Sunset Family Business Radio

Recap: Angel Investing and the Family Business with Karen Robinson and Michael Blake---Insights, Resources and So Much More

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On July 8, 2010, Pat Romboletti and Meredith Moore and Family Business Radio welcomed Michael Blake, co-founder of Start-Up Lounge and Director of Valuation Services at Habif, Arogeti & Wynne, LLP, and Karen Robinson, a serial entrepreneur, philanthropist and angel investor in family-owned businesses.

The day’s discussion centered on angel investing and its role in family-owned businesses from two perspectives:  1. The option of a family business investing in a start-up as a way to diversify and transfer wealth.  2. The role an angel investment can play in these tight money markets.

To begin with, it was noted that family businesses have that critical something that investors love—skin in the game. Also, it has been Karen’s experience that angel investors like the sense that they’re having a direct impact. They enjoy watching a company grow and prosper.

Michael pointed out a tax aspect for family business owners who are considering becoming angel investors. Buying equity in another company as an angel is a tax efficient way to transfer wealth to your children—versus a gift, which is taxable. Plus you get (sometimes much needed) diversification. It’s an advantage available to family businesses especially in dealing with sharing your wealth with subsequent generations.  A key point now that it looks like the estate tax is coming roaring back and the amount you can transfer tax free is being lowered significantly.

When Michael was asked to envision the ideal angel investor and their role, he replied, “One in which the check doesn’t bounce.” A statement that has the advantage of being funny and true. He went on to say that an ideal angel identifies a specific role within the company—if any. “Smart money sometimes means doing nothing,” he said. He also likes those angels who develop a personal relationship within the business.

So, how to start? Of course, begin with your circle of friends who filter things for you, your trusted advisors. “Let people know you’re open for business,” Michael urged. Also, set specific criteria. For instance, decide whether you’re willing or not to go to, say, Chattanooga where the angel is headquartered.

 Karen chimed in with the advice to make sure expectations are in sync. “Expectations need to be clearly stated,” she said. “Who has control?” You will want to recognize that perhaps a new formality will be introduced into your business—a business plan or a fully-developed management team, for example. “There will be a trade-off of control,” she advised, “A new shareholder will want some rights.” She also pointed out that, as the business owner, you need to ascertain how you will return money to the angel investors to compensate them for the risk they assumed.

 Regarding angel investors versus banks. According to Michael, angels swoop in when the banks say no. “Banks are generally cheaper, so try there first. If you can get money from a bank, take it,” he encouraged. He also made the distinction between venture capital and private equity. “Venture capital historically is about building value by encouraging innovation and growth. Private equity is about financial engineering, that is, lowering the cost of capital to create value,” he said.

In pulling together your trusted advisors in an angel investment scenario, Karen advised, “It is very important to have a board made up of more than your attorney and CPA—people who work for you who may have their own agenda.” She suggested looking for veterans in industries that are complementary to yours. Michael agreed—seek out people who have been in that seat before, he said. Successful entrepreneurs, for example. His Start-Up Lounge, for instance, has a free monthly luncheon for angel investors where you can listen to some war stories.

 In the imaginary plus and minus column exercise, angel investing came out a clear winner. Among the pluses:

• The money. “It’s green!” Karen laughed. And Michael continued, “Family-owned businesses turn to strangers—banks, angels—when the three Fs have been exhausted: friends, family, and fools.”
• Expertise. According to Karen, when expectations are aligned, it works to tap into the business acumen of the angels. But you do need to be clear on what each party wants—just the money or also the expertise? Michael said, “You need come-to-Jesus meetings, early and often.”
• The demand for an outside board. When you have a downturn like we’re in now, a great board will help you step back and take in the big picture. As Karen said, “They may not have the answers, but they can ask the tough questions.”

Please download this lively discussion to hear the minus column and all of the other great insights including details of all of the great resources available in the Atlanta community.

Michael S. Blake, CFA, Director of Valuation Services, Habif, Arogeti & Wynne, LLP, http://www.hawcpa.com , 404-892-9651

Karen Robinson Cope, Managing Partner, Atlanta Technology Advisors, 770-329-3630, Krobinson@ata-6.com

If you follow start-ups in Atlanta at all then we know you have heard of this week’s guests. Michael Blake is co-founder of Start-Up Lounge and Director of Valuation Services at Habif, Arogeti & Wynne, LLP, and Karen Robinson is a serial entrepreneur, philanthropist and angel investor in family-owned businesses. 

Our show will look at angel investing from two viewpoints.  One, how can you diversify your family’s wealth by becoming an angel investor.  And two, with banks saying no and private equity sometimes being a option that means the loss of your autonomy, could an angel investor be a good source of capital to grow your business?

You won’t want to miss the very lively discussion that we know will open your mind to possibilities.   Have a paper and pencil nearby—this discussion will be chock full of useful information, with a heavy dose of inspiration as well.

Our guests:

Michael S. Blake, CFA, Director of Valuation Services at Habif, Arogeti & Wynne, LLP

Michael S. Blake, CFA, is Director of Valuation Services at Habif, Arogeti & Wynne, LLP. He has fifteen years of valuation experience including transaction support, fair value accounting, litigation, and fairness opinions. He also has four years of experience in managing and performing assignments on FAS 123(R) stock option and warrant valuation, FAS 133, hedging instrument evaluation, FAS 141, purchase price allocation and FAS 142, good will impairment testing.

Michael’s industry experience includes information technology, medical devices, drug development, computer hardware, electronic entertainment, telecommunications, broadcasting, publishing business services, e-commerce and Internet-driven services, aerospace, paper & timber, beverage, media, manufacturing, and private equity.

He received his Bachelor’s Degree, Cum Laude, in Economics and French from Franklin & Marshall College and his Masters of Business Administration Degree from Georgetown University.

Michael is the co-founder and co-host of StartupLounge.com, an online podcast and forum resource for entrepreneurs and private company investors. He is a Nominee for the 2009 Turknett Leadership Character Award.

Michael’s professional affiliations include:

• Chartered Financial Analyst Institute
• Stamford, CT Society of Investment Analysis (SSIA)
• Phi Beta Kappa
• Georgia Tech/Emory TI:GER Entrepreneurship Program Advisory Board
• Ukrainian American Chamber of Commerce

Karen Robinson Cope, Serial Entrepreneur and Philanthropist

Karen Robinson Cope is the managing partner of Atlanta Technology Advisors, a firm dedicated to growing early stage companies. Prior to ATA, Karen was the President and CEO of Prime Point Media, one of the largest alternative out of home advertising companies in the United States. Ms. Robinson joined Prime Point Media in 2001 when the company was still in the planning stages and was instrumental in the successful commercialization of the business and sale of the business. Prime Point Media was acquired by Outdoor Partner Media, a publicly traded company located in Toronto, in August 2006.　

Before joining Prime Point, Karen was chairwoman, President and CEO of Enrev Corporation, a battery management technology company that was sold in 2001. At Enrev, she led the company’s development of a licensing model for its proprietary products, established a notable roster of private stockholders, and raised more than $42 million in private equity. Prior to Enrev, she was president and CEO of Electronic Power Technology, Inc and President and CEO of Advanced Charger Technology which was sold in 1998. From 1991 until 1993, she served as vice president of sales and marketing for Amnex, a telecommunications company. At Amnex, she doubled sales in less than two years and under her leadership, the company was ranked second in its category in INC. Magazine’s fastest growing publicly held companies. Prior to that, Karen served as vice president of sales and marketing for National Data Corporation, a $900 million publicly traded company. She has also held leadership positions at AT&T and the May Company where, at 23, she was the youngest divisional sales manager in the company’s history.

Karen holds a BA in economics and political science from the University of Redlands. She is a member of the Board of Counselors of the Carter Center, as well as a board member of a number of companies and non-profits. She is the past president of the Technology Executive Round Table, and a protégé in the Committee of 200, the premier Women’s National Professional Organization. In 2000 she was honored as the Georgia Technology Woman of the Year and Wireless Weekly named her one of the top 20 Women in the wireless industry. She is a frequent speaker at both the regional and national level where she has spoken at MIT, Georgia Tech, Harvard and Emory Universities. She is also a frequent judge, most recently at the Ernest and Young Entrepreneur of the Year.

Ms Robinson is married to Richard Cope, also a serial entrepreneur who is the CEO of Nanolumens, the leader in flexible displays. They are parents to Alexandra Mara and live in Duluth, Ga. They are actively involved in Perimeter Church and supporting micro lending in both Africa and Central America.

Karen Robinson Cope, Managing Partner, Atlanta Technology Advisors, 770-329-3630, Krobinson@ata-6.com