Here’s what I look for in my personal angel investments.
I originally trained as a journalist, and any reporter will tell you it’s important to include the “5Ws” of who, why, how, when and where. In investing, this is usually referred to as an “investment hypothesis” and that sounds mighty fancy; the kind of thing which might put your own investors’ minds at rest, but for me it’s less a hypothesis, more a ‘present state of gut’. But ‘5W investment strategy’ sounds less, well, digestive.
When: I usually invest in the back half of the calendar year
Update: I’m not making any new investments until we close the first VC fund for M8 Ventures, which could be soon, or it could be not soon. Not investing right now.
Since 2010 I have made an average of only three investments per year. Not because I don’t meet a lot of great companies, but because I’m working off a small, personal fund which I am trying to grow by investing in the best companies I can find, rather than the ‘portfolio’ approach of larger investors who are aiming to get one big return out of 20 companies.
I like investing in startups I get to know well by mentoring in accelerator programs.
The kinds of startups going through these programs change from year to year but generally speaking the majority are looking for investment from the middle of the calendar year onwards, so I usually avoid investing in the first half of the year, to ‘keep my powder dry’.
Keep in mind that it might take you a couple of months to get me (or any other) investor onboard so don’t hit me up at mid-year. I’m often travelling in December, January, April, August and September. So most years, May is the sweet spot.
This year (2017) all my capital has been invested so don’t hit me up for investment (hit me up for coffee and advice). I’ll update this post if an unexpected exit comes through and I’m in the market again this year.
Who: I invest in people I like
I think I understand technology well and I've made some successful bets on investing in the right technologies at the right time. So that leaves three other primary variables: the founders, the customer they’re addressing and the problem they’re solving.
The most important of these is the founders. Whether your startup goes really well or goes really badly, the future involves us spending a lot of time together in person, on the phone, or in a message thread.
If you’re someone I really like, I’ll look forward to it. If you’re a dickhead, I’ll avoid you. If it’s 9pm on a Sunday night and you’re almost in tears with worry about something you have to do on Monday morning and you call me to help you work through it, I want to be able feel like I can pause Netflix, apologise to my wife, and take your call in the next room without hating you.
If I don’t like you much, I won’t be doing everything I can to make my investment in your startup succeed, which increases the risk of losing my money.
This hasn’t been an easy thing to come to terms with. When a big VC says they like to invest in people they mean “we have the capital required to back you through a few unsuccessful ventures before you succeed, and we know how to trap you on the hamster wheel so you don’t escape until we’ve burned you out or you’ve returned 100x”.
I don’t have that much capital, that much time or that much leverage. When I say it, I mean, “life’s too short to spend in the company of anybody other than the people I really like the most. And I will move heaven and earth to help my closest friends. So fuck it, this is my own money, I’m going to gamble it on who I like most.”
Usually not the people with the most investment potential, or the highest score in rocket surgery school, and especially not the new breed of hustlers ready to burn interns, employees, girlfriends, business partners and investors in order to be a billionaire. You might be experiencing an industry backlash right now but I’ve never been a fan.
Who Part 2: a problem and a customer I “give two shits” about
“Gives two shits” is an Aussie slang term for really, really caring about something, which Niki Scevak introduced to Australian venture investing at Blackbird (thanks mate).
I’m not interested in customised womens’ dress shoes, so I’m not going to try very hard to help a customised womens’ dress shoe startup. But I’m very interested in customised trail running shoes. Everything in between is a bit blurrier. I never said I’d be easy.
But follow me on social as I share a lot about what I’m into and you’ll get the picture. I definitely give two shits about music, video, writing, fitness, mobility, energy, group messaging, democracy and inequality.
I spend a lot of time at the moment thinking about how artificial intelligence, machine learning and autonomy are going to change our world. Hit me up about that.
What: usually an angel or pre-seed investment
My usual cheque: $10–50k in a AUD250k – AUD2M round. Twice I’ve gone for $100k but since that basically wipes me out for the year, I’m unlikely to do that.
My long-term goal is to grow my total investment capital (and supplement my paltry income) by turning over my small investments so I can’t hang around for you to IPO.
How: equity or convertible note
I will do equity investments and convertible note but I’m not yet sitting on enough capital to consider SAFE notes.
I will be seeking to exit from my investment in your startup at the Series B round, looking for a relatively modest return. I won’t sink your whole round by approaching your Series B interested parties with wild unsolicited offers but I would like to work with you on approaching them about it on terms you and I agree on. So far, it’s never been a problem.
Why: because startups are everything to me
A rational investor seeking only an attractive risk/return in Australia would simply buy more Sydney real estate. So anybody considering investing in tech startups either wants to gamble with higher risk/return investments, or they really, really love tech startups, the tech startup community, and the kinds of people who work in and on them.
I really, really love tech startups because in 1995 Daniel Petre changed my career and my life by giving me a shot at producing early online content for what became ninemsn. Soon after Tim Brady, Maury Zeff and Tony Faure gave me another huge break and I helped bring Yahoo! to Australia and New Zealand and then the AsiaPac region.
Why me? I think I had some of the skills, none of the experience, absolutely nothing to lose, and there weren’t many people like me to choose from.
I had a six year career in journalism and media relations and then a 15 year career as an early hire and co-founder in tech startups. But by 2010, I was 45 and I could tell I would soon be too old for sceptical investors to consider me as a founder.
So I began learning how to be a startup mentor and angel investor, and hopefully I’ll keep learning fast enough to keep doing this the rest of my life.
Where: local, and not via social
I like to invest in startups I get to know through the BlueChilli and Startmate accelerator programs. I recommend BlueChilli for idea-stage founders and also for startups who need help building their tech platform. I recommend Startmate and the Muru-D programs if you’re the more traditional team of mostly tech founders with a prototype who need help with commercialising and raising capital. If you’re studying at, staff or alumni of an Australian university, they all have great accelerator programs.
I don’t like to invest in startups which are currently not in Australia. I can’t truly get to know you if you’re not here.
Please don’t hit me up via Twitter, Facebook, Instagram, WeChat, SnapChat, Skype, unsolicited phone call, by commenting on this post, and especially not LinkedIn.
Get a warm email intro to me from another person in the tech startup industry who knows me.
When I have availability I am happy to have a coffee with interesting founders working on interesting startups, to learn more about you and see if I have any useful advice for you. It doesn’t always have to be about investing. But please understand due to other commitments I may not be able to see you for a month or two.
I don’t expect anybody to read this before hitting me up but now at least I have a blog post I can refer them to.