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Angel Investing should move "from a black art to a legitimate science"

An interview with Pat Gouhin, CEO of Angel Capital Association, partner of Business Angels Europe.

What? ACA is a collective of accredited angel investors, North America's most prolific early-stage investment class. The association is the largest angel professional development organisation in the world.

Who? 14,000+ member accredited angel investors, 250 angel groups, accredited platforms and family offices and 20,000+ entrepreneurial companies in ACA member investment portfolios.

What’s more? On May 12 to 14, the ACA is having its annual conference ACA 2020 – The Summit of Angel Investing - entirely online. 12 hours+ spread over 3 days of interactive sessions with virtual networking. Full of timely and timeless topics. More information and registration here.

Hi Pat, so how did you get involved with the Angel Capital Association?

Neither as an entrepreneur nor as an investor. My background is engineering and association management. I have led multiple professional societies, including the International Society of Automation (ISA) and served as the Chief Operating Officer of the American Institute of Aeronautics and Astronautics (AIAA). After a small break in 2017, I saw an opportunity to work for the Angel Capital Association.

It really was a match made in heaven. I could bring in my expertise in association management and layer that on top of the sound fundamentals and content curation that occurred during the first 15 years of ACA. ACA was born out of like minded individuals that came together as part of a network of emerging angel groups. But, as I said to the board, ACA is now a teenager – and we need to think about what we want to be when we grow up.

The ACA started - and was positioned as- a trade organisation. However, I believe trade organisations are made up of corporations and represent corporate interests. We are not about that. We are about individual angel investors even if they do belong to Angel Groups. I therefore believe we have a higher responsibility to be the steward, or caretaker, of the angel investment community. By cultivating the profession, we will provide value to the broader community and the individuals in it.

For a year now, I have been working with the board on gelling this vision and pivoting the organisation to provide offerings and value consistent with that we see in other individual member organisations. We offer events and networking opportunities; education, webinars and smart practices; data analytics; public policy and more. We are also looking at thought leadership in new areas such as syndication, publications, and recommended practices. Through such a strategy we hope to further evolve the community along the spectrum of going from a black art to a legitimate science understanding that there will always be a subjective value to what we do.

Being the steward of a community knows no geographic boundaries so we hope to work with all of our international sister organisations, like Business Angels Europe, in pursuing this lofty and global vision to strengthen the voice of Angel Investors everywhere.

Could you elaborate on what “steward” means?

A steward means a caretaker. Our responsibility is to look out for the entire profession, but also to look out for the stakeholders that we may have historically seen as outside of our membership realm. This includes individuals and companies functioning as incubators, accelerators, family offices, economic development agencies, academics, and entrepreneurs. We need to look at the larger community more broadly than we ever have.

I also believe we need to focus attention beyond the borders of North America but to do this in a harmonious way with all of our wonderful colleagues in all parts of the world. This is the bigger responsibility and higher calling that we are accepting.

Seeing your wide experience with association management and different industries, in what way did you see the Angel investor community have its own particularities?

Each person looks at a situation with their own filter and perspectives. I came into ACA without the historical knowledge of how the startup ecosystem works but rather with an eye towards the best practices of 100 year old professional engineering societies. The ACA board is primarily made up of entrepreneurs and/or angels that started their activity with angel groups at roughly the same time. They therefore have progressed on that journey together and this can be both a positive and a negative.

I am working with them to gain appreciation of their perspective while laying that with my outside knowledge and expertise. I think this has been an energizing and liberating discussion for all as we consider all of the possibilities for the future and how we can be thought leaders to advance the community.

While many in ACA looked at the 15 to 20 year history as being a long time, I compared that to the century old groups that were built upon professions covering multiple centuries and say that the journey has just begun. From that perspective, Angel investing is only in its infant years.

I like to point to the example of programme/project management and how a half century ago, project & programme management was considered a black art. No one really knew what standards to uphold and there was no defined body of knowledge. One could not go to the local college, university or trade school and get a degree or certificate in project management. A little group (at the time) stood up and said they were going to plant the flag and own the profession. They were the Project Management Institute (PMI), which built a body of knowledge called PMBOK and world recognized certification called PMP.

Today PMI has hundreds of thousands of members and certified project management professionals around the world. They did this over the course of the past 50 years and I would say Angel investing is about 30 to 40 years, from a development perspective, behind the profession of programme/project management.

Before Business Angels Europe got involved in it, the ACA was already focusing heavily on Women investing. Would you be able to elaborate on what the ACA is doing now in this field? Do you have a new focus – or what are your current initiatives?

We have had a lot of energy and activity in the field of women investing and there are many examples of funds/groups that focus on female investors and entrepreneurs. We have had a yearly forum focused on Women investors and a monthly peer group call.

The numbers are still not where they need to be but we are making progress. We are also looking to tie in the smart practices from other diversity initiatives so that we can cross pollinate knowledge and networks. Diversity focused groups have been making inroads in recent years but we would now like to amplify that impact by broadening the conversations between groups. ACA can and will play a significant role in this effort. We have a team working on new content and a diversity, inclusion, and equity (D,I,&E) portal on our website.

Our goal will be to elevate and create one conversation so that we are all working together toward a common future. We believe that there was a trend toward more syndication pre-pandemic and we think that the pandemic will only increase the opportunities for collaboration moving forward. As such, this creates unique timing for us to bring communities together in ways that previously just did not happen.

How do you see the future with online deal sharing?

We are trying to figure this out to see what the post COVID-19 crisis looks like. We have launched a member sentiment survey to see how investors see it. Once we get the results, we will know a little bit more and we will merge this thought into the thought of a Task Force that has been studying the syndication landscape for the past 9 months or so.

I think we will be looking at a crawl, walk, run strategy to build momentum for harmonizing the syndication process while also building the necessary trust and credibility that is needed for success.

We do believe that COVID-19 is likely to change how we all operate for the foreseeable future and ACA, like everyone else, is attempting to understand the landscape and pivot accordingly so that we can continue to offer high value to our many members.

On Women Angel investing you published a study with Wharton School of Finance. Could you reflect on the importance of working together with academic institutions?

In my earlier work at an Aerospace Association, we saw a wonderful balance in the organisation between practitioners, academics and government. While all three communities offered a different perspective, they respected each other and came together to truly unite a profession. I believe we need this harmony within the startup community as well. We need the insight of researchers and academics to transition from the black art to science.

The academic community will play an important part in this role in further enhancing the critical role they are already playing in educating the next generation entrepreneur.

We are looking for ways to strengthen our relationship with academia and learn from their resident expertise. At some point, when we have garnered enough data, we will apply machine learning and AI to this bringing out new insights that will increase results for all. The bottom line is, we need to understand and improve the odds of investing.

What is ACA’s relationship with The Kauffman Foundation?

As is the Kaufmann Foundation, the ACA is headquartered near Kansas City. (Gouhin is located in Raleigh, North Carolina). The Kauffman Foundation was a founding investor of ACA and directly supported the birth of this community. I believe they are proud of what ACA has become and ACA maintains a strong and supportive relationship with the Kauffman Foundation. As the Kauffman Foundation continues to evolve the landscape and look for new ways to support entrepreneurs and capital formation, ACA will look to expand and grow with that vision.

When it comes to the United States, it feels like in Europe we tend to focus very heavily on Silicon Valley (SV). Is this dominance also prevalent within US discourse?

We indeed see a focus on SV, as well as on New York and Boston.

But in the rest of the U.S., we see a lot of other territories who are fighting to show their value. There is a real movement with strong results that shows the significant value from investors and entrepreneurs between the coasts.

Most Angel investors invest locally – not in SV. And we see a growing group of success stories from all over. In fact, it was one of the reasons why we wanted to have our Summit this year in Denver, Colorado. I visited a Startup week there earlier and there were more than 20 thousand visitors! This is just one example of a thriving community that is setting a positive example for building and maintaining a thriving ecosystem outside of Silicon Valley.

You mentioned that part of ACA is a strong focus on government relations – or lobbying. What are ACA operations in your capital, and what is your view on its importance?

I spent 15 years living in Washington, D.C. and while I am neither a lobbyist nor a government relations specialist, I do understand that we need to be represented to have our voice count. We have a very active public policy initiative where we make sure the voice of the entrepreneur and angel investor is heard and understood by our legislators in the nation’s Capital. We have learned that when we are out of sight, we are out of mind, so we work hard to make sure that doesn’t happen. We have representation in Washington D.C. and we have lobbied very effectively with many positive results to show for our ongoing efforts.

We have a two-pronged attack. We are not only about supporting entrepreneurs, but in order to have that message resonate, we need to represent the investors' perspective as well. While our legislators are well intended, there are quite often unintended consequences that could harm our community if left unattended. For example, in the latest stimulus package: we realized that original language would have excluded many startup entrepreneurs from participating! We worked with our elected officials to educate them on the deficiency and changes were made.

While our efforts to date have soley been U.S. focused, there are probably some political issues that go beyond borders where we could work together to advance the community on a global basis?

On the website there is a list of policy positions the ACA is fighting for. Lets pick one – the Accredited Investor Definition. Could you elaborate on your approach and succes?

We have been fighting on this position for years. We believe the legislators have listened to us and recently announced that they would not (at present) consider raising the minimum level of wealth standards to be an accredited investor. We support this move along with the apparent consideration to open up criteria to look at other considerations beyond wealth, such as sophistication of the investor.

The ACA continues to monitor and comment on this as we work to make sure that new definitions will not harm those who are already investing. We anticipate working with lawmakers and regulators to examine the definition of “sophistication” and figure out how ACA can eliminate pain points based upon our curated content and expansive network.

Now to the ACA Summit (May 12-14, 2020 ). It has moved fully online. Why did you make the decision? Why were you confident to go through with it?

About five weeks ago, we decided to pivot to a virtual event that will take place in two weeks. We ultimately settled on software called Pathable, which will enable us to hold a great Summit with strong content and networking capabilities.

The Pathable mobile app, virtual conference module, and roundtable meeting functionality will allow us to wrap this around Zoom and hold a new and exciting meeting that goes beyond the typical Zoom meeting most of us are participating in these days.

As to the programme, The committee adjusted and has brought in considerable “timely” content to balance out the “timeless” content that every angel needs to know. We are opening up with futurists and we end with the Securities and Exchange Commission (SEC). In the middle we have international activities, core fundamentals, innovation showcase, honors and awards, and so much more. All of our partners are represented and will be participating to make sure that angel pain points are understood and friction points reduced with the myriad solutions they offer to meet today’s and tomorrow’s investment challenges.

I think any individual that is basically familiar with technology will be able to network at an even higher rate and gain more knowledge and community than might even be possible in the historical face to face event.

I think people are going to love it. Its new its different.

If you would like to profile two speakers and/or partners of the event, who would that be?

We have so many great speakers and interesting stories that I would encourage everyone to check out the link below and see who resonates most for them. There is sure to be something for everyone!


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