Jon Gosier: Spreading the angel investing wealth
Jon Gosier is one of those well-to-do tech entrepreneurs you may have never heard of. That might be because he made his money heading not to Silicon Valley, but to Uganda.
It's there that he was introduced to angel investing, a sort of financial backing used to help startups or small companies get going that typically has a warm and friendly vibe. Gosier found himself investing in several companies not only in Uganda, but also in 11 other African countries, and succeeding nicely along the way. Now he's hoping he can bring this brand of investing to the land that so heavily restricts it: the United States, of course.
You see, in the U.S., friendly or not, investing in startup companies is typically limited to people who are already wealthy. Yes, it's a little unfair: You have to make at least $200,000 a year or have $1 million in other assets to become an accredited investor. If not, you're out of luck. But Gosier, 33, a brash, African-American entrepreneur who once dreamed of being a filmmaker, has come up with a model for a fund that lets us regular folks get a shot at beating the stock market.
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From Uncle Sam's perspective, there's a good reason the bar for angel investing is so high: to protect us from blowing our retirement savings on new companies that flame out. And don't think they don't: Three out of four venture-backed startups bomb, according to Harvard Business School senior lecturer Shikhar Ghosh. But Gosier is among a growing group of investors who think their industry should be more democratic (a viewpoint, of course, that can be good for business too). We're expected to run our 401(k) plans, after all. Why not engage in angel investing? "I don't think this is something for most people," he says. "But it should be a choice."
So who is this guy, and why should anyone put money into a venture like this? We met Gosier at a tech and governance conference in Philadelphia, where he is based. Dressed in a black suit, he looks more like a financier than a techie, but he quickly shows he has entrepreneurial audacity. Though he talks about SEC regulations, he doesn't sound like he's reading an adviser-type script; rather, he displays an easy familiarity that tends to make people comfortable.
"I like to take leaps of faith," he says. In fact, that's how he wound up in tech in the first place. He started his career in music, working as an audio engineer in his hometown of Atlanta, and dreamed of being a filmmaker. That led him to a job at Tyler Perry's studio, just as the director was building his media empire. But Gosier says he wasn't satisfied with the entertainment business. So in 2008, when his then-girlfriend got a job at a nonprofit in Kampala, Uganda, he decided to follow her and figure out the rest later.
Drawing on his childhood hobby of tinkering with computers, Gosier started a software development company called Appfrica. When a few employees began working on their own projects, he gave them some of the company's profits to launch their own businesses. The companies grew, and he says he was bit by the tech/startup bug by the time he returned to the U.S. in 2011. Along the way, Gosier has invested in a handful of businesses outside of his fund (it's too soon to say which ones have succeeded or failed, he says), and he has jumped on a truism that not everyone might realize: It doesn't take millions of dollars to get involved in a startup, even as an angel investor.
His most recent break was to get accepted into a Goldman Sachs program that plans to support 10,000 small businesses through education, networking and, sometimes, loans. There he met a group of entrepreneurs eager to try out angel investing. Not all of them were accredited, but Gosier found a workaround in government rules to allow them to get a piece of the action. They've created a fund called Third Cohort Capital, chipping in $10,000 apiece to invest in tech startups. So far, they've backed three.
But how big — and sustainable — can Third Cohort actually get? Many big venture capital firms struggle to make money and survive in the long run, so what chance is there for a tiny fund that can invest in only a handful of companies? "One or two investments is not likely to provide a return," says Marianne Hudson, executive director of the Angel Capital Association. Plus, companies that take money from Third Cohort have to meet additional regulations, so the most promising startups may not even bother. "It's often too much of a burden for companies to take on," says Alan Smith, the chair of Silicon Valley law firm Fenwick & West's corporate group.
That doesn't faze Gosier. As a black investor, he believes this may be a window of opportunity for other minorities, who typically invest too conservatively, according to a study by Credit Suisse and Brandeis University. He's also determined to bring as many others into the fold as possible, so he has also launched a larger investment firm, Cross Valley Capital. Its investors will need to be accredited, but the firm will give 5 percent of its returns to a network of accelerators — essentially, boot camps for entrepreneurs — around Philadelphia.
Is Gosier ahead of the curve? Perhaps. "There's nothing structurally preventing this from happening," says Ray Leach, CEO of JumpStart, an accelerator and investment fund in Ohio. "It's just different."
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