Emmett King, co-founder of Transylvania Angels Network (T.A.N.), on his entrepreneurial and angel investor experience in the U.S. and Romania, the local startup ecosystem, T.A.N.'s mission and activity, and what he looks for when deciding to support a venture.

Emmett King always wanted to live outside the U.S. but never thought it would be in Romania. The Cluj-Napoca-based angel investor and entrepreneur's experience spans numerous sectors, having founded or been part of the founding team of ten different companies across eight industries - from a waste management company that went public on Nasdaq to a training and consulting one in Cluj. He is a co-founder of cyber security company D3 Cyber, a founding investor and board member of telemedicine and home healthcare services company Telios Care, and of technology company AiVA Vision. He is also a minority shareholder and former COO of Wirtek A/S, a Danish IT consultancy company that provides software development, testing, and consultancy services.

In 2018, he co-founded Transylvania Angels Network (T.A.N.), which works across the ecosystem to help startups access funding and mentoring while assisting potential investors with access to promising projects. Since its establishment six years ago, T.A.N. has facilitated more than 30 investments, while its members invested a total of EUR 3.5 million. The organization, which made community-building part of its efforts, is networked with all the actors in the local ecosystem and is building connections in the region as well. While the local ecosystem is nascent, and there are things to be learned on all sides, he points out the need for founders to have the knowledge and background that comes from founding more than one venture and sometimes failing.

More on his experience in the startup sector, some of the things he teaches startup founders - 'the kids' as he calls them - the investments that caught his attention, and T.A.N.'s work in the interview below.

How did you transition from entrepreneurship and working in the corporate world to being an angel investor?

Ever since I was very young, I have wanted to be an entrepreneur and live outside the United States. I went to university to study accounting and learn how to run a business. For me, the accounting system is the skeleton of any business; whether it's a small business or a big business, the difference is just the number of zeros and people. All of our skeletons look the same; how we flesh it out and how the business is different - that's what makes it unique.

After just a few years of accounting, after the university, I started my first business. It was a failure in six months. I lost USD 600. There were two, excellent lessons learned: that the sun came up the next day, so failure was not deadly, and that I wasn't as smart as I thought it was.

The second venture that I joined turned out to be the largest financial success. It was a waste management company that we took public on Nasdaq by using a reverse merger. Those were two of ten different companies that I either founded or I was part of the founding team in eight different industries. I am a big proponent of lifelong learning so I like to challenge myself to go into a brand new place, and learn and understand. Back then, the way you learned a new business was to go down to the library or order the magazines for that business. Every domain had four to seven different magazines and by reading through them, seeing who was advertising, checking out the article, that's how I could learn a new business.

Six of the companies made money. Four of the six achieved 10 to 100k of profitability before moving on or leaving them to my partners. The waste management was huge, obviously, going public and being publicly traded. A few years later, an even larger waste management company acquired it.

The other large financial success was with a freight forwarding company. Because of circumstances, I had to move to Los Angeles, which I swore I would never do. I had been there visiting several times as my friend, who introduced me to my wife here in Romania, had lived there years for a few years.

My partners both had mortgages and kids back in the New York area. I had said I would open the West Coast office in year three of the business plan, when we got the Boeing account; but then, six months later, we got the Boeing account, so I had to go to Los Angeles. It was a unique experience not just on the business side but also personally because being all the way across the continent prepared me for moving to Romania.

So, after five years there and 15 years of entrepreneurship, it was time to fulfill my second goal, which was to live outside the U.S. Never, ever did I think it would be in Romania. If you want to make God laugh, you tell him your plans. I did. Central America, the Caribbean, nice beaches. I really wanted to speak another language and experience a different culture. America's great, but the world is big, my parents taught me that. I met my future wife, and she said, 'You know we can go wherever you want to go, but if you come here [e.n. Cluj-Napoca], I can continue my career.' She's an actress at the National Theater in Cluj.

The only introduction my friend, who is a banker, did was to my wife. So I really entered through culture and then had to build things here.

The first company that I helped start we took it out of an NGO, Adventure Camps. It still exists twenty years later. I'm really proud of that even though I got a business divorce from the two other partners in 2007, and I left Adventure Camps with them. The other company we had was Adventure Inc. - for team building, training and consulting.

Then the financial crisis came, and I earned no money in 2009 and 2010 because all training and consulting had stopped. I said, 'I've got to go into IT; they're not even affected by the financial crisis.' That was my transition into IT here in Cluj. I did business development and sales for an American IT company, a Canadian one, an Israeli one, and then a small Romanian one, too. In 2013, I found the opportunity to manage Wirtek, a Danish publicly traded services firm delivering software & hardware solutions. It took five years for me to finally get an employee stock warrants program not just for me, also for half of the employees. This was quite a unique initiative at that time, in 2018.

It was there, at Wirtek, with the work-life balance of a Danish company, when they initially didn't want to give me equity, I said, 'Okay, I'm going to go out in the startup world, I'm going to find equity for myself.'  That was the beginning: searching through the startup world in 2013. It took five years for me to find my very first angel investment, which was Telios Care, through a private placement - that's why I'm a founding investor and board member there. At the same time, in June of 2018 Mircea Vădan and I agreed to create Transylvania Angels Network.

How did Transylvania Angels Network come to be?

How that started was that I had been going around the startup world for five years and looking for guys and gals with fives and ten thousand to increase my muscle and decrease my risk. I had an inheritance from my parents and that's 75 - 80% of what I've invested over these six years. People were saying, 'Yeah, you find the startup, we'll see about it.' And Mircea said, 'I have five guys; why don't we start an angel investing group?.' Mircea had established an NGO, Cluj Startups (CjS) in 2012, when there wasn't much going on in the ecosystem. Mircea had been down in Bulgaria and tried a couple of companies. Bulgaria actually started earlier than Romania did, and he got some good experience and came up here and started the NGO Cluj Startups with some friends. What we decided was to make T.A.N. a brand of CjS, so that when people join us, the money goes to the NGO, not to us. It's not a business. I'm proud of that. I like that that the money goes into the ecosystem and helps out.

The first year, we didn't charge anything, and we didn't do any investments; we were just figuring things out. Then, in 2019 to 2020, the very first syndicate we did was for Telios Care - so two of my babies were helping each other out - and we raised EUR 200,000 at a EUR 2 million valuation. That was the very first deal we syndicated. We have now invested in over 30 startups, a little bit over EUR 3.5 million invested. And that's with our members investing their own money.

In 2019, we met with two other angel groups, Growceanu (Timișoara) and TechAngels (Bucharest), explaining that we'd like to be able to work together and do syndicates. It was the simple idea that as a rising tide will lift all boats. Both groups agreed immediately. They invested in Telios Care - in that 200k deal we raised. Therefore, that was the very first angel investment in Romania to get investments from all around the country.

My second investment was a device for kids with ADHD [e.n. Tully] in which I invested with some of the members at TechAngels. We're getting ready right now to invest in CBN Agro together with both groups. With almost every investment we make - if we've raised enough ourselves, great; but that doesn't always happen. Therefore we usually encourage the startups to go and pitch at the other two networks. Sometimes we do deals on our own, but we like to share and work together when it's appropriate.

Transylvania in your name reflects just your location, not your interest...

Exactly. From the beginning we've been looking for startups from Romania and over the last two years, we have begun to see startups outside of Romania. We haven't invested in any yet, but at our last couple of meetups, we had startups from Italy, Crete (Greece), Hungary. We're looking to regionalize both on the investment side and on the networking side. We are networked all over Romania, with all the ecosystem actors, and are making connections with actors in all of the surrounding countries.

Are there legislative changes that would incentivize investors to be more active and models to follow?

We've had a senator or two from the local area come to talk to T.A.N., and I always wait till the very end and then just say: please, look at England. They're getting 30 -50+ percentage off their taxes in the year of investment. If you can't get me that much, then 10% - 20%. It's so brilliant in England because it de-risks the investment by 30 to 50% on day one.

Rich guys are always looking for tax breaks, everybody's always looking for tax breaks, so it's a good incentive policy from the UK. The Government is now riding the coattails of IT. The mayors and senators show up at events that they weren't showing up at in 2015 - 2017. Now, the politicians are showing up at Techsylvania, How to Web, and Unchain Fintech Fest. IT has grown to six or seven percent of GDP, but that has been individual entrepreneurs - the individual investors, those who work in accelerators and incubators, the individuals at companies that are supporting them with budgets and things like that. That's really been the case from the beginning; it's been individuals like Mircea [e.n. Vădan], Mălin Ștefănescu, Vlad Gliga, David Achim and Ciprian Man and Adrian Erimescu in Timișoara [e.n Growceanu]. The Government, we hope, is going to listen and change. When we first started investing with convertible loans, it was kind of a gray area. It's something that we're trying to educate about and it will take some time. Even Germany and France only passed options laws in the past couple of years because they were losing companies to the US.

How has the local startup ecosystem changed since 2013? What has been pushing it forward?

I can quickly and easily answer that it seems to get better each year, with more and better startups. As I said, in 2013, 2014, 2015, there was very little.

Philipp Kandall, who is Chairman of the Board of Techsylvania, was somebody I sat down with, and he pointed out that the weakest part of the ecosystem is business development and sales strategy.  It's been the individuals that have been pushing it forward. […] It can still improve because it still is very weak on most things other than the tech; it depends on the individual startups.

As I said, we're looking to integrate, not just in the country, but also regionally by reaching out to the angel networks in Hungary, Bulgaria, Slovenia, of course Moldova, also Ukraine. We're talking to different regional groups. Business Angels Europe came to Bucharest a couple of weeks ago asking how they can help Romania. The ecosystem is nascent and it needs time. I joke that the angels and the VCs from Romania are still learning and we have a lot to learn. Interestingly, in Bulgaria - they're ahead of us by a couple of years. […]

It's just a matter of time and some failures so that the kids learn from their mistakes before they start their second or third startup.

There's also the important concept of thinking beyond the Romanian borders. Telios Care is a scale-up now, with over 300,000 clients, with seven of the nine largest insurance companies in Romania as our clients. So, for them growing the firm inside the country has been a strategic choice. For other startups they should look to test here and then extend and expand in other countries. However, not every company needs to go outside the borders. It really depends upon the startup itself as to how they decide to grow their companies.

Have you noticed any changes in the profile of the founder since T.A.N. started?

Interestingly enough, it's not all kids. For the two biggest investments that I've made - Telios Care and A.I. for Visual Analytics (AiVA) – Pushkar Chatterji, the CEO and founder of AiVA, was in his 40s when I invested four years ago, and Philip Choban was in his 60s when I invested in Telios in 2018. You can imagine that there was some question in Romania about that. I just kind of laughed because in America, at 70 or 80 you can still keep on doing business.

There are also kids; there are high school kids showing up at Innovation Labs, and it's great. A couple of years ago, they weren't. I'm glad to see college kids and some high school kids are there and doing things. Three high school-aged teams from Cluj have even been on [e.n. the television show] Arena Leilor.

You have mentioned several countries in the region. Is there one country where you see increased activity or being more attractive?

Because I live here, this is the task I've given myself and my obligation to help the Romanian ecosystem. This is my home. As I said, I think Bulgaria is ahead of us; they have more investments and some more exits than we do here in Romania, so I would say Bulgaria is a little bit stronger, but it's smaller. Romania is half the size of Poland, and Poland is in a different league because they're right next to Germany, and they have created more companies, put more companies on the stock exchange.  The entire region of CEE is slowly but surely growing.

Are there specific verticals that Transylvania Angels Network is looking at?

We're agnostic about business domains, open to looking at startups doing anything and everything. Med-tech and fin-tech are very big in Romania, and I have a couple of investments in both of those. I have 15 investments, soon to be 17. One of those is in ag-tech: CBN Agro Tech. We don't see a lot of ag-tech. The other one that we don't see much of is cybersecurity. A couple of years ago I invested in Cyscale from Cluj. Obviously, my partners and I have a cybersecurity services company, so that's why it's also interesting for me, but it's something that's just needed everywhere, and there's not a lot of it.

We've talked about the successes, but don't forget the failures. I finally have a company that is "successfully closing their doors". It's a startup where the founders had already had an exit and you don't find too many experienced founders in Romania.  T.A.N.'s operations manager had two of them and jokes, 'I have experience as a startup founder; I successfully closed two companies.'  Due to the higher risk of angel investing we tell people that they should bring their Las Vegas money, meaning money you can afford to lose. Romanians invest in crypto, and I think that that's much riskier. It's something we're trying to teach - that if you're willing to take such risks with crypto, then you should be looking also at angel investing too.

The statistics, ever since I was young, were that it was always four out of five businesses fail in five years. I was quite surprised recently when I did an 'Uncle Google' search and found out that now in America 49% fail in the first five years and 67% fail in the first ten years. So, in the U.S., which obviously is the most entrepreneurial country, it doesn't even get to 80% in 10 years. In my entrepreneurial endeavors in the U.S., I was able to be successful more than 50% of the time, even though some were small, but it still counts. My partner, Mircea, wants 30-40% success. I'm very optimistic and strive to achieve an outsized success percentage with my angel investments.

What else are you teaching startups?

They need to learn so many things: fail fast, fail smart, learn something, communication is difficult, hire slow, fire fast. These are catchphrases, but they make sense if you explain them to the founders. Important characteristics of a founder include: perseverance, persistence, patience, thinking outside the box, and really focusing on the problem.

Too many startups are in love with the solution they built. They love their own service or product, and they're not in love with solving the problem of getting that product-market fit which is good for the clients. If they do that then an investor sees that they are really focusing on what the clients need, how much they will pay, how big is the market, who are the competitors - these are the things.

I call them the kids because they're all kids for me - when the kids say, 'You've got to try out the app,' I say 'no'. Just tell me who you're selling to, how many of them are there, how much you're selling at, and what the profit margin is.' The business side of things is what I talk about. I'm not a techie. Luckily, the good part of having a team at T.A.N. is that I've got plenty of techies to look under the hood, kick the tires, and tell me that the car/app won't go anywhere.

T.A.N. and our members help each other to structure investment syndicates, but they are not done by or inside of T.A.N. The lead investor helps the startup to create an investment structure, whether it's a Special Purpose Vehicle (SPV) or a Convertible Loan Agreement or directly investing. Lead investing is challenging; I call it herding kittens. Herding cats is tough. Herding kittens is harder. Because, 'Emmett, did you send me that term sheet? Yeah, I did last week. Oh, could you send that again? I seem to have missed it. What was the valuation again?' And I tell them, 'Well, you have a document with all of that.'

It's a matter of really doing the work to earn the carry fee of getting everybody together and being the liaison between the investors and the founding teams, but it's quite important to have that one or two people who not only believe in the investment but also are willing to put in the work to bring everybody together.

We are also building the community, so we have coffee and dinner once a month. It doesn't matter how many people show up; it's about community-building.

One of the weakest parts of this EU money coming in is it's going to the VCs and into the specific startups they invest in. We need to get EU money into the ecosystem to support incubators, accelerators, mentors, advisors; who can then help hundreds of people or hundreds of startups, not just the ones that get money invested from the funds given to a VC.

Is there anything else you look at when considering a startup or an idea you want to invest in?

Ideas are a dime a dozen. Execution is gold. People come up to me saying they've got this great idea. My answer is always, 'Okay, let me ask you: Who's going to open the door in the morning? Who's going to close the door in the evening? And who's going to show up on Sunday night at 3 a.m. when the pipes are broken and the fire department calls?' The day-to-day management of a business is key. Everybody thinks it's the board or the CEO, but for me, it's the people in the trenches who are running that business. Sometimes the CEO is in the trenches, especially in a startup, yes.

It's about the people and for me that's always been the case as an entrepreneur and an angel investor. I'm trying to understand the founder's personality and how they interact with their team. I'm trying to understand if they have a good ego, but not too big, if they can listen and adjust and change their mind or opinion on some things. I think that the hardest thing a founder must do, is to decide when everybody else is wrong and they're right and the inverse of that.

It's also about who I'm working with and who I'm going to talk to: Are they just about the money, or do they love the experience of being an entrepreneur? Do they have something that will help solve a problem - like Tully, the device for kids with ADHD? Philip [e.n. the founder of Telios Care], really wanted to solve a problem of healthcare in Romania with telemedicine. Of course you want to make money, it's a business, but who you're going to work with is really quite important.

Then you've got to have a solid business case. You need to have a good market and a good plan, and then execution is gold.

How have you seen the funding activity this year?

Last year, T.A.N. raised follow-on rounds for both Telios Care and AiVA in the first six months and then it wasn't until August September when we had three opportunities. Mircea led two and I led one. We raised EUR 110,000 to 130,000 for three different companies: Finqware, MyBenefits, and Nordensa. That was again in collaboration with the other angel groups – Growceanu and TechAngels. So, there was a flurry at the end of the year, and it was about a million that T.A.N. members invested in 2023, which was a slow year. Everybody was nervous and cautious. That sentiment hasn't changed in 2024.

As of now, we have some people individually invested in some things but T.A.N. has not syndicated an investment yet in 2024. We're getting close to investing in CBN Agro, we'll raise about a quarter million through T.A.N., and there's another investment that's in stealth mode, so I cannot divulge any details. We'll see how the year wraps up. People are still talking about a bad recession, inflation, and the terrible fact that there is a war going on. Numai Dumnezeu știe viitorul.

You could try to be smart and find the investments that you think can weather the storm. It's not a bad thing that they start in tough times because sometimes too much money has ruined some startups.

I always tell the kids to find clients that can pay, and make me pay at a higher valuation next year because they have revenue and clients. If you can bootstrap, if you can go to friends, family and fools, do that because you keep your equity. It's your company.

(Photo courtesy of Emmett King) 

simona@romania-insider.com