Unsurprisingly, Larry Uhl graduated at the top of his class. (He was in the top three in his eighth grade class in rural Colorado). It’s true that there were only three kids in his class, so technically, he was also in the bottom three of his class. His parents recognized his potential, and taking some advice from a seasonal ranch hand, they sent him to a military school in rural Missouri. It turned out to be a reform school, and Larry, not needing reforming, was a star pupil there, too. So, after two years, he found himself applying to and being accepted by Phillips Academy Andover. Like the statistician who had one foot in ice and one foot in boiling water, but on average his feet were comfortable, Larry had, on average, a pretty average high school experience. 

From there Larry went to Harvard and later Harvard Business School. After that he spent almost two decades at Merrill Lynch in investment banking and another two decades at UBS in wealth management. Those long tenures in financial services gave Larry a special aptitude for creative financial arrangements, and I’m not using that as a euphemism for toxic financial instruments that ignite credit crises (Larry didn’t do those). I mean it in the most complimentary sense: smart ways to accommodate different needs and objectives in a single deal.

For example, about four years ago Move2Play was getting their line ready for the holidays, and they needed funding to make it happen. Their next round was on track for Q1 of the next year, but that wasn’t going to be in time, and all they needed in the short term was a couple hundred thousand. John Bell suggested that they didn’t need equity financing, they needed inventory financing. So, the team came up with a $200K inventory loan that could be converted at a modest discount in the next round. 

Larry has been an investor in Xeal, an EV charging startup focused on apartment applications. They needed financing, but the Pasadena Angels team didn’t think that the standard two year convertible note was going to work for Xeal. Sure, that’s a conventional norm, and most people default to the old standby, but they recognized that Xeal was very likely to need more time. And, the problem with a convertible note coming due without any other financing in place is that it puts everyone in a bad place. 

The company doesn’t have the ability to convert it to the newest round of equity financing, and it doesn’t have the cash to pay it back. That leaves a very wide range of possibilities, from forcing the company into bankruptcy to just letting the loan grow more past due. The enormous gulf leads to an awkward negotiation, and the investor’s options are limited to either take what’s offered or take the whole company down by forcing it into bankruptcy. The key is to avoid getting to that place by anticipating possibilities and putting contingencies in place. 

In general, the financing should match the business plan. The trick comes in anticipating what might change when things don’t go to plan and building in contingencies. Something like 70% of startups pivot, which means that the business plan changed, which may mean that the financing deal no longer fits the plan that was agreed to. 

The answer for Xeal was to make it a three year note instead. In other cases, Larry’s started to use other provisions. Notes can include provisions to increase interest rates or principal paybacks if they aren’t converted or paid back in time. Those can seem like harsh terms, but they are gentler than BK, and they convey the urgency of meeting those financing deadlines better than a monthly phone call.

“It’s about more than the money” reflects the Pasadena Angels ability to apply a wide range of financing options, as well as the know-how to apply them intelligently to situations by anticipating possibilities based on experience. It also reflects a reputation for not exploiting that advantage of know-how and experience over entrepreneurs. For Larry, the fun challenge is to use that big bag of financing tools creatively to solve problems before they happen.