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Harmonix Music Systems - Now That's How An Angel Deal Should Work

Written by: Brad Feld

Article Overview: I’ve invested in over 50 angel deals in the past 12 years. Several have been big winners for me, a few have done ok, and some have failed. Many are still active – including several that I did before I started making venture capital investments in 1996.

Harmonix Music Systems - Now That's How An Angel Deal Should Work

I’ve invested in over 50 angel deals in the past 12 years. Several have been big winners for me, a few have done ok, and some have failed. Many are still active – including several that I did before I started making venture capital investments in 1996.

Recently – a company I invested in 11 years ago – Harmonix Music Systems - was acquired by Viacom / MTV for $175 million. The deal closed last week and the money has been flowing to the Harmonix shareholders. And – it’s plenty – as Harmonix only raised $10 million over the life of the company. The reactions from a few of the angels I helped recruit to the deal included “incredible outcome – I had forgotten I had shares in the company”, “Brad, are you sure you got the decimal point in the right place”, and simply “holy shit.”

I’m extremely proud of Eran Egozy and Alex Rigopulos - the co-founders of Harmonix. Eran is a fraternity brother of mine – although he was more than four years younger than me so we never lived together. Eran remembers approaching me when I was a judge for the MIT $10K competition the year that they entered – Eran recognized my name from our frat and after thinking “Hey – I know of that guy” approached me about getting together. I remember the first time we hung out together and got a really crappy meal in Central Square in Cambridge at one of the omnipresent Indian places. Eran and Alex regaled me of tales of the vision they had for creating musical environments and games for non-musicians. They were incredibility creative, passionate, and infectious about their ideas.

I helped put together an angel round in 1995 for them. It was modest – I think it was a total of about $500k. Over the next few years, they did a couple of small financings - although none of them from traditional VCs – and raised around $10m. Eran, Alex, and team regularly created new products, got key distribution deals with major players, and chipped away at building a business. They sent out an investor letter periodically updating everyone one what was happening. Occasionally I’d get a call from one of the angels that was in the round asking how things were going. Time passed.

In 2005, they released their newest product – Guitar Hero. It was a monster hit. Suddenly, Harmonix went from a sleeply little company that had been ambling along for a decade to a hot up and comer. MTV swooped in and grabbed the shiny nugget just as the Guitar Hero franchise was picking up speed (if you loved Guitar Hero, then check out Guitar Hero 2) – it’s a perfect fit for Viacom / MTV’s latest new media push and their demographic.

I expect to see great things from Eran, Alex, Harmonix, and MTV over the next few years. Congrats guys and nicely done!

Read this article in Brad's blog.

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Article Tags: 10 million, 11 years, 500k, alex, busine, central square, decimal point, distribution deals, financings, founders, frat, fraternity brother, harmonix music systems, holy shit, mtv, musical environments, shareholders, vcs, venture capital investments, viacom



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toronto angel group - The Toronto Angel Group is a very hard group to get into. You have to have a very stable and viable business plan and they like to stick their fingers into your pie and they are usually looking to invest big bucks. Which means that they usually want to take control. If you look deeply into these groups you need to know someone or have a very good idea with potential clients backing you up. In my opinion, other sources of financing will give you better control of your business or learning to ask for the money upfront. One of the things I found is that new buisness owners are afraid to ask for the money upfront but every other business expects you to unless you have a proven credit history. Good luck with the Angel Investors
Angel Investors - From Wikipedia, the free encyclopedia the definition is: An angel investor or angel (known as a business angel in Europe), is an affluent individual who provides capital for a business start-up, usually in exchange for convertible debt or ownership equity. A small but increasing number of angel investors are organizing themselves into angel networks or angel groups to share research and pool their investment capital. With that being said, Angel investors can come from a number of resources. You can try ACA (Angel Capital Association) in US / CA. Family & friends- Well, for me personally, I never do that type of business with family or friends for fear of a damaged relationship. I do not borrow from them, nor allow them to borrow from me. However, in my business I see it all the time. One place you can also try if not self employed, is with your current employer or even co-workers (of course having a good relationship with them is key). Also, get the information out to everyone and anyone about how you are seeking an angel investor, because you never know...just look at Evan's experience!
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Who inspired you to start? - When I was a teenager I read "The Art of the Deal" by Donald Trump while on a road trip to New York City. It helped inspire me to want to start my own business and is also one of the reasons why I have created so many famous entrepreneur profiles. I believe that by modeling the success of other entrepreneurs you too can become successful. Who was it that inspired you to start your business?
Re: SEEKING PRIVATE OR ANGEL INVESTOR - Do a Google search for Angel Investors. You will have many options to choose from. I think SCORES is one but I am not sure. Don't email them, pick up the phone and contact as many as you can. You need too have a rock solid business plan for these investors to even smile at the notion. Good luck with your journey.


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