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Angel and Venture Investing in Texas

Angel and Venture Investing in Texas

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A West Point graduate and recipient of two Bronze Stars in Iraq, Randall Crowder makes strategic investments in new players joining Texas’ burgeoning health care industry.

He agreed to speak with Fiscal Notes about Texas’ angel and venture investing climate.
A West Point graduate and recipient of two Bronze Stars in Iraq, Randall Crowder makes strategic investments in new players joining Texas’ burgeoning health care industry.

He agreed to speak with Fiscal Notes about Texas’ angel and venture investing climate.

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Published by: Texas Comptroller of Public Accounts on Feb 08, 2012
Copyright:Public Domain


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A Review of the Texas Economy from the Office of
Susan Combs, Texas Comptroller of Public Accounts
February 2012
ngel andVenture Investing in
 An Interview with Randall Crowder
by bruce Wright
nvsos and
venture capital
somo  naon’s mos
 
February 2012
Fiscal Notes
Fiscal Notes
February 2012
manager. I you answer only to your-sel and maybe your spouse, you’re anangel. I you manage someone else’smoney, you’re probably a proessionalmoney manager.While
investors can certainlyinclude riends and amily — that’swhere many entrepreneurs get theirinitial cash — angel investors aretypically wealthy individuals whomake individual investments in acompany that oten range anywhererom $25,000 to $250,000.And it’s probably appropriate tomention “super-angels,” a term that’skind o in vogue lately. A super-angelis really just a very active angel whomay invest more than a typical angel— someone with signicant wealthand experience.On the other hand, a
is a proessional money manager,because they are largely deployingmoney on behal o other people andorganizations, such as private wealthmanagers, pension unds and endow-ments. Reputable venture capital rmsare eectively service providers thatreally understand how to invest in andbuild companies.
FN: Are the angel and venture roles un-damentally dierent in other ways?Crowder: 
When entrepreneurs are just getting going, they need moneybut they also need help. That’s whereangels can be really eective. A lot o angels are ormer businessmen andwomen who understand how to startand grow a business. Many made theirmoney doing it themselves.So with that initial capital otencomes a lot o mentoring, saying here’swhat you need to do next, here’s howto incorporate your company, here’swhat lawyer you should use, here’swhat accounting system you shoulduse — a lot o the blocking andtackling needed to start a businesseectively.But because angels traditionallyinvest small amounts o capital, theytend to ocus primarily on early-stagecompanies. For the same reason,angels generally don’t invest incapital-intensive industries, the thingsthat cost a lot o money to commer-cialize, like pharmaceuticals or cleantechnology, where it can oten takehundreds o millions o dollars to goto market.Angels tend to preer companieswith products that can get to marketrelatively quickly such as sotware.While angels are a wonderul sourceo capital early on, many companiesneed more money to grow, moneybeyond what angels are willingto commit.
FN: And that’s when venture capitalsteps in, right?Crowder:
Well, don’t get me wrong,many venture capitalists also helpstart businesses.At TEXO Ventures, or example,we’re committed to providing capitalto early-stage health care companies,while also collaborating on solutions tomany o the issues that new companiesace. Being successul businessmen andentrepreneurs ourselves helps us iden-tiy with what our entrepreneurs areexperiencing. But we typically look toinvest in companies ater riends, amilyand seed investors have gotten thecompany to its rst “value infectionpoint,” its rst milestone as a business,which is oten a proo o concept.Dierent venture capital rms havedierent investment strategies, but it’sa sae bet that many like to invest $1million to $5 million in an initial roundo nancing. That money is oten usedto execute a company’s go-to-marketstrategy.But there are also some very largeventure capital rms with billionsunder management that specialize inthe later stages, in growth capital.
FN: And these investments are made toown a chunk o the new company, right?Crowder:
You got it. Traditionally,you’re always investing or equitypositions in the company because youwant to see the upside i the companyis acquired or goes public.That said, there are always newmodels popping up. For example,certain groups now are doing arrange-ments that look more like a loan they invest in a company and arepaid back through a revenue sharingarrangement. But many investors don’tagree with this model, because theybelieve that early revenue should uelthe growth o these young companiesrather than being pulled immediatelyback out.
FN: The economy is still airly rocky, so— how’s business in Texas these days?And how badly did the recession slamour investment community?Crowder: 
Well, while things are clearlynot ideal or many investors, manyolks believe that what’s happeningin venture capital is just a marketcorrection.Ever since the Internet bubble, theventure capital industry has expandedrapidly, and many believe the supplyhas just outpaced the demand. It’s notunlike what happens to specic sectorslike social media. Investors witness thesuccess o a company like Facebook and then rush to und anything thathas a social media angle to it.To be brutally honest, there areeasier ways to make money thanventure capital. Identiying compellinginvestment opportunities and usheringthem through to a successul exit ishard, hard work. Especially in the early,critical stages o a company’s lie,you nd yoursel continually acingnancing risk, managing go-to-marketstrategies and ghting to dierentiateyoursel rom competitors who are justas hungry and committed as you are.So when you hear all this doom
uying a Pieceo the Future
 Venture Investing
 in Texas: An Interview with
Randall Crowder
Continued on page 4.
o economy canprosper i it puts barriersin the way o new busi-nesses and the jobs theycreate. And as you mightimagine, the main barriermost budding entrepre-neurs ace is a lack o money.Fortunately, when the banks won’thelp, an entire investment industryis willing to step in — i the idea andthe team behind a new businesslook promising. The eorts o indi-vidual “angel” investors and venturecapital rms have helped some o thenation’s most successul companiesget their starts.One Texan uniquely poised todiscuss these orms o investment isRandall Crowder, a managing partnerat Austin’s TEXO Ventures and ormerexecutive director o the
, a partnership o angelinvestors that provides investmentand assistance to early-stage compa-nies in Central Texas.A West Point graduate andrecipient o two Bronze Stars in Iraq,today Crowder makes strategic invest-ments in new players joining Texas’burgeoning health care industry. Heagreed to speak with
Fiscal Notes
 about Texas’ angel and ventureinvesting climate.
: First, since you have experi-ence in both felds, I’d like to ask you todistinguish between angel and ventureinvesting or our readers.Randall Crowder: 
Most people think that you’re either an angel or a ven-ture capitalist, a proessional money
randall cowd,Manan Pan,Asn’s teXO Vns andom exv Do,cnal txas Anl Nwok
Fiscal Notes
is available at

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