A Q&A with Jack McGowan of Buffalo Angels

Originally a commercial banker, Jack McGowan has been involved with Insyte Consulting since 1994, and currently oversees Buffalo Angels and the Western New York Venture Association as the executive director. In that role, he brings together entrepreneurs and investors willing to accept risk for big return in high-growth business plans.

McGowan has had a ground-level view of the changes in Buffalo’s business climate in the last five years, and when entrepreneurs come to him with business ideas, it’s his job to prepare them to pitch their ideas in front of a panel of investors. McGowan says that while Buffalo’s entrepreneurial community is still in its early stages, opportunities are there for investors and entrepreneurs alike.

What is the purpose of Buffalo Angels?
We have a multipurpose goal. Investors themselves, they are looking to invest in companies with the potential to provide a significant return. These are investments, they’re not donations. But they want to do good as well. They want to help form and fund companies in the Western New York region that can hopefully grow and be successful to create jobs and wealth in the community. It’s a win-win. In many cases, it’s not going to work out. This is high-risk investing with high reward.

What kinds of entrepreneurs are your member investors looking for?
In terms of entrepreneurs, we don’t focus on any particular sector or industry. We are looking for companies that have potential for high growth. Given the reality that most companies won’t become highly successful, you need to have some that are very successful to make it all work from a portfolio standpoint. We invest in companies that appear to have the opportunity to grow significantly. They tend to be tech-based, usually with some sort of unique defendable technology. Some companies could turn out to be nice solid businesses.

How can entrepreneurs connect with your organization and outside investors?
The best way to reach us is through our website, WNYventure.com. A big part of my job is being the initial point of contact for entrepreneurs to talk about the process and determine if it’s a fit. We also encourage them to pull together information to prepare themselves to be successful and present in front of the group. Entrepreneurs are encouraged to contact me through the website and begin the process.

On the investor side, they need to be accredited investors with a minimum income and net worth standard. People that are interested in learning more about the group or joining the group are encouraged to contact me through the website to learn more about the organization.

After all your years in the industry, do you have a sense right away of the kinds of companies that will be successful or won’t be?
The thing is, I try not to evaluate the idea. For us, it’s about their ability to execute on that idea and validate it. We don’t invest at the idea stage. We need to see evidence that the entrepreneur has identified potential customers and engaged with them. Do the customers think it’s a good idea, rather than investing on beauty or potential. If there’s a lot of technical risk, we look to see if they’ve begun to address some of that, (if) they’ve at least begun to go down that path and put in place a plan, a mechanism to deliver the product or service.

In what ways should entrepreneurs prepare if they want to work with you, or if they’re seeking funding?
A big part of what I do is I help them pull that info together. You want to have a one- to two-page executive summary with overview, problem, potential market, and a clearly described product or service and how it solves a problem. You need to show the team a developed financial model, how will you make money, who is your competition. You need to have a pitch deck, which provides basically the same information as an executive summary in a more detailed format. What could it look like? Financial projections will never be right on, but show us you at least have a working model.

What are some success stories that come to mind recently?
Success stories take time. These are all early stage companies. The expectation is it will take five, seven, 10 years before exit and financial return for investors. We’ve invested in some portfolio companies that are making good progress. Athenex went public early this year. That’s been one of our biggest successes. Angels as a group didn’t exist at the time, but a couple of our members invested in Phoenix. As far as companies we’ve invested in (during the) last several years, we’re in a company called Grainful in Ithaca (N.Y.). We’re in Clearview Social; CoachMePlus; Patient Pattern; Voiceit, a 43North winner; Graphenix Development, and we’ve got some other individual members investing in other successful startups.

In what industries or sectors are you seeing the largest growth? What are the trends now?
There really aren’t that many, frankly. Over the last five years, there’s been a great uptick in interest in startups, people starting companies. The last couple of years, it’s been fairly steady. There’s not one particular industry that’s outperforming others. There’s a broad base of companies in various industries we’re seeing, (that are) making some traction here in Western New York.

What inspired you to become involved in venture capital?
I’ve been doing this for a long time. Originally, I was a commercial banker. I joined Insyte in 1994. I was always interested in aiding companies, evaluating companies. The exciting thing is, we’re helping to grow companies here in Western New York. We’re making a contribution to the health of the region and growth of the region. That’s why I do it. That’s really the key reason our members are involved, as well. Angel is typically a small piece of their larger invest portfolio, high-risk investments. But people enjoy learning about the companies.

What are the needs of your member investors? What are they looking for?
One of the rules of thumb, companies we invest in, we like to see potential to return 10 times on the money within five to seven years. When we say high-growth, we mean it. We’re looking for multiples of 10 times when a company exits.

How would you assess Buffalo’s current climate for entrepreneurs? What are its strengths and weaknesses?
There’s a limited amount of capital here. Angel investing is not for everybody, and we appreciate that. We can always use more. On the company side, too, the biggest factor you look at is how qualified the management team is. We have a limited amount of people with experience. In areas like the West Coast and Boston, you have experienced entrepreneurs. They have a road map and know what they need to do to launch a successful venture. A lot of people launching companies here have strong technical strength, but there’s a gap in business experience, and that’s an important factor.

In the last several years, there’s a lot more support, more organizations, more money, trying to help grow the entrepreneurial community here. It’s a great thing, but it takes time. It takes a while for a company to grow and be a success, same with the business community. We’ve got a good number of prospects at the front end of the funnel. We’re still in the early stages as a community. But we’re doing good things and starting to see some results.

Read more articles by Joel Lehman.

After spending 15 years in northern Vermont where he worked as managing editor for a daily publication, Western New York native Joel Lehman returned to Buffalo this summer to be part of the city’s renaissance. He lives with his girlfriend and his goldendoodle, Wilson, and he enjoys running, skiing and cooking for his family.
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