Following a successful career in the telecommunications industry, Steve Chaddick, EE 74, MS EE 82, has made his mark locally as an active angel investor and a great supporter of Tech’s programs, faculty and students. When our staff wanted to find out more about how startup funding works, Chaddick was the first person we thought to consult.
Where can new companies get the money to get off the ground?
To begin commercializing their innovations or ideas, most young companies need to find seed funding, which can come from government grants, competitions, loans and sometimes even friends, family and maxing out personal credit cards. Such early-stage companies typically aren’t ready for traditional venture capital.
Is that when angel investors become involved?
Yes. Often angel investors are individuals with expertise and interest in specific areas—like mine in telecommunications—who are willing to invest tens to a couple hundreds of thousands of dollars to assist a startup in getting up and running.
What does it take to be a successful angel investor?
You have to set a long-term horizon for company success. Even then, you have to be comfortable with the fact that the success rate for startups is miserable. Typically only one or two companies out of 10 will show enough of a return to keep you going to the next investments. It takes patience and fortitude.
How do you personally decide in which companies to invest?
Many angel investors are passive investors who don’t get involved in the companies they support financially. But I prefer companies where I can get involved and provide leadership and advice. Most importantly, I’m interested in companies that have a clear value proposition that’s easily articulated and defendable—via intellectual property or time-to-market advantage. I also look for the solid beginnings of a management team.
Are there warning signs that turn you off from a company?
One red flag is an uncoachable CEO.
Scientists often make lousy chief executives though they can make good chief technology officers. Startups really need someone onboard with solid business and sales acumen. Another warning sign is when a startup’s customer discovery process is based on assumptions (and founder bias) rather than on research and reality.
What should startup founders look for in an angel investor?
Someone who can provide them more than just money. Connections and specific industry experience can be just as important. Someone who can build bridges with other funders, including venture capitalists. Someone who will have patience and a long-term view on success. Someone who maintains a lean startup methodology, focusing on startup engineering to uncover customer needs.
You’re a member of the Atlanta Technology Angels. What is that, exactly?
Atlanta Technology Angels is a consortium of angel investors that provides investment opportunities in early-stage technology companies, and education to both investors and entrepreneurs in the greater metro area and the Southeast. The ATA’s members often work in groups as a single investing entity rather than as individual investors to fund and foster startups.
How do you lend your startup and investing expertise at Georgia Tech?
I’m involved in a lot of entrepreneurial and startup efforts at Tech. I helped teach the pilot of Startup Lab and Startup Summer last year. I’ve also served as an adviser to the Advanced Technology Development Center’s VentureLab incubator and the Georgia Research Alliance. I’ve personally invested in about 15 companies, many that have come out of the Institute. To me, Tech’s exceptional students, faculty and alumni represent the smartest investment I could ever make.
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