Wednesday, January 5, 2005
Interview with John Dilts, Managing Director, Keiretsu Forum
John Dilts in the Managing Director of the Keiretsu Forum (www.keiretsuforum.com), an angel group establishing a Los Angeles chapter. I caught up with John to better understand what the Keiretsu Forum offers to angel investors, and what he sees as the potential of Southern California.
BK: What is the Keiretsu Forum, and how does your group operate?JD: Keiretsu Forum is an investment community of accredited private equity (angel) investors, venture capitalists and corporate/institutional investors. Our mission is "Great Association With Quality Deal Flow". Forum members invest in high-quality, diverse investment opportunities in Emerging Technologies, IT and Software, Life Science/Healthcare/Biotech, Real Estate, and any segment with high growth opportunity. The community is strengthened through its involvement in social and charitable activities. We are a North America network of capital, resources and deal flow with chapters in the San Francisco East Bay, Silicon Valley, Southern California (Los Angeles, Westlake Village and Long Beach), Chicago/Midwest, Boston/New England, Hawaii/Pacific Rim and Calgary, Canada.
The group operates as follows: emerging companies come to the Forum through member referrals or by otherwise hearing about the Forum in the venture capital marketplace or via the website. We prescreen each opportunity to determine if it has the basic requirements we look for in a company, e.g. attractive market opportnity, competent management team, realistic growth plan, unique product or service, etc.) The prescreening process is accomplished via our group of committees, each aligned with a particular industry sector as mentioned above. The committee chair will inform Keiretsu management of the committee's decision regarding whether to allow the company to proceed to our deal screening meeting. This meeting is attended by a dozen members that hear each of 7 to 9 presentations in one morning and who decide which 4 or 5 will proceed to the monthly Forum meeting. The Forum meeting is attended by a broader group of members and guests who hear the presentations and then engage in an open Q and A session, lasting a total of approximately 20 minutes for each company. At the end of each presentation a "gold sheet" is passed around the room and individual members can sign up to be contacted by companies in which they have interest. This is not a commitment to invest, but rather an acknowledgement that they would like to proceed further to consider an investment following a period of due diligence. The diligence is lead by a team leader that emerges from the list of interested investors. Following this diligence period, the interested members decide whether to invest individually.
We also host a number of social and charitable events and activities for our members to reflect their interest in participating together to "give back" and to contribute their time and money to worthy causes in the spirit of Keiretsu's focus on generative collaboration.
BK: I see you're launching a new chapter in Los Angeles. Why the decision to plant a Keiretsu chapter here?
JD: We felt that it was important to locate a chapter in Los Angeles in order to tap into the strong trend in the region toward increased venture investment. Los Angeles is a town built on entrepreneurship and there is a strong need for the support of early stage investors. Also, the ever-growing importance of technology in the media and entertainment business has created a wealth of opportunities for investing in emerging technology companies in that sector (as evidenced by the recent investment by Keiretsu members in a streaming media company.) We believe that the Los Angeles area is the source of a great deal of innovation and we hope to help facilitate and support that creativity while enabling strong returns for our member investors.
BK: Have you signed up initial members yet for the chapter?
JD: We have a number of inquiries regarding membership in the LA Chapter. As with all of our chapters, we prefer that prospective members attend the Forum in order to observe our process and so that we can get to know them as well. If there is a good fit, we will invite qualified (accredited) indviduals to apply for membership. Because we are an organization of serious investors, we are very careful about who we select as new members. Unlike other business organizations, we are not simply a networking or social group.
BK: How do you see yourself differing from the other angel groups in town, and what will the focus of the LA group be?
JD: We are different from other angel groups in a variety of ways:
a) We look at companies from a diverse group of industries, not just the technology sector. Some of our most successful investments in recent years have been in the real estate industry, which most angel groups don't consider.
b) We have a very disciplined structure and process that builds confidence among our members in how we conduct our meetings. Also, we heavily rely on member participation and collaboration in reviewing each of our deals in an environment that promotes 'swarm intelligence'. This member involvement often involves hands-on contact with companies in order to properly analyze an investment opportunity as well as give the company much-needed feedback on their offering. Companies that approach us highly value this feedback and mentoring which they find to be highly unique among the angel investor organizations. We also provide a great deal of resources and referrals to our presenting companies that go far beyond our providing just capital.
c) We are deeply committed to giving back to the community and we have supported more than 30 charities with 100's of thousands of dollars in donations. We have a policy of backing charities about which our members are deeply passionate. This creates a heightened sense of spirit and generosity among our membership who often comment that this is the reason they chose to join Keiretsu over other angel groups.
d) We have a policy of open collaboration with other angel groups and venture capital investors. We believe that the more deal flow we share with other groups, the better our chances of receiving quality deals in return as well as finding follow on investment for our portfolio companies.