With great candor, Rusinow offers his lessons learned in his 2011 book, his third, entitled “What I really Think – 160+ Life Lessons, Truths & Calls to Action.” The book is mostly about the battle to get rich, how to stay rich and how to enjoy what money can bring.
Fortunately for Wisconsin, one of his forms of enjoyment and staying rich is angel investing. He started Silicon Pastures, a Milwaukee angel group, in 2000 and has gravitated to a model where he takes the lead investor position and serves as a very active chairman of the board. Hence the adjective “Darth.”
Entrepreneurs who work under his guidance know he can be very demanding on hitting milestones of progress for the new venture. Because of his track record of more wins than losses, he can pull other angels into deals where he takes the lead with several hundred thousand dollars of his own money.
His biggest win has been BUYSEASONS, an on-line purveyor of costumes and party goods. Rusinow invested an initial $125,000 in 2000 and then led two successive rounds at undisclosed sums.
It sold for 11 times cash flow in 200, something north of $50 million by my math. He got a significant, but undisclosed, percentage of that cash-out, as did founder Jalem Getz and other participating angels like George Mosher.
The region also benefited from several thousand new jobs.
Early this year, Rusinow cashed out of ModernMed, a concierge doctor chain, along with founder Jami Doucette. That deal fit the new thinking about early stage investing of achieving exits in three to give years.
Let’s skip the deals he candidly describes that didn’t go so well, but suffice to say that he learned as much from his failures and from his successes. Angels have to quick learners.
Among his 161 lessons are more than 20 that shed light on the art of angel investing. Here are some in abbreviated form:
• Forget banks for startup funding. They are not allowed to make risky investments.
• Be deadly serious and rigorous about your undertaking if you are asking for OPM – Other People’s Money.
• Be aware of the risks; you can lose your heard-earned money in a heartbeat.
• Investing in startups can be rewarding because you meet smart, upbeat people.
• Smart angels look at lots of deals, conduct serious due diligence, play the percentages by investing in a portfolio of startups. Dumb angels don’t do these things.
• One of your ten startups has to be a ten-bagger or you are pretty much screwed on your overall return. The one with a 1000% return offsets the losers.
• Active “whale” angels deserve some a premium return for their sweat equity. That could mean warrants.
• Pre-money valuation is critical to final returns. For companies with no sales, they can easily be set too high to allow for decent return on exit.
• Success is all about the management team. Passionate startup leaders should never have balanced lives. They need to be all-in.
• Build in protections for angel investors in the initial round against future venture capitalists in subsequent rounds and against founders who miss major milestones but still own stock.
• Beware of researchers who want to run the business. Marry the researcher to a top CEO who runs the show.
• Know when to fold ‘em. When key milestones are repeatedly missed, take your losses and run.
• Avoid family connection in new venture. They complicate business decisions.
• Generating operating revenue, versus other kudos, such as winning grants and good press, is all-important.
Rusinow concludes his tips about angel investing by writing that when things go right with a startup, like they did with BUYSEASONS, it can be “a lifetime highlight.”