From John P. Dilts, Maverick Angels

With the onset of a global economic crisis where venerable financial institutions are collapsing, government bailouts are commonplace and confidence among individual investors as well as entrepreneurs seeking funding is at an all-time low, a new way of early-stage venture investing has emerged. Maverick Angels has innovated a new model for creating a new win-win approach to successfully address the growing challenges afflicting the venture capital and angel investment sector. The Maverick Angels Model brings together new entrepreneurial investment opportunities and high-net-worth investors to form a collaborative and symbiotic community. This new approach is based on mutual trust and a uniquely collaborative and educational process to provide a novel strategy for supporting new ventures in the market. This heightened level of synergy between entrepreneurs and investors will foster future economic growth and prosperity for the investor communities and entrepreneurial ventures we serve.

A Hybrid Model to Support the Entrepreneurial Ecosystem

The key to understanding the Maverick Angels Model is to know that it is a very progressive, hybrid model of a conventional angel network, professionally managed club and venture accelerator rolled into one. The reason for this new innovative approach is to create a more robust, win-win process and outcome for all involved when considering very speculative, early- stage ventures. Our approach equally benefits our investor Members, presenting entrepreneurs, our value-added Sponsors and our corporate acquisition partners. We create and support the entrepreneurial ecosystem which has emerged in cities across the country and in Europe given the retraction from the market of traditional financiers and which serves as the promise for future economic growth in our communities.

This is a marked advance over the traditional VC model where entrepreneurs only win if they are funded which is an extremely rare occurrence for most average early-stage entrepreneurs who usually gain nothing from the VC experience and conventional angel network if they are turned down for funding. VCs provide a very chosen few entrepreneurs with the potential to receive larger sums of investment while the angel model provides a network of resources from a room full of investors who are morel likely to invest smaller dollars in more deals.

Both models have co-existed for years and at times have created conflict for the investors and entrepreneurs (resulting in company founders and the angels’ ownership levels being “crammed down”) and at times they have benefited those parties as well when the entrepreneurial venture ramps up and exits in a reasonable time period without cram downs along the way.

Maverick Angels seeks to fill the void where traditional angel groups and VCs fall short by creating a more robust, end-to-end hybrid approach which leverages the broad resources and relationships of the Network to involve education, facilitation, collaboration and acceleration to create a higher chance for a more positive outcome for all. The goal is to reduce the risk while increasing the upside for a broader number of players and a wider scope of opportunities which approach the network. Entrepreneurs constantly receive constructive feedback from Maverick Angels management as well as our highly participatory Members and Sponsors.

The entrepreneurial path has repeatedly proven to be fluid and dynamic, not static and linear and our active participation and mentoring as angel investors during the growth process can have a dramatic effect on our investment decisions and ultimate outcomes. This is in stark contrast to simply doing some up front diligence and rolling the dice trying to find the next Google which is the traditional VC and angel network approach. At Maverick, we work to optimize opportunities which come to us at every step of the way, from our Jump Start Program, Arena Meetings, and our AngelLink virtual network, to our ongoing mentoring and Acceleration Program and our Corporate Partner Program which encourages and facilitates portfolio company acquisitions.

Our Fee Structure Creates Objectivity, Educational Benefits and Individual Investor Choice

Some VCs do not support angel networks charging entrepreneurs fees. However, our fees make it possible for us to provide the many ways in our hybrid model in which we facilitate the qualification, development, and rapid growth of new start-up ventures which come to our group.

Just as importantly, our model allows us to serve the interests of our Members to invest individually at their sole discretion without paying expensive management or investment banking fees as with the VC model. As a result, Maverick Angels Members can trust the objectivity of our process while making their own personal investment decisions within the trusted environment of like-minded, like-spirited angel investors which we maintain and facilitate from an impartial, arms- length distance.

VCs’ management costs are covered by their venture fund’s management fees which are typically very sizable and constantly growing with the ever-increasing size of VC funds (management fees are usually 2.5% of funds under management plus VCs receive 20% or more of the profits of the Fund). The VC model’s approach does not necessarily serve the interests of most entrepreneurs in the long run. This becomes apparent when looking at the overall effect of the entrepreneur taking on too much VC money too soon. VC funding is very rare where entrepreneurs often have only a 1 in a 100 chance of getting funded. Also, The minimum investment requirements of the average VC fund is normally too high for most entrepreneurs seeking small start-up dollars.

Entrepreneurs can very often make out much better by paying smaller phased fees to professionally-managed angel groups like Maverick Angels to obtain numerous resources including high quality, early instruction on how to create a scalable and efficient venture growth strategy and how to pitch a wide group of angels more effectively (with a higher chance of funding than with VCs). With the Maverick Model, entrepreneurs are not forced to raise too much capital too soon and give away too much equity to VCs who may very well replace them in their management roles if the company does not scale as fast as they would like.

VC and Angel Model Flaws vs. Maverick Model to Heighten Win-Win Outcomes

While not all VCs do harm to start-ups, there are countless stories of unscrupulous VCs (often called “Vulture Capitalists”) who take control of companies with the lure of larger dollars and tossing naïve entrepreneurs aside when their often unreasonable VC agenda is not met. Many entrepreneurs regret going to VC’s for a variety of reasons, including:

1) Being turned down after numerous pitches with no explanation of why and no feedback at all;
2) Wasting time with numerous diligence meetings that go nowhere and which create delays which can ultimately ruin a company;
3) Being forced to give up too much equity after a drawn-out term sheet negotiation that, by the time it has taken its course, the entrepreneur has no choice but take whatever terms are offered or fold;
4) Dealing with VCs as micro-managing board members who place onerous constraints on day- to-day management;
5) Face the risk of being replaced in their management role since the VCs often gain a controlling interest in the company.

The fact that the VC does not “charge a fee” to present to them is the last thing most entrepreneurs care about – they want education, mentoring and resources as well as a fair shot at taking their company to the next level while supported by smart money mentor investors offering valuable resources to help in building their businesses. With the VC model, entrepreneurs are often at the mercy of capital-heavy funds that want to call the shots without offering any value back to the entrepreneur unless they invest and then their relationship can often become oppressive.

Many conventional angel investor networks also don’t charge entrepreneurs a fee to present their companies to them, but they often behave no differently from a traditional VC group in that they seek out a few diamonds in the rough and turn the rest away. This denial can often occur after protracted due diligence meetings with no added value and a focus solely on gaining investor leverage at the expense of the interests of the entrepreneur in moving their venture forward.

On the contrary, Maverick Angels has a much more refined, systemic, collaborative, supportive and generative approach to giving entrepreneurs an alternative to this often zero sum game which is clearly now in decline as a viable model for funding companies. Well-organized angel groups like Maverick offer a more complete, end-to-end approach to support the ever-changing entrepreneurial journey. Such value added angel groups are now clearly on the rise across the country and provide a glimmer of hope for early-stage entrepreneurs and investors during the current challenging economic environment.

Learning More and Making Contact

Go to www.maverickangels.com to learn more about how our next generation, entrepreneur- friendly model provides a positive, win-win experience for presenting entrepreneurs and early- stage angel investors.

Feel free to contact us at 818-706-7686 or at info@maverickangels.com for more information about coming Maverick Angels events.