched this desktop software and it was focused on private peer-to-peer sharing of your personal media. We had to pivot halfway through and it was really stressful. It was so stressful that I actually got sleep apnea during the whole process.

It's that experience that made me want to move into the venture capital world. But we can relate to entrepreneurs who are going through tough times also. We kind of bring these two… and Dave and I are so different.

Dave is more engineering, operations, finance and I'm more sales, marketing, BD and we're both really good at product, I think. So, we kind of bring those different worlds to bear when entrepreneurs need it.

We tend to spend half our time looking at B2B companies and half B2C. So, we really don't have a sector focus. We don't have opinions about what we use or what we target. We just really look for great ideas, great entrepreneurs.

In fact, the main thing, and this kind of differentiates us from most other investors, is we really do imagine whether we would start this company with these entrepreneurs. Then we strive…That's kind of the ideal. It takes a lot to make that statement. We try and come as close to answering yes to both of those things as we can.

There are some great ideas that have come through here that we haven't invested in, that are kind of too enterprisey or maybe too geeky. We looked at investing in a company called MongoLab. They wanted us to lead it. It was just not in our sweet spot, so we gave it to Steve Anderson. He led it and we did a small amount, invested a small amount in the company because we just felt like we weren't going to be as effective.

So, we tend to invest in companies where, again, by reaching, by striving for that ideal, companies we would start and people we would start them with, it does mean we have to be passionate about the idea. So, there may be great ideas that we don't invest in because we're just not passionate about the idea.

So, we're most comfortable investing in two cofounders probably because that's the world that Dave and I come from. We've worked together for 15 years and we've seen it work really well. We've seen other companies where it hasn't worked as well. But we're pretty good at assessing the co-founder dynamics to kind of understand whether we think it's going to work for that pair. So, I think it's what we know. It's what we're comfortable being a part of.

I think also, it's hard to find all of the skills needed to create a successful company within one cofounder. So, I think having two, we feel like we can, instead of putting all the pressure on this one cofounder to deliver in all these ways, we can kind of divvy it up amongst the two. We also have found that when the going gets tough that if there are two cofounders that are close, they can really support each other and help them get through it.