how we invest€¦ · how we invest volume vii eguide [email protected]
TRANSCRIPT
HOW WE INVEST VOLUME VII
eGuide www.tencapital.group
Contents Jon Trauben of Altitude Investment Management .............................. 6
Advice for Investors in the Cannabis Sector ................................................................................... 6
Advice for Startups ................................................................................................................................... 7
Industry Evolution .................................................................................................................................... 7
Challenges in the Space ......................................................................................................................... 8
Brett Commaille of Hlayisani Capital ....................................................... 9
Advice for Investing in South Africa .................................................................................................. 9
Advice for Startups ................................................................................................................................... 9
Industry Evolution .................................................................................................................................. 10
Challenges in the Space ....................................................................................................................... 10
Matt Johnson of Johnson Venture Partners ........................................ 12
Advice for Venture Investors .............................................................................................................. 12
Advice for Startups ................................................................................................................................. 12
Industry Evolution .................................................................................................................................. 12
Challenges in the Space ....................................................................................................................... 13
Daniel Hallawi of KapVista ........................................................................ 15
Advice for Investors ............................................................................................................................... 15
Advice for Startups ................................................................................................................................. 15
Industry Evolution .................................................................................................................................. 16
Challenges in the Space ....................................................................................................................... 16
Jason Todd of Thinker Ventures .............................................................. 18
Advice for Investors Focused on the Midwest ............................................................................. 18
Advice for Startups ................................................................................................................................. 18
Industry Evolution .................................................................................................................................. 19
Challenges in the Space ....................................................................................................................... 19
Mikael Krogh of Investigate VC ................................................................. 21
Advice for Investors Focused on the Southeast Asia Market ................................................. 21
Advice for Startups ................................................................................................................................. 21
Industry Evolution .................................................................................................................................. 21
Challenges in the Space ....................................................................................................................... 22
Paul O’Brien of MediaTech Ventures ...................................................... 24
Challenges Startups Face ..................................................................................................................... 24
Mediatech Space Evolution................................................................................................................. 24
Manuk Hergnyan of Granatus Ventures ............................................... 26
Advice for Investors ............................................................................................................................... 26
Advice for Entrepreneurs ..................................................................................................................... 26
Industry Evolution in Armenia............................................................................................................ 27
Challenges in the Space ....................................................................................................................... 27
Henry Yoshida of Rocket Dollar ............................................................... 29
Investment Areas of Interest .............................................................................................................. 29
Investment Areas to Avoid .................................................................................................................. 29
Challenges in the Space ....................................................................................................................... 30
Samara Gordon of Hyperplane Venture Capital ................................. 31
Advice for Investors ............................................................................................................................... 31
Advice for Startups ................................................................................................................................. 31
Industry Evolution .................................................................................................................................. 32
Challenges in the Space ....................................................................................................................... 32
Pieter Dorsman of Angel Forum and E-Fund .....................................34
Advice for Investors ............................................................................................................................... 34
Advice for Startups ................................................................................................................................. 34
Industry Evolution .................................................................................................................................. 35
Challenges in the Space ....................................................................................................................... 35
Gregory Bohlen of Union Grove Venture Partners ........................... 37
Sectors of Interest .................................................................................................................................. 37
Sectors to Avoid ...................................................................................................................................... 37
Success of Beyond Meat ...................................................................................................................... 37
Doug Doan of Hivers and Strivers .......................................................... 39
Advice for Investors ............................................................................................................................... 39
Advice for Startups ................................................................................................................................. 39
Industry Evolution .................................................................................................................................. 40
Challenges in the Space ....................................................................................................................... 40
Joy Schoffler - Investor and Advisor .................................................... 42
Advice for Investors ............................................................................................................................... 42
Real Estate Investment Evolution ...................................................................................................... 42
Gaining Exposure .................................................................................................................................... 43
Vinod Jose of Konglo Ventures LLC ...................................................... 44
Advice for Investors ............................................................................................................................... 44
Advice for Startups ................................................................................................................................. 44
Challenges Startups Face in India ..................................................................................................... 45
Pedro Falcão of LC Ventures .................................................................... 47
Advice for Investors Interested in Portugal ................................................................................... 47
Advice for Startups ................................................................................................................................. 47
Industry Evolution and Challenges ................................................................................................... 48
5
6
Jon Trauben of Altitude
Investment Management
Advice for Investors in the Cannabis Sector
The cannabis industry is a different space because it's in its creation phase.
It's not about disrupting something else. With this new industry being
developed and no precedent or historicals to look at, it becomes an effort
to dig in and live this industry. It’s about understanding it on a granular,
ground up, basis because the information flow and data sets are limited.
It's hard to be a part time investor in this space as you're looking to gain
exposure to this industry. The result is that if you want to invest in the
industry, you either find and invest with managers that live and breathe this
industry every day or you have to live and breathe it yourself.
It’s also important to understand the industry is a microcosm of the world
in terms of it covering nearly all the verticals that exist.
Typically, we think about the industry in about 11 or 12 different verticals,
but the result of that is there are opportunities in:
agtech
SAS tech
supply chain
data
advertising, media and marketing
real estate
cultivation
manufacturing
retail
7
Once you spend the time to start understanding this industry, you then
have to look at the different verticals. When you see an opportunity, you
need to educate yourself on the details and the opportunities of that
particular vertical. For an individual investor, it's a multipronged process of
diving in fully to understand the industry and the various verticals so you
can try to uncover where the opportunities are.
Advice for Startups
The big startup wave of the industry is pretty much over. That's not to say
that there's not interesting new opportunities being developed, because
there are always opportunities, but for the most part, the industry has gone
through a huge startup cycle already.
For an entrepreneur looking to start a cannabis company at this stage it is
important to think about:
1. What's different about you?
2. What is defensible about your strategy?
3. Why are you and your management team uniquely qualified to
execute the strategy?
The truism in this industry is management. The cannabis world is different
today than it was in 2016 and 2017 where there was room to develop a
company. Those dynamics are changing and the development of new
companies has to be about a new strategy, a unique take on it, and a
strategy that can create a defensible moat.
Industry Evolution
The industry is still figuring itself out and its path forward. The biggest
trend that we see coming out of this startup cycle is companies emerging
into their growth stage. As they do this, these companies are boxing out
the remaining startup companies and they’re starting to pull ahead and
win. This will continue to play out over the next few years.
8
On a global basis, the legalization of cannabis for medical purposes
continues to pick up steam with countries also starting to legalize
recreational use. The lesson that we learned from the North American
market is that after a couple of years of medical legalization, recreational
legalization will follow. Overall this is a global industry and a global
opportunity for startups.
Challenges in the Space
The biggest impediment to the industry is regulation at a state and national
level. This is also a global issue and the reason for this is because the
customer base exists, but they want to buy a quality product.
However, over time, as you deliver the opportunity to buy a quality product,
things will migrate from the illegal channel to the legal channel.
Jon Trauben’s Background
Prior to getting involved in the cannabis industry as
an investor, Jon came out of a 25 year career in
commercial real estate finance.
He was an MD at Barclays and Credit Suisse.
Contact Information
Web: Altitude Investment Management
LinkedIn: Jon Trauben
Listen to the full interview here
9
Brett Commaille of Hlayisani
Capital
Advice for Investing in South Africa
Don't go into the space to learn. Always try to work with experienced
investors or investment groups. This allows you to spread your risk.
Spend time developing the discipline to not fall in love with the company
right away. Figure out when to put in money and when you shouldn't. It’s
also important to not let a win or a loss go to your head.
This is an exciting sector, but it's certainly not the instant wealth that you
often hear about with other spaces. There are more risks here than most
people expect. Learning to take the time to do proper due diligence is key.
Advice for Startups
Do your work and do the research. You’ve got to be very motivated.
You also have to be flexible enough to know when it's not the right
approach and be able to pivot relatively quickly and easily. Being able to
understand when you're going down the wrong path is very important, so
that you can correct the path as quickly as possible.
Understand that sometimes, you may have a perfect idea, but it might be
the wrong time or the wrong market. There are any number of things that
could be messing with your investment thesis, so the ability to adjust is
critical. The power of luck and good timing can also play a big role in the
space. This means you've got to stay in the market and you've got to make
things work. Be persistent.
10
Industry Evolution
In terms of the venture side of investing, South Africa is at least 20 years
behind some of the more developed markets. When it comes to having a
properly functioning ecosystem, many other markets have had a kickstart
from governments who put in money to create funds. Whereas most of the
African countries venture capital was created by entrepreneurs trying to
fund the entrepreneurs.
South Africa still only has a fraction in terms of the international numbers,
but those numbers are bigger than ever. The South African market, for
example, used to be on the African continent and used to take the most
transaction numbers along with the largest amounts. This is starting to shift.
Challenges in the Space
One of the biggest things to consider is that Africa is not a homogenous
market.
Every country and territory is very different and very diverse.
If you make it in one country, it does not mean that you can make it in
another,
Understanding each market is important and makes this a challenging
space to be in. It's not easy to jump from one market to the next. This also
means that if you look at your local market, most of the time the local
market is relatively small. You may have a large population, but to find the
middle class, for example, as a target population, it's very seldom that you
have that as your only market.
You need to found your company already looking into other territories
where you can grow. The company needs to be born with an
internationalization mindset. You have to put effort into finding networks to
assist with global growth and funders who are prepared to support getting
11
enough traction in your local market to show that you deserve that support
to move into the other territories.
Brett Commaille’s Background
Brett has a background as a chartered accountant, then moved into
the world of banking in various areas such as the Middle East and
South Africa.
He came to the realization that he was better at being entrepreneurial
in the finance space and assisting those who were trying to build
companies.
Brett has an obsession with trying to figure out how people build
businesses and how they grow those businesses.
Contact Information
Web: Hlayisani Capital
LinkedIn: Brett Commaille
Listen to the full interview here
12
Matt Johnson of Johnson Venture
Partners
Advice for Venture Investors
You don't have to do it alone.
There are ways to leverage the power of technology and network effects so
that you can find like-minded investors with similar strategies and goals.
Today it’s much easier to source great deal flows with other individuals and
learn from one another.
There are a lot of ways to join groups if you want active returns and want to
get involved with startups that you're interested in.
If you're seeking passive returns and find the asset class interesting, then
invest through a fund and let a professional fund manager or professional
go out and find the opportunities for you.
Advice for Startups
If you’re looking to raise capital, get to know your audience, which in this
case, is the investor. It's either going to be a professional fund manager, an
individual angel or an institution.
Get to know what their goals are because, in a way, they're your customer.
Industry Evolution
Technology is starting to shift the industry.
A lot of platforms are focused on investment management and assisting
fund managers to be better organized. The platforms also focus on:
13
sharing of information
sharing of due diligence
document control
executing fund transfers
funding transactions
These are difficult problems to solve and there are a handful of platforms
that are getting close to solving these issues. It’s important to keep a
watchful eye on these platforms to see which one emerges as the market
leader and which one provides the best solution for investors to better
manage the process of deal tracking and sharing of information.
Challenges in the Space
There's a tendency to overcomplicate things. There's also a lot of noise in
the space.
This means it's difficult to know who to turn to, where to turn, and what to
take to heart?
There's a lot of conflicting data, advice and information that the space is
bombarded with every day.
This makes it imperative for investors to stay disciplined and set parameters
around their strategy.
For entrepreneurs, staying focused on delivering a quantifiable value prop
for your customer and being obsessed with the customer is key. Try to
eliminate noise and distractions by staying laser-focused and disciplined on
execution.
Matt Johnson’s Background
Matt always knew he wanted to be an early stage investor.
14
Out of sheer curiosity, he discovered the world of early stage startup
investing.
He is self-educated and acquired enough knowledge to gain capital
from high net worth friends and family which allowed him to start
doing deals.
Contact Information
Web: Johnson Venture Partners
LinkedIn: Matt Johnson
Listen to the full interview here
15
Daniel Hallawi of KapVista
Advice for Investors
Look for a team and/or founders that click.
You should invest in people over products, especially at the early stage.
Once you've found that team:
understand the company
understand the industry
do research on the space
Invest in companies with a substance. If these individuals are trying to build
a company and just acquire users with no real revenue in the future, stay
away.
Advice for Startups
In terms of the structure, guidance, and compliance, make sure that you are
worth investing in from day one and are focused on investors because the
right investor can make or break your business.
Not having the right investor can almost guarantee your business will fail.
You need to manufacture serendipity to find the right investor, either by
hustling your way into the view of every investor or utilizing every available
resource possible to get your offer out there.
First impressions matter.
Make sure that you seize your opportunity with the investors in front of
you.
Be transparent.
Be punctual.
16
If you say you are going to do something, do it.
Be courteous of the investor’s time and the effort they’ve gone through to
meet you.
Industry Evolution
There's more of a focus on the VC and PE space. You have people with a
sizeable bank balance that are now looking at the VC/PE space as opposed
to other traditional investment options.
This means there is more money coming into the space. There's more
money to fund innovation and there is a greater nurturing of talents. In the
last few years, there's been an influx of brilliant companies that are
attractive to investors.
There are a lot more talented people out there who are willing to try their
hand at entrepreneurship, which can only benefit them and the sector.
We're going to see an uplift in, not only the talent side of things and
incredible companies, but also there's going to be a lot more money
coming in to fuel new companies.
Challenges in the Space
With more funding available comes increased competition.
There's a lot more people in the space and more talented individuals that
are out there starting companies. So, in terms of your peers, one of the
biggest challenges is going to be startups attempting to stand out when
there is already so much talent to choose from.
Daniel Hallawi’s Background
Daniel has 10+ years in funds and wealth management for global
financial institutions.
17
He stepped away from the corporate grind and became a founder.
He later moved into the investment space where he now wears
multiple hats and runs a family office for his own family assets.
Contact Information
Web: KapVista
LinkedIn: Daniel Hallawi
Listen to the full interview here
18
Jason Todd of Thinker Ventures
Advice for Investors Focused on the Midwest
You need to know a bit about the space that you’re going to get involved
in.
Many investors fall into sharing the excitement with the entrepreneur and
getting wrapped up in that excitement. The problem is that this can lead to
the investor having no clear grasp of the space that the entrepreneur wants
to operate in.
At the end of the day, excitement doesn't mean anything if you don't have
a solid business plan.
Advice for Startups
Market validation is key.
It's important to talk to the people who don't love you.
There are 2 types of people who are going to do business with you.
1. The people who love you.
2. The people who are not yet sure they should love you.
All too often, entrepreneurs fall into the trap of running their concepts by
people who love them. However, the people who love you, by and large,
are lying to you.
Get to the people who don't love you and have no vested interest in your
success. These are the people that will tell you the truth. If you make it a
comfortable space for them to tell you the truth, you can learn a lot from
them. If your idea doesn't change after having talked to those people who
19
don't love you yet then you're on the wrong path because your idea should
change once it hits the marketplace.
Industry Evolution
The Midwest has been a challenging startup space, particularly for areas
outside of some of the larger Metro centers like Chicago. The challenge is
finding entrepreneurs who have good ideas and want to do something
impactful in smaller areas.
There is a vacuum of opportunity in the area that is significant enough and
exciting enough to get a high volume of quality businesses coming
through.
There is also a lot of hype around certain sectors and people using words
that they don't mean. Since certain sectors have become so popular and
there are people moving in and out of them, you run into a lot of
companies who are saying things that aren't true and trying to get money
for solutions that are outright false.
Challenges in the Space
Money is one of the most ubiquitous commodities in the world.
You can come across money.
The challenge is, in order to get to money; you need to have a good story.
Many times people just don't have a compelling story and this is a hard
thing for new companies to recognize.
Additionally, some people, when they're talking about the size of the
market, use bogus numbers to get people excited. At the end of the day,
this is not something you can bank on. You have to come in with better
research and treat it more conservatively.
20
Entrepreneurs, many times, get caught up in the excitement and believe
that just because they think it's a great idea that everybody else should
think it's a great idea, too. This causes them to throw numbers out that
don't make any sense.
Jason Todd’s Background
Jason spent some time in sales and marketing then moved into
technology.
He is a self-taught programmer.
He started an eCommerce company that sold residential heating and
air conditioning equipment to consumers.
Contact Information
Web: Thinker Ventures
LinkedIn: Jason Todd
Listen to the full interview here
21
Mikael Krogh of Investigate VC
Advice for Investors Focused on the Southeast Asia
Market
Always pay attention to the founders.
Of course, the business idea has to have merit, but great founders are the
foundation of any worthy company.
A company with the world's greatest idea or product and bad founders is
more likely to end up a bad investment.
Founders are the foundation of everything.
A lot of businesses tend to jump across industry sectors, especially when
you have early stage focus. Since movement is likely, it doesn't make too
much sense to have an industry focus if you’re looking at early stage
investing.
Advice for Startups
Find the product market fit.
Also find a go to market strategy that's not based on advertisements. As a
general rule, try to remember that advertisement doesn't always work.
Consider looking at a strategy that acquires the customers outside of
regular advertisement.
Industry Evolution
In Southeast Asia regular VC investing has grown tremendously, but early
stage VCs are lagging behind.
22
What this means is there hasn’t been a lot of growth in the region. This
makes early stage investments a bit trickier to obtain. There's misalignment
in the market because the VCs started out smaller then became successful,
so these funds became much larger. By virtue of size, they are much more
focused on series B, and beyond, so seed to series A ends up lagging
behind.
Challenges in the Space
The biggest challenge is the go to market strategy. Acquiring customers in
an innovative and smart way isn’t easy because we are so overwhelmed by
information.
The problem with approaching any business with a value proposition today
is that people are so overwhelmed that they can't even think about
changing a supplier, for example, just to save half a percentage of their
total cost.
In order to get the attention of customers today, you have to approach
them with how you can make their lives easier and their processes simpler.
Mikael Krogh’s Background
Mikael started out in a large fund in Norway as an equity analyst.
He has also worked in operational roles, but mostly stayed on the
investor side of things throughout his career.
Contact Information
Web: Investigate VC
LinkedIn: Mikael Krogh
23
Listen to the full interview here
24
Paul O’Brien of MediaTech
Ventures
Challenges Startups Face
What we typically see is that depending on where the startup grew up,
rather that be New York, Silicon Valley or Austin, they tend to get different
advice.
They also tend to get a different perspective from the community, and that
advice is neither right nor wrong. The advice is attuned to how that
particular region tends to work.
The mistake that's made is as the startup matures, they are still fixated on
the advice and the experience that they had in their own region. They don't
appreciate that when you get into that next stage of series A and series B,
you have to start talking to other markets to raise capital. As you start
talking to those other markets, you've got to appreciate that they may have
completely different experiences and expectations with regard to what
happens at that next stage.
Mediatech Space Evolution
Media will always play a pivotal and critical role in our world.
It shapes our culture.
It shapes our economy.
It shapes what we know.
It shapes how we connect with people.
Whether or not the economy is stronger or weaker, there will always be
demand for media. What we've seen recently is an affirmation of that. A lot
of the big companies are looking to participate in more innovation.
25
Likewise a lot of private groups, public funds, grants, and federal money,
are coming into the space looking to participate in the immediate industry
at large because we know that the media industry plays an important part
in what we all do.
Paul O’Brien’s Background
Paul works in Venture Capital Economic Development, serving
investment in entrepreneurs.
He has a passion for media innovation and investment.
Contact Information
Web: MediaTech Ventures
LinkedIn: Paul O’Brien
Listen to the full interview here
26
Manuk Hergnyan of Granatus
Ventures
Advice for Investors
Every startup and every team is different.
Often, early startup teams spend little time in understanding the market
and whether they are serving or trying to solve the real human problem.
There's a lot of hype out there and a lot of startups are just focused on the
technology side of the company. A lot of times, this means they are
overlooking the real need and the type of problem they're trying to solve.
Make sure the entrepreneurs understand the market and the need they're
trying to serve and pay attention to team composition and the team
dynamics. The team should have the ability to change the course of the
company and not be broken in the process.
Advice for Entrepreneurs
Execution and discipline are keys to success.
Remember that once you get external funding, you have to deliver. All too
often founders lack the execution capabilities or the discipline needed to
move a company forward.
Spend as much time as you possibly can sharpening your skills in these
areas.
27
Industry Evolution in Armenia
Granatus Ventures was the first venture capital firm in Armenia and was
started in 2013. At that time, there were just a handful of startups. The
industry was transitioning from being a destination for outsourcing
contracts or custom software development to real product development
and tech entrepreneurship.
Now, it is a completely different industry. A lot of startups, some success
stories, and international capital came into the country. Significant rounds
have been raised, so there are now a lot of copycats in the first stage.
Currently, more startups are focused on developing technologies,
particularly AI and machine learning.
One particular aspect of the Armenian ecosystem is that there are links with
advanced business ecosystems, particularly within the US. Trends and
patterns of development in the U S ecosystem are quickly transmitted into
Armenia.
It is not uncommon for new companies to start with having consumer
facing offices in the US while the back offices reside in Armenia. This
creates a lot of interesting opportunities given that Armenia is a small
market.
The majority of the startups don't try to solve local problems.
They try to solve global problems.
In other words, they are turning the disadvantage of being a small country
into the advantage of a global mindset from the outset of development.
Challenges in the Space
Armenia is a small market and somewhat detached from larger markets.
The biggest challenge is market access. Most Armenian companies are
developing solutions for global markets. Developing linkages to the global
28
market is one of the most important challenges that Armenian startups
face. They try to fill this gap and address the challenge through networks
and partnerships or partners in other countries.
There is also an increasing demand for high quality technical talent. This is
becoming a challenge for startups, particularly when more and more
international companies are being attracted to Armenia due to the
availability of talent which is still affordable.
Manuk Hergnyan’s Background
Manuk has a background in the management consulting industry.
Contact Information
Web: Granatus Ventures
LinkedIn: Manuk Hergnyan
Listen to the full interview here
29
Henry Yoshida of Rocket Dollar
Investment Areas of Interest
Henry prefers to stick close to what he was professionally trained in, which
is in the financial services retirement space.
There are still a lot of opportunities for people to build great companies.
Generally, there are two ways to make this happen:
1. They can build new products in the financial services and retirement
space.
2. They can build technology enabled workflows to make the above
products more efficient and accessible to a larger group of people at
a lower cost.
Henry is passionate about Fintech. He notes this particular area of interest
for the purposes of creating new and innovative products and its ability to
enable the existing workflows and products to become more accessible and
available to people at either lower price points or lower cost overall.
Investment Areas to Avoid
Henry notes the importance of staying away from things you don’t
understand. Because of this, he prefers to avoid investing in hospitality and
real estate particularly.
While lack of understanding is a driving force, Henry does believe that early
stage investing is very much about betting on the execution abilities of a
team. However, while the team may be more than capable of solving a
problem, their skills shouldn’t cloud your judgement.
30
Challenges in the Space
The number one thing that hurts early stage startups is a lack of singular
focus. In other words, they have a big idea and they're trying to do 4 or 5
different things.
Ideally, startups should become good at one very specific thing and then
expand from there.
In the early phases, it's easy to get distracted and try to do too many things
at once, whereas you should just focus on that one thing that could make
your business work or be viable at this early stage. No one is expecting you
to have a 25 products services platform on day one. However they probably
expect you to have identified a niche, product, or market opportunity and
be good at solving a problem in that specific space.
Henry Yoshida’s Background
Henry is a successful entrepreneur and an experienced angel
investor.
He was the founder of the venture capital-backed robo-advisor
retirement plan platform Honest Dollar (acquired by Goldman
Sachs), and MY Group LLC (acquired by CAPTRUST), a $2.5
billion assets under management investment firm.
He is a former Merrill Lynch Vice President.
Contact Information
Web: Rocket Dollar
LinkedIn: Henry Yoshida
Listen to the full interview here
31
Samara Gordon of Hyperplane
Venture Capital
Advice for Investors
If you are going to invest regularly, try to commit to a strategy around a
check and round size in addition to the target ownership that you're going
after.
If you want to write a larger check on a company that's really taking off,
that's one thing, but there's often a trap that investors fall into when they
lack conviction.
Instead of digging in deeper or working with a company to fix some of the
things that they see as problems with either the business or the product
side, the investor will just write a smaller check and attempt to derisk.
You should be clear on what your strategy is for how you want to invest in
terms of mechanics of the deal.
Advice for Startups
It's never too early to think about:
business fundamentals
go to market strategy
sales
There is no such thing as hiring a salesperson too early.
One of the biggest differences between the ways that experienced
entrepreneurs build their business versus newer ones is when and how they
make that first business and sales hire. Companies should think about
commercialization as they're specking out the product.
32
Industry Evolution
Rounds are getting messy and it's causing a lot of confusion for funds and
for founders who are trying to navigate the fundraising space. We're likely
going to see some clarity be forced upon investors and founders as to what
they really need to raise.
Funds and investors are also getting stricter on what milestones they want
to see for the stage they are investing in.
As these things come into play, this landscape will get a little less messy
than it is today.
Challenges in the Space
A general challenge that founders face is that they're getting conflicting
advice about needing to have 100% conviction around what they’re
building and the approach they’ve taken to solve a problem.
You need to be really flexible and adapt to market dynamics and/or
customer needs.
So, what investors are looking for, and what you need to think about on a
day to day is:
Am I the right person to do it?
Is this the right solution?
You need to go out and convince customers, investors, and new employees
that you want to join the team, that you have nailed it and have come up
with something that is going to work.
At the same time, you need to wake up every day questioning if your
assumptions were wrong.
Think about what you need to change.
33
The truth is, these are hard things to balance at the same time. It can be a
lonely job constantly trying to juggle these priorities, so make sure you
always have someone you can talk to rather it is a coach or your CEO.
Samara Gordon’s Background
Samara started her career in product after graduation where she
joined as an early employee at a Fintech startup in Boston. She was
the first person working on their product as a product manager.
While with the startup, she was spending nights and weekends
working with a predictive analytics company that she started with a
professor from Penn.
She’s also worked with a European management consulting firm and
moved to New York to help start their US office.
She spent a few years traveling the world and working on different
strategy projects for larger companies.
Contact Information
Web: Hyperplane Venture Capital
LinkedIn: Samara Gordon
Listen to the full interview here
34
Pieter Dorsman of Angel Forum
and E-Fund
Advice for Investors
Realize that you're in it for the long haul.
Be mindful that you're dealing with people who are working under great
amounts of pressure.
At the end of the day, it comes down to the people. Get comfortable, not
just with the company, the technology and the business plan, but with the
people as well. Get to know the founders. Get to know the entrepreneurs.
Go out with them for dinner; have a coffee with them.
Know the people you are working with and see how they operate under
various circumstances because, no matter what, you're investing in people.
If the technology doesn't work out or the market has changed and the
company has to pivot, you're banking on the people to make that change
and pivot the business in another way.
You’ll go through many ups and downs, so you better be sure that you
have a good relationship with the entrepreneur.
Advice for Startups
Investigate what you need.
What do you need in terms of resources to get your company off the
ground?
Do you need developers?
Can you do it on your own?
What is it going to cost you?
35
How long are you able to go without a salary or without money?
There is this image that startups are run by young people, but more and
more people in their 50s and 60s are starting companies after a corporate
career and these people invest quite a bit of their life savings. It often ends
up being a larger amount than they had planned. Take time to plan your
financial resources and see how quickly you can get a product ready.
Industry Evolution
There are a lot of companies in different sectors.
It started out with software and biotech. Now every other sector in the
world, you'll see incredibly interesting startups, but you also see a lot of
capital coming out of different areas.
For example, angel investors used to be a very small group. Now, it's gone
mainstream, so you see many different angels, but you also see many
different angel funds, especially for people who cannot invest a large
amount of money. Unlike before, these people can now participate through
a fund.
There's also a lot more collaboration in the space, which means you can do
deals much quicker and you can be much more successful in leveraging the
expertise that exists in different geographical areas.
Challenges in the Space
For a lot of startups it's very hard to go to market.
Believe it or not, it's not very hard to come up with a technology if you're a
bright individual or you come out of an industry where you see a certain
problem that you want to solve. However, it is very hard once you've got
your product ready to take it to market. This is where a lot of companies
fail.
36
Some companies can take their product to a certain level of, say, a few
million dollars, but to really scale it into a $200 million company, that
requires a different skill set. This is generally where you see a lot of the
original founders begin to peel off because you have to bring in a senior
executive management team with the right skillset.
Pieter Dorsman’s Background
Pieter started his career as an investment banker in London doing
corporate finance.
He later moved to Hong Kong for Barclays Bank doing large
corporate finance transactions all across Asia.
Contact Information
Web: Angel Forum & E-Fund
LinkedIn: Pieter Dorsman
Listen to the full interview here
37
Gregory Bohlen of Union Grove
Venture Partners
Sectors of Interest
Union Grove Venture Partners are in a wide and diverse group of sectors.
Their primary drivers in making investment decisions are that an investment
should add either transparency or efficiency to a process or a marketplace.
They’re in areas such as:
1. Progyny - a women's fertility insurance company.
2. Poshmark - a women's apparel trading platform.
3. Beyond Meat - which they have recently exited from.
Sectors to Avoid
Union Grove Venture Partners tries to avoid the energy sector. They made
one investment there and thought that they had a company that was going
to lead the efficiency in solar and CPVC. As it turns out, the company did
lead efficiency, but nobody cared. They also avoid investing in pre-clinical
risks in healthcare companies.
Another area they try to avoid is Bitcoin, although they’ve invested in some
funds that have made Bitcoin investments. Union Grove Venture Partners
tries to avoid high capital intensity companies or companies that have
taken huge rounds of capital and are now starting to run out of money and
are trying to re-strengthen themselves.
Success of Beyond Meat
Anybody who thinks meat substitutes are a fad doesn't understand the
underlying economics of the marketplace. In protein efficiency, if you're
38
using feed stocks for livestock, you have an efficiency ratio that is
somewhere between 7% and 14%. Beyond Meat was able to achieve
higher than 90% efficiency of protein conversion.
You can essentially feed the entire world on protein from Iowa, Illinois,
Indiana, and Ohio which is a shocking transformation of food stocks.
Gregory Bohlen’s Background
Gregory’s experience and relationships in the venture capital and
investment banking communities have been developed over the past
30 years.
He has invested in over 50 venture-backed companies.
Contact Information
Web: Union Grove Venture Partners
LinkedIn: Gregory Bohlen
Listen to the full interview here
39
Doug Doan of Hivers and Strivers
Advice for Investors
It's all about the leadership team.
You can do due diligence, but in an early stage company, this is often
difficult because there's not a lot to dig into.
Doing due diligence on an early stage company is very fraught with
problems because there's just not enough history to guide you. On the
other hand, you can and should do due diligence on the entrepreneur
because it's really all about the entrepreneur to begin with.
A great entrepreneur will find a way to bust through walls, pivot the
company and succeed.
Advice for Startups
It's all about fierce commitment. Starting a business is one of the most
difficult things a person can do and the failure rate for being an
entrepreneur is quite high.
We're in a world where it's so interesting and buzzworthy to be an
entrepreneur. We hear a lot about people who started a company in their
basement and 2 months later they were a billion dollar company.
The problem is these stories are not as relevant as a lot of people believe.
Starting a business is going to challenge everything about you as an
individual.
It's going to be one of the most difficult things you’ll ever do.
However, it may also be the most rewarding, too.
40
Industry Evolution
There's the Silicon Valley and then there’s everybody else. If you're in
Silicon Valley, the perception, at least for those who are outside of it, is that
in Silicon Valley, you've got an ace in your hand when you're at the table.
That's a powerful advantage.
It's a formidable ecosystem that they have created there. The end result of
this is that they are hyper-connected and companies that are seeking
funding in that space have some advantages. However, there's also a
culture that is different from the rest of the country.
The companies that are outside Silicon Valley generally have lower
valuations. They are also going to be a little more humble and a lot more
focused on getting customers and getting the revenue machine started.
The perception that you can outrun the competition and be successful if
you spend a lot of money isn’t going to be a working scenario for the
future. In the coming years, the quality and the character of the leader and
of the CEO is going to count a lot more than it does now because you're
going to need people that can do difficult things, tell hard truths, and that
can survive problems when they appear.
Challenges in the Space
Depending on where you are and what you're trying to do, the challenges
are different.
For example, in the military world that Doug focuses on, there are a lot of
things you learn coming out of one of the military academies, but how to
raise capital is not one of them. Former military members generally have no
tradition of investing back into younger military members that are just
getting out of the service.
Raising money and how to raise money is not something these people have
much experience with. However, if you're coming out of Stanford, you have
41
an advantage because you’re right there in Silicon Valley. The individuals
here tend to learn about capital so quickly because they have an ecosystem
that supports it. This means their ability to understand and attract capital is
high. On the other hand, if you're somewhere outside of a major
ecosystem, your ability to attract and understand capital might be much
lower.
The bottom line is the ability to attract capital. This ability is going to vary
depending on your experience and where you're located.
Doug Doan’s Background
Doug is a military veteran who graduated from West Point.
He invests exclusively in companies led by military veterans,
especially graduates of the US service academies.
Contact Information
Web: Hivers and Strivers
LinkedIn: Doug Doan
Listen to the full interview here
42
Joy Schoffler - Investor and
Advisor
Advice for Investors
Cash flow is important.
There are a lot of sponsors out there who are still underwriting for a lot of
growth in the market, and depending upon the asset class, that growth may
or may not come.
It's really easy to have a good track record over the last 10 years with how
well the market's done, but when times are rough, you want an operator
who:
Has a lot of cash
Isn't overleveraged
Isn't going to just walk away
Also make sure that you're not utilizing growth assumptions from the last
couple of years, but modifying it to show a potential downturn in the
future.
Real Estate Investment Evolution
There’s a better use of technology in the space.
There's a lot of room for operational efficiency within the real estate
industry, and we're seeing that adoption happening, but there is still a lot
more room to grow.
New real estate technology platforms are starting to make use of
algorithms and AI that make the initial due diligence process easier,
especially on the debt side of things.
43
Gaining Exposure
The most important thing for startups to remember when trying to gain
exposure is being in the right room, both on and offline.
The 2nd most important thing is having the right message when you're
there. As a brand, you get to control perception. In that controlling of
perception, you really have the opportunity to tell a story and make sure
that people understand:
What it is you're doing
How you're doing it
Make sure you're in the right places talking to the right audiences. You
want to be able to take people through a journey and automatically answer
a lot of the questions and objections they have with your messaging.
Joy Schoffler’s Background
Joy previously owned Leverage PR.
Her company worked with a lot of early stage and mid stage
companies, primarily in tech, financial technology, and real estate.
Contact Information
Web: Joy Schoffler
LinkedIn: Joy Schoffler
Listen to the full interview here
44
Vinod Jose of Konglo Ventures
LLC
Advice for Investors
Investors have to look at investing from a portfolio perspective. That means
there are other asset classes that you should have in your portfolio before
you get into startup investing.
For the average person, when you look at your entire portfolio, an
allocation of 5-10% is likely something that you can put into startups where
you know that risk, but also has the opportunity for an outside return.
If you follow a systematic process in identifying and building a pipeline
followed by evaluating the startups in that pipeline, then you're emulating
what a VC fund does. The best way to do this is through an angel network
and not trying to do it all by yourself.
Find other investors who have similar interests that you can work with and
learn from. You can leverage each other's capabilities, network, and add
value to the company.
Advice for Startups
It's important to understand what you are trying to solve. A lot of
companies end up doing something incremental. They might be solving a
problem, but it is not large enough or sustainable enough to build into a
billion dollar business. The reason this happens is because there are so
many solutions and competitors in the market that there isn’t enough of a
moat to build around the business.
The solution to this is targeting large markets and large problems.
45
Additionally, new entrepreneurs typically lack market experience. They
might be very good at building the product, but they tend to overestimate
the size of the market. The key to solving this issue is to spend time getting
to know the market and being careful not to overestimate its size.
Challenges Startups Face in India
Entrepreneurship, in itself, is a tough journey.
Indian entrepreneurs have a much harder time because of the environment
and the government or the regulatory issues they face. In this sense, US
startups have a much better success rate than many other places around
the world.
Another challenge we are seeing is large companies like Amazon, Google
and Facebook dominating the market to such an extent that there are not a
lot of opportunities for new companies. Almost anything that the new
company tries to do, if they're successful, is quickly bought out.
The chances of building a large company like Amazon from scratch are
becoming more and more difficult. This is simply because these large
companies that are operating now got ahead when the internet took off
and this offers them an unfair advantage.
Vinod Jose’s Background
Vinod comes from a consulting background.
Contact Information
Web: Konglo Ventures
LinkedIn: Vinod Jose
46
Listen to the full interview here
47
Pedro Falcão of LC Ventures
Advice for Investors Interested in Portugal
One thing to look at is the interesting characteristics of startups in
particular regions. Compared to companies in other areas, in Portugal, with
the same amount of money you can do 3x more. It can be developing a
product, software, or even hiring sales and marketing people; you’re able to
do much more with less.
The country has been focused on producing more for a longer period of
time with less money. Another thing that sets Portugal apart is that because
they are a small country, it is great for testing people and is especially good
for testing new technologies and products.
However, being a small country also has drawbacks. For example, from the
very beginning, startups in a smaller country need to think about
messaging internationally and be focused on an international market. After
a couple of months most startups here have to go abroad. This is a huge
difference from other countries like the US where you can stay for 2-3 years
working exclusively in your country.
This means that from the ground up, Portugal has to think internationally in
terms of supporting different languages and different needs because each
country has specificities.
Advice for Startups
There are some caveats that you must consider. There are risks with the
currency and there are risks with the culture of the country. Keep in mind
that each country has people that work with very different values from one
another. It's not necessarily bad, but they are different, and it's something
that you must consider when investing in those other countries.
48
Industry Evolution and Challenges
Investing used to be a small environment. Portugal didn't have more than
20 relevant entities in the investing market. After about 20 years the
country has seen huge growth. While they are still small, they now have
more than 50 risk capital firms.
What has happened is that you can typically find investment sizes of 200-
300k in Portugal. However, above that, you have to bring in foreign
investors.
Portugal knows that it still has to grow, which is no easy feat. Generally,
revenue is a concern and they still have to grow their base of VCs and
business angels in order to be at the same level as countries such as Spain
or the US.
Pedro Falcão’s Background
Pedro started working as a programmer during the 80s.
He later became an analyst and strategic consultant.
Pedro became an early-stage investor and has invested in over
100 startups.
Contact Information
Web: LC Ventures
LinkedIn: Pedro Falcão
Listen to the full interview here
49
50
Band of Angels
About TEN Capital Network
TEN Capital Network provides funding as a service to
companies anywhere raising venture capital. Its network of
over 11,000 accredited investors represents venture capital,
angels, family offices, and high networth individuals.
©2020 TEN Capital Network
www.tencapital.group