Q&A with Victor Thorne, Managing Director of Columbus 2020 and Partner of Broadline Capital
A technology entrepreneur and venture capitalist, Victor Thorne recently participated in an angel investor panel discussion sponsored by Innovate New Albany, New Albany’s incubator for technology startups. In case you missed it, Thorne shares his insights on creating a climate conducive to innovation and what angel investors look for in startups.
As an angel investor, what do you look for in a good investment?
We look for a very clear, unique value proposition and sustainable competitive advantage. Does the product or service solve a real problem? Is there a large enough customer base willing to pay enough for the product or service to make it a profitable and scalable venture? I also consider risk-adjusted return. If founders of a company aspire to be worth a billion dollars, but there is a high likelihood that it is a binary outcome of all or nothing, we would want to know there are assets of value such as patents to mitigate the risk. A medical device, advanced material or nanotechnology might fit this profile.
How important is leadership?
The best idea doesn’t guarantee success. Execution is critical and that means there has to be a strong leadership team with experience in whatever the new venture is doing. Successful startups often end up doing something very different from their original plan, and it takes strong leadership to guide a company through the iterative stages of the growth process.
What is the best way to present the concept?
It’s really important to have a clear elevator pitch. In less than a minute an entrepreneur should be able to tell me what she is doing, who is going to pay for it, why they will buy it and why they should buy it from her instead of someone else. People tend to drill down to the technical details and get in the weeds too fast. They forget that they have to explain it to early stage investors who are more generalists and have a different frame of reference or calculus.
What is the biggest mistake entrepreneurs make?
Turning down capital when it is available. I have seen entrepreneurs who spend a year raising a Series A round and after finding the right investors, suddenly more investors want to join the syndicate. The entrepreneurs don’t want to give up too much ownership, so they turn down the new investors. But six months later they are behind schedule, and need an infusion of additional capital. This situation is common and rarely turns out well for the founders. The vast majority of investments don’t meet their original stated projections. We are trained to have lofty goals, but we also have to be realistic.
What other factors are important?
When you get past the team, the industry, the competition, the product or service, financial model and the sales and marketing strategy, investors want to believe that the investment can be a home run. If you are telling me that you can build $5 million in revenue in 5 years that is not a sufficient return to get my attention. Investors look for potential market leaders and disruptors who can change a very large addressable market. In reality, the financial projections startups provide are usually stretch goals. That is why there is great emphasis on restricting angel investing to accredited investors to make these types of investment decisions because there is such a high risk of failure.
Are angel investors in it strictly for the money?
It’s not purely to make money. Angel investor organizations like Ohio TechAngels (based in New Albany) are made up of community leaders, business executives and entrepreneurs who are trying to support local enterprises and to build entrepreneurial wealth and experience so that those entrepreneurs can come back, become angels and mentors themselves, and reinvest in other ventures in our community. There is great emphasis on education, learning and networking.
Compare Central Ohio’s investment climate today to 2000?
In 2000, my brother Christopher and I began developing an SaaS software business while I was living in Columbus, which is our hometown. Unfortunately, at the time the startup support network and the angel investor network were not yet developed in the region. In 2001, we moved our business to Chicago where the networks were more mature. We eventually sold the business to two venture capital firms, one in Boston and the other in Silicon Valley. I returned to Columbus in October 2010. Today, we are much further along, but we still have work to do. With TechColumbus, the Ohio Third Frontier, JobsOhio, NCT Ventures, Draper Triangle Ventures, Ohio TechAngel Funds and Mark Kvamme’s new Drive Capital, Central Ohio has a much more robust mentoring and advisory support network and fewer gaps in the startup funding continuum that now includes an essential ingredient – higher risk concept and seed capital.
What inspires you most about what you do?
I like to see great ideas come to fruition that can improve some aspect in our lives. Ideas that can make a positive change in the world — something that can benefit the planet by reducing emissions, technologies that improve educational outcomes or even mobile apps that make people live happier, healthier lives.
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