How is an angel investor—someone who provides seed capital for business startups—like a psychic? According to Wharton Angel Network and Alumni Business Showcase Chairman Steven Shindler, W’76, angel investors must accurately judge whether early-stage entrepreneurs are correctly predicting the future. He says that angels have to ask, “Are their ideas great, do they resonate?” At the 2011 Wharton Alumni Business Showcase this summer in New York City, the answer was a resounding affirmative.
It started as an alumni competition three years ago, modeled after the well-known Wharton Business Plan Competition for University of Pennsylvania students. On a June evening in the foyer at Christie’s, it quickly became clear that the Alumni Business Showcase has become much more than a competition.
“It’s really something that grew out of the feedback we received from the people who participated in last year’s competition. They said that it’s nice to compete and win a competition, but the fundamental objective for their business is to get funded,” says Jeff Mulholland, W’86, co-chief of the Wharton Investor Resource Exchange.
One finalist, Sudhir Rani, WG’11, CFO of TerViva BioEnergy, reports that the firm has leveraged participation in the event to raise funds for a $2.5 million seed round from angel investors, including from one alumnus at the event itself. The firm has developed an environmentally responsible feedstock for the production of biodiesel.
“For a startup to be able to present to a room full of potential investors is almost unheard of,” another finalist, Mary Beth Minton, WG’82, founder and CEO of Arete LLC, says, adding that since the event the firm’s added a number of “incredible advisors.” Arete produces children’s toys and books, most notably the Zylie the Bear line.
The shift from competition to showcase is part of a greater vision shared by Shindler and the other organizers of the event, namely that Wharton alumni should be committed to helping fellow alumni.
According to Eric Ewald, WG’03, co-chair for applicants, they aim to provide entrepreneurs with “ a lot of strategic guidance,” such as connecting entrepreneurs with coaches, devising strategies, identifying markets, advising on corporate governance, and “hooking them up with accountants and tax professionals.”
“More than any other type of investing, angel investing can create enormous wealth,” says Shindler. “I submit, however, that our program provides not only that opportunity but, equally important, it provides opportunity to help make a classmate’s dream become a reality.”
If the participation of more than 63 business applicants, 90 volunteers and 80 accredited investors is any evidence, Shindler’s new model appeals to a large number of alumni.
Calling the past event an “out-of-control success,” Shindler says, “We didn’t even have to go out and recruit investors to show up.”
Entrepreneurial hopefuls submitted their applications and business plans to five panels composed of 72 judges, and 12 finalists had the opportunity to present their plans live at Christie’s for an audience of judges and angel investors. Business ideas were diverse and ambitious, representing industries across the board—biofuels, high-density fiber tech, cancer diagnostic and targeted treatment probes, point-to-point ground transportation planning and nanoparticle measuring technology—which “really mirror what’s happening in the venture community today,” says Ewald.
“There’s a heavy emphasis on life sciences and biotech. There were a lot of applications in the mobile Internet space, which is very hot right now, and clean tech was another big category,” he explains.
The finalists themselves were also demographically diverse. One had just celebrated his 43rd class reunion, some were between six and 10 years out of school, and, remarkably, three of the entrepreneurs just graduated. Four others are still in school and involved with Wharton Entrepreneurial Programs.
“Great companies attract great investors, but you first have to have great companies,” is how Shindler puts what the finalists brought to the table.
The two common denominators among the finalist teams were that they all had at least one member who was a Wharton alumnus or alumna, and all their businesses are in the early development stage. The goal of the showcase is to target businesses beyond the idea and seed stage that are ready for the scrutiny of angel investors, but have not yet reached a commercialization stage.
2012 and Beyond
Where will the Alumni Business Showcase go from here? Investor Co-Chair Joon Shin, GEX’06, inspired by the energy of the June event, says it will dynamically grow because of the incredible opportunities it provides.
The Alumni Business Showcase organizers envision the world’s largest network of angel investors and alumni and a series of events across the country.
“It’s a big, ambitious plan,” Shindler says about possibilities for 2012. It’s not a matter of if or when, it’s a question of “how big is big,” he says.