ACA Member Profile: Jorge Varela & Cowtown Angels – Growing Active Capital in Fort Worth

ACA Membership Director Sarah Dickey interviews Jorge Varela as part of a series of profiles of ACA members

How and when did you get involved in angel investing?

I have been actively investing since before the word was popular. I made my first investment more than 15 years ago in TFB Corporation a company in which I later served as CEO.  I am still invested in the company and I am Chairman, but have been able to have two liquidity events and look forward to a third. I was involved in my first startup when I was 21, Braun Systems, which we sold a year later to ITT Systems in 1987.  I then moved to Silicon Valley before all the Valley excitement and became employee number three with VoicePlus, which we took public in a roll-up with Nhanced Technologies. These two early experiences gave me the bug for startups that I have not been able to shake. 

I started several companies and saw them through to exits before I transitioned to spend more time in advisory roles due to family commitments.  In 2012 I learned about Tech Fort Worth and their project to start Cowtown Angels. I had not yet participated in a formal angel group and so this was very exciting.   ACA, the Alliance of Texas Angel Networks (ATAN), North Texas Angel Network and especially Chuck McCoy were all important to getting Cowtown Angels started well.

Could tell me a little about your ACA member group / your investing history? 

Cowtown Angels was founded late 2012 and our 38 angels have invested over $9.1M in 16 companies in our first three years. We really picked up our investing pace in 2014 when we invested $4.4M in 12 companies including 8 new companies 5 follow-ons. Our largest investment so far has been nearly $2M to one company. 

We have a diverse set of members which translates to a good mix in our portfolio. When we created Cowtown Angels, we thought that our local strengths in oil and gas and logistics would dictate our investments and members. But only a few of our members come from these industries. More than half are serial entrepreneurs. Although most of our investments are in life sciences and high technology, including cloud based solutions to enterprise solutions, we are also in consumer deals including a children’s game and health food. We are truly mavericks and have no fear of interesting deals. 

Are there any recent exciting investments you would like to share?

In 2013 Tech Fort Worth held a competition and awards ceremony to highlight promising companies. E-Mist Innovations, which produces a disinfectant that can penetrate surfaces and enter the air system quickly, was among the winners. As part of the award, they got to pitch to Cowtown Angels.  As a result, Cowtown provided a bridge note and one angel took the CEO position to help the founder move the product forward. In early 2014 we invested in the company and they went to market.  The company was able to make an immediate impact during the recent Ebola outbreak in Africa and was instrumental in eradicating the disease in the US. The company is growing fast and is now selling in Africa.

We believed in the entrepreneurs as well as the company’s purpose and it is a true success story for everyone. 

What has changed in the way you and/or angels in your area are investing versus a year ago?

We lean heavily on ACA so that we can learn from others and are growing more sophisticated and smarter in our processes. We have an awareness that the competition for good deals is growing across the US which can artificially prop up valuations and unrealistic expectations among entrepreneurs. We find that there is available capital in Texas, but this is causing entrepreneurs without good leadership to reach out for funding before they are ready.  We expect entrepreneurs to bootstrap before they reach out for external funding to build credibility. 

We also know that there is great quality in the middle of the US. We and others in our part of the country are more deliberative in our approach and find great success. Our members are very engaged. We are collaborative with other angel groups in order to fund and grow the best deals in Texas. We want Texas startups to stay in Texas so we created the Alliance of Texas Angel Networks (ATAN) to easily syndicate deals across with other Texas based ACA members

What is the most important issue or trend for your member angels to be aware of in the next year?

Overall the goal for Cowtown Angels in 2015 is to prep our portfolio companies for exit. As a new group we are building relationships with VCs for deal flow and strategic partners for exit.  I personally believe that even though we are a relatively new group a few of our investments will have great exits in short order.