There is a new theme going around the internet that rich people don’t create jobs. The fact is, they are wrong. Rich people create thousands of jobs, simply through their spending. You might even say that since they pay the lion’s share of taxes, they are creating all the government jobs as well!
In April of 2007, I co-founded Hyde Park Angels. The reason wasn’t to create jobs. I did it with a couple of thoughts in mind. One was that as an independent trader that went back to school to get an MBA, I wanted to get a job in Venture. When I went into the market to try and get interviewed, no one would hire me despite my experience and gold plated degree. Trading your own money is a brutal business, and I knew that one day it would end for me. I had to have something else.
Traders on the floor used to see a lot of deal flow. But it was really random, and there was no contextual way to aggregate it and undertake rigorous due diligence. The second phenomena that caused HPA to develop is that we saw a gaping hole in start up funding. The Venture Capitalists weren’t taking risks on smaller companies. Along with that, very few of them would invest in the midwest. Entrepreneurs would simply leave for the coasts. We thought if we could create an angel group here, we could not only formalize the capital formation for start ups, but we could create a little ecosystem, and make some good money for ourselves in the process by investing wisely.
So, we started. We were a start up, if you will.
What’s happened since? We invested in 13 companies. We are actively engaged in due diligence with some more, and we constantly look at new deals. In the past two weeks, I bet I have looked at 20-40 deals, each one unique, and each one based in the midwest. Many others in our group have looked at different deals. Our initial seven angels have sprouted to 94. One of our companies, Gradebeam, exited and was bought by another company. We made a little money. Now the ultimate question. Did we create jobs?
Yes, we did.
If the angel investor didn’t write a check with their own money to invest in the start up firm, that entrepreneur couldn’t have gotten their firm off the ground. That means the 13 firms we invested in wouldn’t have hired one person.