• Sergio Muñoz posted an article
    Stats from the Halo Report see more

    By Sergio C. Muñoz, SVP at HOTB Software and member of the Board of Directors at LAVA

    The Halo Report provides analysis and trends on US angel and angel group activity. Earlier this month, The Halo Report issued a special Minority Report analyzing 2,382 deals in 2016 where the gender and race of the entrepreneur was verified using data from the Angel Capital Association of 13,000+ angels. Assuming a basic breakdown of 100 entrepreneurs, 58 of funded angel deals went towards white males, 26 were for non-white males, 13 were for white females and 03 were for non-white females. This is what could be termed as the current state of affairs. Via LAVA, it is not my intention to debate the political gamesmanship behind the current partisan political culture nor to complain about the dismal figures for non-white female entrepreneurs. Rather, the intention of this post is to begin an effort at impacting those numbers in a positive direction.

     To live successfully in the entrepreneurial eco-system requires two fundamental elements: Singularity of Purpose and Sufficient Capital Resources. The singularity of purpose for any entrepreneur and also any investor is the same: Making money through supply and demand economics. The big differentiator in the equation probably lies in that 58% of the sufficient capital resources is going toward white males and 42% goes towards all others. If we want to balance the numbers just for the sake of balancing the numbers, we have to begin with the realization that institutional bias and prejudice in business and social affairs have created this purposeful imbalance for generations. And it is a long-tailed monster that has chipped away at the confidence of the non-white entrepreneur for decades.

     As an executive with an angel group in southern California, I find myself consistently pleading with female entrepreneurs to gather or create the confidence to go through the discovery process to open themselves for investment. A majority percentage of those female entrepreneurs find the right reason to reject my pleas and convince me that they aren’t ready for my type of funding. Accordingly, at the end of the year 2016, the term sheets that my team wrote at HOTB also skewed towards the white male entrepreneur because they were the most willing to go through the enormous effort of laying their heart and their money on the table for the reward of receiving investment.   

     I talked about this phenomenon through with Jean Huang, Vice President at Bernstein Global Wealth Management in Los Angeles. She summarizes her thoughts with the following wisdom: “Risk is a muscle and it just needs to get exercised.” Then, we talked present-day statistics: 16% of LA based angel funding is going to female entrepreneurs but women control 51%, or $14 trillion, of personal wealth in the US and are expected to control $22 trillion by 2020, according to the report Financial Concerns of Women released by the private bank, BMO Wealth Institute.

    For Ms. Huang, she estimates that 70% of her clients are women and she believes that “women are more emotional and anxious around money and take longer to make decisions.  Higher returns mean higher risk and women generally aren't as comfortable around risk as men are.  As they spend more time in the liquid capital markets, women will find they are no longer satisfied with future expectations of more muted returns. Nonetheless, I'm confident that over time and deal by deal and opportunity by opportunity, all involved in entrepreneurship will find their way to economic success.  And that success will feel a lot more satisfying than buying an S&P index fund.”

     I am hoping to connect with the next generation of entrepreneurs and angel investors that are going to help positively impact next year’s numbers with the angel groups in the Angel Capital Association and thus positively impact The Halo Report for 2017. To connect with Women in LAVA, please join us on Wednesday at  our event:

    Women in LAVA invites you to a panel discussion supporting female entrepreneurs by helping them better understand one of the most important sides of the equation – the Money. From Angel Investors, private investors, venture capital and more, we plan to get “down and dirty” with specific deal points and terms, revenue benchmarks and board involvement. 

     6:30pm - 8:30pm PDT

    Bernstein Private Wealth 1999 Avenue of the Stars, 21st floor Century City, CA

  • Sergio Muñoz posted an article
    Investing in the Disruption of the Music Industry see more

    By: Sergio C. Muñoz, LAVA Board Member and SVP, Ventures at HOTB

    People often talk about passion in business. I don't know if I truly feel passionate about the day-to-day of angel investing and writing term sheets and MSAs and SOWs but I know for sure that I do feel passionate about the idea of investing in a startup that is capable of disrupting the music industry.

    A few months ago, I connected with a startup based in Orcas Island, Washington called 8Stem. Turned out that the startup was co-founded by Bruce Pavitt. Bruce (pictured, right) founded a startup many years ago, a record label named Sub Pop, with $50. He signed an enormous amount of independent recording artists and in the eighties, he purposely (and by accident) changed the world. He signed a band called Nirvana. He recorded their first album, Bleach, financed a tour, nurtured them in the press and then set up the recording of their second album. He contracted their producer, Butch Vig and then a lightning bolt struck. Butch and Nirvana's frontman, Kurt Cobain, shopped their record deal to Geffen Records and left Sub Pop. Bruce was paid an early termination fee and points on the next two albums. One of which would be Nevermind, an album that knocked Michael Jackson off the Billboard charts and sold over 100 million copies at +/- $17.99 per compact disc. These points would end up being worth multi millions of dollars. His company was valued at its peak at $30M. From $50 to $30M.

    Bruce transplanted himself on Orcas Island and made friends with a local entrepreneur named Adam Farish. Together, they created 8Stem as both a personal and professional pursuit to take all that they have learned in business and in the music industry and create a disruption. The purpose of 8Stem is to educate music lovers on the science of recorded music. Once they understand the concept of Stems, as elements to create Songs, users can then go on to manipulate those Stems and create Remixes. Here's a quick tutorial

    Remix culture is estimated to be a multi billion dollar black market. 4/5ths of this market is on Google's YouTube and 1/5th of it is on Soundcloud. Bruce and Adam want to create the first Remix platform that allows the artist to stay within the legal parameters of the major music labels but also allows them to benefit financially from their artwork. One of their first successful collaborations was with Kim Thayil, guitarist for the multi platinum band, Soundgarden.

    Bruce and I recently hosted an investor panel in Whistler. As a startup with $700k raised in Founder, Friends, Family and Angel funding and a functional MVP live on the iOS app store with thousands of users, 8Stem is currently raising the last leg of their angel round. Their debut will be at the Upstream Music Festival hosted by Paul Allen in Seattle. On Friday, May 12, Adam will host a panel with the first Remix artist to win a grammy, RAC. He will be following keynotes by Quincy Jones and Macklemore. 

    For more information on 8Stem, connect with me via LinkedIn. In attempting to support 8Stem, I am currently in negotiations with a community of independent artists in Latin America and the US to see if they can join the platform. My first collaboration will be with Chancha vía Circuito from Argentina. I am currently in the process of Remixing a track that Chancha has provided called Dionisio (Thunderbird 52 Remix). Stay tuned.