What is a “pracademic”? It’s not a moniker you can put on many individuals, but that’s what Cash Flow Diary podcast guest Michael O’Donnell calls himself. In short, a pracademic is someone who looks at new businesses practically and helps them get off the ground and stay in the air with success under their wings. But there’s more to it than that. Knowing everything that goes into creating, building and expanding a successful business venture has allowed serial entrepreneur Michael O’Donnell help lots of businesses get their start. He even formed a pretty cool Angel investment group to help more business owners reach their dreams. In fact, some of the first businesses Michael started and sold are still alive and kicking stronger than ever… still expanding across the globe! If you need funding but aren’t getting very far, Michael is one of the experts in his group that can tell you exactly why you aren’t getting the funding you seek. There are reasons. This pracademic doesn’t just theorize about what it takes to build a successful business; he’s in the trenches with start up’s every day! If you think Michael was born with a silver spoon in his mouth, you’d be wrong. He was born into a poor family and vowed to grow up NOT POOR. He’s reached that goal brilliantly and continues to help others reach that goal, too. You are going to learn a great many new things in this episode. You’re going to learn new terms and new ways of thinking. You’ll even learn what “intrapreneurship” is and how it works. You might want to grab a pen and paper before you listen to this episode. It offers some very valuable information. LISTEN NOW
On this episode of Cash Flow Diary, J interviews Michael O’Donnell, the Executive Director of the Office of Innovations and Entrepreneurship at the University of Central Florida. Michael refers to himself as a ‘pracademic’, and specializes in teaching students how to get their businesses started. He is currently part of six startup companies and formed the Florida Angel Nexus, an organization with a mission to provide funding and advising for select statewide emerging growth businesses.
05:24 Michael’s origin story
10:29 Advice to new entrepreneurs
10:58 10,000 hours to becoming an expert
13:01 The entrepreneur sequence
15:27 Necessary qualities and characteristics
17:16 Angel investing
20:49 Apply for a free one-on-one breakthrough session / J’s episode insight
23:03 Exceptional returns & valid asset class
25:17 Knowing which angel investments are good
27:30 Becoming and Angel Investor
28:54 Vetting ideas
31:33 Florida Angel Nexus
33:55 Finding Angel investors
35:42 Top 3 mistakes
39:34 Why Florida?
43:12 Failure and success
47:14 Michael’s final advice
Main Questions Asked:
- What is your origin story?
- At what point did you realize you wanted to be something other than a ‘standard employee?’
- What would you say to the person considering starting a business and looking to build their cash flow?
- How do beginning entrepreneurs overcome obstacles?
- What are the necessary characteristics, qualities, and things needed to be done to be a good entrepreneur?
- Define what an Angel Investor is and what it is they are primarily looking for.
- Talk about exceptional returns and the concept of a ‘valid asset class.’
- How do you know which Angel Investments are good?
- How much does an Angel Investor start with?
- How do you systematize the vetting of other people’s ideas with such variety?
- Tell us about the Florida Angel Nexus group.
- Is there a technique to uncovering and finding these Angel Investors?
- What are the top 3 mistakes that most entrepreneurs make?
- What has been your spectacular failure, and overwhelming success? How did you handle both?
- What is your advice to someone who wants to get started but need a push?
Key Lessons Learned:
- Intrapreneurship is the process of entrepreneurship within corporate America.
- The Florida Angels Nexus model is “do well and then do good.”
- Nobody has a ‘money problem’, people have an ‘idea problem’.
- Florida is one of the top 3 entrepreneurial friendly states in the USA.
The Four Necessary Components for Entrepreneurs
1) Culture (people who are ‘in culture’ for your business)
The Entrepreneur Sequence
- Have the idea.
- Determine if the idea is feasible. If feasible ask, “Can I build a business model around it?”
- Get a plan together.
- 80% of a decision to make an investment between an Angel group and an entrepreneur is how they perceive the CEO on a one-on-one basis.
- Angel Investors want to create a profitable and diversified portfolio, connect to fresh innovations, and stay technologically current.
- Many Angel Investors are successful entrepreneurs who have made money, or corporate executives who want to get back into the business (vicariously or otherwise).
- Angel Investors want to have access to opportunities for exceptional returns.
- People who try to do Angel investing by him- or herself don’t experience the kind of returns that those in a focused Angel group do, as Angel groups focus on one asset class and/or the Angel group that has access to resources to go across platforms.
Exceptional Returns & Valid Asset Class
- Properly vetted Angel transacting is the highest return on IRR in any asset class (27% over a 3.5 year period).
- The second most valid class is real estate, which returns more than 20% IRR.
- There is a difference between Angel Investing and “friends, family, and fools.”
Difference Between Angel Investing and Real Estate
- In the real estate business, the mantra is “Don’t do a bad deal. Protect the downside and the upside will take care of itself.”
- In the Angel business, the mantra is “Find the good upside deals and don’t worry about the deals that don’t work.” You are always looking for deals with the right market.
Becoming an Angel Investor
- Take 10-15% of your free cash flow and put it into your angel investments over a reasonable period of time. You should end up in the highest asset class in terms of IRR.
- Some want to invest $250K a year over a number of years. However, the average Angel will do $25K a year spread over a few deals.
- The due diligence process for choosing an Angel Investment is significant and can be from 3-5 months.
Finding Angel Investors
- Finding Angel groups can be as easy as doing a Google search for one in your area.
- All Angel groups are run differently, but there are standard questions.
- It is important to remember that Angel groups don’t like to fund ‘hobbies.’ They want to know how much you have invested.
Top 3 Mistakes Entrepreneurs Make
1) They believe are the only person with the idea. The reality is that idea is probably already being seeded elsewhere too. They key question is “Can you execute first and best?”
2) Over valuing your business and providing value post investment instead of pre-investment.
3) 80% of innovation and failure come from people under 30 years old.
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