I recently had the pleasure of chatting to seasoned entrepreneur and angel investor, Alex Chompff. He shared his wisdom and extensive experience from being in the startup space for a very long time now. He's seen many trends come and go, and he's constantly keeping an eye on the latest startups and advancements in tech.
He is currently Managing Partner at Evolution Ventures and Executive Director at Evolution Accelerator.
I loved his take on AI and how it's going to change the startup landscape - in a good way! Think solo founders, launching faster, and experimenting at a rapid pace. We go into detail about it in our interview, so keep reading to learn more about:
If you're new to angel investing, make sure to check out our angel investing 101 guide! As always, drop us a message if you're interested in learning more about how to angel invest with your community through PIN (for both accredited and unaccredited investors).
I'm a Californian and I'm the child of immigrants. My father was an entrepreneur and my whole family was very entrepreneurial, and so I've turned out pretty entrepreneurial myself.
In my journey, I had the good luck to serve as the director of technology for a very large venture capital firm in the late 1990s, so that really exposed me to what successful investors look like and what they look for.
I wasn't part of the deal flow, but I was part of the team which was quite small. A VC firm is usually less than 30 people, so you get a chance to see a lot of things if you happen to be in the room when deals are happening.
I'm what you'd call an investor operator. So about once a year, I'll create a new project for myself, and sometimes I'll raise funds for that project through my community.
And then throughout the year, as I see things that are interesting, I'll make investments into other people's projects and then do what I can to try to be helpful to them along the way.
Today I run an accelerator and a venture syndicate, and we've built a reasonable portfolio of projects.
I think this is actually a great time to be angel investor. In particular, it's a little bit difficult time to be a venture capitalist right now. To be a first time fund manager - is very difficult right now.
But I think for angel investing, the timing is actually excellent. There's a lot of evidence that shows that investing during recessionary periods, and it's not clear that we're in a recessionary period, is when you get the best opportunities to pick up great talent and great companies at very competitive prices. Plus, a lot of people who have been thinking about the projects that they want to work on are now free to work on those projects. So there's a lot of reason to believe that you can see the creation of what will become excellent companies during this period.
There are also some really interesting things happening in terms of disruption. We have some geopolitical disruption, which is not a lot of fun for anybody, but geopolitical disruption does coincide with opportunity.
We’re also seeing some disruption in places like the banking market and what's going on with regional banks here in the United States. That means that taken together with the maturity or increasing maturity of technologies like Blockchain, there's a real opportunity for the disruption of monolithic industries like banking.
Then there’s also artificial intelligence, these large language models, and they're really changing the character and nature of a lot of what's going on out there by creating a lot of opportunities for entrepreneurs. I do think that there's some reason to suppose that the use of funds is going to change.
There weren’t as many angels in the late 1990s. Back then, when you would go seek professional funding, a lot of times that funding would go to infrastructure costs. But as companies like Google and Amazon made infrastructure increasingly less expensive along with the advent of angel investing, you would see that a lot of the use of funds had a great deal to do with building teams.
Now I think what's going to happen with artificial intelligence is that the use of funds is going to shift again. In the same way that Google and Amazon and other companies made infrastructure less expensive, I think artificial intelligence is going to make collaboration and teams much less expensive.
I think it's much more possible today to build a startup with one or two people and surround yourself with artificial intelligence. You can replace a lot of the costs that might have been associated with marketing or legal support or technical support, that you would have raised money for.
Absolutely. Yeah. I actually got my open AI developer key in the first week of May and I stayed up all night for a few nights and launched my own beta product a few days later.
I have an artificial intelligence interactive environment where people can interact with legal experts, tax experts, marketing experts, angel investing experts, and I'm actually delivering that now.
I've got about 150 users in that beta environment, including some notable individuals who are in the top 100 of wealth management worldwide, some of TED's most popular speakers, etc.
They're in my beta group now playing around with that environment. And again, what's interesting is I was able to create and launch that product pretty much on my own course of a weekend. I think that's indicative of what AI is going to support.
I'm excited. I love disruption and change. I like to be at the forefront. I've had some pretty good luck with a fintech or two that I've been behind, and so that has really stoked my interest in that space.
I do. When I look at AI, it reminds me a lot of the travel industry. If your readership is of a certain age, they'll remember when every mall or every shopping center had one or two travel agents. They existed everywhere and it was a very good living to be a travel agent.
Now of course, travel agents are very difficult to find. They're very few and far between. They're quite specialized. If they're still around, there's really no more general travel agencies. Google and a host of other services did away with those.
I think if you're an attorney, you're pretty much in the same position as a travel agent was in the 90s. You're at high risk of seeing your transactional work replaced by artificial intelligence. I think a lot of knowledge based experts are in the position of where travel agents were.
There's still going to be room for expertise and the ability to synthesize and pull together things in a creative way and understand a wide range of topics, but if you were doing something that was pretty transactional, AI is going to make a pretty good run at it.
With that said, there's always going to be room for humans to be creative. Every time something new comes along, people say it's going to be the end of the way that it was. And you know, that's true. But the Buddha also teaches us that all things are impermanent, and if you can embrace change, then you can use it like the gravity well of a planet to propel your ship to outer space.
Change is just like gravity. It's a force of nature. So you should learn how to adapt and use change to your benefit.
I tend to lean very heavily when it comes to team selection and on Ernesto Sirolli work.
Ernesto Sirolli is an Italian author with a PhD who has made a study of entrepreneurship and created a philosophy called the Trinity of Management.
The Trinity of Management is the heart of what's called ‘enterprise facilitation’. An enterprise facilitation has been used on every continent to create thousands of businesses and now collectively tens of thousands of businesses over Ernesto's lifetime.
As it happens, Ernesto and I are very good friends, and I have studied under Ernesto. Ernesto's Trinity of Management is a really great place to start when selecting teams for entrepreneurship. It basically holds that you have product people, you have market people, and you have finance people.
In order to get a really great enterprise team together, you need to have people from each category. You need to have somebody who is passionate about creating a product or service that the world needs. Then you need to have somebody who's passionate about going out and meeting everybody in the world to find out what it is that they need. And then you need somebody to count all the beans and buttons and make sure you don't go broke while you're making your product and servicing in your market.
So I tend to use the Trinity of Management as a good shorthand. When I see a team that's got all three elements, that makes me feel comfortable. If I see that they're missing an element, it's something I talk to them about.
There is a particular phenomenon that I see a lot in technology that's a big red flag for me, and it's when people are raising money to build their product.
So your plan is to raise a significant amount of money and then give that money to an engineering group or an engineering team member that's not part of your core team, that's not being compensated with equity. That's a pretty big red flag for me. I call that prepaying your hostage taker, and I won’t invest in that.
I have invested in solopreneurs, but generally I lean toward teams that fulfill that trinity of management.
The most interesting thing I've learned from angel investing and from working with large groups of angels is that it's a passion we are doing and not necessarily because we want to make money.
Money matters, and angel investing should certainly be undertaken in a disciplined way with an intent to return at least what you put in. Hopefully more than what you put in. You don't want to have to pay to angel invest, you want to earn for angel investing.
But there are also easier ways to make money than to angel invest, because angel investors almost always end up devoting a great deal of time and effort and attention to the projects that they're working with and that's really where the payoff comes in.
It comes in the social reward before it comes in the financial reward. Every team that you help, every project that you help, is an opportunity to be of service to people. That act of service gives your first payback. Helping other people is the first way you get paid.
Most of the angel investors that I know, including myself, we are drawn to being around brilliant, passionate people. We want to be around people who are creating things. And most of us are creators ourselves. Or at least a fair number of us are creators ourselves, so I think that my learning is that it's really first about being of service.
It depends on which investments. I give my founders a great deal of autonomy. I'm entrusting them with resources from myself or from my other investors. So if I put together a syndicate, I'm part of the investment group, but there are other people involved, and if I didn't trust them, I wouldn't be giving them money.
I like to give them the freedom to operate and at the same time, I want to be helpful.
I'll say that investment or fundraising is a lot like a wedding. And really, anybody who's ever been married knows that the wedding is in the rear view mirror pretty quickly, and the marriage is for a lifetime. What I encourage people to do is not so much think about fundraising or think about investment, because then you're kind of thinking about a wedding.
I encourage them instead to think about being married. How can you help your partner to be successful? You're cementing that partnership with money. There's a financial instrument at the heart of that arrangement, but ultimately you're there to help one another over a lifetime, and hopefully that's the kind of investment that you're making.
Let me start by saying that all success in life begins with a series of failures, right?
You have to make mistakes, and you have to have misjudgments, and you have to have things that don't work out. And while we may not talk about those things very much, they are there for everyone.
It’s an important part of the investment experience. It's an important part of the startup experience, is to embrace failures and learn from them. That being said, I do have some fun investments that are working out pretty well.
One of my investments last year is taking on a major player in the social media space and is approaching its first million user mark. That's a pretty exciting thing to see because that company is less than a year old.
Once they hit their million user mark, they'll probably be a solid eight figures in valuation, and that's fun because were the second investor there last year, so that could be a 30x to 40x return. We got in on the recommendation of a friend of ours, Steve Hoffman, from Founderspace. If you know Steve and you know Founderspace, he is also an investor operator. And Founderspace is called the number one international incubator in the world by Forbes.
That's certainly not the normal though, just the one that's fun to share!
I have another one that I was co founder and first investor on in 2017. That's a fintech play in the banking space. That particular organization does risk management for high risk depositors into federally regulated banks and credit unions.
Over the course of that project, we've facilitated about $2 billion in risk managed deposits and risk managed transactions, and now we're turning it into its own bank.
It'll be fun to watch an investment go from a classic software startup to becoming what they call a de novo bank. That's something that's been a learning experience over several years.