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How to be an Angel Investor

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How to be an Angel (Investor) 

My mother was an angel. Earth angel. She saw to my aging grandparents when everyone else was working and she took care of my dad as he was dying of cancer and made our very small household budget stretch miraculously.

In all of this, she was a beautiful kind soul and never spoke ill of anyone. When her funeral came, all the enemies in the family managed to pay their respects on different days of the wake avoiding each other but showing up to honor one classy woman.

When my mother passed, I didn’t know where to focus my attention. My work while fulfilling me felt a little small now that I had more time on my hands. I used to be the main caregiver to my mother with the helper, I saw her to hospital visits and I was her companion when I could.

It was after slightly more than a year of soul searching and matching my talents and resources with the world of business, leadership, and economy that I saw the space I needed to fill in a very vivid dream. I woke up one day in November 2016, fully aligned in my body and mind. I lay in bed in Santa Monica daydreaming and future making like a caterpillar before being a butterfly. I called my best friend in Singapore to chronicle the day and the moment – I committed to being and playing a bigger game.

I am committed to helping create more Earth Angels (Investors). I would gather compassionate, kind, influential people who would use their wealth to invest in women ecosystem building startups and businesses. I was going to be an Angel Investor Educator and Angel Influencer.

Thank you, mom, for showing the way.

So… 

10 Key Success Factors in Angel Investing

I was thrilled to meet fellow angel investors and investor wannabes at the SoGalBoss Summit.  The speakers were the highest caliber with a mix of expertise and experience and a lot of compassion for the world we are building. These are my 10 takeaways. If you are intending to be an angel investor or are one already, I welcome you to send me questions and comments.

1. Invest only what you are afford to lose

99% of startups fail. 50% of businesses never make it past the first 5 years. If you intend to invest in any company you are not personally running you need to be aware that you have little or no control after you put your money in. The money either comes in 10x or 0x and some variation in between. The unicorns are not running wild and they are at this point still mostly paper money until sold. The mass media hype of a ton of money at 10-20x is rare.

So DON’T do it

Don’t die trying to be an Angel.

But if you know you can and want to be an Angel to a business because that is the mission you are aligned with and called to.

Do it wisely. Playfully and with real intent to add money and expertise to help the startup grow.

Have a Big Enough Why before you start. Examine your intentions before you begin.

2. Invest in what you use

All of the speakers suggested that we know what we are investing in. Pocket Sun of SoGal Ventures invests in the millennials generation and the She-Economy and her venture firm’s Investment Thesis is super clear.

When I asked about new technologies I am keen on and how I could not possibly wrap my head around the material fast enough, they agreed that my method of getting a trusted friend who is an expert in the area to look at the materials with me or quiz the founders was crucial before moving forward.

3. Invest in people
Repeatedly, everyone says to look closely at the executive team and to see that the team have worked with each other for some decent amount of time (2-3 years). If they are co-founders, check they compliment each other in their strengths.

By the way, founders must be a bit crazy. So be ready.

And since early stage is really the team and what they bring to the table

Are they obsessed with the startup? It has to be for posterity and it has to be their baby and if they want to get out  – that’s a huge warning.

Do they really listen to you?

How do they manage teams conflicts?

How have they built a team?
Are they a single founder who can’t work with anyone?
Ask their employees and vendors who work with them for their 360-degree feedback.

Are they the creator/tech genius and not a good manager of people?

Remember innovation without implementation is just ideation

Or are they the business person with an idea and now looking for a team?

A talent magnet founder is a good aspect to have as people want to work for them

If they have too much to say and there is no money discussion. It is almost always a bad idea
Are they the Ideas, Sales or Execution? I am sure you can imagine that all 3 is ideal. Good luck finding that perfect founder. And when you do hold her down and invest.

Founder life sucks so they must have good reason to do it. Is it a passion project, mission or ego? Who are they really making it for? My psychological background has helped me greatly here. It is crucial before you bank on their dream project.

Trying to re-found a company is the most challenging. This means trying to remove a founder or get a new one. So to keep yourselves safe ensure that the vesting for founders is four years.

A Big Red Flags is a lack of regular communication. The best founders and CEOs give regular and detailed updates of the company’s progress. Michael suggested regular check-ins and that really helps the founders keep accountable as well. Is the entrepreneur going to be proactive with you even when it is a crisis or they are in a bad state. Transparency is crucial for true strategic partnership. Listening to what they tell and what they don’t tell you too.

How good is the founder and/or CEO at prioritizing? They do it every day
This is not what they put in a pitch deck so ask for it.

4. Invest in yourself and learning to know what you are measuring and seeing. Invest in a good lawyer and accountant. Don’t get hoodwinked by fancy pitch decks and moving promises. Do due diligence. On yourself and what you expect and can really expect. The balance of optimism and cynicism will keep you in check.

Most of the experts agreed that they take 1-3 months to do due diligence

and to “Think the Unthinkable”. An example of the Unthinkable raised was of Theranos https://www.vanityfair.com/news/2017/08/theranos-walgreens-settlement-running-out-of-cash. Where many people believe in the company which used a lot of borrowed credibility. If anyone did look closely in the investing stage, you would have seen even though the investors were credible and celebrities none were biotech investors. A warning sign.

Ask what could make this suddenly a 0x game

5. Please invest in things apart from startups

The ones you know and can measure returns. For myself, I have 3 properties 1 Singapore and 2 in Berlin, insurance, stocks and shares, my government savings for retirement and my own leadership development company. I am mostly covered.

I still prefer property investments however I am intrigued and also moved by innovation and mission-driven disruptions. Hence I am learning to be an angel.

But if you don’t feel safe or secure or clear about your investments. If you don’t know your risk appetite and don’t have a clear investment strategy with more conventional means of wealth creation. Look at those first.

Angels are not VCs. Remember that VCs spread risk across a large portfolio. They have to bank on a unicorn sometimes to cover their other investments which may be losses. VCs needs to return in 7-9 years. An angel can choose to invest in an eco-system builder, like a clinic for rare childhood illnesses, like a matchmaking app for nannies and mommies, etc. This means you can choose smaller investments and lesser returns. You don’t have to report to the investors in your fund. Maybe you have to report to your spouse or family but mostly you play a different game.

6. It may take you 5 to 7 years to really become a great investor. To internalize the spotting of a good deal and the ability to craft the deal to your benefit. Michael Lints from Golden Gate gave me great comfort when he said this. I was hesitant to even try and now I know the trying is the price of learning. Getting your hands dirty allows you to see clearly the investment and the challenges of each industry. Every investor and consultant in the room and founder shared horror stories of poor matches and losses and the need to remove founders and to buy out investors who weren’t aligned. Their scars were glorified as they survived to invest again and this time wiser and more prepared.

Educate yourself in round dynamics before you begin as angels and founders change their positions as rounds go and when VCs enter and renegotiate.

7. Network to get your best picks

Since you may be a new investor and not many inbound as yet. Inbound means startups sending their decks to you. You can start with proactively outbound reaching to startups which match your investor thesis. I have spent the last 2 and a half years at conferences in Singapore and United States spotting startups and founders I feel I would like to get to know and support. You don’t have to be physically at events as there are many platforms matching investors with founders or crowdfunding platforms and these allow you to see what is out there. Be comfortable cold calling and chasing a potential investment and if they are not ready for investing, at least you are on their mind when they next ask for funding.

I actually love being the unknown investor parading as a reporter (so now my cover is blown). As then I can really see the startup on their downtime and not always pitching (although they really should) and ask probing questions which look a lot like these 10 areas of consideration. Apart from the usual business case and the market validity.

Eventually, you hope to be getting inbound and on the top 5 of a founders list which matches your investment thesis.

8. Pay to learn. Learn so you don’t have to over-pay

Pocket suggested rather than put the usual $50,000 into one startup, try to convince 10 startups to take $5,000 as your investment and that will allow you to pay to learn.  This will allow you to learn about negotiations in ten different companies.

Elaine Kim, CRIB co-founder, and CEO, suggested that we may need to buy the ticket to get into the game but a small ticket with the possibility to top up.

What you could use to convince them to take $5000 rather than the usual

$50 000 includes your help with getting them an executive team, clients, selling products, be their mentoring sounding board, raise money and open doors to other investors.

9. Form your own Proprietary Insights 

This came from Lee Xueling from Bain and Company, I resonated strongly with; who emphasized that we should form our own proprietary insights. Test their product and process and look at their competition current and new innovations that could dethrone them.

She mentioned how notebooks growth were totally knocked off by the introduction of the Ipad. These unexpected and unpredicted are normal in an era of constant disruption.

You cannot manage what you cannot measure. Xueling reminded us to be careful what people say and do. Surveys aren’t true. Try to do a follow home exercise, where you follow the consumer back to see how exactly they use the product. Intuit does that.

Watch the Net Promotion Score and it has to be at 9-10. Or else that’s a warning sign too.

Enjoy startup post-mortems and learn from them

And consider what if a big company takes over the vertical?

10. Make your own Investment Thesis. 

SoGal Ventures has a clear investment thesis that makes founders know immediately if they are a match and their thesis is so clear that other investors pass them introductions when they see a good company.

What makes a good thesis?

  • Differentiated
  • Helps filter out 90% of deals
  • Reflect your own World View & Strengths
  • Catching on Big Challenges
  • Helps you build a Legacy
  • Essential Elements
  • Stage
  • Sector Focus
  • Geography Focus
  • Check Size
  • Deal Frequency
  • How Involved
  • (and add anything else you need for you to match your investor appetite)
  • Things to remember
  • Always Test the Thesis

For your partners and you, it is like a marriage. You could work with partners for ten to twenty years. So pick your first few investments very carefully

For Early Stage Startups, it is very hard to check everything because they don’t have the data. So it has to be something you believe in. And yes your Gut feeling
and at least 61% of everything you want.

Finally, I think Sarah Chen, CVC at Sime Darby was the one who reminded us that investing in a company is a privilege. It is their blood, sweat, and tears and they are trusting you to give good advice.

I could not help myself – the SoGalBoss Summit was so good, I sacrificed my Sunday to write this. I loved how committed clear and conscious the speakers were. Thanks again. Pocket and Sabrina and all else who started this off.

The next SoGalBoss Summit in January will focus on women in entrepreneurship, with the same information-packed, no-bullshit approach but different topics.

 

 

 

 

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Callum Connects

Benjamin Kwan, Co-Founder of TravelClef

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Making music to create a life for his family, Benjamin Kwan, started an online tuition portal and his music business grew from there.

What’s your story?
I am Benjamin and I’m the Co-Founder of TravelClef Group Pte Ltd, a travelling music school that conducts music classes in companies as well as team building with music programmes. We also run an online educational platform which matches private students to freelance music teachers. We also manufacture our own instruments. I started this company in 2011 when I was still a freshman at NUS, majoring in Mechanical Engineering.

I was born to a lower income family, my father drove a taxi and was the sole breadwinner to a family of 7. I have always dreamed of becoming rich so that I could lessen the burden placed on my father and give my family a good life.

After working really hard in my first semester at NUS, my results didn’t reflect the hard work and effort I put in. At the same time, I was left with just $42 in my bank account and it suddenly dawned on me that if I were to graduate with mediocre results, I would probably end up with a mediocre salary as well. I knew I had to do something to gain control of my future.

During that summer break, I read a book “Internet Riches” by Scott Fox and I knew that the only way I could ever start my own business with my last $42 would be to start an online business. That was how our online tuition portal started and after taking 4 days to learn Photoshop and website building on my own, I started the business.

What excites you most about your industry?
Music itself is a constant form of excitement to me as I have always been an avid lover of music. As one of the world’s first travelling music schools, we are always very eager and excited to find innovative ways to a very traditional business model of a music teaching.

What’s your connection to Asia?
I was born and raised in Singapore and I love the fact that despite our diversity in culture, there’s always a common language that we share, music.

Favourite city in Asia for business and why?
Hands down, SINGAPORE! Although we are currently in talks to expand to other regions within Asia, Singapore is the best place for business. I have had friends asking me if they should consider venturing into entrepreneurship in Singapore, my answer is always a big fat YES! There’s a low barrier of entry, and most importantly, the government is very supportive of entrepreneurship.

What’s the best piece of advice you ever received?
I have been blessed by many people and mentors who constantly give me great advice but right now, I would say the best piece of advice that I received would be from Dr Patrick Liew who said, “Work on the business, not in it.” This advice is constantly ringing in my head as I work towards scaling the business.

Who inspires you?
My dad. My dad has always been my inspiration in life, for the amount of sacrifices that he has made for the family and the love he has for us. He was the umbrella for all the storms that my family faced and we were always safe in his shelter. Although my dad passed away after a brief fight with colorectal cancer, the lessons that he imparted to me were very valuable as I build my own family and business.

What have you just learnt recently that blew you away?
You can not buy time, but you can spend money to save time! With this realisation, I was willing to allow myself to spend some money, in order to save more time. Like taking Grab/Uber to shuttle around instead of spending time travelling on public transport. While I spend more money on travelling, I save a lot more time! This doesn’t mean that I spend lavishly and extravagantly, I am still generally prudent with my money.

If you had your time again, what would you do differently?
I would have taken more time to spend with my family and especially my father. While it is important to focus our time to build our businesses, we should always try our best to allocate family time. Because as an entrepreneur, there is no such thing as “after I finish my work,” because our work is never finished. If our work finishes, the business is also finished. But our time with our family is always limited and no matter how much money and how many successes we achieve, we can never use it to trade back the time we have with our family.

How do you unwind?
I am a very simple man. I enjoy TV time with my wife and a simple dinner with my family and friends.

Favourite Asian destination for relaxation? Why?
Batam, it’s close to Singapore and there’s really nothing much to do except for massages and a relaxing resort life. If I travel to other countries for shopping or sightseeing, I am constantly thinking of business and how I can possibly expand to the country I am visiting. But while relaxing at the beach or at a massage, I tend to allow myself to drift into emptiness and just clear my mind of any thoughts.

Everyone in business should read this book:
Work The System, by Sam Carpenter. This book teaches entrepreneurs the importance of creating systems and how to leverage on systems to improve productivity and create more time.

Shameless plug for your business:
If you are looking for a team building programme that your colleagues will enjoy and your bosses will be happy with, you have to consider our programmes at TravelClef! While our programmes are guaranteed fun and engaging, it is also equipped with many team building deliverables and organizational skills.

How can people connect with you?
My email is [email protected] and I am very active on Facebook as well!
https://www.facebook.com/benjamin.christian.kwan

This interview is part of the ‘Callum Connect’ series of more than 500 interviews

Callum Laing is an entrepreneur and investor based in Singapore. He has previously started, built and sold half a dozen businesses and is now a Partner at Unity-Group Private Equity and Co-Founder of The Marketing Group PLC. He is the author two best selling books ‘Progressive Partnerships’ and ‘Agglomerate’.

Connect with Callum here:
twitter.com/laingcallum
linkedin.com/in/callumlaing
Download free copies of his books here: www.callumlaing.com

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Entrepreneurship

Before you enter a Startup or before you choose your founding team or new hires read, “Entering Startupland” by Jeff Bussgang

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Before you enter a Startup or before you choose your founding team or new hires read “Entering Startupland” by Jeff Bussgang.

Jeff knows how to spot and groom good culture, as the book session was held in Zestfinance a company he invested in and now, “The Best Workplaces for Women” and for “The Best Workplaces for Tech”, by Fortune.

These are the questions during the Book Launch.

How to know if a hire including the founder is Startup material?
Jeff says to watch for these qualities.

First, do the hires think like an owner?
Second, do the hires test the limits, to see how things can it be done better?
Are they problem solvers and are biased toward action?
Do they like managing uncertainty and being comfortable with uncertainty? And comfortable with rapid decision-making?
Are they comfortable with flexible enough to take in a series of undefined roles and task?

How do we know if we are simply too corporate to be startup?

Corporate mindsets more interested in going deep into a particular functional area? These corporate beings are more comfortable with clear and distinct lines of responsibility, control, and communication? They are more hesitant or unable to put in the extra effort because “it’s not my job”.

If you do still want to enter a startup despite the very small gains at the onset, Jeff offers a few key considerations on how to pick a right one.

He suggests you pick a city as each city has a different ecosystems stakeholders and funding sources and market strengths. You have to invest in the ecosystem and this is your due diligence. Understand it so you can find the best match when it arises.
Next, to pick a domain, research and solidify your understanding with every informational interview and discussion you begin. Then, pick a stage you are willing to enter at. They are usually 1)in the Jungle, 2) the Dirt Road or 3) the Highway. The Jungle has 1-50 staff and no clear path with distractions everywhere and very tough conditions. The Dirt Road gets clearer but is definitely bumpy and windy. Well the Highway speaks for itself, doesn’t it?

Finally Please – Pick a winner!

Ask people on the inside – the Venture Capitalists, the lawyers, the recruiters and evaluate the team quality like any venture capitalists would. Would you want to work for the team again and again? And is the startup working in a massive market? Is there a clear recurring business model?

After you have picked a winning team and product, how would you get in through the door?

You need to know that warm introductions have to be done. That’s the way to get their attention. Startups value relationships and people as they need social capital to grow. If you have little experience or seemingly irrelevant experience, go bearing a gift. Jeff shared a story of a young ambitious and bright candidate with no tech experience who went and did a thorough customer survey of the users of the startup she intended to work with. She came with point-of-view and presented her findings, and they found in her, what they needed at that stage. She became their Director of Growth. Go in with the philosophy of adding value-add you can get any job you want.

And as any true advisor would do, Jeff did not mince his words, when he reminded the audience that, “If you can’t get introduced you may not be resourceful enough to be in startup.”

Startupland is not a Traditional Career or Learning Cycles

Remember to see your career stage as a runs of 5 years, 8 or 10 – it is not a life long career. In Startup land consider each startup as a single career for you.

Douglas Merrill, founder of Zestfinance added from his hard-earned experience that retention is a challenge. Startup Leaders to keep your people, do help them with the quick learning cycles. Essentially from Jungle to Dirt road, the transition can be rapid and so each communication model that starts and exists, gets changed quickly. Every twelve months, the communication model will have no choice but to break down and you have to reinvent the communication model. Be ready as a founder and be ready as a member of the startup.

Another suggestion was to have no titles for first two years. So that everyone was hands-on and also able to move as one entity.

Effective Startupland Leaders paint a Vision of the Future yet unseen.

What I really enjoyed and resonated with as a coach and psychologist was how Douglas at the 10th hire thought very carefully what he was promising each of his new team member. He was reminded that startups die at their 10th and their 100th hires. He took some mindful down time and reflected. He then wrote a story for each person in his own team and literally wrote out what the company would look like and their individual part in it. In He writing each of the team members’ stories into his vision and giving each person this story, it was a powerful communication piece. He definitely increased the touch points and communication here is the effective startup’s leverage.

Douglas and Jeff both suggested transparency from the onset.

If you think like an owner and if you think of your founding team as problem solvers. Then getting transparent about financials with your team is probably a good idea. As a member of a startup, you should insist on knowing these things
Such skills and domain knowledge will be valuable. There is now historical evidence of people leaving startups and being a successful founder themselves because they were in the financial trenches in their initial startup. Think Paypal and Facebook Mafia.

What drives people to enter a startup?

The whole nature of work is changing. Many are ready to pay to learn. Daniel Pink’s book Drive showed how people are motivated by certain qualities like Mastery, Autonomy and Where your work fits into big picture. Startups do that naturally. There is a huge amount of passion and the quality of team today and as it grows then the quality of company changes.

The Progress principle is in place, why people love their startup jobs is not money rather are my contributions being valued? Do I see a path of progress and do I have autonomy over work and am I treated well?

Find out more about StartupLand on Amazon

And learn from Zestfinance

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