Q&A: Valuable Insights from Investor David Friedman
OC Startups Now will periodically run Q&A’s with interesting entrepreneurs, investors and other key players in the OC startup/innovation ecosystem, in their own words.
This Q&A is the fourth of a series with Tech Coast Angels‘ OC investors. It focuses on David Friedman, who joined the OC chapter in 2009.
Tech Coast Angels (TCA) is is the leading source of funding to early-stage companies in SoCal, as well as the second-most active angel investor network in the U.S. in terms of funded deals.
Individual investors typically invest between $25,000 and $50,000 per deal, although they can invest more.
TCA has five chapters: OC, LA, SD, Central Coast and the Inland Empire.
See related story about recent TCA investments here.
OCSN: What was the catalyst for becoming a member?
Friedman: I do stock and options trading now and wanted to broaden my portfolio with alternative investments. I have always wanted to be a VC and run a fund but never had the wherewithal to do that. I figured angel investing would allow me to do both: add alternatives to my portfolio and be a “mini-VC” or angel investor.
When I first joined, I also believed that I could invest AND become an operational executive for a startup. That hasn’t happened although that is still a desire of mine.
OCSN: How did your prior work experiences prepare you to be an angel investor?
Friedman: My background is very diverse. I have a unique combination of technical skills, having acquired a couple of engineering degrees, and business skills, both from the perspective of getting an MBA in econometrics, as well as migrating my business career from engineer to product development to marketing.
While I worked as chief marketing officer for several high-profile companies, I was not only involved in new product commercialization, but also became involved in acquisition and partnership strategies.
I believe my education, plus my career, is a great foundation for angel investing, where we have to look at the market, market/product fit, commercializing new technologies, and ways to build a business.
Additionally, during my career. I have been considered an “intrapreneur,” developing new businesses and new products for several tech companies. So I feel the pain of an entrepreneur even though the funding in my career came from corporations vs outside financing.
OCSN: What is your investment strategy as a TCA member?
Friedman: My general strategy in investing is to have approximately 10% of my portfolio in angel deals and alternatives. That said, I still want to minimize my risk so I like to invest in TCA funds and supplement that with individual investments.
The areas I’m most interested include companies related to my background and expertise in software, the IoT (the internet of things), communication, finance and technology. And I like engineered products/services particularly in the medtech space.
I recently invested in a company called Curvafix which deals with “curved screws” for orthopedic fractures. I understood the need and the solution and was impressed with the CEO, who’s an engineer that converted to a businessman. I related to him.
When I look at an individual company, I look at the technology, whether the company has a sustainable advantage, has a disruptive product or is implementing a disruptive process. If they fit this mold, then they are on my consideration set.
OCSN: Please discuss any synergies you have with other local funding entities
Friedman: I am involved as chair at TCA, screening for OC, and am always looking for better deals. Bonding with other angel groups makes sense since we don’t necessarily see the same deals.
Additionally, TCA OC is located at the Cove at UC Applied Innovation, (UCI’s innovation institute).
The Cove funds are located there and there’s an overlap of members with TCA. By the way, I am not part of the Cove funds, because initially they were investing in earlier-stage companies, and to me that entailed too much risk. I believe they recently changed their strategy. (See related story here).
OCSN: Please discuss your mentoring activities at the Cove, Chapman and Camp Pendleton
Friedman: At this stage in my career, I want to give back to others and help them be successful. And as I said, I want to be involved with a startup preferably as an operational executive, but also as a board member or advisor.
Through my consulting or mentoring I have been able to find such opportunities. I have been an executive-in-residence at Chapman University’s incubator, (known as Launch Labs), for about six years, although there is not as much activity there as in the past.
When UCI Applied Innovation formed, I immediately signed up to be an EIR and work with some teams there on an ad hoc basis. I set up office hours a couple of times a month where any of its Wayfinder incubator teams can stop by and discuss their business and I provide advice and guidance to them.
Some of the teams come back over time, and I’ve developed a good relationship with them e.g. Metaseismic. (see related story about Metaseismic here).
One of the important things I do is teach marketing at Camp Pendleton as part of the Marine Executive Association Business 101 series. There are many volunteers who give their time to produce a five-day course aimed at Marines coming out of the corps and moving to either a government, corporate or entrepreneurial venture.
I have been doing this for about six years and it’s one of the highlights of my year giving back to those who serve our country.
OCSN: Anything else you’d like to add?
Friedman: It’s nice to be able to do things at this stage in my life that are fun and make a difference to others. By far, though, the entrepreneurial ventures are the most exciting because you can invest in companies that can change the world or become involved in supporting companies that create new medicines or medical devices that cure disease and help the ill or infirm. I am proud to be one of the 330-plus angel investors of TCA who believe that we have made a difference over the past 20 years in existence and are positioned to be the best source of funding for companies seeking seed and pre- A round funding.