Episode 18: What Do Angels Do?

MAK: Hey everyone, we’ve got a really important question we’re diving into today.

GRANT: Yeah, we’re gonna discover what Angel’s do, because our last guest, Cobi Petrucciani said they can be really helpful for new companies.

DAD: I think you’re talking about Angel Investors, is that right?

GRANT: Yeah, that. People that fly around with money, dumping it on companies.

DAD: They are actually referred to as “Angels”. They definitely help new companies, which we learned are “startups”, by investing in companies. And, I think it’s great as we start to think about building your business and learning more about investing.

MAK: So Dad, who are we interviewing today?

DAD: Well, this guy built and sold his tech company and then started an Angel investing company in the Midwest. He personally invested in 42 companies, and his investment firm has invested over $16M in 38 companies throughout the US.

GRANT: Who is it dad?

DAD: You don’t have any guesses?

MAK: Is it Mr. Johnson down the street, he has a huge pool?

DAD: No, it’s not him. But, you know him as your crazy uncle that likes to play golf.

MAK/GRANT: Uncle Tony!!!

DAD: Yep, that’s right, it’s Cobi’s dad, Tony Petrucciani. 

GRANT: I never knew he was an Angel? 

MAK: Yeah, Aunt Lori says he’s a little devil sometimes!!

DAD: I agree, I’ve known him for a long time, and I can see how he could be called that. And, here he is. Welcome to the show Tony.

TONY: Glad to be here. Thanks for having me on the show.

GRANT: We’re really happy you’re here on Money with M & G! Our listeners will really enjoy hearing from you.

MAK: And, I think our guests will like having you, because you’re funny, and have a lot of positive energy.

GRANT: I think what Makenna is saying is you got a lot of “kid” energy.

TONY: I haven’t really put a big effort toward growing up 

MAK: We’ve got a number of questions for you. BUT, before we begin, can you tell our listeners one thing…. Do you like 3 Musketeers or Cotton Candy better?

TONY: 3 Musketeers

GRANT: That’s exactly what I thought. You like Cotton Candy better!!

MAK: Weren’t you listening? He loves three Musketeers better.

GRANT: Now that we got that out of the way, can you tell us a little bit about your background?

TONY: My Mom and Dad started a business out of our house when I was 5. They sold instruments and supplies to doctors. I got to watch the business grow until they grew big enough that they had to rent a building – then we go our house back!

MAK: And, now you live in this sweet house. What’s your favorite part of your current life, now that you did all this cool stuff?

GRANT: And the movie room has a screen over 15 feet long from corner to corner. It’s awesome when Cobi and I play video games together on it!!

TONY: Yep, I do have some fun stuff, but there was a lot of hard work. I had to guide my company through the Great Recession – we went from 65 employees all the way down to 30 over 18 really rough months. You have to have enough money to pay your people!

We re-built, but it was tough. Entrepreneurs have to really stick with it, especially though the tough, times to be successful.

GRANT: I knew you would say something like that. Dad says you whine a lot. Is that true? 

TONY: Yes, I like wine. But, I don’t whine. That sounds like your dad…

MAK: Ok, you know that we’re really into investing. And, you’ve known dad for a long time. I think you’ve called him a serious tight wad for the last 30 years or so. How do you invest in other companies? What does that mean?

TONY: When most people think of getting money for a company, they think of going to a bank and getting a loan. The problem is, most startup companies can’t get a loan from a bank. So, we will actually give the company money in exchange for owning part of it.

GRANT: And, you do this as an angel, but I don’t see any wings!!!

MAK: So, what do Angel Investors do? How do they help companies? Are you working with a company now when you do this?

TONY: Well, an Angel investor will invest in one or more companies, which gives the company money to do things like buy inventory, pay for advertising and websites, and even pay their employees.

Because the Angel Investor is a partner with the company, they also help find customers and employees for the company along with giving advice an all sorts of things. If the company becomes a success, the Angel shares in that success.

MAK: And are you really invested in over 40 companies??? Are there any really sweet ones you can tell us about?

TONY: Well, I did invest in 42 companies. Some of the ones that I think are really interesting are:

• Scioto Biosciences – they help make premature babies health more quickly using bacteria therapeutics
• React Mobile – they have a wearable panic button that helps protect workers in hotels and hospitals
• Thrive Agritech – they will help us grow food regardless of what the weather is outside. 

GRANT: Those all sound really cool. But, how do you know if a business is worth investing in? It may sound awesome, but if it doesn’t make money, that’s a problem, right? 

TONY: We look at the team that started the company – do they have the skills to run a business? Do they have the passion to stick with it through thick and thin? Do they have a big enough market to sell into?

MAK: Wow, that’s cool. You get to learn all about them. Have you made any money? Can you tell us about something that worked really well?

TONY: Every once in a while, you hit a home run. We had a company that we invested in December of last year, and they were acquired in July. We made a return of over 3 times what we invested – it had an IRR of 590%.

GRANT: Have you ever made a mistake? What did that look like? And, did you lose money?

TONY: I have made many mistakes. Learning that most of my mistakes weren’t due to the product or service, but either the team didn’t work well together, or their market was too small.

I have had 1 company so far that went out of business, so I lost all the money I invested ☹

MAK: How is this type of investing different than what most people invest in, like stocks, bonds, earning interest in a bank account? 

TONY: There is a term called liquidity – if you can turn your investment into cash quickly, it is called liquid. Angel investing is very illiquid – there is pretty much no way to get your money out until the company “exits” – which means they get acquired by a bigger company or go public

GRANT: We started a dog sitting business. And, as we grow, dad tells us we’ll need money to hire more people. But, having help from an angel, along with extra money sounds perfect. Would you suggest using an angel? Why or why not?

TONY: Some people like to own all of their company and not have to share it – I would say not to use an Angel if that is the case. One other thing to consider: if you start taking other people’s money, there will be pressure to grow and grow quickly. If you don’t want that pressure, you shouldn’t work with an Angel. But, if you want to grow more quickly than you can on your own, and you want to sell your company instead of keeping it forever, Angels could be perfect for you.

MAK: How do owners get investors? Why would they? Why wouldn’t they want one?

TONY: A simple search on Google could get you a list of groups of Angels in your area. Angel groups are always looking for companies to invest in. Our group looks at 300 to 400 companies a year!

GRANT: If you could give our listeners a piece of advice, what would you do differently?

TONY: I would ask for more help – I think I wanted to look like I knew what I was doing, so I wouldn’t ask for help. It reminds me of a quote: “Why would we hire smart people and tell them what to do? We should hire smart people and have them tell us what to do!”

MAK: Last question, what would you recommend we do to grow wealthy?

TONY: I heard this when I was 12 – “Buy low, sell high!”, but really, the one I like best: “pay yourself first!” You should always save a good percentage of your paychecks and live off the rest. If you spend money first and hope there is some leftover, you could be in trouble.

GRANT: Thanks for being here Uncle Tony. It sounds like you are really helping a lot of companies. I know you’re going to do great.

MAK: Yeah, I didn’t know you were doing all of that. It sounds so cool, and I’m glad we’ve had a chance to learn so much from you. Thanks for being our uncle!!!

TONY: Hey, thank you for having me on your show. It’s been a ton of fun:

GRANT: I hope you’ll come back so we can catch up on more insights, investing advice, and stories about all the great investments that you’ve done.

TONY: Sure will. Thanks Mak & G, it’s been a real pleasure. Check us out on VisionTech-Partners.com so you can see all the cool stuff we’ve been doing.

MAK/GRANT: We will.

DAD: What a great host, who’s done some pretty awesome stuff. We’re very lucky to have Tony here.

GRANT: Hey Dad, all of this talk about investing has me wondering, is there any way we can get involved with investing ourselves?