Reflection on Local Angel Investment From Inside Out

Tim Berry
Tim Berry , Founder , Palo Alto Software
22 May 2012

This is a good time to reflect on my experience with locally based angel investment. I just finished with the fourth of our annual angel investment event for my local group based in Eugene and Corvallis, Oregon. I’ve been an investing member since the group — the Willamette Angel Conference, nicknamed (ugh) the WAC — started.

We now have an investment in Cascade ProDrug, using technology developed at our own University of Oregon (based in Eugene, where I live) to help people fight cancer by reducing the toxic effects of chemotherapy. It’s an early stage investment, meaning that it has a long way to go, several years, before it gets through all the testing and makes a difference for people. We like the local connection. 

We try to make our investments as convertible debt. We have a standard term sheet as a starting point. We’ve never seen that term sheet survive negotiations all the way through signing, but it’s usually a good start. It’s technically a loan, but nobody wants it to actually be a loan and get paid back. Instead, we all want the company to grow and prosper so that our debt gets converted to stock ownership in a year or two. We do it that way so neither we not the startup have to decide what percentage our money is worth until later, as it grows, and bigger investment follows.

This year we started with more than 30 submissions from startups. After several weeks of due diligence, we narrowed that down to five, of which three were using technologies developed at one or the other of our two big local universities, the University of Oregon and Oregon State University.

We’ve used the gust.com platform to manage our documents, submissions, due diligence, and so forth since our first year, 2009, even before it was renamed and reconfigured. That’s worked out very well for us, which is part of the reason I blog on this site regularly.

After four years of it, I now have small investments in four small local companies. It’s inappropriate for me to make public statements about these companies, but I can summarize by saying that one of the four looks good, one looks bad, one is doing okay, and this most recent one is too soon to tell.

In the meantime, over these four years, I’ve now spent four Springs as a member of a group of people looking in detail at local startups. The activity and the group are part of the benefit. For the most part I like my fellow WAC members and enjoy participating in a team looking at startups. I enjoy the weekly meetings when we spend evenings listening to pitches or sharing the results of our exploration of specific startups. I like the excitement of new companies and large potential and, yes, big dreams.

So is that a good way to invest money, you might ask? Am I happy with what I’ve got for the money I spent? The answer is yes, I am. These are all very high risk investments, meaning that they are all way more likely to lose than to win; but if they do win, they have a long shot at winning big. It’s a hit business, in which one hit pays for all the other losers. I wouldn’t want my life savings put into that kind of investing, but it isn’t.

More importantly, is this a good way to spend time and money? I say yes definitely. Oh, and aside from all this selfishness, I like to think that this activity is also good citizenship, contributing to the attractiveness of this community for startups and people thinking about startups. The availability of our kind of investment is a positive factor.

Gust Launch can set your startup right so its investment ready.


This article is intended for informational purposes only, and doesn't constitute tax, accounting, or legal advice. Everyone's situation is different! For advice in light of your unique circumstances, consult a tax advisor, accountant, or lawyer.