Monday, April 19, 2004
Interview: Andrea Sloan Pink, Seraphim Fund
Andrea Sloan Pink is a managing member of Seraphim Management LLC, which recently announced the close of Seraphim Fund I, a fund which co-invests with the Tech Coast Angels. I asked Andrea a little about the new fund.
BK: What is Seraphim, and what's your investment structure and focus?
AP: Seraphim is an index style venture fund investing in early stage companies in Southern California. What we mean by index style is that the fund is invested using an objective criteria rather than subjective decisions by management. There are three criteria that must be met for Seraphim Fund I: 10 members of Tech Coast Angels must invest in the round; their combined investment must be at least $350,000; and a Tech Coast Angel must have a board seat or observation rights.
In this way, Seraphim invests alongside experienced investors that make up Tech Coast Angels, the largest angel network in the country. We designed the objective criteria by analyzing past Tech Coast Angel deals. By implementing the criteria, investors in Seraphim will be invested in the top tier of angel transactions in Southern California, ones we believe will have the greatest likelihood of success.
The fund will make about twenty investments over a period of three years. Each investment will be about $130,000, a significant piece of each round. The prospective portfolio companies can come from any of the Tech Coast Angel networks which are located in Los Angeles, Orange and San Diego counties. Most companies that seek funding from Tech Coast Angels are technology ventures.
BK: Why did you decide to create a fund focused on angel investments, and what are the advantages of your fund versus individual angel participation?
AP: We created a fund focused on angel investments for several reasons. First, the fund allows angel investors to diversify their early stage portfolios. This is a significant benefit to angel investors. It is extremely difficult to have the time, energy and capital to be sufficiently diversified in this asset class. Seraphim is the first index style investment vehicle to provide access to this type of deal, very early stage where typically only private investors with big pocket books can get in.
Second, the fund also substantially reduces the funding risk of individual investors by putting significantly more capital in at an early stage. This allows a start-up more runway to gain traction before going out for a VC round.
Third, Seraphim Fund is an important part of the capital puzzle that has been missing in Southern California. It is our aim to continue to build the venture financing infrastructure here. Seraphim is the first fund to bridge the gap between individual angels and venture funds that typically finance companies at a later stage. We believe that financing from Seraphim will help companies attract the attention of VCs through out the state.
Seraphim provides significant advantages to investing as an individual angel. John Kensey, Ben Barak and I are all active private investors. But, there is a limit to how much you can see, and how much due diligence you can adequately perform in a year. Seraphim allows us to leverage the experience of the more than 200 members of Tech Coast Angels, many of whom have experience in domains we may not. So, we designed the Fund to meet our own needs initially and it just took off. In addition to leveraging experience, we also achieve greater diversification, which I believe is critical in this asset class. Seraphim is designed to provide a solid foundation for an investor's early stage portfolio. It provides a "basket" of twenty geographically and industry diverse companies to which one can add individual investments in deals where one has the expertise and passion.
BK: Has your fund made any investments yet?
AP: Yes. We invested $130,000 in Cargo Technology (www.cargotech.com) just a few days after closing! Deal flow within Tech Coast Angels is strong and we expect to have more deals that meet our criteria in the very near future.
BK: Are there any specific sectors you are focusing on, or will it be any and all TCA-related investments?
AP: Our aim is to be diverse. We will invest in every company that meets our criteria. Tech Coast Angels generally sees the same range of companies a typical VC sees, just at an earlier stage. So we expect to invest from info tech to bio tech, but consumer product deals have been known to crop up on rare occasion, too.
BK: Will you be including institutional or other fund investments in Seraphim, or are your investors purely angels?
AP: Seraphim Fund I is closed. Future funds will be open to accredited, institutional and other fund investors. We think this is a great way for institutions and funds to tap into the very cutting edge of what's happening. It's a way for them to have a window into what is up and coming, without having to spend time reviewing every company themselves. It would allow a fund to have an early relationship with the crème de crème of angel invested companies here which may put the fund in a better position to do a mezzanine round with them later.
BK: Thanks!
Seraphim Fund Profile: More information »