What Angel Investors Want you to Know: An Interview with Brian Cohen

Brian Cohen is an ACA member and the Chairman of the New York Angels, the most active angel group in North America. He co-founded Technology Solutions, Inc. in 1983 with his wife, which he later sold to the McCann Erickson World Group, becoming Vice Chairman of their technology group. As a publisher, Brian helped found a number of computing publications, including Computer Systems News & InformationWeek. As an investor with the New York Angels, Brian has invested in dozens of early stage technology companies. Most recently, Brian co-authored the book, What Every Angel Investor Wants You to Know.

We recently spoke with Brian to hear more about his outlook on angel investing and the broader entrepreneurial community, and we wanted to share the discussion with our readers below.

What prompted you to write your book, What Every Angel Investor Wants You to Know?

I came to angel investing a long time ago when it was painfully called “stupid investing.” I was doing PR at the time for early stage startups, and every now and then, I would feel compelled to be a partner in the company and invest in them. Back in those days, there were no angel friendly term sheets or legal documents to review, just a big pile of papers that granted you the right to invest in the company. I ended up losing all of the money I had invested in those companies.

Years later, I realized that there has to be a smarter methodology to investing in startups. I wanted to understand the point of angel investing and how to do it better than most, and that’s when I decided to join the NY Angels. Writing the book was an opportunity for me to share everything I felt and had learned about angel investing through the special relationships I had formed with investors and entrepreneurs.

What are you seeing as a need for enhancing angel investing practices?

We are now going through a period of angel exhaustion. Angel investors have been too quick on the draw and best practices were not always being followed, such as not doing the kind of 'do diligence'* required before making smart investments. As a result, less angels are getting exits and have slowed their investment appetites.

In my experience with the ACA, I see that they’re constantly raising the bar of smart angel investing. There’s less tolerance for doing angel investing in an “amateurish” way, and instead more angels are looking to be more professional in their methodologies. This gives me hope that we’ll be able to move smart money back through the startup ecosystem again.

Are there any new trends in angel investing that are particularly catching your attention?

I think angels are becoming "promiscuous." What I mean is more and more angels are starting to look outside of their groups and into online opportunities for investments. I believe in the power of group wisdom and that angels make smarter decisions the more they socialize and collaborate. Angel groups need to start forming relationships with some of these online crowd-funding sites to provide best practices. The New York Angels is actively working with some of these sites to better curate investments and offer due diligence techniques.

How do incubators, accelerators and business competitions fit into the picture in your opinion?

I think there’s value in them, and at NY Angels, we partner with all of the accelerators and incubators in NYC. We drop by weekly to nurture and invest in the best opportunities. However, I believe the downside to them is in the mentorship, not being able to provide long-term relationships for entrepreneurs past the program’s completion.

How does the New York startup and investment ecosystem compare now to a few decades ago, and when did it really gain the momentum it has today?

NYC had a reputation as a cold, calculated financial place where no one shared information. But in fact it’s just the opposite. The early days of the NYC startup community was created by incredibly bright people who were warm and embracing. Because of that foundation, there’s a lot of support among startups here. It’s a wonderful environment where you can share your dreams, and people here will listen to those dreams and are willing to help 100%. The power of the startup community in NYC is extraordinary.

About 7 years ago, the local angel investor community started actively helping the community, and that’s when startups began evolving everywhere. In fact, NYC is like a giant accelerator. The NY Angels was the only angel group in town for the longest time. Now we’re helping create the NY Angels Gotham Network that connects all of the different angel groups to better support the entrepreneurs.

Aside from Pinterest, which is arguably your best-known investment? Are there any memorable investment stories or outcomes that you would like to share?

I have a certain sense of pride in some of the investments I’ve made. comiXology is one example. This was the story of a bright, young entrepreneur who sang opera at Julliard. He figured out how to orchestrate a relationship with the two largest comic book publications, DC and Marvel, and he now has command of the worldwide distribution of comic books.

From your perspective, what are the most important things that angel investors can do individually to help raise the perception of the ‘smart’ angel investor?

Nothing takes the place of being involved in the community. When you take the time to get to know your community and in return the community develops trust in you, that’s when angels can make smart decisions. I believe that when you do a lot of angel investing within your community, you start to develop a sense for it and can begin to understand and incorporate angel best practices.

*'Do diligence' is a term that Brian Cohen uses in his book to describe due diligence that equally identifies the reasons that one should not invest in a startup and the reasons that one should.