Started three years ago, NextGen has quickly expanded into one of the largest and most active angel investment groups in the D.C. area, with 80 local, wealthy and not-yet-over-the-hill investors now among its members.
Their next investment? NextGen itself.
Two dozen member investors have together poured $1 million into NextGen’s own seed round of financing to expand the group’s investment model nationwide. Already this year, NextGen has launched chapters in New York and Boston, and this seed round will fuel the next phase of expansion into Chicago and Austin. Mindus says he has set his sights on 10 more cities after that — including Atlanta, Philadelphia, and the Raleigh-Durham corridor on the East Coast, as well as Seattle, Portland and San Diego out West — before he hopes to start looking at possible global expansion.
“I think in each of those cities we will find a robust group of young entrepreneurial and tech-minded individuals who want to participate in a community like NextGen Angels,” he said. “We want people who don’t just want to invest in great start-ups, but also ones who want to be actively involved, roll up their sleeves and help those companies with more than just money.”
Mindus traces the organization’s roots to a meeting of local investors in summer 2012. He had spent the past few years working for John May, one of the most well-known angel investors in the D.C. area (and today co-chairman of the World Business Angel Association) and had been invited to join a forum to discuss forming a new angel group in Washington.
“I looked around the room and saw 20 people age 60 or older, and two others who were in their 30’s,” Mindus said. “I pulled the two of them aside afterward and asked what they thought about an angel group for young investors. They asked where they could sign up.”
Those two were among two dozen individuals who attended the first informational meeting that summer. All 24 who attended the meeting signed on that night.
Originally, Mindus set a hard age cutoff at 40. But when Michael Chasen, one of the founders and formerly chief executive at Blackboard, came knocking at the age of 41, Mindus decided there was room to bend the rules.
“We changed it from ‘below 40’ to ‘youthful,’ ” Mindus said. “We sometimes call it the ‘Michael Chasen rule.’”
Still, not one of the investors has celebrated his or her 45th birthday. The youngest — D.J. Saul, managing director iStrategyLabs in D.C. — hasn’t yet celebrated his 30th.
That makes for a much different experience when entrepreneurs step into the room to pitch their company.
“When I walked in, I at least knew some of the names in the room, and I knew many of them knew who I was, because we run in the same circles,” said Martin Ringlein, founder and top executive at nvite, an online ticketing and event management company in Washington. “Usually, investors have no idea who I am beforehand, so I have to sell myself and who I am before I can start selling our company. That wasn’t the case here.”
More than 10 NextGen Angels investors ultimately participated (along with other D.C. area investment firms) in nvite’s $1 million seed round of financing last summer. At that point, Ringlein’s company didn’t have any revenue coming in yet because it had yet to put its product on the market.
“With younger investors, they’re slightly more willing to take a risk on an new company that’s pre-revenue or even pre-launch,” Ringlein said. “It’s just a cultural thing, but it fills an important gap in the market for companies like ours.”
NextGen’s investors include Paul Singh, founder of Disruption Corporation and now managing director of 1776; Simita Bose, partner at Novak Biddle Venture Partners; Grant Allen, senior vice President at ABB Technology Ventures; and Peter Corbett, chief executive at iStrategyLabs in Washington.
Unlike in venture capital firms — in which investor funds are pooled and the organization decides whether to bet on a company — investors in angel groups like NextGen choose whether invest their own money in new businesses. Members of the group are usually responsible for identifying and recruiting early-stage firms to pitch at group meetings.
In NextGen’s case, members are required to make at least one investment each year, and the minimum check for any deal is $10,000. The check sizes tend to range all the way up into the hundreds of thousands of dollars for later-stage companies.
The group’s portfolio includes a mix of technology and, as Mindus puts it, “tech-enabled” ventures, including SocialRadar, an app that lets you geo-locate your friends in real time, APX Labs, which builds the software behind devices like Google Glass, and Urban Stems, a hyperlocal, tech-centric flower delivery service.
This latest move, with members turning their focus inward and financing the group’s expansion, isn’t unprecedented. NextGen’s members have backed several ventures run by other members, including SocialRadar, started by Chasen, and Singh’s Disruption Corporation.
At a time when the ranks of start-up investors is rapidly expanding across the country, it isn’t necessarily the funding — or even the hip, young and cool factor — that makes NextGen Angels a promising, scalable model for other cities, Mindus said.
Rather, by gathering tech entrepreneurs who have recently built and sold their own companies — who not long ago were on the other side of those investor pitch meetings — and some who are still running their own start-ups today, he believes the group can offer more current, timely expertise and mentorship to start-ups its members opt to back.
“Having angels with functional expertise is always helpful to founders,” Singh said. Should the group continue to identify and rope in actively engaged members, he added, NextGen “will do just fine in all the cities they’re planning to enter.”
Mindus pointed out that new members must commit to helping every firm in NextGen’s portfolio — even if they themselves didn’t take a financial stake in the company.
“That’s unique for angel groups,” he said, adding that “it should prove even more valuable for our entrepreneurs as we grow to new cities, because their networks grow with us.”
Member investors and portfolio entrepreneurs have in several cases forged friendships, as well. Suddenly, Mindus said, conversations aren’t happening over conference calls or in stuffy board rooms, but at back yard cookouts over burgers and beers.
With that friendship, he noted, comes yet another reason — one that extends beyond financial rewards — for investors to go the extra mile to help their portfolio companies succeed.
“We’re trying to bring together an exceptional group of entrepreneurs and an exceptional group of investors,” Mindus said. “When you get them all together in the same room, and when they can relate to one another and are truly committed to helping each other, that’s when great things start happening.”