Oct. 15, 2020

43 investments in 2 years - how is angel capital deployed? By Steve Walsh.

43 investments in 2 years - how is angel capital deployed? By Steve Walsh.

Steve Walsh, angel investor, Advisory Board Member at ZenSports and the CEO at Procurrence talks about angel investments, working as an advisor, fundraising for Procurrence and comparison of fundraising in the pre-COVID VS COVID world. We also discussed Steve's work at Procurrence and how he is approaching to investors right now.

Steve's LinkedIn: https://www.linkedin.com/in/steve-walsh-a791a44/

Procurrence Inc: https://www.procurrence.com/

Fill out this form to get connected to investors and mentors: https://form.typeform.com/to/vT8gVQDG


Transcript

And today's a guest speaker with angel investors who invested in 43 companies in the past 2 years, and who is also a, that is about to fundraise. 

So, in this episode, we'll talk about both angel investments and fundraising for the company itself. So let's keep by you giving us some background on yourself and on croaker and sorry for the alarms. 

That's okay. That's okay. Hopefully I'm not in trouble. They're not coming from me. So thank you for our thanks for having me no problem. So I'll give you a little bit of background. 

I like to call myself at times that recovering operator I was in corporate America for little over 20 years in the telecom and technology space. 

I had the pleasure of working for some of the greatest companies in the world in Cox Communications and Comcast, 

and about 2 years ago, 

decided to leave corporate America to become an entrepreneur and started building my own company in procurements where we help small medium businesses source. 

Technology products, Internet service for their business based purely on zip code. So we help small and medium businesses get connectivity. And at the same time, I started to get involved in this. What? 

I call the startup ecosystem meeting other entrepreneurs, other angel investors. And what I realized pretty quickly is, I wasn't the only 1 with a great idea, and a ton of great companies, and entrepreneurs out there. 

That could leverage my skills from the past and we're doing capital raises. So I started getting into angel investing. 

Surrounding myself with people that have been doing it for a long time successfully. 

And that has just grown over the last 2 years to what as you said is now 43 companies I've invested in the last 2 years. 

Nice crude and the speed of the investments is impressive. Great work there. Congrats. But let's start by talking about recurrence. 1st, and as fundraising process and then we'll move on to your and your investment experience. 

So 1st question is, you've tried raising money from angels and vc's in the past and that didn't work, right? Why not? 

Yeah, I think even though I was in business for 20 years and had a tremendous amount of success building, massive business divisions, that other companies I understood, I was the 1st, time entrepreneur. 

And when I went to talk to even micro vc's and VC firms, they loved the context in that I had industry experience. They love the fact that I had had a lot of success. 

And I wasn't our 1st job out of college entrepreneur, but I hadn't built the tech yet. I hadn't done a race and offend friends and family side. So they all gave me some pretty safe advice. 

And after hearing this 30 or 40 times that they get started again, they said, look go out. 

And surround yourself with people that know you do a small round enough to raise money to build the tech and to get the product launched, 
go build an MVP show that you can build an MVP show that you can raise a little bit of capital and show that you can start to get some customers to pay attention. 

And then you'll be ready for a more formal round with either angels or even. So, that was sort of the I call it the homework. They gave me and I think it was a test to see if I could go out and do it on my own. And that's really what we spent our time doing. 

So it wasn't a no, it was a, not now from the VCs and I actually think it was pretty sage advice, because it made us do things the right way. 

Uh, it made us be really gritty and to realize how hard it is to raise money and how to do it the right way and so far. So good. So, that was really what my 1st foray into trying to raise money from vc's. Look like. 

Nights, I think a lot of people have very, very, very similar story because I have multiple of those. So, next question is about, you know. 

Do you really think that only people with some sort of traction, 

or some sort of really decent proof that their product is needed that their product is in demand can raise from VCs or should someone else even try to raise from PCs? 

Or? I think it depends upon where you're at. I would say that.
You know, if you're just getting your product out there with an MVP if. You know, 

you've got under 10000 dollars in revenue if you're not growing a double digits yet in growth month over month or quarter over quarter you're probably still playing in that angel investor space where you can get someone in that tend to 50000 dollar check range per check you might be able 

to raise a couple 100000 dollars at a time. 

I think if you're going to go to a VC firm, they're gonna want to see a product and market not for years, but a pretty sustainable track record of at least 3 to 6 months. 

Maybe a little longer of revenue they're going to want to see double digit growth and they're going to see revenues probably in that 50 to 100 K or more a month in revenue. So if you're not at that, I'll call it that stage yet. 

I think it's going to be hard to get visas to pay attention because remember. 

These are not looking for 1 X2 X3 X return. They're looking for 10 X, a 100 X, a 1000 X moon shots. So you really have to have traction. You really have to have your business hitting on all cylinders to get a vc's attention. 

So, it's not that people shouldn't raise for vc's. I just think you need to understand. 

How they look in investments, why they why they pick so few and where your company stacks up in that process. 

Right and that's a really good point. If you think your company is making decent returns probably decent for you, but not decent enough for VCs. So it's really important to keep that in mind. Absolutely. 
So, let's talk about the current situation with recurrence. You're about to raise your official round from PCs and angels what are the major steps that you're taking right now? In preparation to that round? 

Well, I think the, the 1st, 1 was trying to check all the boxes of what the folks I talked to last time told me I needed to do. So, they said go out and show us. You can raise money. 

So, we went out and did a friends and family round last early this year on a convertible note and it was we didn't go get checks from my uncle. I went and got folks that I know from the industry who've known me for 15 or 20 years. 

who've seen my success building, multi 1B, dollar business units and who very much believe in what we're doing. So we did a small. 

Convertible note, raise 6 figures there we went and spent the last year building, our tech stack and building our minimum viable products. So our marketplace is now live. 

Up on the website for folks to interact with us, and also we're up across all social platforms. So we started doing our 1st marketing campaigns and we actually got our 1st customers in the last couple of weeks. So we're starting to generate revenue. 

So, everything that they said to do, which was raised some money, build a product, start to get customers. We're checking the box and all of those. 

So, our next round, we anticipate getting ready in the next probably 90 days and to go out and do more of a large around probably 500 to 750000 dollar around. That'll give us 18 to 24 months worth of runway. 

And at that time, when we can really have a good story around how we built the company, what we did with our raise, how we've run really lean haven't taken not a lot of head counts. So very lean. 

And then what we're doing to drive customers and to drive market share. So I think that's that's our play and how we're going to go to market. And that's how we've gotten ready for that. 

Is over the last year on a quarterly basis, I try to stay in touch with the folks that gave me that council and advice to let them know the progress we're making to make sure you keep them updated as an angel myself. 

I think 1 of the frustrating things about being an angel is some founders are really good about keeping you updated on either monthly or quarterly basis and others aren't. 

I think making sure you keep people updated on where you're going and what your progress is, because there's so much noise out there. It's very easy for an angel to forget about you. And then all of a sudden, Here's a quick update email. Hey. 

You know, let's see from we talked about this, this and this, here's an update on how I'm doing on those metrics. It makes it a lot easier to get you to the top of the pile. 

When you're constantly giving them an update about how you're doing. So, I think, as we get ready for our round, the most important thing I can do. 

Is to make sure I'm keeping tabs and keeping track and updating the people that said, hey, keep me in the loop. Put me on your update and making sure I keep them updated on our progress. It's probably the best thing you can do as a founder. 

Absolutely 100% always recommend people to really focus heavily on.
Letting people know where you're at, so that once we're actually ready to fundraise, you're not just, 
you know, coming out of the blue to investors saying, like, hey, you remember? Yeah, we talked a year ago. No. Have you ever heard that? There's a great book out there called dig in a while before you're thirsty. 

It's, it's a great book and I recommend it it's just it talks about. 

Creating these relationships before you need them, you know, and it takes time and making sure you dig in well, before you need water so right. That's just I just think that's our process. 

Right, yeah, and that's that's a really nice effort to be honest. Love it. So, 1 full up that 1 to ask you about your upcoming fundraising, you mentioned that's the 1 reason enough for an 18 slash 24 month runway. 

Why did you pick that amount of time? And why not last or why not more? A couple of reasons 1. You don't want to you don't want to pick too long a runway and so much money that. 

You don't really have a plan behind it and when you're a startup, your business is iterating and changing so fast. You don't know what the next 6 months looks like never mind 2 and a half years from now. So, I think. 

Angels and VCs are hesitant to fund companies beyond 24 months, 18 to 24 months, tends to be that sweet spot. 

And the reason why you don't want to do it, just for 6 months or 12 months is you don't want to constantly be raising, you actually need time to run the company and to get the growth and to start to show results. 

So you want to raise enough money to be able to last for a year and a half to 2 years, but you don't want to raise so much that it looks like you're planning for the next 10 years because. 

The marketplace really changes very quickly right now, especially in the world of coven. So, 1824 months tends to be a really good, sweet spot for most companies raising nowadays. 

Great. Great. I totally agree with that. I think that's a good amount of runway that we can secure, but next question is about covert itself. So a lot. 

Changed in the post cobit world and specifically the outreach to investors making those new connections with investors where potential investors has changed drastically. How do you do this? How do you find new connections to potential investors how to reach out to them? 

Well, you know, I'm a big LinkedIn guy. I know you and I connected on LinkedIn. I've got over 10000 LinkedIn connections, so I've been on it probably about 13 years. It's by far the biggest way for me to connect with new investors new angels. 

Other entrepreneurs tends to be a really easy way to connect. The interesting thing is because of coven everybody is online all the time. 

And people are more available, so, while you can't get face to face meetings, I've actually found getting conversations and new conversations with people is easier than it's ever been because everybody has no place else to go except the online all the time. 

So, I found people have a lot more availability and a lot more openness to new relationships and new connections then they might have been 7 or 8 months ago. So that's been an interesting byproduct of the pandemic. 
Right. That's a great great. I totally agree with that. And how do you reach out on LinkedIn 
specifically? 
Do you some automation tools or do you actually research based on the keywords and then dig into each individual profile? Or how does that process work? 

Depends upon what I'm looking for, in in customer outreach we will use some automation based on keywords industries, size of company. So, for example, procurement's our target audience is I'll call it 1 to 50 employees 1 to 5 locations. 

So we typically will search for business owners or or in companies of 0T to 100 employees with 1 to 5 locations. And you could be very specific about your outreach on LinkedIn. And that's on the customer side. 

If I'm looking for either investors, maybe other angels to talk to or even a lot of times what I'll do is if I'm targeting someone, let's say you, for example, in your firm. 

I'll take a look at my current LinkedIn connections to see how many other people that I know may know them and with 10000 connections. This is a pretty good chance that within 1 or 2 degrees of me, somebody in my network knows. 

You, and a lot of times I'll just shoot a quick email to that person and say, hey, Steve. I I noticed, you know, Bob over here, would you mind making a quick introduction of. 

I think he and I know a lot of the same people, I'd really value that 9 times out of 10 people come back with a no problem. Happy to do it. 

So, I do a lot of that a lot of 2 degrees of people. 

I just find that it's a really easy way to network. People are pretty open to it. And, you know, the biggest thing for me. 

Is just be honest about what you're trying to do if you're an angel investor looking to make new connections, tell them that if you're an entrepreneur that's considering getting ready for the next round and you want their advice or feedback. 

Tell them that I think the more open you can be with people about your agenda, and sometimes there is no agenda when I'm talking to other angels to say something like, I understand you invest in angel investments so to why we're in some of the same portfolio companies. 

I'm always looking to chat about deal flow and share deals.
Most of them come back and say, so am I, let's talk it's a really easy conversation. Mm, right, right. That's very much true. So, um. 

Wondering I think I had another question I've got it. Oh, email right? You mentioned email and I wanted to hear about the paid version of LinkedIn. Is it worth it? And why? Why did you decide to upgrade it? 

So, I do do use sales Navigator. I want to say it's 7. I think it's in between 7, 800 dollars a year. So, call it 70 dollars a month. You know, from my business. We can't, you can't be on every social platform every day. 

You know what I mean? Everyone has their favorites minus LinkedIn so I've chosen to put.
A monthly investment to LinkedIn, because when you're looking to connect with people, you can be 
very specific about your targeting. You can be specific about your industry size of company level title and I just found that some of the capabilities I get. 

With the sales Navigator version of LinkedIn make it a little bit easier for me as I'm trying to go through my day and meet new people. It's not for everybody. This is really it's only in the last 12 months. I've jumped to the paid version of LinkedIn for the 1st, 11 or 12 years. 

I used the free version. 

But the more I started to grow my business, I realize that sometimes you have to spend money to make money. And this was a good way from a social media platform for us to make an investment to help grow the company in my own brand. 

Right actually, at this point, I would like to point out that I'm using free version as well. So if you're broke founder, if you think that, you know. 

Maybe you need LinkedIn upgrade version 1st of all there is a free trial so just. 

Start with this, and if you really see a lot of help there definitely upgrade another node by the way it's really helpful if you reach out a lot individually. 

So, if you are, like, Steve, who needs to send a lot of personal emails, then that's that's that's all for you. 

If you're just doing mass emailing, you know, mass, adding people on LinkedIn, not really sure what's, let's move on and talk about conferences now. 

So, before conferences was honestly, the major source of new connections for me, now, it's a, but what do you think about current conferences? There are some breakout rooms or discussions after those conferences. 

So I've recently been on TechStars demo de, Los Angeles and they had a nice breakout room where a bunch of interesting people but. 

Do you think that's a good place to find new connections or should people just find 1 channel like LinkedIn or Twitter and stick to it? I think you have to do a little bit of everything nowadays. 

I don't think there's just if you're just a 1 trick pony, you just use LinkedIn, you're going to miss out on opportunities. So, like, you, I do attend conferences. A lot of them are virtual now and that's fine. I spoke at that. 

I was a speaker at the pace conference last week, which is in the call center in technology space about emerging technologies. Great conference breakout session was attended by 40, 50 people. I got a few request for appointments afterwards. So, for people to learn about my company. 

So, I find it's a great way to make different connections. The people that attend conferences aren't always people that are real heavy, unlinked and people that are heavy on. Linkedin might not be heavy on other techniques. So, I do think you have to do a little bit of everything. 

I'll tell you this, it's made everybody a lot more efficient.
Because you can attend more conferences now, because you're not spending the time and money. 

On airline travel hotels, so you can pick and choose which conferences to attend. You can tend to multiple in a week. 
You can attend only certain breakout sessions, because, you know, when you physically go to a 
conference, sometimes you feel like well, I already spent the money to get here. I have to attend every session from 8 in the morning to 10 at night. 

When when you're doing a virtual conference, it's really not the case because you've probably spent the heck of a lot less money to get to, to attend. 

And you can pick and choose how to weave it into your normal business schedule. So I think you have to do a little bit of everything and the virtual conferences now, have made it a little bit easier for you to be able to, to get scale. 

Right and probably.
No, never mind, I'm not going to leave any links to conferences, but. 

You can Google it let's move on now. Let's talk about steve's angel investments. So you've done 4, 3 investments in the past 2 years. 1st of all. What do you invest in what stage to invest in and. 

Yeah, those 2, so I knew when I got into this, that it was really the only area of investments I really hadn't done. I was big into stocks and mutual funds on the market for the last 25 years, but I wanted to get into early stage investing. 

So I wanted to start to follow and learn from some people that I look at is probably the best in the business. 

So 1st and foremost guy like Jason, who is probably the most successful angel investor of all time he created the launch festival. 

He runs a podcast, you may have heard a call this week and start ups 3 times a week. I've been following Jason for about 4 or 5 years. I read his book that he put out on angel investing how to take 100000 dollars to 100M dollars. 

Read that a couple times, joined to syndicate, which is 1 of the largest syndicates in the world with 3000 members. And by doing some deals with Jason I got introduced to some other what? I'll call Super angels. People like Gil pagina. 

Who's in alumni of the same university? I went to UMass. Amherst. Zach bilious Ed Rowan who runs? Hack? Vc. 

These guys have all had multiple exits into what's called unicorns, which are companies that have evaluation of a 1B dollars or more. They've all had multiple unicorns. 

And I knew that if I started to do this, I should write small checks into a number of companies. I should invest alongside the best who have the best deal flow. 

So, my philosophy and it's 1, I stuck pretty close to is I only invest via syndicates and some of the guys I just mentioned, I'm in all of their syndicates. I try to write seed stage checks. 

So, typically, products have a product in market. They have revenues of I'll call it 10000 to 100000 dollars in monthly, recurring revenue. 

They're growing either monthly or quarterly at double digits and they're syndicated by other people out there whether it's Jason or Gill or maybe David facts. Just people that give me a really good signal that there are other people. 

Behind this company that know exactly how to do this and it probably considered the best. So. That's what I've done. It's given me access to a tremendous. 
Breath of companies, I will say, predominantly based in Silicon Valley. The reason for that is most of the biggest angels their syndicates invest heavily in Silicon Valley because the number of exits that come out of there every year. 

It doesn't mean, I don't have investments outside of Silicon Valley. I do.
But I would say 80% of my portfolio is in the Bay area and the other 20% is spread out across. 

New York, Chicago, Atlanta, Austin, some of the other up and coming cities, but predominantly, it's tech enabled companies out of Silicon Valley. 

Right, right personally, can't say the biggest fan of it's just like the 1 thing that I don't understand is why does he has so many ads on his podcast? 

I mean, multiple into unicorn I assume he has money, right? 

Why do you know the answer for that question? I don't. I think it's just he's had so much success. 

And people understand, his podcast reaches so many people in this space. 

That they're just throwing money at him and want to be associated with them. His big thing is he doesn't take anyone on the podcast that he has not use the product and endorses. 

Um, but I just think he's, he's gotten so popular now he's on CNBC every couple of weeks. I think people just want to attach themselves to his brand because he's built an unbelievable brand. I mean, I've become friends with a lot of folks that are a part of a syndicate. 

They're just people of high integrity. They really know what they're doing and honestly the deal flow. 

It's, it's unbelievable the deal that Jason presents, because people know that if he gets involved in their deal, he can just bring a ton of other investment money to them. So. 

It's, uh, he tends to pick winners so I think people just want to do business with them. I think that's probably has something to do with it. 

Right, yeah, I think that's a good answer. 

And I still don't like him. I'm jealous but but that's that's a nice Raja tell respected and 1 more question I want to ask you on your investment thesis. 

So, let's see if it reaches out to you on LinkedIn or on email or somebody else, will you actually can see them or will you forward them or what will happen next. 

Yeah, so I get probably as soon as soon as you put entrepreneur or angel investor on your LinkedIn profile, you get probably 10 to 20 people a day total strangers coming at you saying, hey, here's my pitch. Here's my deck. Can you help me. 

And what I try to do is give everybody the council that I would want to get, which is look thanks for 1st of all. Thank you for reaching out to me. I have recognize how hard this is. Because I've done it myself. Here is my thesis around investing and I don't go into it a long way. What I say is. 

I invest alongside angels and I lift the syndicates them in and I say, I don't write direct checks and companies. I do it all through my syndicates. 
And what they look for is this, and that, what we just talked about, which is. 
You know, 10 to 100000 a monthly revenue, double digit growth, and a product in market. If you fit this criteria, send me your deck and I'm happy to make an introduction. 

If you don't fit this criteria, let me know if you know how it can help you and come back to me when you do because I'd love to look at at your deck but I'm very specific about when I'll make introductions and when I won't. 

Because I know what these folks are going to look for, because they've told me. 

And I know what I look for, so I think it tries to give the entrepreneur. 

Good counsel about what's required and also, you know, I don't I hate wasting people's time. 

And I don't want to take the time to set up a call with them. 

When I know that too early, and I know they haven't hit the metrics and I'm just gonna have to tell them that I can't move forward. I'd rather tell them right up front. 

What my criteria is, and what the people that I surround myself with look in the foreign companies, and if they meet that criteria. 

I'm happy to make an introduction and I, I probably make, I don't know, 4 or 5 introductions a month right now for people that come to me and say, hey, Steve. 

What do you think of this deal? Can you help me? I'm like, hey, this, this sounds like a great deal. Let me introduce you to my friend over here who is in the space. So it does angel investing. So that's how I tend to operate. I think people appreciate it because I'm pretty candid with them. 

You just can't be all things to all people. So I try to tell people Here's who I am. And this is what I look for and if you meet this criteria, I'm happy to help you in any way. 

Great so here,
we're moving on to last 2 questions off today's episode 1st, 

of which is what's your advice to those early stage founders who are not quite at this stage where they generate 10 K what's your advice to those people in terms of fundraising or. 

General advice, I'd say, um, advice that I took, I would pass along to them and I, I did this with a. 

Founding team I talked to last week who hadn't built the product yet hadn't raised their friends and family round and was talking to me about money. And I just sort of turn the tables and said, look. 

When you come to someone like myself, a total stranger for money. 

If you haven't been able to build a product, or you haven't been able to go to the people that know you the best, the people that have known you for 1020 years, and ask them to be involved in your company and given them the courtesy of that introduction. 

That's signaling to me so I would say that before you ever come to a total stranger for money. 

You know, look inside about what you're trying to do and if you truly believe in your in your, what's your building and if you truly believe you're building something special. 

Then take it to those around you, you're closest to and I think you might be amazed at how many of them are excited about it and want to be involved. And if they get involved and you get that product 
built. 
That is tremendous signaling to an angel investor like me. So my best advice would be have the courage to show what you're doing to the people around, you. 

Have the courage to give them an opportunity to be involved. 

And that will be a really good signal of to you. Do you have a good idea? Is it fundable and should you move forward? I think that's probably the best advice. I could give someone. 

Perfect that's a great advice. And on that great advice, we're moving on to a last question, which is a call to action. So, Steve, what's the 1 specific thing you want to do? As soon as the episode is over? 

I I think it would be, um. 

Have the confidence to reach out and ask people in the eco system for help I know it's what I did a couple years ago, and it has helped me mentally. If you're a founder. 

That hasn't raised money before, reach out to other founders who have successfully done it. You'd be amazed at how much knowledge there is to learn. If you're an angel that's new to angel investing, reach out to other angels and ask them. 

What syndicates and you in? Who are the best syndicates? What type of deal flow do you again? 

You know, so I just think the ecosystem that's been built around start ups and you're a part of it. This podcast is part of it. 

It's really setting people up for success, but you have to be willing to put yourself out there a little bit whether that's reaching out to LinkedIn, whether that's getting a referral through someone, you know, and it takes effort. 

But what I've found is over the last couple of years, I have by making myself a little vulnerable, been able to develop unbelievable relationships that I just see paying off from my company. 

So my branded for my investing for years to come, it's been a lot of fun and I would encourage anyone else to take the same path. 

Great, that's a great advice. And my advice is going to be. 

Follow steve's advice and check out the description, if this app. So I'll leave a few links that were mentioned in the episode. Of course, I'll leave a link to steve's LinkedIn and I'll leave a link to the type form, which you can fill out. 

And if I like your project, I'll connect you to my network of actively investing investors and advisors. So definitely take a look at it, fill it out. Checkout seems linked in and have a good date.