Nov 132014

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Dr. Earl R. Smith II


J. S. Gamble, Founder and CEO, Montis Group, LLC

In this series of articles, I describe several discussions that I had with investors in the Washington DC area. They range from angel investors to senior partners in well established funds. I have known most of them for many years. That allowed us to cut through the usual PR crap and get to the heart of the process of reviewing investment opportunities. When I told them that my objective was to provide a series of articles which would help companies seeking funding, each was very willing to help – it is, after all, in their interest to improve the process. I owe each of them a debt of thanks for agreeing to sit down and ‘open the kimono’ so to speak.

The first article in the series – Conversations with Investors – Chapter One – focused on Jim Hunt of The MITA Group. Jim is a fairly typical angel investor – a successful entrepreneur who has turned to investing on early-stage companies. My next interview was with a close associate of Jim’s whose background and experience makes for a different approach.

vive la différence

Every investor is different – they have different backgrounds and approaches to the process. This is one of the greatest lessons that founders need to learn. Each investor has a common characteristic – they have money to invest. But their life and business experiences are always more important than their bank balance. In the first of this series, I emphasized the need to match the investment opportunity to the interests of the investor. Many meetings are wasted because founders did not take the time to match their opportunity to the investor’s interest. The lesson for this chapter is the need to match the presentation to the experience and tendencies of the investor – to realize that each investor is unique and will respond better if approached in terms they understand.

Visit with an experienced analyst

I have known JS for a number of years. He is Founder and CEO of Montis Group, which is focused on investing in and advising Early Stage Technology Companies. JS is an Advisory Partner of The MITA Group. In addition, he is a member of New Vantage Group, the Active Angel Investors of Vienna, Virginia, and a member of the Capital Access Network at the Dingman Center for Entrepreneurship at the University of Maryland. He is currently working with a dozen like-minded private investors to form a Group of Angel Investors focused on more active engagement with their portfolio Companies.

JS has a more academic bent when it comes to analyzing investment opportunities. He earned an MBA in finance at Wharton and is very experienced at building and testing financial models. As a result, he is murder on unprofessionally drawn business models and financial projections.

Currently JS is invested in or actively engaged with several early stage Technology and Service Companies in the Mid-Atlantic Region. He served as Acting CEO of Smart Imaging Systems, Inc. and as an adviser to Agilyst, Inc., Semantic Labs and Wiser Together, Inc.

Prior to founding the Montis Group, JS was Senior Operating Executive in Broadband Cable and SVP of Wireless Operating Units with Comcast. He has more than 15 years of Full P&L (up to $1.2B in Annual Revenue) and CapEx responsibility. He had responsibility building teams focused on innovation, improving execution and launching new products and services to drive revenue growth.

Way back when, JS spent several years on the professional staff of McKinsey & Company, Inc. and Price Waterhouse where his clients were primarily telecommunications companies. He also served in various roles with GTE Mobilnet (Wireless Operations).

The Initial Screen

We met at Old Glory in Georgetown – a bourbon house that offers tables with a fine view of M Street. After chatting about deals that we were each involved in and people we knew, I turned to the interview. I told JS that I wanted to focus on how he decided whether or not to make an investment. My first questions was, “What percentage of the deals that come over the transom do you discard out of hand?

He knew that I had already done an interview with Jim Hunt; so the first response was a question. “What did Jim say?” I grinned and said, “now, now – no cribbing. I’ll tell you afterward.” That was the first lesson from the interview. Angle investors in a given geographical region generally talk to each other frequently. They share information and track closely each other’s success and failures.

Seventy-five percent of what I see is discarded out of hand,” offered JS. (Jim’s number was 70%). That means that, on average, three out of every four deals gets only a cursory consideration. His principal reasons for dismissing opportunities were 1) the business model does not hold up, 2) it’s not in my area, 3) the founders are looking for a passive investor and 4) I don’t know any of the principals or their advisers.

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