Trip, Not Destination, Is Angel Investor’s Joy
Ask Richard Wolpert what makes him tick as an angel investor and he tells you about the time he built a media room. The story behind that goes back to his childhood, when he decided he would build and sell a profitable business by age 30 so that, as he puts it, he might be done with working.
Wolpert did indeed build and sell his own business by age 30--After Hours Software, developer of a Rolodex program for the Macintosh computer, sold to Adobe in 1993--and for a while he “goofed off and went jet skiing and had a good time.”
He also dabbled in angel investing, with stakes in three start-up companies: Bit Jugglers, a developer of screen savers and children’s software since sold to Compaq; Mind Over Technology, a computer training company sold to Knowledge Universe; and Autohighway.com, a provider of free audio content on the Web that went public in 1998.
But he wasn’t through with working. In 1996 Wolpert went to work for Walt Disney Co., first as senior vice president of technology and then as president of Disney Online. He left Disney two years ago to start his own online entertainment network, Checkout.com.
Even that wasn’t enough. Restless, Wolpert decided to install a media room in his Westlake Village house, complete with a big screen and a projector and a computer hookup for three-dimensional images and sophisticated sound. It took months to design and build the room, an absorbing project that carried Wolpert deep into the technology that, as it has evolved, now drives the marriage of the Internet and the entertainment industry.
“Halfway through it I realized I was having a great time,” Wolpert says. “But the day it was done I had some friends over and played a movie for them--and then I lost interest. Now I have an exercise bike in that room, and apart from going in there to ride the bike, I don’t go in there much at all.”
The project was not fruitless, however, because it taught Wolpert something about himself that is probably true of many other angel investors: He lost interest in his media room because the satisfaction of work lay not in the product but in the work itself--the act of conceiving and building something.
The joy, in short, came from what angel investors do every day in helping entrepreneurs make their ideas real. So Wolpert turned his attention to angel investing. So far he has 18 start-ups in his portfolio, including 14 launched since the first of last year, most of them entertainment-technology ventures.
“It’s not about making money and being done with it,” Wolpert says. “It’s about coming up with an idea for a project or a product and seeing it through to the point where other people understand it. Building it is fun and so is the fact that people get the idea.”
Angel investors like Wolpert are the swashbucklers of the capital marketplace. They take far bigger risks than venture capitalists in backing the start-up or the very early stage company, and they stand to make far more money than venture capitalists.
But the challenge is not to make money. It’s to build a business in very little time and nurture it to the point that it’s ready to take off on its own.
For Wolpert, it was the practical things that absorbed him in building his media room and it’s the practical things that interest him as an angel investor.
“When you start a business, you need office space and a management team and you need to build out your technology and find your customers and develop strategic relationships,” Wolpert says. “You probably won’t be successful in doing all of these things, but if you know where the main pressure points are, you will be successful in the end.”
Like many other angels, Wolpert doesn’t practice the rigorous due-diligence characteristic of venture capitalists. Instead, he exercises the caution of an instinct that comes from many years of angel investing.
“I’m not a good due-diligence guy,” Wolpert says. “Eighty percent of my decision to invest in a deal is based on my gut reaction to the people and the idea and the business model. That’s not quantifiable. I can’t tell you that I have a list of nine things to look for in a deal.
“But I want to see that the entrepreneur is realistic about what he or she is trying to do. What’s the goal--to become the next IBM or to have fun with something less than that? When I walk into a business in the start-up stage, it’s a feeling. The stuff that’s going to work is obvious--and so is the stuff that isn’t going to work.”
His advice for entrepreneurs with good ideas and no money?
Network, network, network. Like other angel investors, Wolpert rarely looks at business plans that come to him directly. Rather, he uses an extensive network of professionals to screen the entrepreneurs who seek his help--attorneys, accountants, business associates, other angel investors and even venture capitalists.
“If you’re an entrepreneur, you should use your own network to get to an angel investor,” Wolpert says. “Talk to people you know or work with. Share your idea and ask for their assistance, and don’t think that your idea is so unique that you can’t tell anybody about it, because if it really is unique, you’re a genius--or it’s a bad idea.”
Next: What happens when angels tinker with an idea.
*
Juan Hovey can be reached at (805) 492-7909 or at jhovey@gte.net.
