Handshakes and Hashtags: Two Key Ingredients for Networking Success

I never believed the refrain “who you know is as important as what you know, ” but, from Hollywood to Wall St to Silicon Valley, it’s hard to say there isn’t truth to it. For all of our connectivity, business is still built on interpersonal relationships.

When I first got to venture capital, I assumed we were all assessed by our IRRs. Surprisingly, a critical framework by which investors assess my industry is by a concept called “network centrality.”

Shockingly, this is what we called “hanging with the cool kids” when I was in high school (or grade school for that matter). In this context, the term is defined as a measure of how much you are an “influencer” and how well connected you are to other influencers. The theory goes that the more connected the VC, the more (and perhaps better) dealflow she/he sees. I’ve seen LPs literally build maps of VCs and their connectedness to others and the tech ecosystem at large. For example, see Endeavor Organization’s NYC Tech Map.

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Just like putting off contributions to your 401K, neglecting your network is a career-ending mistake.

Your network is perhaps your most valuable professional asset. So, just like you manage your 401K and 529 plans, building a networking strategy is a good idea. Today, there are more tools than ever to make it happen.

Hashtag Networking

Mark Suster recently wrote an excellent post about how to build business relationships online, from blogging to tweeting, and engaging with new people (without being a stalker!). He credits many of his closest professional relationships to this type of online introduction.

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Successful networking, whether online or off, requires that you demonstrate substance — domain expertise, credibility, etc. and sociability — that you’re enjoyable to be with. Too many forget the last part.

Online, you can start a conversation with almost any person, in any industry, anywhere in the world. You can chime in on topics (via twitter or comments on a blog post) and listen to experts on others you know nothing about. Unlike in the real world, where you can find yourself in a conversation that’s over your head, online interactions are all upside. The anxiety of saying the wrong thing is lessened online, where at worst, you don’t get any responses (fortunately Zuckerberg has yet to add the “dislike” button).

Building your online persona and engaging with others ismarketing” or an “air game”. Historically, we thought of marketing as public relations or advertising. Only businesses and professional athletes could afford to market themselves. Nowadays, the individual (VC, entrepreneur or other professional) has to have a solid air game. Building your online presence greases the skids for networking in the real world, just as PR and TV ads help sell products.

Handshake Networking

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Press flesh, break bread, or any two words describing human interaction, not facilitated by a screen or keyboard will work. Photo Credit: Julia Taylor.

While connecting with others with tweets and comments is quite valuable, I believe handshakes beat hastags. Basically, if you’re going to invest in building relationships online, you should have a similar “sales” or a “ground game” to go with it. It’s easier than ever to demonstrate substance and sociability, but the landscape is noisy. Marc Andreessen tweets over 160 times a day. Rising above this noise is critical and that’s why its best to combine both the the air and ground games.

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For more background on this infographic, read this post at CB Insights.

We all know those uniquely talented people who can strike up a conversation with just about anyone at a party (some of my college friends, you know who you are). If you were like me, it isn’t as comfortable connecting with total strangers.

One of the most difficult aspects of meeting people is breaking the ice. By building your profiles, writing blogs, posting on FB and tweeting, others can know about you before you actually meet live. One of the best professional ice breakers these days is “I like what you wrote about in your blog.” It’s always wise to read someone’s online profile before meeting them, even if its just a potential chance encounter. Flattery will get you everywhere, and there’s no question that entrepreneurs that show evidence of having read my stuff score points.

As a VC, I think about my sales strategy as often as my marketing approach. We’re humans — emotional and psychological beings. The expression “to break bread” is as old as the bible but the meaning hasn’t changed. Today, we might more often say “grab coffee” but the meaning is the same which is to bond over food and drink and get to know one another on a human level. There are certain elements of a person that just can’t be understood solely from online interactions (even online video). For this reason, I always prefer to meet entrepreneurs live, my second choice is Skype/Hangouts and (the very) last resort is the phone.

A few quick tips for networking in today’s world (whether online or off):

  1. Take a point of view. Develop your narrative. Politicians have their talking points. So should you. One of my old mentors said “I pay you for your opinions.” Sometimes being contrarian on a topic can help gain notice online. I’ve encouraged younger folks looking to interview for startup or VC jobs to have points of view on particular companies or industries. If you think Bitcoin is a fad, say it. Be sure to back it up too.
  2. Ask good questions. Make sure you have some questions chambered, e.g. What’s the biggest challenge you’re facing, why did you attend the show, etc. Be engaged, listen, and don’t just try to sell your book. One of the key benefits of face to face meetings is that people let down their guard.
  3. Create lists of people you want to meet. I’ve created target lists of people I want to meet, and lists of people that I haven’t connected with in some time. Just like sales, you need quarterly targets. Find ways to get introduced to people you don’t know — don’t be afraid to ask someone to introduce you or even try an InMail on LinkedIn.
  4. Play to your strengths. If you’re more comfortable with the written word, invest in blogging and building your online presence. If you find real world schmoozing more to your taste, invest there. Either way, remember that both activities support one another in showing substance and sociability.
  5. Break Bread. I host a variety of events — including founder breakfasts to foster meeting new entrepreneurs in a less pressure-filled setting. These founder breakfasts are hosted by myself and a few friends. Each of us invite people the others don’t know and it makes for great connecting and often fantastic conversations.

Before You Make That Pivot

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This post originally appeared in TechCrunch.

According to Eric Ries, a pivot is a “structured course correction designed to test a new fundamental hypothesis about the product, strategy and engine of growth.” The rise of the Lean Startup methodology, however, has led entrepreneurs to indulge and glorify the pivot without fully weighing the consequences. Changing course opportunistically is a key part of starting a company, but the best startups only pivot when absolutely necessary.

As an investor, I love the lean startup methodology. In the early days, the risks of large pivotsare small and the upside can be huge. Entrepreneurs should be focused on developing MVPs and proving or disproving hypotheses.

This changes once you take venture capital based on a particular strategy. The clock starts ticking and in my experience, pivots past a certain point can often be painful.

The Pivot, the Restart and the Hail Mary

Like “burn rate” the word “pivot” has been overused, often incorrectly. In basketball, a pivot is when one foot moves and one stays on the ground. Take another step and you’re called for traveling. The same goes in businesses.

Burbn becoming Instagram is a classic pivot. When the team behind the podcast platform Odeo recapitalized and changed course to create Twitter, it was a restart (a wildly profitable restart, but a restart nonetheless).

Recently, I’ve seen startups with millions of dollars raised moving to radically different markets or tech platforms, relatively late in the game. These feel more like Hail Marys. Perceived “sunk costs” and the entrepreneurs’ fear of letting down their team, family and investors drives this behavior. Often the founder embarks on the new plan with less diligence, insight and passion for the problem than their original business.

Why Are You Pivoting?

Before making any changes, understand the motivation for the pivot. Do you feel like youhave a viable product, but you misjudged the go-to-market plan? Did you underestimate the complexity of the product you seek to build? These may be perfectly good reasons to pivot.

Or, have you learned that the thesis you used to attract an all-star team and millions of dollars in venture capital is fatally flawed? All entrepreneurs have these moments of doubt, but sometimes it’s more than emotion, it’s truth.

Be honest with your advisers, trusted investors and senior team. reassess your options. There is no shame in starting a company that fails to change the world, but a badly handled pivotcan cause more damage than hitting the stop button.

Prepare for the Fallout

When I was starting Brontes, my cofounder Eric Paley and I were commercializing a 3D-scanning technology invented at MIT. Our original focus on industrial applications caught the attention of a prominent VC who scheduled us to present to several partners at a future meeting.

In the intervening period, we pivoted. We started researching the dental market, spending time at the Harvard Dental School, discussing partnerships with companies like Invisalign and talking to dentists. Our conviction on the dental opportunity increased.

We pitched this dental strategy at the VC partner meeting and it was a total disaster. We hadn’t properly guided our sponsor through the thinking behind the change and they didn’t invest. Brontes ultimately sold to 3M for $95 million dollars, proving that pivots can pay off. Nonetheless, I’m grateful that we pivoted to dental before taking the VC money or the outcome may have been quite different.

Manage Your Employees and Investors Through the Pivot

Six months after co-founding Sample6, I began considering diagnostic applications rather than the original application of the technology. After spending time with customers to validate the diagnostic approach, I casually floated the idea with one of our engineers. To my surprise, he had been thinking about the very same thing and explained how diagnostics would actually be easier to build and potentially more valuable.

The decision to pivot is largely in the hands of the CEO. Below are some of the best practices I’ve learned along the way.

Socialize the idea informally to trusted advisers. Pivoting might have been on your mind for months before you even consider implementation. Slowly and deliberately share the datathat’s leading you to consider a pivot to your inner circle of managers and investors. Don’t distract your sales team. Some teammates may fear for their jobs, rather than consider what’s best for the company. Ask one or two trusted senior engineers to think through new development timelines. In many situations, savvy colleagues will come to the same conclusions you do.

Pivot fast and burn the boats. Once you have decided to pivot, do it quickly and cleanly. Straddling the old and new business is all too tempting, but not a good idea. Employees will be confused and the team will be stretched between two very different strategies. It’s never easy to kill the original dream, or any revenue associated with it, but startups can only execute on one plan.

Making a big change? Offer your investors their money back. If you’re making a dramatic change, the right move is to offer their money back. Most won’t take it. Good investors have backed the team no matter the change. But the offer shows an honest understanding of the scope of the change, and gives investors a chance to redouble their commitment.

You also might be asking your investors to write another check, or minimally, makeintroductions to new investors who might be more aligned with the idea. If the pivot fails,you’ll want their help negotiating an exit. If you ever plan on raising money again, or are looking for a gig at a venture-backed startup, their recommendation will be critical. Be careful with these relationships.

Signs It’s Time to Pull the Plug Rather Than Pivot

If you’re looking at a restart, or Hail Mary, ask yourself these questions first.

Do you have fewer than six months of funds? If so, manically focus on profitability or start looking for acqui-hire options or a sale of the intellectual property. Paul Graham has called this period in a startup’s life the “Fatal Pinch,” and massive changes at this point tend to look more like death throes than thoughtful recalibration.

Need to replace more than 30 percent of your team? At the early stage, team chemistry is critical and firing a third of your key contributors will mangle morale. And if you need to recruit new technical leads, just start over.

Are you pivoting more than a ballerina? If you don’t have a compelling vision to motivate your team, or you’ve lost faith, don’t try to fake it. Time is more precious than money. Just becauseyou have some money left in the bank doesn’t mean you should spend it.

Sometimes the best thing you can do is pivot. Other times, banging your head against the wall because you believe it’s your life’s mission, despite the fact that the market is telling youotherwise, is an even bigger mistake. The self-aware entrepreneur knows when to hold ‘em, went to fold ‘em and when to pivot ‘em.

Requiem For A Unicorn

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This post originally appeared in TechCrunch.

Marc Andreessen has said that there are 15 companies per year that generate 90% of the returns for VCs. Startups jockey for position in the “Billion Dollar Club.” In the world of startups we don’t have the S&P 500, we have the “Unicorn 50.”

Fab was once a member of this unicorn club. Founders Jason Goldberg and Bradford Shellhammer appeared on magazine covers. The company was a fixture on “most innovative” lists. Fab raised $336 million dollars in total funding, including a recent $150 million dollar round which valued the company $1.5 billion dollars. Now, in what can only be called the largest flash sale in history, Fab is reportedly being sold to PCH International for $15 million dollars, or just 1% of its former value.

Stories of outsized success are inspiring, but the disproportionate attention paid to these mythical beasts is detrimental to the broader startup ecosystem. This obsession with founding and funding unicorns has driven VC funds to become billion dollar behemoths, and as a result, ignore smaller, though still very promising, companies.

I call this kind of startup a “thoroughbred.” They’re impressive organizations that have the potential to change the lives of their customers and employees, but differ from unicorns in that they are “only” likely to exit for $100-500 million dollars. Some VCs see these companies as too small to concern themselves with, but there is something fundamentally broken in the startup ecosystem when funding a company that sells for a quarter billion dollars is an unattractive prospect.

Thoroughbreds can be lucrative

Personally, founding and selling a thoroughbred company proved to be life-changing. In 2003, Eric Paley and I raised $8.5 million dollars for our company,Brontes Technologies. Our goal was to digitize a part of dentistry that hadn’t changed since Egyptian times. We developed a hand-held scanner that allowed dentists to create 3-D models of their patient’s mouths and 3-D print crowns and fillings. We didn’t get our faces on the cover of Forbes, instead we spent most of our time on the (un)glamorous dental trade show circuit. In 2006 we sold the company to 3M for $95M, generating an excellent return for our investors, and for us.

The proceeds of the sale and our entrepreneurial learnings served as a springboard to start Founder Collective.

Bigger isn’t Always Better for Entrepreneurs

In the five years since we started the fund we’ve seen a dramatic growth in the number of venture capital funds and the amount of funds they have under management. This surplus of dollars means that any attractive category of companies—think of subscription ecommerce in the wake of BirchBox or daily deals after Groupon—will quickly have 3-5 venture-funded startups competing for investor dollars, customer attention, and resumes for key hires. Each company will raise more money than the previous one and an arms race for everything from Adwords to office space will ensue.

Not Every Market is Winner Take All

The problem with trying to attain mythical status is that there can only be one. Raising huge amounts of funding locks you into a binary outcome—you’re either worth billions or you go bankrupt.

First wave web companies were built on the strength of network effects that rewarded companies like Amazon and Ebay with near monopolies. This has led many to believe that there’s bound to be a single winner in any tech category, but not every market has a winner takes all dynamic.

Apple and Android co-exist. In adtech, dozens of very successful companies deliver solutions to brands and publishers. Even in the slow moving dental industry we had a venture-funded competitor that also enjoyed a sizable (~$200M), but non-unicorn exit shortly after ours.

Forget the Fairy Tales, Focus on Being a Thoroughbred

Not everyone has to be running a unicorn to build a great company, recruit a great team, or to raise capital. It’s hard to ignore the pundits, but just like in politics or sports, sometimes it’s the best thing one can do for their sanity. Focus on your customers, co-workers, and your venture capital strategy and there’s a good chance you can build a life-altering business that’s rewarding personally and financially.

Fred Wilson’s post about Capital and Success says it well – one shouldn’t correlate fundraising to likelihood of success. Nor should you focus on whether or not you’re a founder/investor/entrepreneur at a “Unicorn.” Remember even unicorns can be a mirage as Webvan, and now Fab demonstrate.

Strategic Investors – You’ll Have Sold Your Company. You Just Won’t Know It.

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According to CB Insights, 30% of fundraising dollars in Q1 2014 was from strategic (or corporate) investors, with corporate VC funds participating in 15% of all rounds. The discussion invariably comes up at Board Meetings when a fundraising process is begun. Legendary VC Ted Dintersmith of CRV once said to me, about taking capital from strategics, “Be careful. You’ll have sold your company. You just won’t know it.”

These days, a new class of investors, corporate funds like Google Ventures and Intel Capital, operate more like a financial VC than typical strategic investors. Nonetheless, I’ve been on the receiving end of strategic investments for nearly all of the companies I co-founded, and I’ve learned a lot. Ted’s words still ring true today.

Below are some examples and lessons learned.

Example #1 – Handshake.com & SBC Communications (1998-2001)
In ‘98 Handshake built one of the first online booking and scheduling platforms for small businesses (from hair salons to house cleaners). Not far from Handshake’s offices in Marina Del Rey, CA was a corporate skunk works projects called Smart Pages. Smart Pages, a wholly owned subsidiary of SBC Communications, was formed with the distinct purpose of developing a “next-gen Yellow Pages.” SmartPages and corporate parent SBC Communications seemed eager to do a deal with Handshake. So, roughly one year from our A round, we closed a $20M financing at a $100M valuation (despite virtually no revenue and only a basic product).

My lessons learned at Handshake:

Valuation hypnosis – Don’t be bamboozled by sky high strategic valuations, they create issues for future financings – we would have been better off with a lower valuation from a conventional VC

No fairweather fans – Some strategic investments are used to justify corporate side projects or to tell a “story” to Wall St (in this case, that SBC was hip to the web). When winds shift, the strategics aren’t always around to help. Often their investment vehicles are the first to go.

Example #2 — Brontes & a large private co. (2003-2010)
Brontes Technologies (sold to 3M in 2006) developed a 3D scanner and digital workflow software for dentists. Our strategy early on at Brontes was to get close to potential investors, partners, and acquirers, but not too close. As we were getting ready to raise our Series B, conversations heated up with a large, privately held dental products company. We had had discussions with other players, but felt that taking capital from most industry players would have limited our exit options (fortunately Ted Dintersmith was on our board!). Playing hard to get paid off with the other potential strategics. The Series B fundraising process catalyzed the M&A process and we ultimately sold the company.

We learned:

Everyone wants to join the club that won’t have them – Strategic investor interest can sometimes be parlayed into an M&A process. (turn them down as investors and they may want to buy the company even more)

Keep your enemies close (but not too close) – Be careful of whom you share information, some parties will use it to learn but have no intention of investing or acquiring despite their overtures.

Example #3 — Sample6 & Chevron Tech Ventures (2011+)
Sample6, spun out of BU and MIT, develops a technology for rapid detection and elimination of harmful bacteria in a wide variety of applications. Early on at Sample6, we were eager to explore applications in oil & gas and thus took Series A capital from Chevron Tech Ventures. However, over time, we determined that the right applications for the technology were in the food and water industries, not oil & gas. This took some of the bloom off the rose for Chevron.

Our mistakes were:

Figure out what you want to be when you grow up – We took strategic money too early- before we had really firmed up the company’s ultimate use case. We let strategic interest drive the initial explorations of the company instead of focusing on where the highest value could be created with the technology.

Crossing signals – There can be real signaling risk in taking strategic money early as well. Since we no longer were executing oil & gas applications, future investors always wondered why Chevron was invested in the first place.

I’m not suggesting that companies should never take strategic or corporate money under any circumstances. Just tread carefully – understand how the strategic’s fund (if there is one) is set up, how the managers are compensated, and speak to other portfolio companies. Strategic capital is typically best used in later rounds from investing companies that have a neutral spot in your market, and, where there is a true champion from the operating team.

Cats in the Cradle: Aging in the start-up world

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There’s a funny thing about age in business. It swings quickly between being your greatest asset and seemingly overnight, a major liability. It’s a factor on all sides of the table. Despite the lesson that we learned in Kindergarten about “not judging a book by its cover,” we all do it. Age impacts fundraising, business development, sales, hiring and more.

Spring 1999

The moment I walked into the room of blue blazer clad venture capitalists, I felt like such a kid. I was at least 15 years younger than the youngest guy in the room. I just graduated from college and had no real business experience. Fortunately for me and my other 22-year old Handshake.com co-founders, it was the beginning of the dot com era. It was a moment in the venture ecosystem when youth was a huge advantage (like today). The mantra was “new (read as: young) industry” is disrupting “old industry.” The younger, the better. I could get meetings with senior execs of many public companies. We secured $3 million in funding within a few weeks of presenting our business. Youth had its advantages. That was, until the bottom fell out of the market in the fall of 2000. Then youth, mine included, turned into a major liability.

Fall 2003

Eric Paley and I were fundraising for Brontes Technologies. We were rejected more than 30 times by VCs. We were often branded as “freshly minted MBAs,” (not a compliment) and we didn’t look the part of your typical Boston med-tech founding team. Neither of us had gray hair nor were we career dental industry executives. One VC asked us, “Which one of you went to dental school?” Our age was totally working against us. We later brought another founder aboard, an experienced tech CTO who, incidentally, had grey, thinning hair. Sure enough, we closed the Series A.

Spring 2011

When I first started fundraising with my co-founders for Sample6, I thought I would be viewed as perfectly ripened. I was mid-30s and had a company “exit” behind me. I later realized that the perspective really depended on who I was talking to. Some VCs perceived entrepreneurs to be in their primes when in their mid-20s, like professional athletes, others prefer older founders. And with the upswing in IT investing (as opposed to med-tech), youth was particularly valued. Had I become a washed-up entrepreneur?

Today

I always thought I’d switch over to the venture side sometime in my 40s. It seemed like an older person’s game. That was until a trusted mentor of mine confessed, “Venture is a young man’s game, just like the start-ups we invest in.” That was all I needed to hear. Everything requires hustle in the end. So, at 37, I became a VC.

As a VC, I hear pitches almost every day. I would say the majority of the founders that pitch me are younger than me, though, there’s quite a bit of variability. When I feel the need to put a founder at ease, I make a joke about my age (I find self-effacing humor to be disarming). I often think about founder-business fit when evaluating an opportunity. So, if someone is in their 40s or 50s and talking about their idea for a social networking or dating app, I am negatively biased. Not sure that it’s the right bias, but it exists.

My advice is that one should be self-aware of how they come off in the room. Are you noticeably older/younger than the others? Either way the old adage is true – if you can’t hide it, flaunt it. Make a joke about it and get everyone to look past age and focus on substance and not, in my case, the dwindling number of hairs on your head.

From the front lines of a NYC office hunt — Our new home at 580 Broadway

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580 Broadway – After build out

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580 Broadway – Before build out

I’m proud to say that Founder Collective has a new home in NYC. We’ve just moved to 580 Broadway in Soho. We’re thrilled. But getting here wasn’t easy. Here’s what I learned while out on the hunt for new space.

Set your parameters clearly at the outset, and conduct the search with several brokers at once.

When we started our search we anticipated looking primarily in the Flatiron and Union Square and we expected low $40s per sqft. The market proved to be much more expensive (and tight) than we expected – especially for small footprints of 1-2,000 sqft in downtown Manhattan. Within 48 hours of listing, a desirable spot had several offers. We fell in love with a slick, top-floor space on 23rd St that, amazingly, was on budget. We put the offer in as soon as we returned from the showing, and it was too late. Because we asked for a three-year term instead of the five the landlord was asking, we lost out to another bidder.

After losing 23rd St, we decided to expand the southern border of our search to Tribeca despite that it would add to the team’s collective commute. Broadening the search helped, and we got more firm on budget and specs. We tracked everything on a Google Doc, checked 42floors.com religiously and worked with several brokers concurrently. The best brokers were hustlers who called us the minute they saw a space available that they thought we’d like.  We also found that the best brokers knew the landlords well, and they often had the inside scoop on a given building.

Startups (and others) should consider sharing or subleasing.

Subleases and office shares are ideal for the start-up. Its often best for the start-up to be the roommate. Security deposits required by some buildings can be 6 months or more depending on the credit history of the company (often on the larger side for early stage companies). For a fast growing company, or a super early stage company, this can be prohibitively expensive and a major drain on cash. More established companies (Series B/C+), or venture funds in our case, have better financials and thus can negotiate lower security deposits. Additionally, companies that are taking larger footprints (>5000 sqft) also typically have more room to negotiate rents, security deposits and build out costs. In one instance, we have 2 portfolio companies moving in together to distribute costs and end up with better space at a better deal (often the larger the footprint, the better the deal).

Don’t fall in love and don’t over-optimize

Searching for an office is pretty similar to searching for a home or apartment. It’s a grueling process that mixes the emotional with the rational. The emotional side (the “feel” of a space, how it impacts one’s commute etc) is hard to separate from the rational (budget, size, price per sqft etc). Just like searching for a home, however, one must temper the temptation to over-optimize. Real estate, particularly in NYC, is filled with trade-offs. Find the best place, move in and get back to business.

 

Investments over dinner and board room – Angels v Seed Funds

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(embarrassing picture from an old Newsweek article)

Eric Paley called me one evening to talk about an angel deal he was looking at. I was cooking dinner with my wife when he phoned. We talked about whether behavioral psychology could really work in convincing consumers to reduce their energy consumption. Eric had known the founders for years and thought the world of them, and I had gotten to know one of them, and figured the business was a bet worth taking. While still cooking, I agreed to invest with Eric and Dave Frankel. That investment, Opower, is my best to date.

It got me thinking how different angel investing is from my role as an institutional seed investor. I no longer make investing decisions while cooking, and that’s just the start.

1000s of companies vs dozens

As an angel investor, I saw a dozen or two companies per year. For the better part of my angel investing career, I was running a business so I didn’t have time to meet hundreds of start-ups. Thus, my context was very different. My first year as an angel, I looked at a med device company, a sports nutrition company, and a restaurant business. I had very little context on any of these. In some sense, ignorance was an asset and thus it was easier to make a quick decision with limited data. There was no time or means to “get smart” in a given space, so if I didn’t get the gist of the business in the initial pitch, I didn’t invest. (that year, I invested in none which was a mistake!)

Founder Collective receives thousands of opportunities per year and we take about 1000 pitches. We track our “venture” funnel in a CRM (jerry rigged Salesforce.com). The minute I see a company that’s intriguing, I can see if we’ve met them before and ask my partners what they think. Usually one of them will have knowledge about the space or related companies. Thus, the context around each deal is much more developed when we make an investment.

Angels pursue passion, invest in the network (and mostly ignore valuation)

When you’re investing your own capital, you can invest in stuff you’re passionate about. Noted angel investor Andy Palmer pays particular attention to the healthcare space, and Joanne Wilson favors women entrepreneurs in the industries she knows well. I invested primarily in my network – virtually everyone I invested in as an angel was someone I knew.

In the seed fund world, investing is our business. We can’t just invest in industries or people that we know. (If so, I would only invest in dental companies!) We make 20-30 investments per year. There simply wouldn’t be enough opportunities. That isn’t to say we don’t have high conviction and enthusiasm for the stuff we fund, its just that we need to explore a myriad of opportunities. Additionally, while some more experienced angels are price sensitive, as a fund, we are much more focused on valuation than I was as an angel. Angels don’t need to think about IRR, mainly cash on cash return, but as a fund we’re measured on it.

Follow on support

I did very little to check in on my investments. Often times, I wouldn’t even be aware of follow-on financings. These investments were for fun and hopefully a little extra “alpha” for my personal portfolio.

As a partner at Founder Collective, I’m responsible for keeping my partners up to speed on our companies. In turn, we have to keep our investors (LPs) updated on the performance of our companies. We discuss them at our annual meeting and they receive regular reports on their value. There’s a benefit here, which is our portfolio gets the benefit of help not just from me, but from the whole FC team and sometimes, even our LPs.

The increase in the universe of angels and seed funds is a good thing for entrepreneurs, but with so many options, fundraising has gotten more complicated. Entrepreneurs today can sequence their fundraising, and graduate from Angel to Seed Fund to Series A fund, etc. This provides the entrepreneur with more options along the way, even for those starting companies in the dental industry!