Can you imagine having three successful exits in a week? It happened to Dušan Stojanovic and this is a story worth dissecting. He is founder and director of True Global Ventures and was namedEBAN’s European Angel of the Year 2013, in part because of those exits in 2012. What can angels learn from Stojanovic’s strategies? One fact is without controversy: he adheres religiously to a strict investing plan.
To Stojanovic, angel investing is a skill-based gamble. It involves lots of luck balanced with roll-up-your sleeves hard work. His methods are proven by the fact that he has a portfolio of 18 companies that includes seven exits since 2005, with the amazing three in one week! All other investments are in companies that have reached a break-even point and none has closed down.
Stojanovic is doing something right and at the root is his systematic, strict investing approach. I learned a lot from it when he shared it in a recent ACA webinar. I’m sure he’ll take a lot of questions about his exits and strategies at the 2015 ACA Summit as well.
- First off, no one denies that luck plays a role. Just like the first employees hired at Microsoft or Facebook who walked away with millions of dollars-worth of stock options, being at the right place at the right time really helps. Acknowledge that, embrace it and seek out local and national opportunities to connect within the angel landscape.
- Invest only in industries where you have expertise. Stojanovic’s three 2012 exits were all related to Internet payments, which makes sense since he has 20 years of experience in business development in E-payments/E-commerce and financial services. He focused on that industry as well as digital media. That’s it. However, while he only invests in a very select number of industries, he does it globally.
- Go global. Stojanovic is a citizen of the world, so he selected New York City, Silicon Valley, Paris, Stockholm, Berlin, Singapore, Hong Kong and Beijing – all of which he believed had strong entrepreneurial growth and opportunity.
- Bet on the right entrepreneur. This is nothing new, but it can’t be overlooked. Many angels will not invest in a deal if they don’t believe whole-heartedly in the entrepreneur running the startup company. Even if you believe in the industry and the product, don’t invest if you don’t believe in the entrepreneur. Stojanovic takes it a step further by only investing in serial entrepreneurs who are reinvesting their cash at the same time that he does.
- Share personal knowledge and expertise to help the entrepreneur be successful. Stojanovic helps his portfolio CEOs understand the industries he specializes in, helps them find customers in the city where the company is based and in the global cities he specializes in. He helps recruit talent, especially engineers and sales people and when Series A rounds are needed introduces them to venture capitalists – especially those he has done previous deals with. He also introduces them to potential acquirers.
- Flip the 75-25 percent rule on due diligence. Interestingly, Stojanovic diverges from the traditional practice of spending 75 percent of the time on due diligence and 25 percent on an exit. He flips the ratio and spends only 25 percent of the time on due diligence and 75 percent of the time working on the exit. How does this work? He’s already well-versed in his industry, so he can quickly weed out startups he feels won’t have a chance of succeeding. He also spends a tremendous amount of time in one-on-one networking meetings with company merger and acquisition representatives, employees who work on corporate ventures, and chief innovation officers to understand what they think and to create strong relationships. He understands who the potential customers are and what companies might be interested in an eventual acquisition.
- During an exit, if there’s an offer on the table, take the cash. Be willing to do partial exits and reinvest the cash in the venture.
Angel investing may be a gamble, but using a strict investing plan and sticking to it increases your odds by turning it into a skill-based gamble. At its core, this hard-earned approach goes a long way to making angel investing more profitable and fun. Stick with what you know, trust your instincts and let the games begin.