Brad Feld told the story of his first VC investment (after making 40 angel investments) on his blog yesterday.
The Gotham Gal told the story of her first angel investment on her blog today.
I was involved in both stories and both investments worked out well. Yoyodyne sold to Yahoo! and Curbed sold to Vox Media, both for similar amounts interestingly enough.
My first venture investment didn't work out so well. It was in a company called Software Developers Company (SDC) which if my memory is working may have been a thinly traded public company. SDC was in the business of distributing programming tools for PC software and wanted to move up market into owning software development tools. They had negotiated a deal to purchase an editor called BRIEF and a version control package whose name escapes me (might have been VCS?) for something like $2.5mm. But they didn't have the cash.
So I negotiated a deal to invest the funds into the company for a revenue share on the sale of both products plus a warrant to buy stock in SDC.
SDC ran into financial difficulties and although the sales of BRIEF and the version control software product were doing fine, they could not make the royalty payments. So we were faced with a quandry, take back the products, which we could do by contract, or restructure the deal. I recall that we restructured the deal, insisted that new management be brought into run SDC, and I think we eventually got most or all of our money back.
That deal taught me a few big lessons. The first is to avoid complicated deals. It seemed like such a smart deal structure but it really wasn't. The second is to avoid fast talking salesy entrepreneurs who don't know how to operate a business. That more or less described the entrepreneur who was running SDC when we did the initial deal.
I worked the SDC deal as a team with Milton Pappas, who was one of two founders of the VC firm (Euclid Partners) where I started my career. Milton did a lot of the heavy lifting on the management change and I learned a lot from him on that deal and many others. There really is no substitute for learning the VC business from older more experienced partners and I am blessed to have been able to do that for a decade at the start of my career.
