After three decades in the automotive industry, Michael DeSimone is ready to take some risks.
DeSimone, 59, of Medford, N.J., sold his two Mt. Laurel, N.J., car dealerships for an undisclosed price (“It was enough to live on,” he said) to Holman Automotive Group in 2007 and got into the angel investment game shortly thereafter, prompted by the many people who were turning to him for early-stage investment.
He’s now the president and CEO of a Cherry Hill, N.J.-based angel investment group called DeSimone Group Investments, where he’s the sole backer.
The firm has invested in 21 companies in the last five years, including LED fixture manufacturer LUXTECH, automotive wireless charging company Momentum Dynamics and notably, CloudMine’s recent $5 million Series A. DeSimone makes initial investments of between $75,000 and $125,000 with follow-on investments of about $100,000 per year as necessary.
The main difference between the two industries, he said, are the surprises, the factors you can’t control.
“Automotive retail is a pretty formulaic business,” he said over the phone Thursday morning. Even though everyone does it a little bit differently, there are a set of basic guidelines and benchmarks that everyone follows in order to minimize risk.
With angel investing, it’s a lot more unpredictable.
“Every year, you learn how much you don’t know,” he said.
DeSimone Group Investments is not actively seeking out more deals right now, he said, because DeSimone likes to be hands-on with his portfolio companies and there’s only so much bandwidth a four-person team has. (How involved? DeSimone said they don’t get involved in day-to-day operations, but if one of their portfolio companies needs help, they’re at the ready. The team once even went to portfolio company Ionfield Systems’ manufacturing site in Horsham, Pa., and helped them assemble products. “It gets to that level,” he said. “You’ve got a lot of skin in the game. You do whatever you can to help them.”)
The bulk of the group’s deals are local, though it recently invested in a Chico, Calif.-based company called Work Truck Solution, which DeSimone found through the women founder-focused investment firm Golden Seeds. DeSimone called that one a “hands-off” investment since he knew the space (automotive industry) and the exit potential.
The companies range from software to social media to life sciences (DeSimone believes that in order to be a successful investor, you need to have a diverse portfolio). Outside of the 21 portfolio companies, DeSimone has also made some deals through or with local angel groups, like Mid-Atlantic Angel Group (MAG II) and Investors Circle.
His team is composed of John Goodwin, the former CFO of his car dealerships; Kendra Brill, who ran operations for DeSimone after he sold his dealerships; and Lauren Shippy, DeSimone’s daughter who recently got her MBA and is based in Florida. They work out of an office in a 12,000-square-foot Cherry Hill building that spans six acres, which DeSimone used to use for parking cars from his dealerships. Two of his portfolio companies — Ionfield and Christini Motorcycles — have engineering and assembly space in the building.
Shippy, the investment group’s research associate, is carrying on the tradition of working in the family business. DeSimone started working in the automotive industry during his senior year of high school at his father’s Cadillac dealership in Pennsauken, N.J. His father, who started as a parts counterman at a Cadillac dealership at Broad Street and Ridge Avenue in 1946, worked his way up to eventually buy his own dealership in 1966.
One thing that the auto industry and the angel world have in common? The importance of a solid team. It’s the first thing his group looks at when considering a deal.
“The people are ultimately critical,” he said.