The Partners at Outlander VC share one very important commonality: experience as founders. Each of us turned to venture capital to solve a problem we faced while sitting on the other side of the pitch deck, and we are now uniquely positioned to mentor founders based on this shared understanding. From the barriers facing minority entrepreneurs to the pitfalls of trial and error, here’s how our team of founders-turned-venture-capitalists is using their founder experience to guide their investing, plus their advice for founders just starting out.
As a female founder raising venture capital, I was pitching to a fairly homogenous subset of men to which I was a stark minority. At networking events, I was disheartened by the lack of gender or racial diversity (especially where those identities intersect) among my fellow founders. In recent years, it’s become more widely-acknowledged that the tech startup ecosystem is not diverse enough. However, just talking about this lack of diversity is also not enough.
We know that 65% of venture capital firms have no female partners and 81% have no Black investors, which directly impacts how they source potential investments, evaluate founders, and fund ventures. At Outlander, we believe that who sits at the decision-making table matters. We believe that one of the best ways to diversify the tech ecosystem is to diversify who is writing the checks, so that is exactly what we did.
On a more day-to-day level, one of the things I work on with Outlander’s portfolio companies that I learned as a founder is ruthlessly prioritizing where you invest your energy. There will always be too much to do and never enough time, so it’s crucial that founders intentionally prioritize progress in areas that will get their venture to its next important milestone.
“At Outlander, we believe that who sits at the decision-making table matters. We believe that one of the best ways to diversify the tech ecosystem is to diversify who is writing the checks, so that is exactly what we did.”
I didn’t start my military business to make money; I started it to solve big problems with a crazy idea that I knew would make a massive impact. And when I transitioned to tech investing, I realized that every founder I met was just like me just years earlier: motivated despite a world of naysayers that can’t wrap their heads around such an ambitious vision for the future and also very much in need of support beyond just capital.
As we point out in Outlander’s Founder Framework, founders are psychologically unique in their bigger-than-life visions and the need for emotional resilience, which is why former operators often make the best mentors and investors: we get what it’s like to willingly embark into uncharted waters when everyone ashore thinks you’ve lost your damn mind.
As a founder turned investor, my advice for any founder is to experiment at the intersection of their passions and capabilities—this will ensure your venture offers a truly innovative and unique insight into the problem you’re trying to solve. It’s not enough to just find a problem and set out to solve it; without an underlying motivation, there is less reason to push through when things inevitably get tough.
“It’s not enough to just find a problem and set out to solve it; without an underlying motivation, there is less reason to push through when things inevitably get tough.”
Though not a tech startup founder, I’ve been fortunate to walk the founder path in other industries. Throughout these experiences, I kept arriving at this conclusion: the companies I wanted to build were ones that 1) I truly believe will make a significant, positive impact in the world, and 2) the founders are uniquely positioned to build their vision of the future.
When I quickly learned that becoming an expert in all my areas of interest was unrealistic, I realized that venture capital offered the perfect modality to scale this desire. As an investor, I am in my happy place: working with brilliant minds who are passionate about solving big-impact problems across a myriad of industries. Investment fit or not, my mission is to help founders succeed, and I revel in acting as both a sounding board for their business challenges, as well as making introductions to potential resources, talking through life, and much more.
Reflecting on my time as a founder, I definitely could have been more honest with myself about my strengths and weaknesses and worked to build a more robust support network. I often encourage our founders to lead with their vision of the future and the unwavering belief that they are uniquely positioned to build that vision. However, this unwavering belief is not to be confused with the unrealistic expectation that founders be experts in every aspect of their startup and execute every operation perfectly (far from it!), but knowing when to assess their gaps and rely on the support system they’ve built is crucial to their success.
“As an investor, I am in my happy place: working with brilliant minds who are passionate about solving big-impact problems across a myriad of industries. Investment fit for not, my mission is to help founders succeed.”
My founder experience is one I hear often as an investor: I didn’t know what I didn’t know until it was too late. As a non-technical founder, I did know I had certain knowledge gaps related to technology. I didn’t realize I also had other big gaps in relationships, capital, and start-up expertise that I’d have to fill to scale my company to over $10M in annual revenue.
I like to joke that during those years of trial and error I personally stepped on most of the hidden landmines that lie in wait for new founders. Now, as an investor, I’m eager to share my experiences with founders to help them stay on safe ground and scale their ventures bigger and faster—and with less angst—than I did mine.
I learned a lot of timeless lessons during my entrepreneurial journey, many of which apply to all leadership roles, not just founding a tech company. An important overarching one is that you must be self-aware and brutally honest with yourself. You won’t be great at everything. That’s okay! Accept it, and don’t try to do it all yourself. Purposefully surround yourself with advisors, cofounders, and peers who complement your weaknesses and your skillset. No one will expect you, the founder, to be an expert in every aspect of your company. You’re expected to lead, a big part of which is equipping your company with the experts it needs to thrive.
“No one will expect you, the founder, to be an expert in every aspect of your company. You’re expected to lead, a big part of which is equipping your company with the experts it needs to thrive.”
With 20+ years in tech as an operator, serial founder, and startup advisor, I’ve observed the process of raising startup capital from countless case-studies, and what I keep running into is a dissonance between the exceptional women of color founders I meet and the inaction of investors.
Note that I am not citing a lack of opportunities, but that fewer investors have been willing to take a chance on a marginalized founder’s vision: it runs the gamut from microaggressions in interviews to dismissing ventures aiming to revolutionize multi-billion dollar industries that simply do not apply to the majority of (white, male) investors. I’ve seen and experienced first-hand the gap between marginalized founders and the support they need to grow their ventures, and I wanted to be a part of the solution.
To bridge this gap, I work to educate the tech community about the untapped potential of not only these underrepresented founders but also the untapped potential of the Southeast. In that same vein, my biggest piece of advice is really for investors, and it’s simple: don’t count us out. If you want to invest in truly exceptional founders, start making a conscious effort to cultivate relationships with investors and founders who don’t look or talk like you. If you want to invest in startups already changing the world with their vision, forget what you thought you knew about the South. We’re here, and we can’t wait to show you what we’ve been working on.
“If you want to invest in startups already changing the world with their vision, forget what you thought you knew about the South. We’re here, and we can’t wait to show you what we’ve been working on. ”
These founder-turned-venture-capitalists are not only uniquely positioned to mentor Outlander VC’s portfolio companies from a place of experience and innate understanding, but we also bring a founder’s mentality (vision, intelligence, character, and execution) to how and why we invest. At Outlander, we invest in the brightest founders with game-changing visions for the future because we know what it’s like to be on the edge of something big.
When I began investing over a decade ago, I evaluated deals using a holistic lens: a well-built company with an innovative product made for a good investment. Using this company-centric framework, I invested $1M into 20 companies during my first year that I thought had a good shot at success, but within 12 months, all but a few (shoutout to ExpenseCloud, Klout, Ticketmob, and Burstly—all 4 of which I later sold my shares in for $2.7M) were clearly failing.
Frustrated, I began taking inventory of the different factors that could’ve prevented them from succeeding, but their solutions, business models, and market influence all checked out. And yet they were still failing.
At the time, I was meeting with founders and listening to traditional pitches and predictive cash flows, which always painted a really pretty picture of the future if all went well. But over time, I understood that expecting things to go according to plan was unrealistic. The only real predictable factor with startups is that their industries will inevitably shift, and their founders will have to find ways to effectively respond. So if change is as inevitable and uncontrollable as the weather, then what aspect of each startup can we look to for constancy?
I decided that if I wanted to be an adept predictor of startup success, I would have to develop a specialized talent in evaluating the founders themselves.
I started observing and analyzing the factors that set successful founders apart from others. What psychologically differentiated them, and how did the stories they told us about themselves differ?
The answers that I found won’t come as any surprise to literature buffs: the most successful founders had shared characteristics rooted in the defining moments of their lives. In other words, they all followed the archetypal hero’s journey. Their personal stories often hinged on a moment (or moments) when they struggled deeply but somehow found a way to persevere or overcome an obstacle they couldn’t control or foresee.
These kinds of stories gave me a glimpse into a founder’s internal GPS, which could be used to predict how they would handle the chaos of a startup’s lifecycle. I began to see that some founders are more wired for adaptability, so I stopped asking for their pitches first and started asking them to tell me about themselves—their stories, their challenges, their fears. The answers they shared in conjunction with the success or lack of success they inevitably experienced provided me with the evidence I needed to build Outlander’s Founder Framework.
Our Founder Framework is the most important evaluation tool we use when deciding whether or not to invest in a startup, and like the industry we work in, it’s constantly evolving as we learn more about founders and their psychological makeup. Currently, the Framework consists of 38 characteristics divided into four categories: vision, intelligence, character, and execution. Like any good literary hero, outstanding founders need strength in each area.
Vision: Think of a founder’s vision as their map. It might not be extremely detailed, but it gives them a necessary outline for the journey that lies ahead of them. It helps them predict hurdles, and it gives them a compelling way to convince others to join in on the quest. Founders with great vision aren’t as focused on the ways they want to get to their destination; they tend to focus on the fact that they’re dedicated to getting there by any means necessary.
Intelligence: When I refer to intelligence, I’m not talking about how high their IQ is or where they got into college, although those things don’t hurt. What I mean is that they have a great internal compass—meaning knowledge of their venture’s industry, the skills to navigate through complications, and experiential knowledge that led them to create this particular solution. When their ship goes off course (and it will), they have the intelligence to get back on course and to learn from the detour.
Character: A lot of extremely successful founders have been what people might refer to as “a real character,” but when I’m evaluating a founder’s character, I’m actually trying to find out what fuels them. I’m looking for homegrown mental fortitude, something akin to grit and determination. A lot of people say they’re ready to give all of their time and energy to see a venture through, but only a handful of them really mean it.
Execution: A founder’s ability to execute is all about their ability to make choices. Founders with this strength know how to combine their vision, intelligence, and character in order to arrive at the next course of action quickly and deliberately. They must be open to adapting their approach or perhaps even looking for opportunities to experiment.
At Outlander VC, we believe in the methodology behind our Founder Framework, and we apply it early when determining whether or not we will invest in a company. So what does that look like in a practical sense?
Founders must score highly in all four categories or we will not invest no matter how good their idea is. That may sound extreme, but let me ask you:
Without a visionary founder, who will entice investors to give the startup an opportunity?
Without an intelligent leader, how will a company know what the next best move is?
Without strong character, who will keep pushing the team and find ways to renew morale?
And without someone ready to execute, how will the startup progress to new levels?
After 14+ years of investing, I know this much: even the greatest ideas are doomed to fail without a well-rounded and dynamic founder to lead the way.
During the last seven years of my investing in startups, I’ve had the chance to meet a lot of really smart people with some interesting ideas. Many of them had a minimum viable product (MVP), several had only a PowerPoint, and a few had just a story to tell about the problem they wanted to solve. Some of the best investments I’ve made have come from taking a risk to back a founder who couldn’t yet “check the boxes” for what more traditional venture capitalists want to see before they will invest.
I’m so proud to have been an early supporter and investor of companies like PartPic, that struggled in the beginning to find outside investors who didn’t see the potential for this startup that made it easier to search for and order parts using computer-vision technology on their smartphone. Yet, once they had a few backers to fund an amazing founding team and their bold vision, were able to scale, grow, prove out their idea and then exit via an acquisition by Amazon in 2016. And EMRGY, a startup that delivers clean, reliable hydropower without the need for construction or dams. When I first met their founder, Emily Morris, she had a slide deck and a clear, compelling strategy for how she wanted to transform the hydropower technology space. I was immediately hooked, and made an investment, even before production started. Now, several years later, they have distributed hydropower arrays in operation across several sites in the US and have secured global distribution partnerships.
That’s why I’m so passionate about the opportunity to provide this type of early-stage funding with Outlander VC.
According to the US Business Formation Statistics (BFS), in 2019, 3.48 million applications to start a business in the US were submitted – a more than 40% growth rate from 2010. And 2020, even with the economic uncertainty triggered by COVID-19, is on pace to far exceed 2019 numbers. Through September 2020, 3.5 million new business applications were made in the US, with almost 50% of those new companies starting in the Southeast.
That’s a lot of companies needing capital to get from the idea stage to successfully launching a new product or solution in the market. Most of these companies will rely on personal savings or investments from friends and family to get started. Others will look to outside investors for their capital. But getting that outside money can be difficult at this stage of a company.
This is where Outlander VC comes in. Our mission is to be the earliest investors in the best technology startups across the Southeast.
Why early-stage? Let’s look beyond the obvious answer that early-stage startup investing offers potential for enormous growth and outsized returns relative to larger, more mature companies.
We also know that, for an early-stage company to even be considered for funding from traditional investors, they need to prove growth metrics and demonstrate the real probability of a high valuation exit. This can make it extremely difficult for early-stage companies to get the required capital to bring on the necessary resources to make it through the “Valley of Death”.
Our team at Outlander is made up of experienced investors who know how to invest in people and ideas even before they have metrics and revenue. And nothing excites us more than when we find great founders with huge ideas in a space where we can assist them in achieving their goals.
Every investment we make takes significant time, both in terms of the analysis we complete before the investment and the additional value we provide after the investment.
Why the Southeast? More than 2,300 startups call the Southeast home. Despite economic stability, a rapidly growing, diverse talent pool, and public-private emphasis on innovation, less than 7% of venture capital funding found its way into the region in the last several years.
And, as Leura Craig shared in our last blog post, we knew we could have a significant impact. In the Southeast, founders need early-stage capital, high-quality mentorship, and access to the major tech hubs to build partnerships, to find customers and, most importantly, to raise later-stage capital.
What does early-stage mean to Outlander VC? Generally speaking, it means a founding team (located in the Southeastern US) with a vision, MVP, and who has raised less than $2M in venture capital.
How do we select the companies in which we invest? We have created a proprietary founder analysis system that allows us to efficiently assess the quality of the founding team. And, through our years of experience in investing, we’ve seen that founder quality is the most important assessment factor in an early-stage deal.
Want to learn more about Outlander VC and our approach to early-stage investing, signup for our newsletter here to stay in touch with our team.
What happens when a Jewish girl from South Alabama who started her career in interior design but then moved into tech meets a guy who grew up homeless in Sacramento and then served in the Marine Corps and became a tech investor? Well, beyond getting married (which is an entirely different story), these two outlanders learned they had the same bold perspective on life and business – never afraid to venture off the beaten path, take big risks, and fight for what they believe in. Soon, they realized there were many others out there just like them.
After a decade of living in Los Angeles, building companies and investing in some of the biggest tech businesses in the U.S., we (Leura and Paige) made the big decision to move to the South to be closer to family. It was a bit of a terrifying change since we knew so few people in Atlanta and, to our knowledge, the South didn’t have much of a tech scene. However, we decided that being operators and investors, we could invest outside of tech, and we made the jump. Why not, right?
In Atlanta, we found ourselves in a different world; yet, on some level, it felt remarkably familiar. As soon as we arrived, the introductions to founders and other investors started rolling in. We were floored by the level of activity in a region that we had considered previously to be quiet. However, what excited us the most was the brilliant, bold, and extremely hard-working founders we began to meet. We started to wonder why we had never invested in this region so full of crazy big ideas led by top-notch talent. It took us many months to examine the tech scene, but we identified areas where we knew we could have a significant impact. In the Southeast, the founders needed early-stage capital, higher-quality mentorship, and access to the major tech hubs to build partnerships, to find customers and, most importantly, to raise later-stage capital. Now, it was time to act.
As we began to interact more closely with many exceptional companies, one fact became obvious. The challenges all startups faced, including founders in major tech markets, were even more exacerbated in the Southeast. If you didn’t fit the mold (i.e. white, male, good degree, and good connections), raising capital was an uphill battle to say the least. We all know the appalling stats around the access to venture capital by women, minorities, and other marginalized founder groups. Paige and I realized that in this emerging tech market, as investors, we had the opportunity to change those odds with our own approach.
Our mission at Outlander VC is simple: we invest in great founders with huge ideas, no matter who they are. But, in order to accomplish this goal and create lasting change in our industry, we decided to remove the unconscious bias from our funding decisions by building a more diverse investment and operations team. We passionately believe that when you change the people at the top, you change the pipeline and the outcome. Most importantly, we want our founders to have the benefit of being supported and mentored by an experienced and well-regarded early-stage fund with diverse leadership.
We are so proud to have built a team of outlanders who question the status quo and who are passionate about finding and supporting the next generation of epic founders who might have otherwise been overlooked.
So, who are we? We are Outlanders. We are strangers to the status quo, foreigners who never fit neatly in any box, and excited by the unknown. If this also describes you, we cannot wait to cross paths to learn from your perspective and your vision for the future.
Investing in seed stage startups can be exhilarating and highly lucrative, but it can also be incredibly risky and time consuming. Identifying the most promising new companies requires a lot of cutting through the weeds – I interact in one way or another with well over 2,000 entrepreneurs a year and take meetings with over 200 of them, all in the process of finding just the 15 I’ll invest in. The reality is startups need money for all kinds of things… most of these expenses are rarely considered by those involved until they actually have to pay for them. Would a novice really be aware of how much Verisure charge for a commercial alarm system? The likelihood of this is low.
When I first began investing, I wasted a lot of time. Tracking down the most promising entrepreneurs was a crapshoot and I didn’t know where to start. But as I developed as an angel investor over the last 8 years however, and now in running Arena Ventures, I’ve recognized the pattern of where my investments come from…where I get the highest ROI on my time.
There are 4 activities you can do as an investor to get to the good deals most quickly: hunting, trapping, farming, and trading.
Hunting is outbound work – hustling at events and parties, scouting for products online, reading and reaching out to people. You go anywhere you can to find great people. You don’t have a specific target in mind, you’re simply looking for unique, brilliant founders. When you first start investing this will probably be the majority of your time until you have a reputation, network and better idea of what you want to invest in.
A good example of hunting is Klout: I found the earliest version of Klout in 2009 while scanning Twitter posts and then tracked them down via friends in Boulder who knew Joe Fernandez. I pursued Joe aggressively, and took him out for tacos and drinks where I could spend time getting to know him and ultimately close on a deal.
When new angel investors ask me where they should start, I recommend beginning with the industry they work in and know best – what’s missing in that market or can be done better? If you see opportunities, start asking around and researching online to hunt down tenacious entrepreneurs that are attacking it. Even if the people in your network don’t bring you an immediate result, you’ll be top of mind going forward if they meet an entrepreneur who impresses them. Search online, attend every possible tech event, go to hackathons, attend parties hosted by startups and investors – do everything possible to find unique and interesting founders.
Check out what these startups have to offer, how are they conducting their work? Are they using up-to-date systems and software? Are they making use of managed it companies for their tech needs? Do they have a set plan in place for how they want to grow and expand their startup? All of this can show you how serious they are and what you can get from them.
After a little time hunting on the startup frontier you can engage in your next deal activity – trading. In this stage you’re working with fellow investors and looking for specific deals that interest you; and offering your own deals up in trade. By now you have a small network, a little reputation, some ideas on what to invest in and a deal or two under your belt.
It’s best to approach other angels and VCs and initiate the trade: share your deals, your ideas, your thoughts. Often times these investors will share deals back with you. It’s usually not a formal “give me X and I’ll give you Y” type of trade; instead it’s a relationship with informal rules of sharing deals with folks you value and respect and they’ll (hopefully) do the same in return. And if not, don’t be afraid to ask “What are you working on? Any great deals I should look at?”
Even now after 7 years of investing I spend a great deal of time sharing my deals and convincing people to invest in the first rounds of companies like Wish.com (contextlogic back then), AngelList, Quizup, Klout, Livefyre, Plated, Laurel & Wolf, Honk and many more. But as much as I’ve helped others, I’ve also benefited greatly from investors trading and sharing with me. When Zimride pivoted to be Lyft years ago I asked (maybe “begged” is a better word) Raj Kapoor to get me into the deal; luckily Tim Chang and the Mayfield guys are awesome dudes, approved the “trade” and got me into the deal (and now just this year we worked together again on the Fitmob / Classpass deal successfully!).
While hunting & trading are outbound activities, trapping is largely inbound (i.e. people coming to you) and you have a clear idea of who or what you’re looking for. You set “bait” that will attract your targets and then you let great founders come to you. Here are a few examples:
A great example of trapping is Postmates. In 2011 Jeremy Gocke of Fliptu sent me this message:
From: Jeremy Gocke
You might have seen this already, but it’s your Uber for deliveries idea…
A month earlier I had invited Jeremy over to one of my happy hours and I told him I believed an “Uber for deliveries” should exist and it would be huge. His email led me to Bastian and I ended up investing two months later. I follow this tactic often – sharing ideas I want to exist – and then waiting for founders or investors to come to me. In fact just a couple weeks ago we invested in Mytable – for two years I’ve been telling people I’m looking for an “Airbnb for Meals” startup and I’ve looked at over 30 now! But this year I finally had the right team pitch me and we closed the deal.
So go out there and set some bait. Spread your ideas, host targeted events and get great founders to come to you.
Farming is largely an inbound activity (deals coming to you) but you don’t have a specific target or type of startup in mind. Instead you invest months and years helping other people; being a great investor to your founders; helping local universities, mentoring at accelerators, and being a valuable part of the community. You make an ongoing commitment to invest time and energy supporting the top people and programs in your city or industry and eventually the deals start coming to you. When that happens, make the most out of the opportunity. Also, remember to not make the costly mistake of not insuring the most important people for your startup with key person insurance (keypersoninsurance.com) because you don’t want to suffer any economic loss after putting so much effort into them.
Farming takes the most work, and the payoff is often years in the future; but it will eventually become one of your best sources for deals and set you apart from less experienced investors. Once you have a solid reputation, a trusted network and years of great deals, many founders and fellow investors will be the ones coming to you and sending you deals. That is what fortunately brought me the ability to be an early check into both StyleSeat (thanks Devin Poolman and Steve Jang) and Wish.com, which is now rumored to be a $3B+ “unicorn” (thanks Brian Wong!).
The best angels and venture capitalists are savvy at the full combination of hunting, trading, trapping, and farming, but it’s important for new investors to remember that being an aggressive hunter at the start is key. You have to build your early reputation and first-hand experience in order to enable you to get the most value out of the other three over time.
In my prior posts, I gave an overview of how entrepreneurs and investors can make the most of AngelList, the top online platform for startup investing.
In it I recommended that both entrepreneurs and new angel investors focus on using AngelList’s syndicates as their method of accessing high-growth startup investments. A syndicate is an investment vehicle that acts like an online angel group led by one lead investor who sources and manages the deals. Investors can request to join a syndicate, see the deal flow, and either invest automatically in every deal to build a balanced portfolio or just participate in the deals they like. In exchange they pay the syndicate lead carry for having found strong deals and for being the point person who coordinates the syndicate’s interaction with the entrepreneurs they invest in.
Since the feature launched on the platform last year, syndicates have become the defacto way to invest on AngelList because the lead investors curate high-quality investment opportunities, often bringing deals to their AngelList backers that would not have appeared on AngelList otherwise (because the startup founders weren’t planning to fundraise online).
To shed more light on the rise of syndicates and what it takes to be a great syndicate lead, I reached out to David Booth who oversees syndicate operations at AngelList.
EP: What exactly is a syndicate lead and how do you become one?
DB: AngelList syndicates enable access to capital for people with high-quality deal-flow and access to high quality deals for people with capital to invest.
The individuals who find and share deals are the syndicate leads. In exchange for offering the deal up to online investors, the syndicate lead gets paid via “carried interest,” a share of any eventual profit from the investment. Leads will typically be experienced angel investors, technical founders of startups, or early hires at successful companies who may not have access to massive amounts of capital (and don’t want full-time VC roles) but who are experienced, well-connected, and excellent at recognizing talented entrepreneurs within their network.
EP: What are the expectations and responsibilities of a syndicate lead?
DB: Syndicate leads must first be experienced angel investors in their own right. Our co-founder Naval summarizes the qualities of an angel effectively: The three things that make a good angel (and thus syndicate lead) are i) access to capital, ii) high quality, proprietary deal flow and iii) good judgement.
A syndicate lead must be putting their own “skin in the game” – investing a material amount of their own capital. They are required to clearly disclose any conflict of interest or prior involvement in the companies they lead investments in, and be transparent about which deals they syndicate. The lead will act as liaison between the company and his or her backers, adding value to the company, and passing on information where appropriate. While leads don’t need to share inside information about a company with their backers, it’s best practice to keep them updated on how the company is doing, and a startup can benefit greatly from leveraging this network of stakeholders.
EP: How do you vet new syndicate leads? Do you proactively recruit people to become leads?
DB: We look for individuals with relevant experience and a proven track record as an angel investor. They might be successful founders or tech executives, VCs, or specialists in a very specific sector. We are also seeing an increasing number of VC firms using the syndicates product to run single deal funds, inviting LPs and investors from their networks to invest where they have excess pro rata rights. To date, leads have been predominantly based in the SF Bay Area, but we have started seeing an increasing number from outside Northern California.
Our team works with prospective syndicate leads well before they ever put their first deal on AngelList, helping vet opportunities and gauge which will generate interest from online investors. We also look at who they are bringing into the syndicate from their own network as backers of their syndicate; if they supposedly have good deal flow and a good network, but no one they know wants to invest with them, that’s a red flag.
EP: What differentiates the better syndicate leads in your experience?
DB: The ultimate judge of a good syndicate lead is “who is making the best returns.” However while there have been some stand-out deals on the platform, this is not easy to judge with less than 24 months of data.
One thing that is clear is that you shouldn’t judge a lead by the topline “total backing” metric alone. Some of the sharpest investors are those with great expertise in one niche who don’t share many deals or have a large following.
Regardless of syndicate size, leads who avoid adverse selection by syndicating all their deals, communicating with backers, and being transparent about why they are investing in a given company build a lot more trust and engagement from backers, and ultimately go on to lead larger, faster syndicates.
EP: What if a savvy angel investor wants access to more capital but doesn’t want to publicly announce their deals on AngelList?
DB: That’s not unusual. A significant portion of syndicates on AngelList are actually entirely private – they are run by the lead solely for the benefit of their own network, and are only visible to users who have been invited. Other leads will share deals only with their ‘funded backers,’ who store their funds on the platform and pre-commit to deals in advance. The syndicates tool serves to facilitate these private deals more efficiently (since we handle wiring of money, creation of legal documents, etc.).
EP: AngelList has several funds on the platform that selectively back certain syndicate deals. What’s their investment strategy?
DB: Yes, we have 3 funds fueled by capital from AngelList backers: the AngelList Select Fund, the AngelList Enterprise Fund, and the AngelList Consumer Fund. The funds will each invest in approximately 100+ of the most promising startups, as selected by an internal fund committee. We also have Maiden Lane, a $25M venture fund that backs a wide range of syndicates, active on the platform.
A fund gives investors the opportunity to back a diversified portfolio of startups with one investment, mitigating risk far more than could be achieved backing individual deals. The funds also get invited to private syndicates that aren’t open to the platform, so they provide access to otherwise unavailable opportunities.
EP: How are syndicates evolving as a product of AngelList?
DB: The AngelList platform has shifted over the past year from being deal-centric to lead-centric; the experience – and increasingly the product features – is about trusting the judgement of lead investors (by way of syndicates) rather than screening and picking companies to invest in entirely on your own. You’ll see that trend continue.
One goal of ours is to make it easier to match angel investors with relevant lead investors whose syndicates fit their interests and investing style. For example, if a new investor on the platform is interested in life sciences startups, we’d try to to proactively match them with some leads more specialized in that field.
EP: What are helpful resources for angels who want to become syndicate leads to determine if it’s the right fit?
DB: We have a landing page for prospective leads at https://angel.co/syndicates/start. You can also contact us for more information.
One of the biggest trends in tech and finance over the last decade has been the rise of equity crowdfunding platforms that enable investors from around the world to find and invest in privately-held companies. For companies, this provides a whole new financing source where founders can promote themselves and receive investments from investors outside of their networks. Crowdfunding democratizes investing by allowing small investors to pool their capital into one large investment, accessing opportunities they couldn’t tap into on their own.
Among startup-focused crowdfunding platforms, AngelList was the early leader and remains at the head of the pack. In 2014, they processed over $100MM in investments…and this is still the early days. Equity crowdfunding is moving into every sphere of finance from real estate to hedge funds and is predicted to surpass $30B this year globally.
AngelList originally started as an email newsletter that founder Naval Ravikant sent to fellow angel investors in San Francisco to share the new startups he found most compelling. In time, that newsletter evolved into a platform where anyone can share what they are investing in, browse the profiles of new startups, and make their investments on the spot.
Our unique model as a venture capital firm that shares every deal on AngelList results in us fielding a lot of questions from entrepreneurs and angels about how to make the most of the platform, so here is my advice:
Nowadays there are thousands of startups with profiles on AngelList. Sticking out among the noise requires you to make a strong first impression in the few seconds that an investor skims over your profile – you need to hook them. Take the time to fill out your full company profile (and your team’s personal profiles) and to think about the story you’re pitching to investors. Include recommendations as well as media like your pitch deck, product screenshots, and ideally a well-produced 1-2 minute video that concisely shows your team, product, and vision. Dustin Dolginow of Maiden Lane wrote a helpful 3-part series on how to craft a great AngelList profile that you can use for guidance.
View equity crowdfunding as a tool you use in addition to traditional fundraising offline. If you’re planning to fundraise on AngelList, lock up firm commitments from several angel investors offline before you begin publicly fundraising on the platform. Like donation-based crowdfunding campaigns on Kickstarter, you want to seed your fundraising campaign with an initial base of backers on Day One. Those first backers lend needed social credibility to other investors that view your profile – an investor who has never met you wants to know that at least others in the deal have vetted you more in-depth. Moreover, their backing on the first day of your fundraise gives the campaign momentum, which can make your company “trend” on the site, generating greater interest and giving prospective backers a fear of missing out if they don’t act quickly. (Justin Thiele sheds light on how to trend on AngelList here.)
We strongly advise entrepreneurs to raise capital on AngelList through a vehicle called a “Syndicate,” however. Syndicates are like online angel groups who back deals led by their one lead investor (to whom they pay carry for sourcing and managing the deals). For an entrepreneur, having one lead investor who rallies other backers and handles the logistics of the transaction results in a much more time-efficient process. The syndicate acts as one entity on the cap table, with one person serving as the liaison and handling all paperwork. Crowdfunding via a syndicate lead gives you the best of both worlds: access to the angels that crowdfunded the syndicate but not the requirement to directly deal with each of them if you don’t want to. Make sure you go with a syndicate lead who knows what they’re doing and is committed to the responsibilities they’re taking on, however. (Also make sure the size of their syndicate is more than enough to cover the amount to expect to raise from them.)
For those getting into angel investing, AngelList is an incredible tool: it allows you to find and invest in exceptional start ups without needing to be a Silicon Valley insider. You can easily sort through the profiles of every startup on the platform, view their story / team / early traction, and look at who else is backing them. One of the most helpful functions of AngelList for new investors is the ability to follow notable angels’ investing activity and start understanding the types of startups they back and people they invest alongside. Learn, in part, by watching the best.
Much like how AngelList’s syndicates are the most efficient model for entrepreneurs raising equity crowdfunding, syndicates are an important resource to investors as well. While a new angel has the money to invest and perhaps a background working in tech, they don’t yet have a track record of angel investments that they’ve learned from. Picking out the winners at their seed stage is incredibly difficult. To make up for their inexperience and lack of a large personal brand in the investor community, they can back syndicates led by more experienced investors in order to access their deal flow (which leads to higher returns). Typically syndicate leads are professional or semi-professional angel investors that hunt for deals around the clock and bring their syndicate opportunities that weren’t appearing on AngelList otherwise. Expect them to share their full, detailed analysis of each startup so you have the information to make your own judgement call (and be wary of those who don’t provide much information).
Best of all, you can back as many syndicates as you want without a commitment to invest alongside them. You’re asked to “back” the syndicate for an amount in order to convey the check size you would write if you decide to participate in a deal, but there’s no commitment to do so. To maximize your deal flow, back the syndicates of several people whose judgement you trust. Many syndicate leads never make their active deals public to those who don’t back their syndicate, so you’re missing out if you don’t back any. Angel investing / venture capital is a “hits business” where you make all your money from your few big wins, so you want to optimize your likelihood of backing one of those winners.
If you are comfortable committing capital to a certain syndicate (putting capital in escrow that is required to be invested through that syndicate), you have the option to do so as a “Pre-Funded Backer.” Some syndicates (ours included) give Pre-Funded Backers early access to their deals and guarantee them allocation. A Pre-Funded Backer can spread money across every deal the syndicate does or can opt-out of some in order to invest more heavily in others. You do pay carry to syndicate leads (15-20%, plus 5% for AngelList), but in a good syndicate, the deals are considerably higher quality than what a new investor is likely to come across on their own.
AngelList profiles, by the way, matter for angel investors too. When you back a deal or request to become a Pre-Funded Backer of a syndicate, the entrepreneur and syndicate lead (respectively) get to decide whether or not to accept your money. In competitive deals, the entrepreneur doesn’t necessarily have the space on the cap table to accept every check, so you want your profile to show off who you are and what value you can add to companies. With a compelling your profile, you will also be more likely to benefit from the social aspect of AngelList – organically building a following of entrepreneurs and fellow investors that you can tap into for sourcing deals or for bringing them in as co-investors into a deal of your own.
When you make full use of it, AngelList is a powerful platform for raising capital and investing in new, high-growth-potential companies. It’s a global marketplace where the best entrepreneurial ventures can get funded, and it continues to evolve every month for the better.
Money is all around us. We can’t get away from it. So regardless of whether you like to spend any money that you have saved away, if you like to use it to buy crypto mining equipment like the kd box goldshell to increase your funds in the future, or if you want to invest this money into something worthwhile, such as stocks and shares, or retirement funds, these are all crucial aspects that must be taken into consideration when it comes to your finances.
Once you dive into the investing world, you can quickly become buried in a tornado of potential deals or the “Dealnado,” as I call it: a swirling, twisting mass of co-investors, scammers, screaming founders, substandard deals, shiny objects, and baby unicorns buried somewhere inside the chaos.
To sort through this mess, you need a methodology to filter the gold from the dirt. Filtering is critical for any type of investing, including real estate, crypto, or startups. For example, hiring a reliable realtor you’ve worked with before is a great way to ensure you’re only shown properties with the most potential. Or, take advantage of resources like this Swyftx Review online review to ensure your first investment into Bitcoin is done on a trustworthy platform. But what about startups? How can you filter through the chaos when it comes to this type of investment?
Crafted from 7 years of angel investing and over a decade of operational experience and research into people, business, and conflict, here are five simple but critical questions I always ask before investing.
This question forces me to think about the quality of the people and the founding team’s dynamic. When I sit across from founders, I ask myself, “Would I join them?”, “Am I inspired by them?”, “Are these the brilliant, crafty leaders I can follow to glory?”. In this context, I’m not thinking like an investor or a leader but rather like a prospective early employee. I try to understand their character, values, capabilities, and passions.
A common mistake we make as investors – particularly investors who’ve previously built companies – is asking, “Could I lead this team?” or “Could I be a cofounder?” That’s the wrong approach. As investors, we can’t actually lead these teams, and we can’t make up for significant deficiencies—it’s their business, and if captains are weak, the whole ship will sink.
When I met Melody McCloskey and Dan Levine (founders of Styleseat) in 2010, I was overwhelmed by their vision, talent, and character—I couldn’t resist the impulse to work with them and invested within 48 hours. And the AngelList office could have been my home – I loved them so much that I invested in their seed and offered to join them full-time (luckily, Naval and Nivi were only hiring engineers at the time).
Since this article’s publication in 2015, question #1 has evolved into our proprietary, 38-point Outlander Founder Framework.
This is a question of your interests—do you really care about the problem they’re solving and love their solution? This is a personal question you need to answer truthfully. Many investors follow a deal because it’s “hot” (i.e., includes famous investors or is highly competitive) or because we get sucked into the hype around a broader trend (“motherf’ing BitCoin is going to disrupt everything”).
Your love for the startup matters not just for mental health but financially as well: you’ll be a better investor if you genuinely care about a startup’s solution and the space they’re disrupting. You’ll spend your spare time learning about their space, playing with their product, proactively recruiting talent, and making key introductions—all things that benefit the company and build word-of-mouth about your value as an investor.
We recently led a small pre-seed round in a company called Service that’s doing “on-demand customer service.” Aside from knowing the founder (Michael Schneider) for six years now, his approach to solving the global customer service problem from the consumer demand side felt brilliant to me. I submitted two customer service issues myself right after our first meeting – both representing about $3000 in goods – and Service solved them in no time. Companies failing to deliver on their promised experience really bugs me, and Service’s ability to smooth that over is something I want in my life. Plus, it’s a problem that hits everyone weekly, if not daily!
You’ve got to offer more than just money if you don’t want to be left on the cap-table cutting board in a competitive deal. Do you have contacts, expertise, or industry knowledge that makes your involvement matter to this team? Great deals are competitive, and great founders guard their cap tables like precious berthing. Only value-add investors get in, and if you’re not bringing something of value, you probably have little chance of getting onboard when it comes down to sorting out allocation in a round.
When you bring value to the entrepreneur in the early days of their company, however, you can directly increase the odds of them winning—and winning big. Of course, influence at the early stage doesn’t mean you get to lead the company, but you can help the company scale and get a unique edge. A great example is when James Jerlecki pitched me Mytable earlier this year: I’d been researching the concept of “crowdsourced food production” for two years and had an Evernote notebook titled “Chowtown” with over 30 companies, notes from dozens of interviews, and countless hours of research (in fact I once hired my sister to set up shop in my home and conducting pilots). So I was ready to add direct value to Mytable from day zero.
I meet many companies that fulfill the first three questions—the fourth one narrows them down a lot, though. You meet great people with interesting ideas where you can add value, and then you realize, “Damn, even if they win, I don’t think it’s going to be huge.” But, of course, this is all relative. Your definition of “major impact” and my definition may be different. I think about it in a couple of ways:
Central to this, of course, is the character and ambition of the founders – are they capable of scaling this company to the highest peaks? Generally, when I see founders primarily focused on getting acquired and making money, my interest disappears because it’s clear that they’re playing the short game and not driven by the intense need to impact the world that top founders possess.
When we discovered Honk in May of 2014 (thanks to a text from my buddy Avesta of Coloft), I realized how massive Corey’s company could be in our first meeting. Corey had almost single-handedly created one of the most unique and scalable platforms to solve the global roadside assistance problem. There was no doubt in my mind that he would disrupt towing with a solution 100x better than anything AAA or the industry had tried previously.
Timing an investment right requires a healthy knowledge of history, an insatiable curiosity for the world, and a reflective mind that thinks deeply about where the world is moving. Where are societal, economic, technological, and other trends moving, and how fast are those shifts impacting the startup’s intended market? Are you in the middle of a technology hype cycle, and is it better to wait? Is this social shift going to become more prominent over time, or is it a momentary blip? Of course, the landscape of trends that could impact a company is vast. So you have to boil each startup down to its essential elements and consider how those elements fare over the next 5 to 10 years.
For example, I’ve worked with Cy Hossain (Founder/CEO of Crowdcast) for almost 18 months as he bootstrapped the development of his new webinar platform. Existing B2B webcasting tools are outdated and don’t offer a compelling, interactive experience. However, the market’s growth and how people are adopting live-streaming video now (versus just a couple of years ago) shows we’re at an inflection point that he’ll be poised to seize.
I also dig into the founders and explore their perspectives on the timing. I want to know if they’re deliberately thinking about the network of broader trends that may impact them and how they plan to adapt if these trends play out differently.
As an individual, I need a resounding “Hell, Yes!” for each of these questions. And if I’m not excited by all five answers, I’ll pass on the deal. If you’re working in a team environment the way we operate at Outlander VC, then your grading will change to reflect your partnership. You need to be open to how your colleagues think and feel.
Of course, every investor has their own methodology that matches their unique perspective—mine comes from what I’ve seen over seven years of investing, plus my background in art, intelligence, and founding a successful defense company. Other investors will have their own questions and weigh the importance of answers differently than I do. If you’re new to investing, crafting your own method for sifting through the Dealnado is the key to efficiently finding the companies you want to bet on.