Keiretsu Forum is the world’s largest angel investor network with 1,400 accredited investor members throughout 29 chapters on 3 continents. Since Keiretsu Forum’s founding in 2000, its members have invested over $400 million in 485 companies. Keiretsu Forum members collaborate in the due diligence, but make individual investment decisions, with rounds in the range of $250,000 to $1.5 million. Companies that apply to Keiretsu Forum are typically in their A or B rounds, usually with $500,000 to $1.5 million dollars. Forum members invest in high-quality, diverse investment opportunities in automation, consumer products, energy, financing, food & beverage, health care/life sciences, internet, real estate, services, social ventures, software, telecommunications, mobile technology and any other segment with high growth opportunity.
I sat down with Randy Williams, the Founder & CEO of Keiretsu Forum (K4) at the San Francisco office overlooking the Bay. I had met Randy when I had participated in several deal screenings at the Silicon Valley chapter of Keiretsu Forum.
Q: What was the inspiration to start K4?
Randy: "I started Keiretsu Forum because of my lack of discipline and expertise as an investor. I get ahead of my skies quite a bit when I invest. But the discipline and the expertise of a membership community, I thought would help me become a better investor. So, we created a membership organization that has no vested interest. And that's one of the secret sauces here at the Keiretsu Forum. We offer the discipline and expertise of smart and accredited investors that can help provide unbiased advice to entrepreneurs and each other. Unlike the kind of advice you might get from your Stock broker that you are not sure you can trust; in the case of Keiretsu Forum no one gets paid for this advice.
So, I started with 25 friends and we all helped each other using great knowledge base, mind share, the tipping poinr and swarm intelligence so that when we make investments 100% of the dollars goes to the entrepreneur. So, to get back to your question, I needed a platform selfishly to become a more disciplined and smarter investor. "
Q: How many members and chapters are there now and how can new members get help?
Randy: "We are now in 29 chapters around the globe with about 1,400 members and friends. In some of the more mature chapters like Northern California we have more than 300 members. I typically recommend new members not to invest in their first 6 months to a year and encourage them to get involved in due diligence and get educated on the verticals before they invest. In fact, we are releasing our 400+ page due diligence package that will be given to members and investors for free. Developed by members of the Keiretsu Forum on how to conduct due diligence so you don't get burned. We needed this since we are in an environment of great opportunity and conversely great risk."
Q: Can anyone get a copy and where?
Randy: Yes, it will be available free to download from the Apple iBook store and other online sources.
Q: Is there a sweet spot of investments that Keiretsu Forum makes? Is there a preference for a sector?
Randy: "I have been asked that questions a lot but the whole spirit of why one joins Keiretsu Forum as a member is that they want diverse deal flow and they get it. And the reason why they stay as members is they make great friendships that they come to trust. I have made 41 investments myself that I have drafted off others in the group who helped me since I was not an expert on some of these investments. My background is in real estate, but I have invested in many other sectors through the Forum. One of our differentiations is that we look at everything. From brick & mortar real estate to technology, healthcare, beauty products, winery, LED lighting, women's shoes....so on. One thing unique about us is that we have a quest to learn which guides our interest in looking at diverse deals."
Q: You mentioned new markets. How do you determine where to go next?
Randy: Great question. It takes a lot of dedication to run a Keiretsu Forum chapter. It takes local leadership, passion to build and retain community. It needs to have a confluence of entrepreneurs and investors. Typically the region needs to be between a 1.5-5 million people.
So, each Chapter president builds a core of 15 members and they expand to build out a region. For instance, in Northern California we started in East Bay 14 years ago, then Silicon Valley, San Francisco, North Bay. Similarly in Northwest, now has 6 chapters starting with Seattle and now have moved into Seattle and Vancouver. One restriction is that chapter presidents cannot sit on boards and any company comes into the Forum, everyone is hands off and no consulting or conflict of interest. Bottom line is that it takes a very special person to run a chapter."
Q: What is the largest investment the group has made?
Randy: We have repeated rounds that we have funded. For instance a real estate fund which has initially been funded and needs new round of funding, they come back to the Forum. For example, a mortgage fund out of Seattle has now raised $6.2 million and they are meeting their milestones returning 11% to their investors and they continue to come back every quarter. In fact, you will see them at the Angel Capital Expo on May 1 at Microsoft in Mountain View and since they are a portfolio company they have proven themselves. Bottom line is that if an investment is meeting their milestone and returning value, they can always raise money here.
Q: What if a company wanted to raise $10 million. How many chapters would it take to raise that much?
Randy: "Years ago it would take 10-15 chapters. Last week we announced Keiretsu Connect where we are filming these presentations and reaching out globally. We don't want our accredited investors to miss an opportunity because they are not physically at the chapter where the entrepreneur first presented. In fact, within 30 minutes of beaming one of the presentations to our chapter in Istanbul they were able to raise $250,000. But despite this technology, trust is still an integral part of the investment and I still insist that each chapter and investor conduct their own due diligence."
Q: Is there any company who won't have a shot at getting funded here?
Randy: "Our big validation is revenue. Specially recurring revenue because it proves value. Revenue is the biggest indicator for us. We love the dreamers but we have a place for them too. Dreamers don't know what they don't know which is the scary parts. We think we are an excellent source of strategic money. Our gray hair in the room is from many of the most successful companies in any industry. So, ask for a resource and we can get it for you."
Q: What is the relationship with the National Labs?
Randy: "They approached Keiretsu Forum 2 years ago to move great science projects, commercialize them and take them to the market. We signed an MOU together with them and I kid the Lab president that we provide adult supervision. We have a committee of 65 members that works on these projects. Our DNA is about execution and to find jockeys, CEOs and executes for this potential technologies. The lab's DNA is in great science. And this partnership has been a wonderful one where complement each the labs technology with investment capital, people and experience. We have 4 projects that are being baked right now."
Q: What are you offering to these projects?
Randy: "We are offering consulting and other kinds of help for free. There are always CEOs and board level members available to help these companies. And just like you have seen in our deal screenings, I always ask these entrepreneurs about what kind of companies they are targeting so we can find them resource and access to help them succeed. We know that companies need more than just capital to succeed, so I always make a point of asking them about what they need. We are deadly serious about funding. This is not OPM and this is not a wine club. A typical investor makes 2-3 investments per year. And each chapter gets to use swarm intelligence and un-vested interest to make us all better investors."
Q: As the CEO, what keeps you up at night?
Randy: "The most important thing for me is to build and retain community. We have this swarming intelligence and mind share that makes all of our members better investors. And I want to keep that. When you come to one of our deal screenings, you come for diversity of the deal flow and they stay."
On my way back from the interview, I had already started thinking about companies and entrepreneurs that I could introduce to Keiretsu Forum, so they could be the beneficiary of all the capital, friendship and grey hair in the room.