Group Profile: TiE Angels

July 22, 2011

It can be challenging for new angel groups to make more than two or three investments in their first year, even when deal flow is exceptionally good.

TiE Angels, founded last summer in Santa Clara, CA, has invested in seven portfolio companies in eight months. Typical investments are between $250,000 and $600,000.

TiE Angels is an outgrowth of TiE Silicon Valley, the founding chapter of TiE Global, a not-for-profit, worldwide network of successful entrepreneurs, professionals, and business executives.

“Last year members of the TiE chapter in Silicon Valley decided it was time to organize an angel group. We wanted to formalize our investing relationship, provide seed capital, open up to more people, and help take companies to the next level,” says Vish Mishra, TiE Silicon Valley president and charter member of TiE Angels.

How did TiE Angels get off to such a fast start?

The advantages of Silicon Valley are unique considering the number of entrepreneurs, the size of the angel investor pool, and the access to domain expertise.

TiE Angels works to be among the best of angel groups by learning from other angel groups, leveraging professional expertise and relationships, striving for efficiency, and coaching and mentoring entrepreneurs.

Members are experienced and well-connected

“Our members are all successful entrepreneurs, executives, and business owners,” Mishra says. “We have people who are just starting companies, people who have started, grown and exited companies to start their second or third business, and even people who are retired after being CEO who want to stay actively engaged.”

TiE Angels now has about 75 members; most are local to Silicon Valley with a few people from outside the region.

“Every month we pick up at least four to five new angels. They hear about us, attend a meeting, and like what they see,” says Venktesh Shukla, TiE Angels chairman.

TiE Angels benefit from the connection to TiE Silicon Valley and TiE Global

Many TiE Angels members knew each other through TiE Silicon Valley, which is the largest of the 56 chapters of TiE Global.

“TiE Global was founded by people from India and that part of the world in 1992 and now has more than 13,000 members in thirteen countries, says Deepak Bhagat, charter member of TiE Angels.

“Some founders were the first generation immigrants from the corporate world. Some were successful entrepreneurs,” Bhagat says. “The focus is on entrepreneurship. We create seminars, classes, and networking events, such as TiEcon, a two-day convergence of speakers, investors, and 125 startups showing their technology in the Innovation Expo.”

While the original TiE organization was started by participants of Indian descent, TiE is open and inclusive to all entrepreneurs. Their diverse investments include Vigilent, an American company, and Vyycore, an Israel-based firm with offices in Silicon Valley.

TiE Angels adds value to TiE through the quality of members and the intensity of interaction between them. “TiE Angels give people a reason to talk and collaborate with each other because they are working on a deal. That increases the overall value to TiE as the value of any network is exponentially higher if the members interact with each other a lot,” Shukla says.

TiE Angels builds on the best practices and processes of established angel groups

“We talked to a lot of groups in the beginning,” says Shukla. “I personally talked with six or seven angel groups. Our process was to incorporate the best practices and to learn what to do and not to do. We focused on structure, process, discipline, and the code of conduct.”

Shukla feels lucky that there are so many angel groups in Silicon Valley. “If you listen to them and to their experiences,” he says, “you can make sure you don’t make the same mistakes and come out ahead. That’s what happened for us.”

TiE Angels follows a volunteer network model. All investments are made by individuals. Entrepreneurs submit their business plans online for review by the TiE Angels screening committee. The committee narrows the submissions down to eight entrepreneurs. Those eight are invited to present to the TiE Angels steering committee.

“We give the entrepreneur ten minutes to pitch and ten minutes to answer questions,” Mishra says. “Out of the eight, we pick three to come back the following week and present to the group. We share the deal sheet, collect interest, and recruit a lead investor.”

Other members who express interest in the deal join the leader on the due diligence team.

“We are so deeply embedded in the high technology companies of Silicon Valley and have members from just about any company you can name, chances are there are some members of that team that know something about any market or technology or if not, know who to call,” Shukla says.

The group considers every business plan that comes in and is open to syndication. The angels are considering ways to more proactively collaborate with other angel groups.

“It so happens that we have invested in all five of our core segments-social media, mobile space, energy, cloud space and life sciences,” Mishra says. “We use Angelsoft as a software tool and are moving very fast.”

TiE Silicon Valley provides offices and staffing and financial support for TiE Angels. “We review the arrangement with TiE every six months,” Shukla says. “We’re likely to consider a modest charge to our angel group members eventually.”

Deal flow is great and angels are engaged

“The word about TiE Angels is out. We are seeing very good deals. The quality has been fabulous,” Mishra says. “We’ve had several entrepreneurs tell us that the best thing that happened to them is the TiE connection. We have people who have gone through other funding networks, and they come to us and say what a delight.”

TiE Angels receive about twenty business plans a month.

“All of us here are well connected and spread the word,” Shukla says.

“We are hands on. We know how to evaluate companies and what clicks and what doesn’t click. I haven’t had so much as fun in a long time,” says Bhagat.

TiE Angels want to invest an additional $6 million in an additional twelve companies in the next twelve months. “We have a wonderful chance of making it,” Mishra says.

TiE Angels helps portfolio companies stay on track and meet milestones

“The combined net worth of this angel group is at least $3 to $4 billion, but the real differentiator is our deep domain expertise,” Shukla says.

“TiE Angels are straight-forward and organized. Good entrepreneurs can find money, but when we waste time, we can never get it back,” says Mark Housley, CEO of Vigilent, a TiE Angels portfolio company in the energy management field.

“The lead they appointed on our deal has been unbelievably responsive,” Housley says. “We gave him a list of all the things we needed help with and asked what they could do. He sent our list out to members, and we got an incredible response with high quality connections and great follow-up. I can call up one of the TiE guys any time and get advice from someone who has skin in the game. All they care about is helping Vigilent win.”

Vigilent was awarded “Best in Energy” in the TiEcon Innovations Expo this past May. Verizon (http://sv.tie.org/news-and-views) reports that Vigilent’s intelligent energy-management systems in 24 Verizon data centers resulted enabled Verizon to shut down 40 percent of the air conditioners and reduce greenhouse gas emission by more than 66 million pounds of CO2.

“From the very start of the investment, the network of people that we gained access to, the short cuts that we would otherwise have to spend time and money to establish, and the coaching they provided have had tremendous positive impact on Vyycore,” says Doron Koren, Vyycore president and CEO.

Vyycore makes chips that extend the range of coverage by up to 100 percent, lower battery consumption by up to 50 percent, and increase data transfer rates up to 200 percent while dramatically reducing the cost of the power amplifier. Vyycore was recently awarded “Best in Show” honors at both TiEcon and MobiTechFest East.

“We have a great match-our need for help and TiE Angels’ desire for helping,” Koren says. “We really communicate a lot, but they don’t try to run the company. It’s all about plans, advice, financial, advice, what do you think about this or that. This is very important for a young company trying to be a big company. They are helping us succeed.”

TiE Angels see the potential of great ROI and are having fun reaching for it

“Every company that we invested in is doing better than the plan,” says Mishra. “We had invested $600,000 into one company, were barely into the company for two months, and we had an exit offer. We didn’t really want an exit to materialize so soon; we want to continue helping build the company first. Give us a couple of years, and then you can expect some exits.”

At TiEcon, two TiE Angels told Shukla that participating in the angel group had changed their lives.

“What happens here is that angels find out about opportunities they might not otherwise see,” he says. “And even if they found out about them, they would never get an opportunity to sit on a board or become an advisor. As an investor from TiE Angels, they can put up $25,000 to $50,000 and be represented by a board member from our group. Now they carry some clout.”

Recently TiE Angels were invited to review a company founded by a group of Russians.

“It used to take $10 to $20 million to start a company,” says Bhagat. “Now you can do it on $3 million or less. The founder of one of the companies I’m engaged with now started it on a credit card. This is a huge technology shift. We just love it. Technology keeps us going and awake at night. There is so much excitement. We want to contribute to it.”