Brian Cohen is the chairman of an organization called New York Angels. He is also known as being the first investor in Pinterest, one of the fastest growing social media websites of all time. Earlier this year, Cohen released a book called “What Every Angel Investor Wants You To Know: An Insider Reveals How To Get Smart Funding For Your Billion-Dollar Idea.”
When I asked Cohen what he looks for in a startup investment opportunity, he told me that the attributes for a fundable startup is: 1.) capacity for growth, 2.) scalability, 3.) profitability, and 4.) sustainability. He told me that angel investors help startups get started and build strong foundations. Every angel investor is different and offer a mix of resources.
“Angel investing should be smart and fun,” Cohen added. “The reason for writing the book is to point out that investing is a smart and fun activity.”
Cohen also told me that entrepreneurs that he invest in must own their ideas and execution. Smart angel investors realize that entrepreneurs that give away too much control does not make a good investment.
“The world has changed.” You have been empowered in important new ways, and it’s essential that you seize your power. It takes nothing from me when you do seize power, and, in fact, it benefits me in the long run. That’s because when you are in the driver’s seat, you know better what you are doing and have a plan where this level of control is in the service of ownership. I like to get founders to incorporate a stake in ownership and control as soon as possible. I want you to own the process, the success if it comes, and the failure if it doesn’t,” writes Cohen in his book.
As an angel investor, you must have a lot of patience. The average exit time for a startup is between 7 and 10 years. “There are many angel investors from 10 years ago that are hoping that they have a decent portfolio right now,” Cohen told me.
Often times, venture capitalists write down angel investors and dilute their ownership as well. Picking the right partners and investors is essential for all angel investors.
It is also difficult to predict which companies are a winner. Most startups fail and many of the angel investors that Cohen knows are lucky if they are net-zero after a few years.
Patience is key for becoming an angel investor.
Cohen told me that iteration has been proven as successful for startups. He said that around
“75% of companies adapt and iterate.” Iterations refers to the act of repeating processes with the aim of approaching a certain goal.
There is a difference between pivoting and iterating. Pivoting is a radical change of the current business model at the company to capitalize on a new and different market opportunity whereas iterations are an incremental change of the current business model in an attempt to capitalize on a tightly related market opportunity. Pivots are usually more risky and expensive.
“When I started out in the business world, there was a lot less iteration. Entrepreneurs would start with a business idea, leave their conventional job, and try to make the business a success. If it worked out, great. If it didn?t, necessity would force them back into the nine-to-five job market. Maybe they might try the startup route again a few years later. But today, if a startup isn?t successful, entrepreneurs start iterating various aspects of the business, trying different permutations until they succeed, even if the business they end up with is quite different than the business they started with. Most entrepreneurs assume they won?t get it right the first time,” wrote Cohen in his book.
New York City
When I asked Cohen why he decided to choose New York City as his base even though most high tech companies were in Silicon Valley, he said “New York is one giant accelerator” and it has a “warm startup environment.” He added that in some cases, he has seen companies in California act as “alpha dogs” while the ones he saw in New York were very collaborative.
My View Of Cohen
I’ve read Cohen’s book and highly recommend it before going to bed or while you are on a plane. It focuses on principles that make a great angel investor and I believe entrepreneurs can be motivated by some of the content as well. I also spoke with Cohen on the phone and he is one of the most down-to-earth individuals I have come across. I personally endorse him as an important person to get to know, especially in the startup scene.