Bill Payne is one of America’s leading angel investors and is in New Zealand for three months to share his 25 years’ experience with angels and entrepreneurs. Payne has invested in more than 50 companies, mentored hundreds and founded four angel networks. In recognition of his contributions, he was awarded the 2009 Hans Serveriens Award, the US Angel Capital Association’s highest honour
Someone walks into your office asking for money. What would make you listen?
Surprisingly enough, we really don't want to hear about their product. We bet on the jockey, not the horse. So first of all we want to be convinced that this entrepreneur can actually be successful in raising money, executing the plan and selling it to customers. The most critical characteristic in all this is integrity. The first hint that not everything you told us is true, we're going to walk away.
We're also looking for what we call coachability. There's nothing more frustrating than to take on somebody who doesn't want to be coached.
But entrepreneurs are by nature bloody-minded.
Yes, we’re looking for strong-minded people with a tremendous work ethic. But if they think they know it all, and can avoid the pitfalls of growing a business having never done it before, they're in for a rude awakening.
We're interested to know if they’ve figured out the channels, the distribution, who's going to buy the product and if the idea is scalable. So we're looking to invest in companies that five to seven years from now can have at least $25 million in revenues.
What made you so successful?
You have to make a lot of investments. The portfolio outcomes that we have measured in a study show most of the return from angel investing comes from between ten and 15 percent of your investments. So if you invest in one or two you're more than likely going to lose your shirt. About four or five will go under, over half of them will give you less than your capital back.
What you're hoping for is that nine out of ten will give you your capital back. And one out of the ten provides all the return on investment—which may be in the order of 20 or 30 times the original investment.
You’re a wealthy man. Does it still hurt to lose money?
Oh yeah, for sure. If you lose in Vegas do you feel bad when you get home? But you knew it was a possibility and you had fun doing it. It’s the same with angel investing. You have to set aside some mad money. For some people it's 20 or 30 percent of their net worth. For other people, it's two.
What brings you down under?
It's populated by beautiful, friendly, cheerful people who genuinely seek expertise and advice. And I have lots of experience I'm willing to share. There's nothing secret about my life. If you want to know how many times I've been married, I'm willing to share with you my relative lack of success in marriage.
Another portfolio approach perhaps?
You could look at it like that!