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Randy Williams, CEO of Keiretsu Forum, is blunt when telling why he started the network of angel investors.
It was his own "lack of discipline and expertise as a private equity investor," says Williams, who retired as the CEO of a bank in the mid-1990s and decided to diversify his savings through investments in the tech sector.
At the turn of the century, as the tech bubble popped and Williams was working with investment bankers who were "turning small liquidity events into even smaller liquidity events" for his portfolio, he decided there had to be a better way.
His idea: to use the wisdom of crowds and connect with people who knew more about the areas he was looking to invest in while sharing what he knew from his financial services background.
Less than a decade later, Keiretsu Forum has 15 chapters and 750 members. The four Northern California chapters invested $51 million through 30 fundings in 2006, making it the largest investor in the region.
The organization has spread well beyond its roots near Silicon Valley and is now doing syndication rounds with other chapters, including 27 such investments with its Seattle unit.
"I wanted to change the paradigm of private equity investing" by creating "an efficient private equity road show."
Keiretsu Forum evaluates 100 company business plans each month. Of those, 10 are invited to give short presentations to the members. Of those, three or four are funded. All the investments are made individually by the members directly with the entrepreneur.
As the membership has grown, the average deal size has gotten larger. While most investments used to be no more than $500,000, many are now much higher and the forum has invested some rounds as large as $3 million and $4 million.
Forum members like to invest in "companies that are a little more mature," meaning they are producing revenue. About 70% of its portfolio is in traditional IT investments, with the other 30% in consumer products and real estate.
"The thing that resonates with our membership is (talk of) a liquidity event within three years," Williams says. "If (an entrepreneur) says three years, it usually means five or six," he joked.
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