As an aspiring investor or a startup founder, your first steps into investing or raising money are typically the hardest.
In our weekly Insights from Angel Investors series we get into the minds of the top angel investors to help you learn how to activate your network, where to start, and rookie errors to avoid.
This week we caught up with Andrew Rea who has been on all sides of the table as a founder, a VC, and an angel investor. The perfect combo since being an angel investor isn't just about investing but also about helping businesses succeed.
While there are a lot of differences between being a founder and being an angel investor, there are many similarities, too. We go over what angel investors look for in early stage companies and what founders should consider when pitching to them.
Background:
· Led Growth/GTM at Capital & started NYC TechWeek
· Built things at On Deck, most notably On Deck Angels
· Invested & incubated deep tech companies at Ikove Capital
· Built an EV company called Olympus. Sold it to private equity
Andrew is not your typical investor, he grew up in Ohio in a blue collar, religious, relatively poor community, meaning he wasn’t exposed to tech and definitely didn’t hang around the finance crowd. Even going to college was a big win for him considering he wasn’t surrounded by people pursuing a degree and further education.
He read a statistic that around 99% of self-made millionaires in the US were entrepreneurs and this piqued his interest in finance, so he decided to go to college and try to start a company.
At college he learned about venture capital and was immediately fascinated at the prospect of a world where people give you money to grow your business into *hopefully* a successful one.
To make a long story short, Andrew met a bunch of entrepreneurs, joined them for a new adventure, raised money, started a company, sold said company. This led him down the rabbit hole of finance, tech, and venture capital.
What really set things off was when he met the founders of On Deck through Twitter and collaborated with them to launch On Deck Angels, a community of operator angels and fund managers.
Through that, he was exposed to a ton of founders starting companies and angel investors as well as operator angels and people with smaller funds. Even though he’d had experience with managing other people’s money at a firm, he wanted to try it out with his own money. So he started doing that on the side while building products for founders.
I had a friend that was at this family office and they did some venture stuff, and he was like, "hey, I think you'd really like this founder. I want to introduce you".
And so we introduced and I had met a lot of founders at this point and done investing as a VC. After 20 minutes of talking to this guy I was like, "oh, this person is incredible". It happened to be a space that I knew pretty well, in real estate tech or something like that. I invested the next day and wired the money. That's how I got started.
Yeah, really, you shouldn't be wasting the founder's time because you're very unlikely to be writing such a big check that you're going to fundamentally change the trajectory. If you're asking for four meetings to make a tiny check writing decision, no one's going to send you a deal ever again.
I’d say it started out with most of my social circle, which was mainly other people working at startups, investing in startups, founding startups. That was probably the first part of it. And then over time working at On Deck my professional and social networks just expanded and merged.
I think it depends. It's funny but I think most people are probably not helpful and VCs might even be worse sometimes, although I have lots of friends that are VCs and think highly of them.
But realistically, if a company is at later stages, it’s very unlikely that you're going to be able to add any meaningful value. The one thing that you can do if you have time and a good network is to do introductions to help out with recruiting, fundraising or investing.
There's obviously some people that have really deep subject matter expertise that might be able to help you think through the product, but even then they're not going to build a company for you.
At this point, I kind of just trust my instincts on people. If I get weird vibes from someone, I'm probably not going to invest.
But besides that, I care more about seeing how they're thinking about things. I think a lot of times you're not looking for someone to have a great, perfect answer on any one thing as much as trying to really evaluate how they think, how they see the world, and what their strength is.
I think it helps. I'd say a lot of my outbound is probably because I see a company in a space that I think is interesting and I already know that space well and I'm following it. Otherwise, if I get the pitch and I'm just so lost looking at it from a distance, unless I really think the person is going to be incredible, I probably just won't even engage.
It goes in ups and flows. It depends on how much time I have because this is a thing I do on the side with a friend of mine.
I was at this degenerate crypto tech party, and I ended up getting introduced to this tech founder that was doing something for kids. So there was this wholesome education founder while being surrounded by a bunch of 19 year old degenerates. And nothing against the degeneracy, but I think that was interesting just because it was the last place I would have expected to meet someone building such a wholesome project.
Utopia!
The noise level has gone down now. It's generally a really good time for people that are excited to build. The types of people building and starting companies right now are higher quality on average than a year ago.
That's a tough one because there are so many friends and people I know that I look up to a lot. I'd say Julian Weiser, Ryan Delk and Nichole Wischoff. She is new to investing, but she's also a solo GP with an incredible background as a fintech operator, and I just think she just works harder than 99% of the VCs I know.
Start building your track record and start doing it by investing in the smartest people you already know, where you have a personal advantage just in terms of knowing them already. You don't have to start doing tons that early, but just start somewhere because it takes such a long time to know if you're any good and to start building a track record.