David Rose started his first business at the age of 10. Since then, the now 57-year-old has founded six companies, invested in 90 start-ups and is one of the most active angel investors in the US.
Described as "New York's Archangel" by Forbes magazine and "the Pitch Coach" by Business Week for his work with early-stage entrepreneurs, Rose is the founder of New York Angels, one of the largest angel investment groups in the US.
He also set up and runs Gust, a collaboration platform for early-stage angel investing.
The term “angel” came originally from Broadway, where it described wealthy individuals who backed theatrical productions. Business angels typically focus on start-up companies that are too small for venture capitalists and too risky for banks. Most are successful businesspeople in their own right and choose to invest for reasons other than financial gain.
Rose’s family has form in entrepreneurship going back three generations. His great-uncle was an entrepreneur and serial investor in the 1800s, and his father won the New York Entrepreneur of the Year award at the age of 84.
One in 400
Rose's personal business is Rose Tech Ventures, an early stage investment fund. He is also an associate founder of Singularity University, a postgraduate programme in Silicon Valley. His recent book, Angel Investing, is already in the New York Times' top 10 selling books list.
Rose is in Dublin today to speak at the 2014 European Business Angel Congress hosted by the all-Ireland Halo Business Angel Network. Attracting an angel is not easy, he says.
“About one in 40 companies will actually get angel funding, which is small but a lot better than venture-capital funding, which is about one in 400,” he says.
“If a company wants an angel they better make sure to have everything in order, because if anything is ‘off’ about your business it will knock you out of contention.
“The qualities angels look for in entrepreneurs are integrity, passion, experience in the space, product traction, a thorough knowledge of the industry, enough potential customers and a good business model,” he says.
Rose sits through about 1,000 presentations a year from angel seekers. He doesn’t hesitate when asked for the secret to successful pitching.
Do not fib
"Get to the point. Tell us what you do up front," he says. "Do not fib or fake. If you don't know the answer, say so. Structure the presentation logically to build a picture of your business. Tell me about your market, what the problem is and how you're going to solve it. Who are your customers? What's your competition and how are you going to make money?"
The majority of the companies Rose sees are US-based, but angel investors are beginning to spread their wings.
“The internationalisation of angel investing is just starting. We are beginning to see crossborder funding and investors expanding beyond their local markets, which is great news for entrepreneurs.”
Asked how a country such as Ireland can take on a culture of angel investing given our unforgiving attitude to failure, Rose is emphatic.
“There has to be a cultural shift in how you look at and tolerate failure and that is your biggest challenge,” he says. “Accepting the need to try and fail is difficult for countries with a long history of preservation and conservatism.
“The US has invented itself from scratch relatively recently and is very open to new things. It celebrates people who try. Failure and risk are acceptable steps on the way to success. If Ireland doesn’t allow its entrepreneurs to fail they will move to somewhere that does, like the US.”
Crazy
Entrepreneurs are crazy by definition, he says, because they see and do things differently, and angels "are crazy to the power of three" because most have been involved in multiple start-ups and invest with no guarantee of success.
“Five in every 10 start-ups will disappear completely. Two might break even five or six years later, two might give a return of two or three times the investment, and one out of 10 might give a really big return. They’re not great odds.”
Rose studied urban planning at Yale and worked as an adviser to US diplomat and senator Patrick Moynihan before moving into the private sector. Based in New York, he set up a computer training business in 1983 followed by a software company in 1988.
He is still based in New York having ignored advice almost 30 years ago to move to a more “tech-friendly” location.
Vibrant
"At the time New York was known as a global centre for business, finance, advertising and marketing – there was no technology there," he says. "Now as we enter an era of technology being applied in businesses from food to fashion, New York City has become a vibrant technology centre in terms of businesses being leveraged by technology. Today, it is the fastest growing technology centre in the world, faster even than Silicon Valley.
“There is an essential difference between a high-street business and a business designed to scale. Businesses designed to scale attract investment. It’s a question of economics. Over half of all start-ups will fail. Therefore you need the ones that succeed to be very successful. I’m never going to get a 20- or 30-fold return on a business that stays local.”
