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Rachel Sheinbein is an angel investor with over 250 startup investments. She shares her insights on angel investing and how it allows her to work with founders “even before the seed stage,” writing $25k checks into technology startups through her vehicle Very Serious Ventures. Later, Rachel discusses how building a community drives her investing strategy and lessons from memorable startup investments. Shaherose and Aamir kick off the show with a special message for founders who like to argue and end with their personal takeaways from the conversation with Rachel.
Highlights from our discussion:
- Why Rachel chose angel investing over a partner position at a VC firm
- What to look for in a quality angel group
- Using a DAF to align with an investing purpose
- Detecting founder passion and coachability
- Defining your purpose
This is for information purposes only. This is not investment advice.
Topics
- (00:00) - 03: Rachel Sheinbein, Angel
- (01:14) - PSA: Your startup's users know more than Aamir the angel investor does
- (02:51) - Rachel Sheinbein, angel investor and advisor
- (04:56) - From engineering to venture capital to angel investing
- (07:28) - Do angel groups and angel networks provide value to startup investors?
- (13:23) - How Rachel aligns purpose and philanthropy with her early-stage startup investing
- (16:08) - Rachel's first angel investment was in a gaming startup
- (19:17) - Investor experience, startup luck, and Sequoia
- (21:49) - How does an angel investor like Rachel measure bad outcomes in startup investments?
- (24:53) - How angel investors operate differs from venture capitalists
- (29:47) - Pitch decks - do they matter when seed investing so early?
- (33:45) - Startup founder signals that matter to an angel investor
- (40:47) - A climate tech seed investment that paid off quickly and returned funds
- (46:39) - Very Serious Ventures angel invests $25k super early in founders
- (48:51) - An exercise to help you become a better angel investor
- (51:04) - Speed round, and the best book on strategy for startup founders
- (52:59) - Our takeaways on better startup investing
Connect with Us
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Twitter/X @shaherose
Twitter/X @avirani
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Creators & Guests
Host
Host
What is First Funders?
Learn from angel and seed investors bold enough to write the first check.
How do they decide which startups to invest in?
How do they gain conviction in founders and ideas?
How do they add value to their companies?
Shaherose Charania and Aamir Virani are operators turned investors. They chat with their friends investing in early-stage technology startups and learn about their strategies to fund the best founders and startup companies.
If you are an angel investor or seed investor, you'll hear how others operate.
If you are a startup entrepreneur, you'll hear how investors filter and decide on writing that first check.
[00:00:00] Aamir:
[00:00:03] Hi, Shaherose. How are you?
[00:00:07] Shaherose: Good, how are you?
[00:00:08] Aamir: Doing great. It's been a good couple of weeks for me. We are dealing with the kids on ski break right now. So I am on daddy duty for the past few days.
[00:00:15] Shaherose: I've heard all about Ski Week. My kid is way too small to participate in that and I've already decided that I'm going to opt out of it because I prefer the beach over the snow, even though I'm from Canada.
[00:00:27] Aamir: One thing I will mention is that I came up with a nice little iPhone app idea while dealing with these kids. And so you might hear about it more within the next two months.
[00:00:36] Shaherose: Okay, want to hear about it now though.
[00:00:40] Aamir: We'll talk about it offline.
[00:00:41] So has there been anything interesting on the deal front over the past few weeks?
[00:00:46] Shaherose: Yeah, I've seen some really interesting deals. Some of them coming in from some listeners. So thank you for that. I'm actually really leaning hard into one of them.
[00:00:54] also Since we last met I had the chance to attend a small webinar with Aileen [00:01:00] Lee from Cowboy Ventures, and she dug into her new report on the future of unicorns and the current state of paper corns. So that was really great.
[00:01:09] And if anyone's looking for more on that, you can check out her website.
[00:01:14] PSA: Your startup's users know more than Aamir the angel investor does
---
[00:01:14] Aamir: One thing I find really interesting is that you and I are dealing with different outreach over the past few weeks of doing this podcast.
[00:01:23] On my side, I feel like I'm talking to a lot more operators, people who are product managers, program managers, software engineers that I've worked with in the past, leadership of that ilk.
[00:01:32] And it's been great. I actually love hearing the projects folks are working on. I hope people will keep reaching out. That's been really awesome.
[00:01:37] And that leads me to one of my stories. I think people listening to the podcast may figure out the things that set me off. I spoke to a couple of founders this past week and one of them was essentially arguing with me over the idea.
[00:01:49] And this is some advice for founders.
[00:01:52] I'm not that smart.
[00:01:53] I don't have the answers.
[00:01:54] Your customers do, your users do.
[00:01:57] And so whenever you're asking me my take on something [00:02:00] and I'm saying, I think it's this, but I'm not sure. I'm not asking you to tell me how I'm wrong or right, I'm asking you to tell me that your customers figured out what's wrong or right.
[00:02:10] Shaherose: Or that you, the founder, have some intuition on what's wrong or right.
[00:02:13] Aamir: Oh, that was the other thing I was thinking about.
[00:02:15] When I talk to folks coming out of big companies, the last few have all said, oh, there's this project that was on the side that I think would be a good company.
[00:02:24] And then you dig into it and it's a project that's come out of someone else's head and usually doesn't have very much customer research behind it or user research behind it.
[00:02:32] And I think that's one of the problems when you're at a big company, you think your own internal research team is figuring things out, but you've never gotten outside the building, as Steve Blank likes to say.
[00:02:41] So please get outside the building, please talk to users and customers, and then come back to me and you can tell me how my ideas don't really mean anything and I will totally agree.
[00:02:51] Rachel Sheinbein, angel investor and advisor
---
[00:02:51] Aamir: Our guest today is Rachel Sheinbein. She's an angelshe's gotten together with two other angels to invest their own money. They have over 250 investments [00:03:00] over the past 15 ish years. They describe their mission as we invest in people we admire building things we want to see in the world.
[00:03:06] In fact, the way she described it, sometimes they invest even earlier. There'll be part of that friends and family round, the first set of checks, they like to write whenever it's just founders and a deck or founders in a prototype.
[00:03:17] The areas they'd like to invest in includes climate, mental health, wellness, and economic inequality. And now onto our episode with Rachel Sheinbein.
[00:03:27] Welcome to the podcast. So why don't we start out by explaining how we know you, and then you can say a little bit about yourself before we dig into the questions.
[00:03:35] Rachel: Sounds good.
[00:03:36] Aamir: So how I know Rachel is through a mutual acquaintance. And I consider you part of the early childhood parents club in my head.
[00:03:43] So there's a group of us here in Silicon Valley who all have kids that are, let's say less than 10 years old. You're one of my go tos on that side of things. So I know you in that setting.
[00:03:51] And it turns out that we actually did work together as investor people a few years ago, right? You are, or were a venture partner at Lemnos while [00:04:00] I was a GP at Felicis and so we talked a few times about companies there.
[00:04:03] The other part I would say is that Rachel, you're one of my go tos when it comes to thinking about life in general, right? Being in Silicon Valley can be a bit of a grind because you're trying to balance work with life, with family, with big picture thinking.
[00:04:15] And I think you're one of the people I really enjoy talking to about that sort of stuff.
[00:04:18] Shaherose: That's so sweet. I want more of that from Rachel. So yeah, Rachel, you and I met when I was running Women 2. 0 and you were at CMEA and you were one of the few female VCs out there at the time. It was early days and you were investing in climate, which, at that time It was first wave and you were there as a judge for so many of our pitch competitions.
[00:04:41] I have a lot of memories just learning from you and how you assess companies back then. And so we're excited to hear about your journey since that time.
[00:04:49] Rachel: Thank you. Yeah, it's hard to believe how many years we've been doing this together. So it's really nice to be here and talk with you guys.
[00:04:56] From engineering to venture capital to angel investing
---
[00:04:56] Shaherose: So to help kick off the conversation, we'd love to hear what you're [00:05:00] doing before you're investing and how you first made your step into this angel seed investing world.
[00:05:06] Rachel: So I started my career as a chemical engineer. I worked on water and wastewater treatment at Intel and eventually worked on corporate environmental in a group in Arizona, where I'm originally from.
[00:05:18] And then Intel sent me to grad school. I got an MBA, master's in engineering at MIT, it was life changing.
[00:05:25] And I came back out and did supply chain and IT strategy for them.
[00:05:29] And I was miserable. And luckily one of my mentors at MIT said to me, remember you did this environmental stuff? Well, now you can have a career in it, doesn't have to be the sideline at a company and, working in a factories on it.
[00:05:43] He encouraged me to look around at what was happening and climate 1. 0 or what I call clean tech investing, which I'm told makes me sound old just to say climate. But he told me, take a look. And I started meeting with startups and getting a feel. And of course my [00:06:00] semiconductor background lent itself to solar and then people are working on water and wastewater and our family business is in recycling.
[00:06:07] That's what My dad did growing up. So we collected our cans pre having that in your house. And our newspapers and all that. So it had grown up in that space and went out.
[00:06:18] I thought I would end up at a company. That would make the most sense. I had an operating background.
[00:06:22] But eventually connected with CMEA, as Shaherose mentioned, and I thought, Oh, that's cool. I'll do that for a year. Venture's not really my thing. I mostly was like, aren't those guys jerks, but I'll try it out and I'll probably find a company and I'll go back into operating. And then I got hooked.
[00:06:40] Aamir: So is that where you ended up writing your first check for investment?
[00:06:47] Rachel: When I left Intel, I took some time off.
[00:06:49] I was looking for a new job and I joined some angel investing group just figuring out what I wanted to do and networking and someone would invite me. And of course, as Shaherose [00:07:00] mentioned, there were very few women, very few women mentors.
[00:07:03] Of course, I came from an engineering world. So that wasn't so new to me, but I was interested in changing that landscape too. And so I started doing some angel investing actually before CMEA.
[00:07:15] But when I applied to CMEA, I had no intention. I wasn't going to parlay that in any way. It was just something to do in between while I was talking with different companies and startups and learning the lay of the land in the clean tech space.
[00:07:28] Do angel groups and angel networks provide value to startup investors?
---
[00:07:28] Aamir: You often hear angels talk about organizations that they can go join, like especially outside of Silicon Valley. Like I hear about these in Austin and Houston. And then in Miami, like you hear about these groups that are forming, are those valuable? Did you find that the first angel groups you joined were really useful?
[00:07:44] Rachel: Yeah. I think it depends. There's some now that I would highly recommend. For instance, I'll give a call out to Portfolia, which is teaching women how to angel invest trying to get more women as angel investors and You can participate with other [00:08:00] women and see the deals and learn and grow your network.
[00:08:03] Broadway Angels, I love them. They're a group of experienced investors who get together. Women who have been at major firms, some are still at those firms, and sharing deal flow, talking about the companies together. I think those can be great.
[00:08:18] Sometimes these groups don't see the best deals, and that was definitely my experience. In that time when I was just doing it to learn before I got into venture It's group think, which sometimes it has its pros and cons, but particularly you might be seeing companies that otherwise were having trouble getting funded.
[00:08:37] So I would suggest some, but maybe with caution because they can be a place where they're just bringing companies that you might not make money, but I guess those are good learning lessons too.
[00:08:49] But yeah, even for Portfolia, when they first talked to me about helping out I said, Oh, I don't like group investing. I don't think we make great decisions that way.
[00:08:57] But I think there are some you can learn [00:09:00] from and be a part of that can help you with a few deals. And especially if you get to do 10 deals at once, it's part of a mini fund where you're learning and in a fund that you know changes the risk profile and then you've got a network which eventually helps because you're gonna end up investing with these people over and over again
[00:09:18] Aamir: Shaherose, have you ever experienced one of these angel groups?
[00:09:21] Shaherose: Yeah, no, it's funny. I haven't, and I'm surprised that I haven't actually.
[00:09:26] Maybe the closest thing to that is the First Round Angel Track community, which I'm a part of, where people bring deals to the table and some folks get together offline in like pairs or so and look at deals together, but certainly not in the way that you've described Rachel: five to 10 folks come together to, to make a decision on a deal.
[00:09:47] There's pros and cons, but you did spend some time at Portfolia setting up one of their funds after CMEA. And I'm curious about that journey. You did CMEA for six years and then moved [00:10:00] on and now you're full time investing, but not with a firm. Can you talk a bit about that?
[00:10:04] Rachel: Yeah, so like I said even before CMEA I was particularly interested in my angel investing and funding women or underrepresented founders, or a lot of the men I invested in at that time had social impact as part of what they were doing. And that was just a personal passion.
[00:10:23] And also because when I was at the venture firm, I was like, wow, I thought engineering was bad. This is like a whole other level. So I think that just got me motivated and to think about it a little bit different.
[00:10:36] Also, at the end of 2009 I met my eventual husband Joe Greenstein, he was running a startup at the time.
[00:10:45] So I was seeing that in his network maybe he had one or two women CEOs in his portfolio, but very few.
[00:10:52] I did angel investing along with my time at CMEA we were doing series A and Series B investing. It was great to learn [00:11:00] alongside some of those investorsIt was climate, energy as well as life science and consumer.
[00:11:08] And got that experience, and then all along, I was doing angel investing and things that were not competitive with the firm.
[00:11:16] And then, like I said, I got hooked. I wasn't going to go back to operate. I got addicted.
[00:11:22] I think we're so lucky. Especially in venture and now as an angel, you're paid to learn, like you're meeting with some of the brightest, passionate just incredible thinkers on what they're doing and to get to be hearing about how they're thinking about a problem and wanting to solve it and how they're going to build that and then be witness, or as I say on my LinkedIn, a cheerleader along the way, it's just. It's addictive. I just, I love it.
[00:11:52] I just kept angel investing and growing our portfolio. And Joe and I sometimes invest separately, sometimes together. We ended up doing more and more [00:12:00] together. He saw that he hadn't invested in any women as well.
[00:12:04] The last 10 years, that's mostly what I've been doing, except you referenced earlier. I did a venture partner role at Lemnos, a hardware fund. My background was in manufacturing and operations.
[00:12:17] I love that role. all I was doing was working with founders, like an operating partner, but we called it venture partner.
[00:12:23] And I helped out a social impact fund in that capacity now part time as well.
[00:12:30] Aamir: Was there a moment where you realized that you really liked this drug and you wanted to keep taking it?
[00:12:36] Rachel: Yeah, that's such a good question. Like when I was finally Oh yeah, I'm not looking for my company anymore.
[00:12:42] Cause in the first few years at CMEA, it was like, Oh, I'm just looking to find my company. And once I find, a CEO, I really want to work for...
[00:12:50] No, probably within two years, I was like, oh yeah, I think I'm not going back. I think this is just too great.
[00:12:57] And I always [00:13:00] said that I know a little bit about a lot, but not a lot about anything. And this is the perfect career for that kind of personality. you're constantly learning about the next thing, you're learning from the entrepreneurs, you're learning about markets, you're learning the future, seeing the future unfold. it's always what's in front of you. I'm very energized by doing the work we do.
[00:13:23] How Rachel aligns purpose and philanthropy with her early-stage startup investing
---
[00:13:23] Shaherose: You're touching a bit on this, but what's your purpose in investing Why are you doing this and what are you going to do with all the money that you've already generated for yourself?
[00:13:33] Rachel: So for me, and I think this is part of my life purpose, too, it's just really about community and the startup community, the personal community. Aamir, you mentioned the community of our families growing up together. What drives me is those relationships and being along for the ride.
[00:13:55] I would hope there's many entrepreneurs who would say, I failed, but [00:14:00] Rachel was there for me. it's the money is in this privileged place to say that does not motivate me right now.
[00:14:07] I'm not sure it ever did, but particularly now, it's really about the people and being part of that experience.
[00:14:16] I have one entrepreneur who was just miserable. He just felt like he's going to lose the money of all his investors and he felt terrible.
[00:14:25] And I remember more than a couple calls and now I wish I had even been more insisting, but I said to him Are you sure you want to do this? You don't sound good, and I'd just rather lose my 25k than have your life not end up well.
[00:14:41] For me, that's just so important, is we're really about people, and building, and dreams. And to the money part, I just want to mention this in case it's inspiring to people. For the last two years, Joe and I decided to invest out of a DAF, a [00:15:00] DAF that goes into a fund that goes into our companies.
[00:15:03] To make the point it's not even money coming back to us. It's money we can use to invest more or to eventually give away. We hope it's exceedingly large amounts of money to do that to continue our passion of investing and to continue our passion of being able to give money away.
[00:15:20] But we're not even financially benefiting from our investments over the last couple of years, and that's also just like psychologically freeing when the goal is really different for us. So yeah, we've really shifted that philosophy over the years.
[00:15:39] Aamir: Let me summarize what you said for people in the audience who may not know what a DAF is. American tax law allows you to create a donor advised fund, which you then donate money into, right? So it comes across as a donation.
[00:15:51] And then you're saying what you do is you then take that money from the DAF and invest it in companies. And all the proceeds then flow back into this donor advised fund, which then allows you to [00:16:00] write checks to various nonprofit organizations around the country.
[00:16:03] Rachel: Correct.
[00:16:04] Aamir: Okay, great. So hopefully this explanation helps folks who are saying what's a DAF?
[00:16:08] Rachel's first angel investment was in a gaming startup
---
[00:16:08] Rachel: It's so nice to hear really your motivation behind all this work. I'm super curious if you can talk a bit about that first angel check. I know for me, that first angel check was so formative and it changed my thinking about what I wanted to do and the minute I wrote that first check, it kind of kicked off my transition to VC.
[00:16:33] Shaherose: So I'm curious for you, what was that first check and what was the experience?
[00:16:37] Rachel: Okay. So when I really initially got involved in angel investing, it was just through a group and, I think it was something that came and I went in on it with a group and I think it failed within a couple of years. So really the hard knocks life for the beginning of my investing.
[00:16:55] I think your last guest was talking about her first check, how it made so much money.
[00:16:59] [00:17:00] That was not my experience. I did get into the excitement of Oh my gosh, they're building something and, going to see their offices and they're employing all these people.
[00:17:09] But it also taught me one of my lessons. I like knew from the beginning I really wanted to see this in the world, and so I backed a product or a person that I wanted to support, but with a little okay, this might not be the huge money maker, but I'm willing to go for it.
[00:17:26] The lessons that I learned from it are like, one, really investing outside my knowledge base. I think that first company was like gaming.
[00:17:36] I never was a gamer.
[00:17:37] I didn't know anything about gaming.
[00:17:39] I didn't know how games became successful or not.
[00:17:42] I really knew nothing.
[00:17:43] I was just following other angels.
[00:17:45] So especially if it's in an industry that like is known, investing in ad tech when there's a lot of people who know a lot about ad tech and I'm not one of them. And there was no one else on the cap table that knew about ad tech. So maybe don't do those. [00:18:00]
[00:18:00] Do something that the lead investors really know about. And the second is just following a group. We invest a lot with community. And we look at a lot of deals because they're coming from friends and people we have relationships with or entrepreneurs that we've known forever. And that's all good. I'll, I will repeat that over and over again, but if it's a group where I don't really meet the CEO, there's 15 people on the Zoom when we talk and I never really get a smaller conversation why am I doing it then?
[00:18:34] Cause I just told you guys, I do this for community and the relationships and the human aspect of it.
[00:18:41] And then I'm like with a bunch of people in a room with no relationships and invest anyway, cause I'm taken by the group or the excitement or whatever and get carried away.
[00:18:52] My approach was, here, these people seem smart. Let's go along with them for the ride and see what happens and maybe lose some money.
[00:18:59] [00:19:00] And then of course when I was in venture, I learned all the detailed ways of looking at a company.
[00:19:05] And when you're investing other people's money, I think, you're more careful and thoughtful and check all the boxes. I don't know that you pick better, but at least you're doing the work that you need to do.
[00:19:17] Investor experience, startup luck, and Sequoia
---
[00:19:17] Aamir: Are you saying that the other investors around you seem smart or that the company in that first investment and the founders there felt smart?
[00:19:23] The other investors, I was trusting the other investors who were experienced. Reflecting back on that moment, what's fake intelligence versus real intelligence to you? But what were the signals where in hindsight they were not that smart? Cause I think this will help other investors, especially the ones who are greener than you are.
[00:19:41] Rachel: Honestly, when you get into this business, you realize there is a lot of luck and your network and timing.
[00:19:47] People can tell you otherwise, but I have heard very famous investors from big firms, even say things like, we only invest in people under 30.
[00:19:57] And then you look at their like best portfolio, like a [00:20:00] WhatsApp that was people in their late thirties, or they tell you we only do, the first company when they're first in the field in it. And then their best investment was Google, not Yahoo or Ask Jeeves.
[00:20:11] And they've done incredibly well.
[00:20:14] So I'm just pointing that out:is smart really the most important aspect of this industry? I'm not sure.
[00:20:22] That was definitely the version of my first investment of yeah, we know. And maybe I thought at the time smart because they had done it before, smart because they are older they had been entrepreneurs themselves. So all those kind of signaling things.
[00:20:38] But over time, I would say that like illusion, no one really knows what they're doing, honestly, it's the real answer.
[00:20:47] Aamir: I'm taking two things away from this. One is we're going to title this episode: Rachel takes shots at Sequoia
[00:20:52] And second, I think you're right. I tell people that no one is as smart as you think they are in Silicon Valley.
[00:20:59] Even the people you're [00:21:00] seeing covered in the media, they're all human. They are brilliant in some ways, but, and they are dumb as doornails in other ways. And everyone has pros and cons to their own lives.
[00:21:09] I think you're helping to bring that out, that the people you think are super smart may not be the best investors. And luck does play a huge role in how things end up working out.
[00:21:18] Rachel: And believe me, I would be very happy to be a partner at Sequoia over all these years. Certain people, go to Sequoia because it's Sequoia because they've done this over and over and over.
[00:21:30] And so they are smart about how things work and how things grow and giving that insight.
[00:21:36] It's just, I don't think you can make generalizations on " this is what will work. This will 100 percent work."
[00:21:45] That doesn't exist in what we do. It is a bit of gambling and luck.
[00:21:49] How does an angel investor like Rachel measure bad outcomes in startup investments?
---
[00:21:49] Rachel:
[00:21:52] Aamir: So Rachel, can you share with us your worst investment? Whether it's that you lost all your money or it was the largest investment you made and it didn't go well, [00:22:00] or it was something else personal.
[00:22:01] Rachel: There's so many that failed. It's like almost hard to pick what really constitutes the worst. Definitelythe one I referenced earlier where the entrepreneur's life isn't going very well now. I didn't think it was the worst meaning, I shouldn't have invested in that. It was the worst in that that would be in no way how, I would want something to end for an entrepreneur.
[00:22:30] Aamir: Ahh. I'll name this one in that it's probably my worst one.
[00:22:36] Rachel: It became a little adversarial with the entrepreneur. About Please just close down so we can all take the tax write off and move on and just a lot of distrust built and I was the representative for a couple other angels that went in together.
[00:22:52] And that was the part I don't like and their dreams didn't work out, but feeling like a little manipulated along [00:23:00] the way and now we're stuck with this investment, carrying out forever and you're never really getting a write off. So that was probably my worst
[00:23:10] Shaherose: When you think about that time, what was the hard lesson that you walked away with? And, do you apply that lesson today?
[00:23:19] Rachel: In that particular case, oh gosh, a really good lesson.
[00:23:22] If someone's raising a million dollar round and you're a group of angels putting in, let's say a hundred K or, 10 percent or something, you got to wait. You don't want to be like a check to nowhere, which is what happened in this case.She got her a hundred K in, everyone thought it was with a Seed or a pre seed group or fund writing a bigger check that had the terms and everything.
[00:23:49] But that didn't end up being the case. So I guess that's two learning is
[00:23:53] one: you were like putting in money to go nowhere because 100k was not enough to start the company but
[00:23:59] two: [00:24:00] It was a mistrust of, oh, we thought we were going along.
[00:24:04] Not saying you can't be the first 25k in and start the momentum. That's also a way of investing that can work out.
[00:24:11] But in this case, it was like a distrust. Everyone thought we were coming as a group of money coming in or at least that there was enough momentum in the round and kind of terms were coming.
[00:24:23] As an angel you're just, trusting the introduction, trusting the conversation. And so if things end up shady later, you do the best you can assessing that.
[00:24:36] But once in a while you're like, Oh wow, that there was actual like deceit here.
[00:24:41] That's so rare. We're in hundreds of investments and I don't even know if I can count more than five, I think one or two right now off the top of my head.
[00:24:49] So it's very rare, but it is, it's a hard one to take too.
[00:24:53] How angel investors operate differs from venture capitalists
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[00:24:53] Shaherose: It makes me want to ask the question about the differences that you experienced [00:25:00] investing out of a fund in series A and series B companies versus being an angel in both pre seed and seed. Could you talk a bit about the differences in terms of maybe how you sourced, how you decided, how you picked as you were talking about earlier between the two experiences
[00:25:17] Rachel: Yeah, it just feels two different worlds in a way, even though, of course, those worlds collide very early on.
[00:25:26] But for me, I think it's the psychological. It's one of the reasons I love angel investing. It's my own money. And if I want to do something because I want to see that in the world, or I want to support that founder, that is my decision.
[00:25:40] It is my, Holy just thinking about what do we want to do? We in a way do it as charity, but we really, we don't think about it. We have separate charitable giving. So we're thinking that, money's going to come back and we're going to grow, but it's just a very different mindset.
[00:25:58] And how I decide, especially cause [00:26:00] it's so early is really people or really products we want to see in the world.
[00:26:05] I ended up doing a lot of mental health and wellness and climate. So it's really social impact that we want to see.
[00:26:11] When I was a venture partner, you have fiduciary responsibility for someone else's money and you're not doing things because you think it's cool and want to see it in a world where you like the person.
[00:26:24] You've got to really believe in all the fundamentals, the markets, the way they're running the business. If it has a supply chain or operating piece, how does that look? What are they going to do? How is it going to scale? Why is this going to be better if it's technical? Does it have IP? You're getting into a lot of detail that as a pre-seed and seed is just really more casual.
[00:26:48] But that could be me.
[00:26:50] I've definitely worked with angels that have a different take, that do all the same work that a fund would do to make their [00:27:00] decision.
[00:27:00] Every angel is different I just think me personally that's the freedom of investing your own money in my opinion.
[00:27:08] And it's part of your reputation as well. If you get into good deals and do good deals, you'll probably see more of them. There is a balance in that too.
[00:27:17] Shaherose: So super curious, you have the freedom, but is there any process to, you deciding you want to invest in a certain company?
[00:27:24] Rachel: We heard a pitch on Monday and he's what is your process? And we're like, you're seeing it right now.
[00:27:29] ha ha ha ha
[00:27:31] You're talking to us for an hour.
[00:27:32] I do then do some reach out after depending how it got sourced.
[00:27:38] If it came what I would say like a low reference Oh, maybe an entrepreneur sent it to us because they were looking at other angel investors or something.
[00:27:47] Then I'll definitely ping a few people, or an LP, I might ping some pre -seed funds to see if they saw it, to see their opinion.
[00:27:54] It doesn't mean I always agree but just maybe get a little bit because it is so much about [00:28:00] the people that I'll do some kind of referencing, just double checking.
[00:28:06] If it's a high reference or someone we've backed before. We sometimes get on the phone and we're like,
[00:28:11] Of course we're going to invest. Cause it's you. And we have a lot of those too. And then really I don't do any work.
[00:28:17] It's almost like they're coming to us because they feel maybe that it's the right thing to do. Or of course, if they show us what they're doing, we can be more helpful later on. But we would say yes before they pitched us. Yeah,
[00:28:29] The process is just a little bit of conversation if it's more me and Joe and we have another business partner we've been investing with for the last two years named Chase Adam, if one of us is definite yes, or of course a three of us, or even if we're a soft yes, then it's okay, let's go talk to a few people and come back.
[00:28:47] If the references start sounding good or a fund says, oh, we passed because of this and then we're like we don't agree. I would love to say like it's these three things, but I would say [00:29:00] something, there's some kind of attraction to a company.
[00:29:04] If you put all the entrepreneurs I've invested in a room, I think you would be like, wow, Rachel, these people are really different. I hope actually you would say that.
[00:29:12] But I think that you would find that every one of them is super passionate about what they're working on, almost obsessed. I think that's a real mark.
[00:29:26] I probably even said this, as early as working at CMEA. It's like when I know that person is just so Passionate, so compelled by what they're doing. That's an entrepreneur I want to back and those entrepreneurs look super different. But that is probably an underlying thing that I'm looking for in them.
[00:29:47] Pitch decks - do they matter when seed investing so early?
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[00:29:47] Aamir: So before we got on this call together Shaherose and I sent you some information and said, if you like, you can send us some collateral you have on the prior investments you've done. That can help us with the conversation.
[00:29:58] And you said, I don't know, [00:30:00] decks are not really instructive to me.
[00:30:02] So could you share a little bit more about that? Do you really not care about what comes across in an email before you meet up with a founder or a founding team for one of the startups you look at?
[00:30:11] Rachel: Okay. I do look at decks and I want to at least say Oh, I like what they're working on.
[00:30:16] I have one that's postpartum maternal health. Like I looked at that and I was like, Oh yeah. I know so many women who suffered from postpartum depression. I care about that issue. I wanna see it.
[00:30:26] Or someone working on electrification, a fleet software, I'm like, oh yeah, I like that problem. I wanna see how they're thinking about it.
[00:30:34] Oh wow, I had one company I advised at Lemnos, the deck was a disaster. It was just like, I have no idea what you're doing. We cannot use this deck to get the rest of your pre seed in. Everyone will see this deck and just be like, I, I don't even know what the company does.
[00:30:50] It's not that I don't care, especially when they're extremes.
[00:30:53] I want to at least get they care about the market. They get the market. I have a pet peeve about saying, the [00:31:00] TAM is 50 billion dollars and it's no what are your actual products doing?
[00:31:06] Or if I think it's a product, not a company.
[00:31:09] So I have like little things I'm looking for in a deck, but I more care like who sent it to me or even if it's cold, which we got once in a while, how they approach the cold email.
[00:31:21] And they knew it was a passion space for me or Joe or Chase that we invest with. But I don't really decide until we talk.
[00:31:30] I would never get a deck and be like, Yes, , I might get a deck and be like, I don't know, but usually because we get high reference intros, I will take a first call.
[00:31:46] So that's why there's no deck standout unless they're like , miserable deck , which I have seen, but luckily not too much of.
[00:31:54] And then you've also said, I want to see this product in the world. Are you actually looking at the [00:32:00] combination of the person and what they're building,
[00:32:03] Yeah that's so good. How do you assess passion? Someone will say, I talked to 200 potential customers before deciding to do this, or I worked at this company before and saw this problem andI just thought about it all the time and I needed to solve it or the research, the way they talk about, the research in the market.
[00:32:24] Or we had one, these founders, I love they came to me in the spring with an idea I thought was horrible. So back to the product question, I was like, Oh gosh.
[00:32:34] Like this product it's in climate. It's something I knew well enough. And I was like, I don't know, why am I even taking this call? Because I really don't like the product.
[00:32:43] And then I got off the phone when I happened to take that first call with Joe and we both were like, Oh, we're backing this founder. They'll figure something out.
[00:32:51] And five months later, they came back with a totally different idea that I love, and they raised a pre seed round really quickly.
[00:32:58] But I was already in, I didn't care, it was [00:33:00] like, whatever you work on, and then that they took five months to take that feedback that's passion right there. They kept iterating until they found the thing.
[00:33:09] So person trumps product all day because then they'll pivot into something that makes sense. They'll get feedback from the market. They'll get feedback from investors.
[00:33:17] I don't think I'd ever do one where I'm like, I want to see that product in the world, but I hate that founder. That would never go. But I definitely will say yes to a founder and kind of like very mediocre on the product.
[00:33:32] But yeah, there's definitely the combo of I really want to see that product in the world. I like the person, but I don't know if there's a business there that maybe I'll also do, which I would not have done as a formal venture investor.
[00:33:45] Startup founder signals that matter to an angel investor
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[00:33:45] Shaherose: Is there anything other than passion that you are looking for when you jump on these phone calls? What are some of the other things you're looking for to get to a yes?
[00:33:53] Rachel: Yeah, reference is important and how I'm thinking about it because of this community aspect, who else am I investing [00:34:00] with?
[00:34:00] Have I invested with them before? Is it a repeat entrepreneur? Is it an entrepreneur I've had a relationship with for forever?
[00:34:06] And I think this got referenced on your show before, but there's a little bit of something around coachability and feedback.
[00:34:14] If you feel like you're in a conversation where you're iterating together, or you make a recommendation about a introduction you want to make, and there's a real oh my gosh, that'd be great, or, oh, I talked to that person, and they said this, and this is how I took that feedback, or oh yeah, I need to get better at this thing do you have any suggestions?
[00:34:34] One of the questions that we love asking is what keeps you up at night? So it gets a real feel of what they're stressed about, like what are the top things that person's working on?
[00:34:47] And another question we ask is how can we help? And making sure the entrepreneur is thinking about who's their team? How are they bringing people in? What are the aspects that, they're going to reach out on?
[00:34:58] There's things of how you build a company [00:35:00] that you're gonna have to see in that conversation. But since we're mostly meeting with the person for an hour, there is some just gut instinct in this of, okay. Yeah. That's someone I'd like to work with.
[00:35:11] Aamir: I think your second point is a good example of getting asynchronous information on a founder. I spoke to one founder, like this was probably about a year ago now, and we had a nice call over an hour and then he asked me a question and I said, let me think about that, I'll come back to you.
[00:35:26] And I wrote out this long email to answer his question and provide some thoughts. And I sent it to him and then I never heard from him again.
[00:35:35] And then a mutual acquaintance three or four weeks later said, oh yeah, that person loved you. Why haven't you been back in touch?
[00:35:41] And it makes me think what you're saying, right? It's It's a two way street, Whenever you ask, how can I help you? And then I help you, you should respond in some way,
[00:35:48] You could tell me that's terrible. I don't care.
[00:35:50] And I'd say, that's great. Thank you for reading.
[00:35:53] But if you liked it, then why not keep the conversation going?
[00:35:55] I wasn't asking for anything and I was happy to just help because, I've been there as a founder too.[00:36:00]
[00:36:00] And I think you're right. There's something around, are you able to keep up momentum with the people you find helpful on your own? That is a good signal for how a founder will actually behave if you do invest in them.
[00:36:11] Rachel: Something that we get to see a lot, even after an hour conversation, is how the follow up is done.
[00:36:18] If we promised, we'll make these three intros to other angels, I have some founders. Oh my gosh. I'm just always so impressed.
[00:36:26] They write me right away. Here's an email. You can use the forward.
[00:36:29] Or do you know these three people? And if so, Here's an email for you.
[00:36:33] Some are just so responsive and then that's how they're treating their customers. That's how they're treating their employees. That's how they're treating their investors. That it's all congruent.
[00:36:43] And I think to your point, when you're in that beginning conversation, that relationship, you're seeing how are they taking feedback? Are they integrating it? Is there a conversation that's opened? You can see that really quickly.
[00:36:55] I've had a founder, like, Oh I could tell the person you had meet with me, didn't really [00:37:00] like me. So maybe we just didn't meet anymore.
[00:37:02] I was like that's a little worrisome because I was pretty interested. But now if you're already cutting off are you doing that with customers? Are you doing that with investors? Like those little things and they're, they might be subtle, but it is about how they're building, all the pieces around them.
[00:37:19] So I think you're right. There's little things that are happening just after an hour conversation.
[00:37:24] Hopefully they're doing their homework on you too. I love that too.
[00:37:27] I had a company come back to me that said, the valuation was too high.
[00:37:33] For the traction and not like you ever want to say I got in a cheap deal, that's not what I was looking for, but it just seemed outrageous. And so we said, we'll pass that valuation.
[00:37:44] And then she said, Hey, I talked to one of your other founders and they said, you're the most helpful angel check they've had. Like you've made their first sales intro. I really want you in. Will you come in on the last round? I was like, [00:38:00] wow, I wasn't even sure, but that's pretty impressive that they did that kind of homework. And I was like, but! No promises I could help you with. Maybe got lucky in that one and you're in a totally different business, but yeah, then I'm like a yes.
[00:38:14] So it is a lot of this kind of back and forth and communication piece and how that kind of dance is happening, even though I did say our process is basically one hour. There is more than that.
[00:38:28] Aamir: Since you bring up valuation, how do you look at it as an angel?
[00:38:31] Rachel: It's been such a rollercoaster ride, right? I can look back at our investments and seeing, the companies that were a 3 million cap and are now worth 3 billion, and a 60 million cap and are now worth 3 billion, and I'd do both of those again, but obviously one is very different from an outcome.
[00:38:52] One of my mentors at CMEA, he's something's cheap because it's cheap. I wouldn't [00:39:00] say I'm like extra valuation sensitive, but I am thinking about it.
[00:39:06] I think the pre seeds, are really getting closer to a 5 to 8, but for sure sub 10. And that wasn't the case.
[00:39:15] But honestly I just had a conversation with an entrepreneur who said, Oh, I was going to go out and raise the seed. And I took advice from people who raised in 2022 and my seed round did not go like theirs. And I took a six month break and came back out and just have more realistic of what's happening.
[00:39:34] And I really appreciated that because, they kept at it. I saw the passion, they're still working on the same topic, but they got the feedback from the market that things have changed.
[00:39:45] But on the other hand, I was telling that founder listen, those friends of yours, they're now in their A or their B or wherever they are. And it's getting taken down there. So don't worry.
[00:39:57] It's actually probably to your benefit to [00:40:00] be more reasonable at the beginning.
[00:40:02] I had a company that it had like a famous chairman, and they came to me, and they wanted to do something. It was a seven or eight cap at the beginning, they hadn't done anything yet, Just the people, and maybe a deck. And I was like, listen, I'll pay that because you guys are great, but you really don't have anything.
[00:40:21] And this company, it's still ongoing. We'll see. They've pivoted a million times since, and it's not like a rocket ship and they took it and said, yeah, you're right. We'll bring that down a little bit.
[00:40:32] If they're setting themselves up badly I, I think that's important to call out and if it's really ridiculous.
[00:40:39] You want people to be thinking about market and where they're going and what they're going to have to raise next. We're definitely thinking about valuation and asking.
[00:40:47] A climate tech seed investment that paid off quickly and returned funds
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[00:40:47] Shaherose: So let's shift our attention to one of your best investments. It could be a more recent one or one from the past where you did realize an outcome. Tell us about what the deal was, how you found the deal, [00:41:00] and what made you say yes.
[00:41:02] Rachel: My best exit was a company that I advised for Lemnos and then advised post Lemnos. I helped them raise their seed and connected them to the investors. And luckily they took a chance on it too. 'cause one of the investors it returned her whole fund which I love and another investor, I think it helped them catapult them and raise their next round.
[00:41:31] Honestly, this is why I think you have to be so humble. They were raising an A at the same time that they ended up having negotiations around an exit. And if you had told me that they were going to get bought at this kind of number at that time as they were raising at like,a fifth of what they were getting bought for at the same time.
[00:41:55] So let's just say that even investors were not thinking that this thing was going to be like [00:42:00] worth what it was.
[00:42:02] And that gets back to being humble in this space. The way they have to sell, they have to do consultative sales, meaning they have to bring in other companies to sell, to do the final sale.
[00:42:12] I was bullish. I made the intros for them. I talked them up, but I was not expecting that kind of exit that I saw.
[00:42:22] But that was just a really fun one because I was also really involved in advising.
[00:42:27] And you said, how'd you pick? I didn't pick. Which is also the best part, because I told you earlier, I really don't like the picking. I like the cheerleading and being along for the ride. Lemnos picked it, and gave me the opportunity to work with them, and then it was such a good relationship that they kept me on, and I got separate advisor shares separately after I left Lemnos.
[00:42:52] So it's also a good example because the picking is not fun to me. It's really helping the entrepreneur along the [00:43:00] way. And thinking about their hires and how do they grow and how they sell and who their investors are going to be and how they're going to run their board meeting. And I love that part. And this one hit all of that.
[00:43:11] So that was just like really fun. And it also got me re-entry into climate. It was an exit in 2019. As people will see in my bio, I basically left CMEA in 2014 and I did angel investing and I did do one or two in climate, but I was feeling a little demoralized, about the space.
[00:43:31] Joe would do some consumer company and get bought by Facebook for a 10 X. And then Facebook would go up another 10 X before the shares were unlocked.
[00:43:39] And I was like, I'm investing in generators for wind in Detroit and they lose one contract with GE and they closed the business.
[00:43:47] It was so hard. And I was like, what am I doing? I feel like I'm banging in my head against the wall, but I'm, I believe in it, but it's just not working.
[00:43:56] And it was really nice to see an exit in that space that [00:44:00] made a lot of money for people and help propel some funds and just had a lot of win all around and the other investors in it are now like, yeah, let's invest more together.
[00:44:08] I was like, I don't do that every time. But it just had all the components that were great and got me back a little bit more into climate. All my last few deals last year we're all in, in the climate space and it's just been fun to get reconnected with group who slogged it out for many years.
[00:44:26] Some of them have stayed this whole time. And then the new energy because of just what needs to happen in this world. We have so many new people trying to work on this problem. Yeah, that one will probably stick with me for a very long time.
[00:44:40] Aamir: Do you mind sharing the name of the company?
[00:44:42] Rachel: It's called Electrify.
[00:44:44] Shaherose: And can you also talk a bit about the time horizon for the return and what the return profile look like for you?
[00:44:52] Rachel: Well that's also super fun because it was so fast. Let's see. They exited in 2019, I'm [00:45:00] pretty sure. I'm guessing Lemnos made the investment less than two years earlier. Yeah, it was real quick, I think those are fun too.
[00:45:11] Cause you're like, whoa, a lot of our great wins, they take 12, 13 years. That's also fine cause by the time they grow to become public it takes a long time, but this was one of those that pre A got taken off and.
[00:45:26] Mufi is the CEO. He's a great leader. Ford was the acquirer, and I'm happy for Ford because they need people who are smart in software to go with electrification, the transformation that's happening. And they saw that future early and were willing to bet big on it.
[00:45:44] And I invested with Julie Lein at Urban Innovation. It's like those relationships that transform from a little bit of a mentor to your peer overnight through, through deals like this which was awesome.
[00:45:57] And then Paul Straub at Wireframe was also in [00:46:00] it, who I had known forever when we were both at different firms investing. So it was also like a great group around the table.
[00:46:08] Shaherose: Can you comment on the outcome,
[00:46:09] Rachel: The numbers aren't public Let me think if I can give you maybe it was a 50x in less than two years. Yeah.
[00:46:21] Shaherose: That's pretty impressive.
[00:46:23] Rachel: And it's it's great to hear that, even from, your conviction in the company and in the team and supporting them along the way, not only did you have an outcome, other investors around the table benefited hugely,
[00:46:35] Shaherose: It built up their track record as well back to community, which is amazing.
[00:46:39] Very Serious Ventures angel invests $25k super early in founders
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[00:46:39] Rachel: Why don't we talk about where you are today? On your LinkedIn, you say you are now at Very Serious Ventures.
[00:46:47] Okay, so Very Serious Ventures because, we're all spinning on a rock in this world. Who knows what's happening here? That's more Joe's sense of humor. But true. That's the name [00:47:00] of what we've been doing the last couple of years with our friend Chase investing out of our DAF into a fund.
[00:47:06] We write small checks, usually 25K. We often do very early or prior to the pre seed or seed, sometimes with institutions, sometimes without. I think about 40 percent is mental health and wellness- Joe's passion and mine and Chase's.
[00:47:21] Chase is interested in web three, does a lot in that area.
[00:47:25] And then I also focus, as I said, on climate.
[00:47:28] But we have some FinTech, we have some future work, I'm interested in deals that deal with what's happening with so many people that are unhoused in our neighborhoods and so looking at that or economic insecurity anything around that.
[00:47:44] So pretty broad, and you can find other entrepreneurs we've invested in and come in through that. If you're talking with other funds and they want to make an introduction, you can reach out on LinkedIn. if you write us and we don't [00:48:00] respond. It's probably because it's not an area of interest.
[00:48:02] Aamir: You had earlier said that the passions you have are around, women, underrepresented communities and social impact. So do you feel like that's wrapping into what you're doing with this entity, or do you think that's just separate and on the side now?
[00:48:14] Rachel: Actually, we're tracking. Not that the industry is one to benchmark against, because it's dismal, but yeah, we have way better statistics of women and underrepresented minorities in what we are doing. Shaherose, what’s the industry average of women getting 2% still or something is it that low? Yea, I think we were closer to 20 of women in our portfolio so it’s still something we're interested in.
[00:48:39] I think it's also because of our networks that we end up meeting great women entrepreneurs. It's not always Oh, I'm going out to meet them, but people know Hey, I met this great woman, send them over to Rachel.
[00:48:51] An exercise to help you become a better angel investor
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[00:48:51] Rachel: All right, Rachel. So here you are, you've been in the investing game for a while What do you do to get better?I think it's really getting [00:49:00] clear on why you're doing this. And so I have a lot of clarity nowI even wrote it down, so I'll tell it to you.
[00:49:08] My purpose is to create connections and enrich our community, broadly defined, including entrepreneurial, friends and family, school, so people can experience more joy and warmhearted moments.
[00:49:22] I just think about that, come back to it in what I'm doing. And as you do this longer and longer, you're finding people you just love a lot of people we're working with have been doing this before, or people we know, or become our friends and I think you get better because you have these hard lessons, like the one where you put the hundred K in when they needed a million, or, start, to see there is pattern recognition.
[00:49:48] Aamir: I see some friends are posting on LinkedIn all the time or Twitter all the time, they're going to every event. They're going to the AI meetups in the city right now. And I feel like I don't get that vibe from you. You operate in a different [00:50:00] way. In 10 years, let's say you're on the Midas List as being like the super angel that has just totally nailed the past decade of investing. What do you think got you there?
[00:50:09] Rachel: I think it's being friends with those people who go to all those things. No, maybe it's because you have friends that are coming over for dinner that have just led that group or were hanging out in that event and sent people your way, or it's because the entrepreneur, you introduce them to their first sales and they introduce you to the next entrepreneur that they love. And you fund that one too.
[00:50:35] So it'll definitely be because we've been here so long and have, been doing this so long that people think of us and bring us into deals and hopefully, they're thinking of us as people who care, who want entrepreneurs to have a healthy mental state. And to have support along for the journey that this is just not a grind, we're all humans living on this [00:51:00] earth and that they're inviting us for that reason into the deal.
[00:51:04] Speed round, and the best book on strategy for startup founders
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[00:51:04] All right, let's do the speed round. Who is a first funder you admire?
[00:51:10] Rachel: Okay, it's Valentine's Day, so I gotta say my husband, Joe Greenstein, and then a shout out to, Broadway Angels, so many of them have mentored me through the years, I love my husband, I love investing, he thinks so differently than I do, and then I love these women who have supported me and mentored me my whole career and that I look up to.
[00:51:30] Aamir: Is there a book or a piece of media that you think had a major impact on how you invest today?
[00:51:35] Rachel: I don't even know if I read this whole book, but Michael Porter says strategy is as much what you say no to. And that would not be a great quote for me in my investing life because, we say yes to a lot,
[00:51:49] But it would be in how I would like to tell entrepreneurs, how they focus what they're saying no to, because there is so much taken up brain space.
[00:51:59] [00:52:00] That really is something I feel like I've repeated over and over to entrepreneurs. What are you saying no to?
[00:52:05] Aamir: Zoom, phone, or in person meetings?
[00:52:08] Rachel: Now I'm hooked on Zoom. It works so well. And then eventually in person as our relationship grows, but definitely for beginning meetings, Zoom. And then eventually I really want you at the kitchen table or on a walk with me.
[00:52:22] Aamir: What is your social media platform of choice?
[00:52:25] Rachel: I really like Twitter for a while. Does anyone even call it X yet? But I would say I just feel like everything's more sane on LinkedIn. And I love I love that version of working with people and seeing what people are up to on LinkedIn.
[00:52:40] Aamir: Thanks for being on the show with us, Rachel. Where can people find you if they want to find out more about you and Very Serious Ventures?
[00:52:47] Rachel: Check us out on our Very Serious Ventures website. And then also on LinkedIn. I usually can write people back or if I don't, it means I'm probably not interested.
[00:52:59] Our takeaways on better startup investing
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[00:52:59] Aamir: Thanks to Rachel for [00:53:00] joining us for this episode. Why don't we talk about some of the key takeaways, Shaherose?
[00:53:04] Shaherose: Yeah, let's do it.
[00:53:06] Aamir: Okay. I'll go through a couple of mine to start.
[00:53:07] First, I think this was a great example of why someone can love angel investing. I really liked her thought.
[00:53:12] She said, it's my own money. I want to do something because I want to see that in the world where I want to support the founder. That's my decision.
[00:53:19] And I think she's right. Many of the angels I know are investing because they want the return, but also because they just like the project, like the person, like the arc of what could happen.
[00:53:29] I know some of the things I've invested in. I'm not seeing the world where it's a 3000 X return and I've made 5 million on a 25 K check, but I do say, Oh, if that thing ends up in the world, I'll tell people I was a part of that story.
[00:53:43] Shaherose: Yeah, it was so interesting to see the contrast between the way a VC thinks about this. And then of course, someone who's, truly an angel.
[00:53:51] What I noticed was also not just the focus on, Oh, this particular product in the world, but her real focus on what happens after the check, [00:54:00] where it's really about founder wellbeing and community came up a lot for Rachel that really her purpose for doing this is rooted in making those connections, having people over for dinner and really building a sense of human connection, which she brought up a lot. And it feels more purpose driven linked to her life and linked to who she is.
[00:54:21] She did say things like, Oh yeah, I'll support you with setting up your board and, customer intros and all the things that we all promise as VCs as well. But the main thing that stuck out to me was the founder wellbeing and that human connection.
[00:54:33] Aamir: So yes, the tribe thing was interesting to me because I think that a lot of the people I know here in Silicon Valley will end up angel investing because they want to stay in the game and in the ether of startups, even if they're not participating themselves in being a part of one as a founder or an early employee.
[00:54:51] And I think that's something that we have to get over. Maybe you just don't need to do angel investing, right? If you're not into it and you don't really want to be a part of that tribe, that's okay.
[00:54:58] I think Rachel does a good job of [00:55:00] describing the case where you do enjoy it. And so you decide to put money after it because it just reinforces the community you want to be a part of, and the tribe you want to be a part of.
[00:55:09] Shaherose: And I think what was interesting about her in particular is, she was an operator for a short amount of time working at Intel, angel invested a little bit, went into VC, angel invested on the side and then went back to angel investing. So again, it's not like she's doing it to do it.
[00:55:26] She really genuinely loves it. It's been her life work up until this point.
[00:55:32] Aamir: Another takeaway I had was that she mentioned working in angel groups and how they're not always the best. It sounds like she's found a few that work really well for her. Broadway Angels, Portfolia.
[00:55:44] The one experience I had super early in my career was with this thing called Kairetsu Forum, which I think Jason Calacanis blew up back in that, late 2000s timeframe.
[00:55:53] I went to an event because a friend had said, you can go pitch to them. And it was a little bit of a mess.
[00:55:57] And so I've always wondered do angel groups ever really [00:56:00] work? And it is that type of system, like where you're joining a forum or an angel network, really the way to go.
[00:56:07] I still haven't found one that works for me. What about you?
[00:56:11] Shaherose: Yeah, it's such a good question. I commented how, I'm a part of something called First Round Angels, but when I, finished the episode, I was like, wait a second, actually, I've been creating an angel community of my own, just not in the way that Rachel had described, where it's a group of people coming together and the group together decides.
[00:56:28] So I think there's other ways to do it. And I just thought I'd share what I did and still do on the side when it comes to getting a group of angels together.
[00:56:36] Aamir: you bring up Jason Calacanis I read his book, Angel, and very quickly followed that up by listening to a series of short podcasts by Naval, both on the topic of angel investing, and they both talked about AngelList syndicates. And it got me interested in trying that out as a way to get into angel investing.
[00:56:55] Shaherose: So a friend of mine, Sundeep Ahuja, had a very active AngelList syndicate [00:57:00] he was looking to get more people involved. It was just becoming a very bustling community. He had too much deal flow and wanted help.
[00:57:07] And I thought I just thought about this myself. I might as well try it. And so the way it's set up, it's different than what Rachel talked about. We brought on five quote unquote partners.
[00:57:16] We're all former founders and operators, and we all independently went out to source, evaluate, and diligence deals that we wanted to invest in based on what we were interested in, what we could be good at, et cetera. And as someone brought in a deal to the team and said, Hey, I'm really interested, I'm digging into this. One other person from the group would agree to be the investment committee and partner in on the deal. And the whole idea is there's one person who has conviction and leads the deal and the investment committee is there to really ask more questions, push the edges of the deal, help the lead with blind spots and not necessarily say no to the deal, but only say no if it really is truly, unethical or, illegal or just a bad thing, but mostly [00:58:00] be there to support the deal.
[00:58:01] And as an IC, you were maybe participating in calls with the founders or helping with, diligence and writing the memo. And so we behaved like a mini venture firm as one person would get conviction, you'd have one person supporting the deal.
[00:58:15] once we got to a yes, and we won the deal, we would write out a memo of the the strong points and the weak points of the deal, which then led us to then presenting the deal to our community on AngelList pitching them and saying, Hey, this is a great deal. We believe in it. Do you want in?
[00:58:31] and pitching them through the platform so that they could decide if they wanted in on the deal and the check sizes were, a thousand, 10, 000, sometimes a hundred thousand, every person would decide whether they were in or not and how much they wanted to do.
[00:58:45] And I think that's a little different than what she was talking about because it avoided groupthink to some degree. There is some groupthink there, but it's not the way that she described.
[00:58:54] It actually allowed for each of us to practice the art of conviction in a deal.
[00:58:59] [00:59:00] And then it allowed us to practice the art of the pitch, to inspire other folks to invest.
[00:59:05] So that's how I've been a part of it. And it's really been an incredible way for me to get into venture, as I have and get into that practice of, sourcing, evaluating, diligencing, but that added work of having to bring on lPs on a deal by deal basis.
[00:59:21] It's called DVC, which stands for the decentralized VC. you can check us out on AngelList or our website, joindvc. com to get a sense of the kinds of deals we have done in the past and we're doing right now.
[00:59:40] So for those out there, I think it's something worth considering, whether you become a lead on a deal and present it to your community on AngelList, or you're someone who's following a lead like myself, and you trust our work, our diligence, our judgment, and you want to follow what we're putting [01:00:00] out there in the world.
[01:00:00] This was another one of my takeaways is something about the difference between luck versus being smart. She mentioned that a few times. And I think that luck plays a larger role than people like to admit.
[01:00:15] Aamir: And I was thinking about her commentary on smart, Smart will never get you 100 percent of the way there, but there's something about knowledge of the sector that can lead you to be more knowing about what's going on. And I think that's where her discussion on tribe also got to me.
[01:00:30] If you align yourself with a certain tribe, it may just be the right time where it leads to a lot of really good investments. Whether it's a group of alumni coming out of a certain company or a group of people who are very focused on one specific industry, like AI, or being really knowledgeable about machine learning. Like those types of groups can end up finding a niche that leads to a lot of really lucrative investments.
[01:00:52] And that was one takeaway for me is. If you're thinking about angel investing, consider the community you're already in. Is there any unfair advantage there [01:01:00] where the intelligence of the community helps buffet you so that you can find that luck?
[01:01:05] Shaherose: to your point on tribe, she said, when you do good deals, it leads to more good deals, which is basically a flywheel of reputation, right? And your network gears start turning.
[01:01:15] And I think that's luck. Luck is being in the right place, right time. But I think you manufacture some of that luck by having a network that's going to put you in the center of energy, activity, and people.
[01:01:30] Aamir: So this is one place where I feel I may have missed out on my chance to be a future angel on the Midas List. I think the knowledge that I had and the set of people I surround myself with and the knowledge that we have, I worry that it's not that fresh anymore. That it's not a source of startup ideas and links and connections.
[01:01:49] And I think that maybe the people we see who become really successful benefit from that first. And then that leads to these connections because the second part of your arc as an investor is the one [01:02:00] where all the connections to other investors matter.
[01:02:02] For all the people we've spoken to and all the people you hear about that are actually GPs at funds, they all talk to each other and they all help each other find deals. And that's where the network is.
[01:02:12] But if you're just starting out and you don't have those connections. How do you actually get that quality deal flow, right? It seems like you have to have that set of knowledge.
[01:02:19] The last thing that really stuck out to me was just her discussion around purpose.
[01:02:22] And I loved her purpose: "My purpose is to create connections and enrich our community broadly defined, including entrepreneurs, friends, and family and school, so people can experience more joy and warm hearted moments."
[01:02:34] I have nothing like that for a purpose for me, but maybe that's something we can work on for next time.
[01:02:39] Shaherose: Thanks to Rachel. Maybe we can share our purpose next time.
[01:02:43] Thanks for listening. We'd love your feedback and suggestions on topics and guests. You can find us on Twitter/ X, @shaherose and @avirani.
[01:02:55] Aamir: Subscribe to our newsletter to get behind the scenes access, learn more about the guests, and [01:03:00] receive the key takeaways from each episode. You can find it at firstfunderspod.com/newsletter.
[01:03:05] Shaherose: And don't forget to subscribe and share with your friends at firstfunderspod.com/subscribe.