Cherrystone Chairman, Stephen Schweich, featured on FPA New England Podcast

August 28, 2025

On August 15, 2025, Stephen Schweich was interviewed by Michael Connaughton of the Financial Planning Association of New England for a podcast intended for the group’s financial planning advisors called “The Wicked Pissah Podcast”. Following is a transcript of the interview, which has been edited slightly to make it more readable. Listen to a recording of the podcast episode here.

Interview Transcript

Michael Connaughton: Hello, and welcome to this episode of the Wicked Pissah Podcast. I'm Michael Connaughton, co-founder of Lead Advisor, and I serve on the Partnerships Committee of the New England FPA. Joining us today is Stephen Schweich, chairman of the Cherrystone Angel Group.

Stephen had spent 30 years in investment banking, and was previously a managing director at Stifel before retiring last year. Before that, Stephen was one of the founders of the technology-focused M&A advisory firm Moreland Partners, which was acquired by Stifel in 2019. Prior to that, he was the President of Robertson Stephens International in London, and a managing director in the Equity Research Department of Alex Brown & Sons in Baltimore.

Stephen has been an active investor in venture capital and private companies in Europe in the USA for nearly 20 years, and has served on the boards of numerous technology companies, including Locus Energy, which was sold to Genscape, Global Bay Mobile Technology, sold to Verifone, and Salon Interactive, current a L'Oreal partner. Since joining Cherrystone in 2011, Stephen has played a key role in sourcing and leading investments in a number of Cherrystone portfolio companies, including Streamroot, which was sold to CenturyLink, Medumo, sold to Phillips Medical. A native of New York City, Stephen moved to Providence in 2009 after working in London since 1996.

Stephen serves on the Advisory Board of Breakthrough Providence and enjoys travel, skiing and kayaking. Stephen received his BA from Amherst College and an MBA from Harvard Business School. Stephen, thank you for joining us today.

Stephen Schweich: Thank you, Michael.

Michael Connaughton: I appreciate you coming on and sharing some thoughts around angel investing. We'd just love to hear a little bit more about your career journey and background and how you got involved with the Angel Group.

Stephen Schweich: You know, I started out in equity research back in the late 80s, early 90s. And at that time, equity research analysts on Wall Street were very involved in transactions, fundraisings, IPOs. And so I've always been around the emerging growth sector, the smaller end of investment banking at Alex Brown, at Robertson Stephens.

So I've always been drawn to entrepreneurship and investing personally. I mean, back then, an analyst could buy stocks that they liked. My father was also an analyst on Wall Street. He made more wealth picking stocks and making investments than in his salary. So, you know, this is really an extension. Angel investing is an extension of what I did my whole career.

And then following on that, the capital markets and the M&A work that I did later in my career, also comes into play. I end up becoming a de facto free investment banker to the companies in the Cherrystone portfolio and try to help them with a lot of their financial decisions. So, it all flows together and the thing that's fun, of course, about angel investing is the intellectual side. You get to see so many different companies, great entrepreneurs, new technologies, and that's what I like about it.

Michael Connaughton: Excellent. Tell us, where does angel fit into the early stage process of company development and what's the evaluation process that Cherrystone is going through to make sure there could be a potential fit?

Stephen Schweich: We want to see companies not too early but not too late. What do I mean by that? We don't really want to look at companies when they're at the friends and family stage of investing, where they're just an idea and they're getting some money from friends. That has to happen before we get involved. And at the other end of the spectrum, by the time the company has a well proven out revenue model, a valuation that's approaching $15-20 million and the company is ready for the venture capital industry and doing a VC deal in the $3-5 million range or higher, that's too late for most angel groups. So, we fit in between there.

And if you look, most of the financings that angel groups get involved in, they are between $500,000 and $2 million. And so, angel groups are a bridge from the friends and family stage into the VC stage. Let me sort of turn to what our process looks like.

Companies come in and apply to present to Cherrystone Angel Group. And we do a pre-screening. And then if we think that they're a good fit, we bring them into our Screening meeting where our members are involved. Every month we have a screening meeting and we look at different companies.

And from there, we choose the ones that we want to bring to our General meeting, which is also a monthly event. And then after the general meeting, which includes the entire membership, we decide which ones we want to take into due diligence. Then, we form a due diligence committee.

If the due diligence committee is positive, we issue a due diligence report and subsequently a capital call to raise money for the company. So that entire process is going to take three to four months. You know, sometimes we can accelerate it, but, you know, it's a very deliberate process, very well structured, and hopefully it yields good results for us.

Michael Connaughton: Excellent. And maybe on the other side of that, Stephen, tell us a little bit about the investors of the Angel Group and how they get involved and usually their background and experience that brings them to the table and garners some interest here.

Stephen Schweich: I think that people join Angel Groups for mainly three reasons. One would be the investment upside of being in successful deals. Two is those seeking intellectual curiosity, who want to learn about new industries, new technologies and see a breadth of investment opportunities.

Our members may have come from one industry like life sciences, but they want to learn more about software. Smart people with curious minds at a later stage in their careers like learning about new things. And of course, the third reason is the social network. We have a pretty important network in Rhode Island and reaching out into New England, and I think that you meet like-minded people in an angel group. So we have a range of different types of members who have had careers in accounting, in banking, in large pharmaceutical companies, in manufacturing companies, lawyers, doctors, and they're all accredited investors, which means that they have a net worth in excess of $1 million, excluding their primary residence.

I would say the average age has been coming down over the last couple of years. I'd say it used to be kind of in the 60s, and I think we're bringing it down from there. And I'd say the other thing, of course, is that there's a lot of room for angel investors to get involved, and we want involvement.

We want engaged members, and that means that they'll bring companies to the group, and they'll go on the board of the companies that we end up investing in, or they'll take an advisory board position. In some cases, we have one member who's the non-exec chairman of a company that's been very successful. And then from there, the members can do things like make commercial introductions and actually help companies generate revenue.

They can help with talent recruitment, finding, you know, key managers that could fill in certain spots, and obviously with fundraising through their network. So I would say angel investor groups are not passive investors. The good ones are active, very active investors.

Michael Connaughton: Great. Thank you for sharing that. And then your group, when wanting to collaborate with that ideal profile that you previously described, a company that's not too early but not too late, how are you approaching companies, or how are companies approaching Cherrystone? How does that work, Stephen?

Stephen Schweich: Well, as I said, they come in through the screening, and then, the due diligence process almost begins from the day that we meet them. And let me talk a moment about how we conduct due diligence on companies and what are the kinds of things that we're looking for. I'd say first is the technology position of the company or the competitive position.

Often, we're looking at companies that have intellectual property, they have patents, they have know-how, and we're trying to assess how proprietary and how strong that company's competitive position is. How powerful will their new technology be? Will it really displace what's out there in the industry?

So that's a really critical part of the due diligence, and that's where hopefully we have members with specific industry expertise that can be helpful. The second thing we look at is the revenue or business model that the company is going to use. You'll have SaaS companies, but you'll have companies that are going to give away a product and get a recurring revenue stream.

But we'd like to see a company that's already at least thinking about what their business model is going to look like, what kind of gross margins they could generate, what they think their go-to-market strategy is going to be. Are they going to need to hire many salespeople, or are they going to be able to go through channel partners? And we're going to try to look for proof points, some early proof points that their revenue or business model makes sense, and that it really will develop over time. So that's the second area that we look at.

The third area we look at is the management team, the founder, the entrepreneur. And most of the time, you're dealing with a CEO founder, but not always. Sometimes you get a company that's been restarted, a new CEO has been brought in. And obviously, we're going to do the normal background checks, talk to other folks that have worked with this individual. We're not biased on age. We've had a very successful company where, I say, it's the oldest management team I've ever seen in the startup because the founder is in her 60s, but she's got as much energy as anybody out there. And we also get young first-time entrepreneurs. So you get a broad mix.

We're going to check them out. We're going to find out about the person. And the other thing we're going to also want to know is whether that person is really full-time? Are they all in? You do get some part-timers that say, “hey, I got an idea. I want to start this company.” And then you find out that they're involved with many other activities. And we had a situation once where a professor out of Brown started a company. And one of our members said, is he really going to give up his tenured position to run this company? Well, he did. And we thought he would. But those are the kind of issues that you get. We'll look at LinkedIn profiles, and I would tell any entrepreneur to make sure that your LinkedIn profile matches up with your story.

And then the fourth thing we do is review a financial forecast. But that is not as critical at this stage of a company's development. I mean, these are companies that are very early. So I'm not expecting tremendous precision, as I would say when I analyze a public company.

Finally, we look at the transaction structure and valuation. I can get into that in more detail. But essentially, there are three instruments that you see out there. One is a priced equity round, where somebody says, I'm going to sell you preferred shares at so many dollars per share, and there's a pre-money valuation. Or you're going to see many convertible note structures usually with a conversion cap valuation. And finally, more of an import from the West Coast, there is the SAFE, the simple agreement for equity. SAFEs are less liked on the East Coast than on the West Coast.

I guess the last thing is people say, hey, what's your exit plan, right? And yes, we pay attention to that, and we want to see it, but it's a long time away, right? And things will change. But suffice to say that it's not the most important thing for me at the early stages when you're doing your due diligence. If the company builds a nice business, they'll be buyers for it.

So, I don't know if that helps, but that gives you a little idea of how we look at companies.

Michael Connaughton: Very helpful. Thank you. And based on what you were sharing there and reading your bio, it seems like there's various industries and verticals that the group will engage with. Is that accurate? Are you looking at all types of companies or the companies that are in certain industries that you like to focus on as a group?

Stephen Schweich: Part of the answer is where we're located ... in New England, and the access we get to seeing deal flow out of places like MIT or Brown University. So we're going to naturally see pretty interesting startups in life sciences, for example, but other areas as well, such as material sciences, where we have a company that came out of Brown from the professor that I was mentioning earlier. We have another company in the medical device space called SmolTap that was also developed by a professor at Brown. It's a device to hold an infant during a spinal tap. So again, these are IP-based sectors. We think that companies that have something proprietary, that's what's going to interest our membership. Advanced Silicon Group is a company where the founder came out of MIT. It is developing nanosensors that can be used for protein detection.

And so I think angel investors really like companies that have proprietary technology. At the end of the day, they gravitate to that, much more so than companies that come to us and say, I've got a really cool new beverage that fits into a certain demographic profile. And we get those, and they come in and they're well-packaged. And they're talking about their distribution. We just got into this store, and that store. But I would say that by and large, angel groups don't do a lot of investing in consumer brands. Also, because it costs a lot of marketing dollars to get those brands off the ground.

At the other end, if you look at a very early-stage biotech company that's got 10 years of scientific work before it reaches the milestones that enable it to exit ... those kinds of investments are also tough. Biotech can require a tremendous amount of capital. So when I talk about life sciences, I'm thinking about, you know, niche companies like, for example, Hilltop Biosciences in the animal space. They started out with a product for the equine market. Now they're moving into the canine market, but it's very defined, and the time frames are not as long as they are in human pharma development.

There are other areas that are less IP-based that also are interesting to us. For example, what we call “femtech” today. We have a company in our portfolio, Egal Pads, that has developed a menstrual pad on a roll that's going into airports, stadiums, schools, universities. And, you know, it's addressing a real need out there, a social need, and globally. And, they have patents. And there are other angel groups out there that are focused on women founders and women-owned companies. So femtech is a space that I think is interesting. We just invested in a company called Flourish Care that's setting up platforms for doulas in childbirth. And that's a growing area.

We see many companies in the digital health space. It's obviously constantly evolving. One of our portfolio companies, Architect Health, is pretty interesting in that space. Two young entrepreneurs that came to us, and we thought that they had some special ideas about creating a portal to look into the distance care market.

We do a little bit in fintech, although that's more done in New York than in Providence. But we have a company called Relevate in that space. We also see bluetech as an emerging category. Jaia Robotics is one of the companies in our portfolio that fits in that space.

So there are many areas that we look at. We're really not sector-bound at all. We are generalists, but hopefully that gives you an idea of the kind of things that interest us.

Michael Connaughton: Yes, definitely does, very interesting. And in some of your comments there, you talked a little bit about time horizon. So tell me a little bit about the evaluation process and what an investor might expect return on their investment over time. I know that's gonna have some variability depending on the company, but if you could explain that a little bit, that'd be helpful to the audience, I think.

Stephen Schweich: Sure. I think generally speaking, from the time we invest, it's a 7- to 10-year time horizon to exit. And along the way, there's going to be a number of companies that won't succeed. This is a high-risk, high-return category. I tell our members that you have your safe money in T-bills and stocks, and bonds, and you should look at angel investing as a small piece of your overall wealth, but exciting and interesting. And we are doing it to try to make money, but it takes time.

Truth is that it's been a tough period during the last five years, not just angel investing, but for all early-stage investment. I think you see this in the venture capital community. There just hasn't been as much liquidity as folks would like. You read about these big liquidity events in AI, but those are multi-billion deals. We're not talking about that world. We're talking about the world where you invest in companies at around a $10 million valuation. And there just hasn't been as much liquidity there. But I think that's changing. I think you're seeing increased M&A activity.

So the time horizon is pretty long. Along the way, there may be recapitalizations where an investor can sell out. But I'd say that's relatively rare. Occasionally, there is a quick pop. It can happen. Medumo, we held for three years, and we got a 3X return, which was great. But those are the exception, not the norm.

Michael Connaughton: Stephen, our audience, a lot of them are independent financial advisors. So they might have clients that are inquiring around angel investing on their own or maybe wanting to get access to angel groups. Does your group collaborate with advisors at all?

Stephen Schweich: We're always looking for qualified new members. Our structure is simple. It's a membership fee of $2,700 a year. That enables us to put on all these meetings and an event in the summer and an event in the winter, and a pitch night in October. We have some staff to help us with the due diligence processes. And we conduct all our meetings in hybrid with Zoom so that we have members who are basically in Rhode Island in the summer but often living in Florida in the winter or out in California. We have many members up in Massachusetts. In today's world, angel groups are not as local as they used to be. For your audience, I would say that anybody who is in the financial field is probably going to be subject to FINRA regulations and compliance restrictions. When I was part of Stifel, I had to go to compliance every time I wanted to make an investment. I had to get clearance to become chairman at Cherrystone.

Cherrystone members don’t have to come to every meeting to participate. They don't have to invest in many deals or any deals. It's an opt-in model where you pick the deals you want to invest in. We have some members who come very rarely to meetings, but they like to receive communication through email, and they see what's going on, and then they engage in what interests them. So we're certainly prepared to talk to financial advisors and take a constructive view towards working with their clients.

Michael Connaughton: I know we've talked about a variety of things, Stephen. Is there anything we missed or should have asked, just in general, around angel investing or the group that you're involved with or just your background?

Stephen Schweich: I would just stress again the importance of engagement. That if you're going to join an angel group, the fun part is getting engaged, actually getting involved with the companies. Not all our members can do that because some have full-time jobs, but many of our members are retired or semi-retired, and they want to stay active, and they want to stay relevant and keep involved in different businesses.

I think that's fun, and it's also fun to look at and learn about different sectors, industries that you never looked at. You never had time, you were too busy with your job, and now you have some time to learn about new things.

It's amazing the amount of entrepreneurship in the US. We see so many startups all the time. They're always coming. So entrepreneurship is really alive and well in our country, and angel groups are really important now because many VC funds have pulled away from the small end of the early-stage investment market. Their funds have all gotten much bigger, and they're looking to write bigger checks. I would say that the angel investor community is playing a larger role in financing startups today than say, 10 years ago.

I would add that the angel groups will collaborate with one another. We work with all the groups in Boston. They work with us. We have a partnership with a group in Salt Lake City, Salt Lake City Angels. We see their deal flow. They see our deal flow. So there's more and more networking also going on between the angel groups. And I think that makes it quite interesting. And then I think just coming to the meetings and now with the ability to engage virtually made it really take off in an interesting way.

It is important to add some structure to an angel investing group. We have a staff member, Maddie Jacks, who manages our due diligence efforts and helps us put together the reports. We have a Managing Director, Ella Hood, who manages the front end in terms of all the deal flow that comes into our pipeline – it is important to keep things organized. We run some pretty good events. Finally, I really enjoy being Chairman and getting to interact with all our portfolio companies and our members.

Michael Connaughton: Certainly sounds like a very exciting time. And Stephen, if somebody wants to learn more about Cherrystone, what's the best way to get in touch with either you or somebody at the group to learn more and evaluate that group for themselves or their clients?

Stephen Schweich: I would just say go look at our website, cherrystoneangelgroup.com, and then I think there's a place there to apply if you're interested in being a member. Right on our website, you can see a lot of information. You can see the portfolio, you can see who's on the board, what we call the steering committee, and you can apply right there.

Michael Connaughton: We'll put the website in our show notes. So if the audience wants to learn more, they can click on that link and take it from there. Stephen, really appreciate you carving out some time and sharing about this topic. It's one that we've had on our agenda for a while, I wanted to learn more about, and the audience has been asking about. So thank you. We appreciate it.