The manager of Ohio TechAngels is quoted in this long New York Times story about the state of angel investing as the economic recovery takes hold.

A new book called “Angel Investing: The Gust Guide to Making Money and Having Fun Investing in Startups,” written by David S. Rose, a prominent angel investor in New York, argues that more people “can and should become angel investors, and that a few big wins make up for all the losses,” according to The Times.

“Angel investing is a legitimate part of an alternative asset class investment portfolio,” Rose tells the newspaper. “A rational person can be an investor and not a gambler.”

Not every adviser agrees.

“There is a lotto ticket element to angel investing,” says Michael Tiedemann, chief investment officer at Tiedemann Wealth Management, which oversees $9.2 billion. “The risk is most people are not going to see the best deals unless you are really well connected in the industry.”

The Times sought out several experienced angel investors, including John O. Huston, manager of Ohio TechAngels, for their insights.

Huston, a former commercial banker and risk officer, tells The Times that he was bored in retirement and figured he could use his ability to assess risk to be an angel investor. But “he quickly invested in a large number of companies without doing enough research — and his initial portfolio didn't perform well,” according to the story.

“If it was as simple as following best practices, McKinsey would have bottled it up, and all the venture capitalists would have stellar returns,” Huston says, referring to the consulting firm.

Despite his initial lack of success, he says he still enjoyed meeting young entrepreneurs as part of the investment process.

At Ohio TechAngels, a group of 330 investors pool their money to invest in startups.

“The most recent fund, its fourth, has $7.3 million to invest, with $3.6 million from 98 investors and the rest from the state of Ohio in matching funds,” The Times reports. Huston says members could go in with a minimum of $30,000 and were capped at $120,000.

Huston says the first fund raised by Ohio TechAngels in 2004 would just be able to return investors' money, if it could sell one more company for $1 million.

“In other words, after a decade, that money has lost value to inflation,” according to the story. But he says the group had gotten better about how it makes investments, the structure of its investments and the tax breaks available for investing in startups.

“I thought the analogue was gambling, but it's warfare,” he says. “Throughout history there have been so many examples of the superior force not winning the battle. I liken angel investing to that.”

A game-changer?

A company born in Cleveland but now based in Boston is helping fight malaria, which kills more than 600,000 people a year.

The Boston Globe profiles John Lewandowski, a graduate student in mechanical engineering at the Massachusetts Institute of Technology who helped invent a battery-powered machine that uses magnets and lasers to identify malaria-infected blood, and cofounded a company, Disease Diagnostic Group (DDG), to develop it.

Lewandowski founded DDG in Cleveland, where he earned his undergraduate degree at Case Western Reserve University. His cofounder and former faculty adviser, Brian T. Grimberg, is an assistant professor of international health at Case Western Reserve's medical school, and a specialist in malaria.

DDG's small device, called the Rapid Assessment of Malaria (RAM), “is portable and easy to use in the field,” according to The Globe “Testers do not need specialized medical training. Each test can be done in about one minute, and cheaply — for about 25 cents. Importantly, it can also detect malarial infections in people who do not yet show symptoms of the disease.”

Elana Fine, managing director of the Dingman Center for Entrepreneurship at the University of Maryland, which last month gave DDG's new system an award worth $100,000, tells the paper, “He could very inexpensively save a lot of lives. This competition is looking for both an impactful idea but also a strong entrepreneur. They really saw that in John.”

A game
A Cleveland startup has a “potentially disruptive idea” for the gambling business, according to this story on VentureBeat.com.

The company is Deck of Dice, which makes a product of the same name.

“It puts an entire deck of 54 playing cards (jokers included) on a set of nine six-sided dice,” VentureBeat.com notes. “So it's like combining dice and playing cards in a new kind of game.”

If Deck of Dice “plays its cards right, or maybe gets a lucky dice roll, it could create a brand new entry among the 100-year-old casino games that collectively make up a $391 billion gambling business worldwide,” according to the story. “It's a potentially disruptive idea, and could lead to the creation of multiple games across many different sectors of the gaming and gambling businesses, its creators say. And the idea is so simple that a lot of people are going to say, 'Why didn't I think of that?' ”

Tom Donelan, CEO of Deck of Dice, isn't modest in an interview.

“We have the most overdue game invention of all time,” he says. “We will use it to create a new casino style gaming venture. We have the opportunity to reinvent the thrill of chance games.”

Bob Lindsay, chief operating officer of Deck of Dice and a 25-year game industry veteran, adds, “There was an inventor who had a chocolate meets peanut butter idea.”

VentureBeat.com says Deck of Dice “is the brainchild of 57-year-old Carmelyn Calvert, an empty-nest grandmother in rural Illinois.”

She “loves games and had a great idea one night to combine two of her favorites,” according to the story. “She began cutting some wood dice and figured out the right combinations of the playing cards to put on each die. For instance, she decided that any time you need an Ace of Spades, you don't also need a Six of Spades. So she put those on the same die.”

Deck of Dice “hopes to cash in on the booming market for both physical and digital casino games,” VentureBeat.com says. “The problem most competitors have is that they all have the same games, like poker, blackjack, slots, roulette, and craps.”

Lindsay said the company has global rights to commercialize its patent. Since 2011, Deck of Dice has already sold more than 250,000 physical dice at $10 per package in retail stores across the country, like Wal-Mart, Walgreens and Target.


Author: SCOTT SUTTELL Publisher: crainscleveland.com URL: http://www.crainscleveland.com/article/20140508/BLOGS03/140509863/angel-investors-debate-the-recipe-for-prosperity-during-the-economic#