Monday, 11 February 2013

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. 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!

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