1:00pm Like a well-rested and tanned movie star, @AngelBootCamp is back on the scene. I’m settled into the auditorium, got the laptops charged, and will be your guide throughout. Which makes me Rita Skeeter compared to all of the Gryffindors speaking today.
- Maia Heyman Paul English, Blade Peter Blacklow Rob Go
1:00 pm @robgo starts by giving a shoutout to Veterans. Text VFW to 9099 to donate $10 to the VFW Foundation.
Starting off with @davidtisch and @wayne Chang. I’m not sure we can take this much style at one time!
David had made 5 angel investments at his first angel bootcamp in 2011, and 185 since. Must be THE poster child for angel investing. Definitely throwing down the gauntlet for Wayne (who is not averse to writing an early check.) Tisch talks about how he met Eric Paley, Phin Barnes, Angus Davis, and especially David Cohen, for whom he started TechStars NY branch.
His learnings from that day: 1)Write lots of checks. 2) Do that consistently. Contrasts that to angels who do 3 deals a year, but takes up a ton of time with meetings. DT (how about those for initials) thinks that his job is NOT to cause a hassle for his companies. Don’t be frustrated with losses, and be a good loser–SUPPORT YOUR FOUNDERS, it’s a lot harder for them. Don’t be a drain on them.
True early stage angel investing is about conviction. David invested in Vine (mobile/video application Twitter bought). DT was user #3 on Vine, way pre-launch. Sold with just 55 users pre-launch. DT had tried to hire the co-founder 6 years earlier, so it was a long relationship. Saw a prototype, it was a “product moment”, and magical. That type of good luck is fleeting. He missed YikYak (for antiportfolio). DT believes early investing is 100% art, and no science. (I’ll be more inclined to agree on consumer products.)
1:18 Dave Tisch talking about Bark Box. Saw deal pre-launch, and Dave thought it was bullshit. Passed on $1mm pre-. “And we don’t pass on ANYTHING. We fucked up.” He ended up writing a check later as an uncapped note and got in. Lesson learned: he has to take risk–and be willing to admit mistakes and chase an investment.
“70% of the deals we get we find–30% find us.”
“You don’t want to fund a humble entrepreneur.” Dave mentions the need for a little swagger.
1:24 ” If you’re recruiting great people, and making them leave their job to join your flaky startups, that’s hard. And that’s what I think about.”
Dave + colleague seeing 100 companies a week. (HOW????) Also does a lot of networking to get his dealflow. He worries every day that he didn’t see it.
“I don’t believe investors are that important or have a big impact.” “Investors do two things–make introductions and pattern recognition.”
1:30. There is a frisson in the crowd. The barometer has dropped. WAYNE is in the room. Invested $1mm in the last 6 months. Talks about the awesome numbers on Crashlytics (40+x at time Twitter went public.) “Be kind if the startup fails. Invest in their career.” That’s how Wayne got into Secret, an entrepreneur he knew forever, and wanted to back whenever. Even though there were failures before.
“Stop. It’s NOT about you” as an angel investor. Amen, brother.
Nice part of being active–the flow gets better, your insight gets better, and value-add improves.
“How do I increase my odds of success? Invest with VCs.”
Now that Wayne is backed by AngelList Syndicate and Atlas, he always gets into the pro-rata rights, and the odds of returns get better. Gets the best of both worlds, leverage and visibility, and still sees small deals as well as large ones.
1:42 KATIE RAE! KATIE RAE! The queen of Boston, cofounder of Project 11, and former head of TechStars Boston, is here to rock the crowd!
Katie has invested in 70 some companies. “Entrepreneurship is so fundamental to a strong society. It takes crazy, awesome people to back entrepreneurs, and I wanted to be one of those people because it’s important.”
“There are a bunch of ways to gain pattern recognition without taking a thousand meetings. But there are a number of ways to hack that, by going to accelerators and picking 10 at a time to look at.”
“How to be a true ally to an entrepreneur is really, really hard.” Katie takes the other side from David Tisch–she won’t invest in assholes, and WANTS to love the entrepreneur like a child. She compares it to having a child–you love them, but you have to understand that they still do stupid crap. Even when you have more knowledge than the kid/company, how do you let it go to let them learn? Forgiveness is necessary as a parent/investor. Screw ups happen, but you have to have the company learn. Don’t let the negative emotion take over instead of how to make events a teachable moment.
@ktrae’s big points:
1)see a lot of deals
2)let go and be an ally
3)continue to learn voraciously. It’s hard to get true feedback from entrepreneurs on how to be a better angel. Hasn’t found an easy way to do this directly, but indirectly by asking others involved in the deal about how she should or shouldn’t have acted. Fellow investors coaching each other can help when entrepreneurs are often shy about giving feedback to THEIR investors.
1:50 Katie Rae gets a question from the crowd, “How can the unknown early investor compete with well-known investors?” Answer: you’ll get a reputation–and a good one–if you’re more than “just money”.
@DavidChang asking @ktrae about her thoughts on valuations. She replies that 1/2 of the people say you’re an idiot if you care about valuations, just get the right deals, whereas others (including Katie) care about the basis. She IS valuation sensitive. She thinks that to return money to her LPs (like me!) is to be able to get a big enough percentage to make a difference, given the big big big time she puts into her few deals.
Can win either way, either by momentum, jumping on the hot deals, or by the value. Katie just doesn’t go for the $10mm cap notes type of A round deals.
2pm: Paul English of Kayak, Blade, 3 other companies, takes the stage. 3 out of 4 winners, jury still out on Blade. Praises Katie Rae, who spoke just before. +1 from your loyal writer.
Have looked at about 150 companies so far at Blade, about 3 deals a week. (website is blade.net, Paul promises to reply.)
70% decision is team, 20% problem they are attacking, 10% is the idea.
On the team, he wants someone who has 1) seen success; 2) is ethical. Prefers 2 founders over solo founders, as it helps during the inevitable tough times.
Reason people fail: not that the technology doesn’t work, it’s solving problems people don’t care about. Less Blade’s job about how to solve the problem, just give help on intros, general feedback, but letting the smart team figure out the problems.
Blade has done 4 companies, 1 has failed already–incredibly painful, even though he knows taking risks important. Only one not in stealth is Wigo (with a founder from BurlingtonVT!!), and Paul’s job right now is to shield the founders until they have 1mm users. Other companies, one in recruiting software, 1 in hardware/software photo space.
“Worst mistake at Kayak was hiring wrong people.” Keeps a binder of all the mistakes he has made.
“At Blade, coaching is the most important thing we can give entrepreneurs.”
Jordan Fliegel of Coachup (himself an angel via BridgeBoys) asks Paul English about the idea of doing B2C companies in Boston. Paul Graham (who had worked for Paul English long ago) told Paul English that he would fail because you can’t build a consumer company in Boston. Paul English wants to change that behavior. If you want to do consumer, there are techniques to set the bar ridiculously high to create the killer apps, and it’s TOTALLY possible to build companies like Kayak here.
2:15pm Jean Hammond sits in. Active angel, co-founder of LearnLaunch, also a member of HubAngels, LaunchPad, and a cofounder of Boston branch of GoldenSeeds. Early investor in ZipCar. Has done close to 200 angel investments!!
Takes us through the macro numbers, provided by AngelCapital Association.
$29B by VCs, $25B by angels, 3995 companies funded by VCs, 70k by angels, with almost 300k active angels in the US.
In response to Wayne’s way to maximize his odds of success (invest alongside a VC who has time, money and attention to put into the deal), Jean says “Whenever I’ve made a lot of money, a VC was involved in the deal. Whenever I lost a lot of money, a VC was involved in the deal.”
Jean makes the case for investing via AngelGroups. I agree that is the best way for beginners, but I generally take the opposite tact: almost all of the best angels I most respect work their networks and generally aren’t investing via groups, as groups tend to act slowly in my experience. But there’s no arguing with Jean’s success.
EdTech industry is right in her sights right now. And a natural fit for Boston. At @learnlaunch, they have a co-working space with 30 companies, and the third cohort of 7 companies is just about to start.
4% of VCs are women. Female angel investors have jumped from 4% to 22-25% in past few years, and 50% of Jean’s personal portfolio are now led by women. Fact–teams with women co-founders more likely to be funded.
Notable leads at AL Syndicates: Tim Ferriss, Elad Gil, Sam Lessin, Max Levchin, Joshua Schachter, Gil Penchina, etc. (I BUY INTO ALL OF THIS…although I am backing none of these guys, but others, mostly less well known. See my investments here.) Moving Syndicates into ETF style of themes. And I’m TOTALLY into that. But I don’t buy the idea of a “fund of funds” piling on another 10% carry fee. Fees on fees on fees. Once is OK. Thrice?
Jeff said AngelList is “collecting more realtime data, with the product replacing paperwork. And lawyers.” That may be one of the quotes of the day.
Still scratching my head how Jeff Fagnan, who is playing such a huge role in disrupting the VC industry, doesn’t have a twitter handle. Then again, I don’t even know if his VC company (spun out of Atlas) has a name yet…
Whooo! BIG aggressive question to the people on the “public funding” platforms, FundersClub and AngelList (Atlas Venture, or in Jeff’s side, the half of the firm formerly known as Atlas).
An angel asks about the question of not following on–Jeff Fagnan’s response states that Darwinism is good. The idea of Party Rounds is put back to the entrepreneur, who should “Just Say No”.
Another great question about Adverse Selection on AngelList Syndicates. VC firms now sucking the API from AngelList to see about leads. The answer–more data will show which people will do well, as it gets more institutional.
Great, tough question, and one that I believe comes with “Founder Emptor” as the correct answer–know your investors, and know what you are expecting, and check with their previous investments, bad as well as good. Have that question with ALL of your investors about what it will take to have the investor follow-on. And for those baby angels who don’t understand that question, we’ll put a link of relevant articles on this later.
3:00: The schedule going forward:
4:00 Ben Einstein of Bolt
4:15 Diane Hessan of Startup Institute
4:30 Eric Paley of Founder Collective
4:45 Semyon Dukach of TechStars
5:00 Angel Panel: Maia Heymann, Shereen Shermak, Freddie Martignetti, Jay Batson, Nicole Stata
5:30 Andy Palmer
5:45 David Cohen
6:00 Cocktail hour
If anyone is enjoying this, tweet me in the next 20 minutes @tydanco, otherwise I’ll slow down the pace.
2:45pm Alex from Funders Club taking the stage now. I’m wiped out, got to take a break, sorry guys.
Ed Pease, partner at Wilmer Hale, talking about SAFE investments, SIMPLE AGREEMENT for FUTURE EQUITY which are akin to converts. The idea on either of these is to come to agreement and funding when there is disagreement on price. That rules out equity investments, for sure. Convertible notes were made to kick the valuation can down the road, but serves no one well, as so many good writers have shown. (Don’t even get me started talking about West Coast 10mm Caps on unproven companies.)
Typical convert has 5-25% discount to the next round, and that’s the reward for the early check. As a check on the amount of valuation running away, there will be a cap–that is, locking in worst case price assurance for the note investor. But not great from the company’s point of view, because there is a maturity date on it, and an interest rate. And no floor.
YC invented the SAFE at the end of 2013. It wants to get rid of all things that aren’t good for the company: interest rate, maturity date, note status. It just says “when you raise a security, I get to convert.” When it converts, you may get the same security as the VCs, but most likely you’ll get a different security altogether. Unlike the convert, where note proceeds are converted into equity at a discount, you don’t get $1 basis of liquidity preference based on 80 cents of investment. On SAFE, dividends and basis are ONLY based on the 80 cents, not the $1 of the converted note.
SAFEs have now gotten more complicated, with MFN rights and now discounts. Lawyers and investors starting to engineer the SAFE. But premise is: 1) Not debt; 2) you’ll get securities in the future, unknown type;
In summary, lots of goodies in SAFEs for the company, the issuer. From company’s point of view, it’s preferable, with the only downside being the unfamiliarity of investors. Wilmer Hale is recommending SAFEs to all of their corporate clients. 5 pages of docs, only one page agreement, only 2 terms to negotiate: discount and cap.
From an investor’s point of view, it is hard to say it’s better, as we’re giving away control of company. Only possible advantage for investor–showing you are “founder-friendly”.
Don Dodge and I pile on that this is TOTALLY stupid for investors. Yechhhhh.
And we’re back (belatedly) from the break. Caught up with my former partner Shereen Shermak at the coffeebreak, along with Jeremy from BridgeBoys, both co-founders from Appcues (stay tuned for a film with them), Don Dodge’s son, who like Dad is now a serial entrepreneur, many others.
Got the suggestion that we should be playing a round of angel bingo. All folks in the crowd, the first one to string together 5 of any of these 9 words wins:
1)traction; 2)pivot; 3)MVP; 4) “the valley”; 5)agile; 6)100x; 7)Uber; 8)Elon and 9)AngelList. (I believe if Jason Calacanis were here, we would have a bingo within a paragraph.)
4:20 And now we’re back with Ben Einstein talking about the joys of investing in hardware. A huge portion of Bolt’s follow-on financings use angels. They’ve only been around 14 months, but 7 companies of theirs have raised significant follow-on financing. Sorry to have missed most of his speech, but you can go back in the archives and hear his story here.
4:25 Diane Hessan, formerly of Communispace and now the CEO of StartupInstitute, but speaking of her angel experiences.
Why is she an angel? 1) Emotional reasons; She also will talk about 2) How she engages in investing; and 3) lessons learned.
The book “Noble House” was a meaningful experience for her. The protaganist thought “One day, I’m going to have a lot of ‘drop dead’ money.” Getting to the point of “just playing” and not agonizing if you made the wrong decision has always had appeal. She only makes angel investment with her “drop dead” money, and not to sweat it. All upside, no downside.
In the spectrum of deals, 1) On one side, there is the stuff you hate. 2) and there’s the stuff when you love the founder, love the idea, you would buy the product, and you want to go for it. But for her, 80% or more is in the middle, where she thinks she can help fix the problems. If the middle is a high number, the signal is “don’t do it on your own.”
But the fun for her is the collegiality, having peers/colleagues alongside is also great–not just with the founders, but also the fellow investors.
Lessons: #1 Know yourself. (She likes investing alongside people she likes and trusts.)
#2 (Didn’t catch it)
#3 Remember that when your investment goes well, you’ll want to put more money in. Start with 10% of the amount of money you’ll want to invest. Think about follow-on rounds. [Ty comment–that seems awful small, especially when she’s only following on 20% of the time. Got to question the math or my hearing. Diane, if you read this, please feel free to comment and explain.]
Her formula: P times X times E. P= big PROBLEM X is Solution. E is Execution–can the team execute?
In response to a question from the crowd–she thinks that women by their nature are too “honest”, not prone to hype. She thinks this isn’t an integrity issue, more of a passion/hormonal issue. Women are like Canadians–they apologize before they talk. “Women need to stop apologizing and framing our ideas small.”
4:35 Eric Paley of FounderCollective (which invested in UBER– first mention for AngelBingo).
Eric thanks organizer Jon Pierce for the killer tradition that has become AngelBootCamp. I vouch–it was important for me to attend, and I learn something every time.
Eric agrees with Tisch that it is “angel investing is way more art than science.”
“What Have I learned over our first 100 investments?”
1) Look for yes, not no. (Example, Uber. Many passed because of fears of regulation. Plenty of people said no.”
2) It’s all about people. “We don’t like media businesses, but we really like Jonah Peretti (BuzzFeed)
3) The Insight is usually beyond popular themes. Get below the surface. (Brontes)
4) Founders should like talking about the hard parts. (SeatGeek)
5) Things often go WRONG before they go RIGHT. Eric, btw, is not a big fan of pro-rata. Like Dharmesh, they state that they don’t like writing follow-on checks. However, they DID follow on with the TradeDesk when they struggled.
6) Great founders seem like magicians (BrePettis, MakerBot)
7) We have many more losses than winners, but you can only lose 1x your money. (oPower)
What due diligence does he do? Outside of fraud, or founder did terrible job at their last companies, the big question is “Are our eyes wide open? Yes, there is risk, just don’t take foolish risk.”
4:50 @semyondukach takes the stage, invested in 100+ (70 still active) companies before he started at TechStars. As well as starting a few himself after his life as a captain of one of the MIT blackjack teams.
He wants to focus on ANGEL part, and not the INVESTING part, of angel investing. Need to think about the emotional returns–money doesn’t make a difference in your life, but finding someone you can really care about and help, THAT makes a difference in a life. His broad diversification (100+ investments) is an attempt to maximize his ability to make a life-changing impact. He spreads it out because he loves those moments, and wanted to increase the likelihood of recreating that impact.
He doesn’t think pro-rata is that big a deal either–if a deal is priced right, then it is at the market, but no extra benefits in terms of friendships, impact. He wants his companies to price deals at the market, so there’s not necessarily a big benefit. He’s not looking for “RIGHTS”, and he’s still done well.
Panel goes on. Maia Heymann as moderator starts it off: “What got you into angel investing, and what do you wish you knew when you started.”
Nicole Stata : “I wish I knew about eBay. My brother and I were hanging out with Pierre and heard him talk about eBay as a cool way to sell Pez dispensers, and we ran out giggling.”
Freddie Martignetti: “I wish I knew about minimum financing thresholds–pledging money if a company can make sure that it has enough to get to the next performance indicator before taking your money.”
Shereen Shermak (@shrcubed): “I got involved in angel investing when I left big banking to become an entrepreneur myself, and it made sense to diversify across all the other entrepreneurs I came across, and it seemed like a sensible quantitative approach.” “I look at this as an investment, as opposed to Semyon.”
Jay Batson: “I come from the Semyon side of the philosophy, being able to help. If I can pay it forward and help other companies, it’s great.” “I tell firms that I invest a small amount over a great number of deals.” What he wish he knew when he started? “I didn’t learn to say no to my commitments to help out to company, and there is a limit to the time I can spend.”
Maia: “If you’re currently working, your connections are freshest and most relevant. You can both work and angel invest.”
Maia: “I care greatly about pro-rata rights.”
Nicole (@nstata): I had been schooled “OF COURSE YOU HAVE FOLLOW ON”, and (previous speaker) Eric Paley told me a different way to approach the problem. The great thing about Boston is you can pick up the phone and visit all angels and most of the institutional VCs. My conversations with Joe Caruso, Eric Paley were invaluable.”
Freddie: Big on pro-rata rights.
Jay: “As a serial investor, having old investors enforcing their pro-rata rights isn’t necessarily adding value. Institutions may be different than individual angels.” Are you investing to help the founder, or are you just trying to force for value.
Maia: “I actually think that the seed and angel investors are most closely aligned to the founder. Their money is much more aligned than the C and D round. Multiple levels of preference ends up ahead of them.
Jay quotes Yoda. “Do, or do not. There is no try. ” If you want to be an angel, JFDI.
Freddie, btw, was friends with an investor in Warby Parker, took him more than 10 calls to get to be able to make an investment, but he had to demonstrate some tenacity to get there. When you get the chance, you have to fight your way in.
Shereen: You need to get a reputation for consistency, a quick but dependable process. Wants to overdeliver on their commitments, and keep promises low enough to ensure that she can over deliver.
Nicole Stata on deal flow. “Jen Lum told me that a big part of sourcing deal flow is going out to the events. You just have to be open to meeting people.”
Maia: “Build your network, networks matter, have fun.”
Freddie: “See a ton of deals. It’s like slowpitch softball. Wait and wait and wait for the perfect pitch, then knock it onto the MassPike.” @fcmartignetti
Super angel and multi-time entrepreneur winner @andypalmer up now, doing about a deal a month, $100k per deal, has put $5mm into this ecosystem, and has made it back and playing on house money. He believes you can’t dabble, you have to jump in. “A problem for MA is its risk profile.” He never invests alone. “I’m a big rugby guy, and everything for me is team.”
Software, ehealth, biomedical stuff are his favorite areas, with double bottom lines.
“There is no problem for dealflow in MA. We have so much great dealflow here.”
“Timing really matters. I don’t think it’s a great time to write checks. There’s so much optimism, prices are really high. I started writing new checks a year and a half ago.”
“If you are taking up entrepreneur’s time, and not in a position to write checks, you are hurting those companies. Only take up entrepreneurs’ time if you can help them.”
“I personally invest in the emotion, of my brothers and sisters in the startups, about 1 in 10 companies. You can have my money or my time, but not both.” I (Ty) think that’s honest–once you start investing after a while, there’s only so much of you to spread around.
Andy quotes Rich Levandov of Avalon. “The only reason I do due diligence is to decide I don’t want to invest in something.”
“My first instinct with the companies I work with is to ask “How can I help?” You have to suspend your hubris that you know their company better than them. Willingness to put the company first is absolutely essential.”
“Your goal is to maximize your relationships with people over that of any investment, because the ultimate return is multiples of whatever you can make on any one deal.” Business is an emotional activity done by emotional people, trying to do things far beyond normal invisible hand MBA. I disavow my MBA at every possibility.” For me, Andy and Semyon have stolen the show today.
5:55pm David Cohen, founder of TechStars takes the stage to wrap it up.
Brad Feld told him about investing, “It doesn’t really matter what your strategy is, as long as you stick to it.” He believed great companies could be created outside of Silicon Valley. “What, the internet doesn’t work here in Boulder?”
“We all give startups advice all the time, there is no crystal ball. But what matters is a belief system you are true to, and a consistent approach.” David, unlike Andy Palmer, is going to keep on writing checks. The consistent approach.
“Give before you get”–TechStars is not transactional. Quality over quantity.
firstname.lastname@example.org promises to share a few deals with new angels to help get them started. NICE. (That work for me, too, David?)
That’s it, folks–it’s beer time. Now you know why this blogpost is entitled “Insufficiently Edited.”