What got you into angel investing?
Mostly my experience with my own company, Optimost. [Acquired by Interwoven, which was in turn acquired Autonomy Corporation, which was bought by HP]. When I started that company, I raised some angel money. The role that those initial angels played was instrumental to the company’s success. The ability to contribute that same experience to other entrepreneurs to me is intrinsically valuable. Also, I am a big booster of the New York tech scene, and one of the key reasons for its growth in recent years has been the much stronger group of angels and the early seed money that is now available. It really helped ignite the whole thing. Like Bruce Springsteen says, “You can’t start a fire without a spark.” Angel investing is the spark that gets the whole thing going.
Certainly I hope there will be real economic returns from my angel investing but that’s not the only motivation.
What was your first angel investment and how did it turn out?
The first one was a company called Order Groove. They are basically a subscription commerce platform allowing eCommerce sites to offer recurring orders-of-the-month club functionality to their websites. I invested in 2009 and they are doing really well. They just raised a Series B round and have clients like L’Oreal, Jockey, Johnson & Johnson, Grainger, and others.
It really resonated with me because they faced some of the same challenges I faced in the early days of Optimost. Early on they faced the question, “Why can’t companies just build this themselves?” What I’ve learned from my own experience is that, while probably anyone can build anything with enough time and resources, none of these big companies have the time or focus to do it. So if you can provide a critically valuable service, they will gladly pay to have someone else provide it.
What investment do you most want to brag about?
(laughs) It’s hard to say who your favorite child is. I guess I have to pat myself on the back that virtually all of my angel investments are still in business. I consider that an accomplishment.
One that I think is particularly interesting is YouNow. They are a next generation, interactive television platform. There offer a huge variety of channels where people perform for a minute and the audience votes thumbs-up / thumbs-down. If the performer gets enough votes, he gets another minute.
What’s exciting to me is that it seems like the logical progression of where interactive entertainment is going. They are doing really well and now have a large number of channels going 24/7, with all kinds of interesting content. And the fact that it is crowd-curated means that quality should just keep getting better.
Notable lessons learned?
I had one train wreck. It’s still going but it’s a train wreck. This was a movie deal. I certainly learned the lesson “invest in what you know” because there was a lot about that particular industry that I wasn’t aware of. And, at least in this particular case, the level of unprofessionalism and mismanagement was the kind of thing you read about (laughs) or see in movies.
What’s the main reason you see for startups you backed, either personally or through DreamIt Ventures, that should have hit but didn’t?
At least for early stage companies, the common theme is usually team dynamics – not that it is not a quality team but that the founders don’t get along with each other and that causes the whole thing to implode. We as investors are constantly talking about how you need a well-balanced team with all these different skill sets and the side effect of this is that sometimes, in an effort to satisfy investors, it inadvertently leads to shotgun marriages, which are usually not a recipe for success.
Most humbling experience (relating to angel investing)?
The most humbling are the ones that get away, the ones that for whatever reason I decided not to invest in and that I kick myself for now. One I can mention is Birch Box. I met the women who run that right when they had the idea, before they graduated from Harvard Business School. They were a really impressive team and had a really novel idea. The challenge I had was that they were going after a category, women’s cosmetics, that I just didn’t have domain expertise in so I had a hard time wrapping my head around the market. But they checked out really high in every other metric and they seem to be doing really well.
How has running DreamIt NYC affected your angel investing?
They complement each other really well. My own angel investing, while in the grand scheme of things are certainly very early stage, within the spectrum of early stage, are not quite as early as DreamIt’s investments. A company that is coming into DreamIt is probably too early for me. I would probably think it needed more traction. So it works out quite well. If they are too early to me, they may be a great fit for DreamIt.
What’s the smartest thing someone you invested in did?
One of my investments is a company called Thumb [recently acquired by YPulse]. They basically provide real-time feedback on anything. The speed is astounding, meaning that you post the question and within minutes you can have a hundred responses.
When I met with the CEO, Dan Kurani, early on, the product demo was the perfect example of actions speaking louder than words. In the meeting, I asked questions on Thumb about random topics and within minutes answers started coming in. Experiencing the product in real-time was just an incredible proof of concept.
What’s the dumbest thing entrepreneurs do?
The kind of continuous dumb mistake I see is companies reaching out to me without doing any homework at all. Just because our names show up on a list of top angel investors does not mean we are going to be interested in what they have. There is such an enormous difference between just reaching out via LinkedIn blindly versus providing a rationale for why you are specifically targeting me because of something in my background.
What makes you better, more helpful, more desirable, etc. to a startup than the average angel?
First of all, I’ve walked in their shoes because I was an entrepreneur myself, raised angel money, grew my company to 85 people, and exited. On the flip side, as an investor and even prior to starting my company while I was at Sony, I sat on the side of the table with VCs and other professional investors. So I think I bring a multi-dimensional perspective on what an entrepreneur might be thinking – what are the things that motivate and are important to an entrepreneur – as well as what’s important to an investor.
What kind of returns do you aim for and how do you track ROI?
I don’t have a precise mathematical model but I’d like to feel confident that there is a reasonable path to at least a 10x return. My expectation is that it could be five years before I see a return. I know it takes time.
I’ve only had one exit so far, Chai Labs [acquired by Facebook] and the rest are still in progress.
Pretend that it’s 2019 and complete this sentence, “[Technology X] is less than 5 years old and now I can’t imagine life without it.”
Self driving cars. I expect this to become much more mainstream. Even though it may be hard for people to wrap their heads around, the ability to make that time in the car productive is very valuable. And the technology is already strong.
If you are an active NY-area angel (or know someone who is) and would like to be profiled for AlleyWatch, please contact me here.
It is so old that it looks new again. Why do I use such an old phone? Wrong question. The right question is: Why you are using a newer one? Let me explain.
Back in the dawn of time (~2005), I was responsible for product development at Bunk1. Time after time a member of our dev team would tell me a feature was ready for testing. Knowing that over 70%+ of our users ran Internet Explorer (hey, it was 2005), I would open the page up on IE and… instant fail. Virtually all of our tech team used Macs and surfed the web using Safari. When they tested the new feature, it worked for them so they were ready to push live. See the problem?
Yes, it is very important to be on top of the trends. Yes also, following the cutting edge is critical to your long term planning. But if you build your current feature set around what the best tech can do, you risk leaving the bulk of your potential users behind.
Let’s say you get the latest phone running the most recent Android OS. Then you build an app that completely rocks… on your phone. But what about the >90% of the Android phones out there running older versions of Android? Does your app work properly for them? You are probably ready to object, “but they’ll update the OS on their phones soon enough.” Perhaps, but what about the hardware? Slower processors, less onboard memory… how fast will your app respond? I have seen several apps look incredibly slick on the latest phones only to see them hang horribly on slightly older models. Can you take that risk?
Now let’s say you use an average phone. As you can see from the graph below, now over half the market is on par or ahead of you. If your app works on your phone, you’ve got nothing to worry about from them. As for the much older phones, they probably drag for everything and their owners are just toughing out the last few months until they’ve completed their two year stint and get a ‘free’ upgrade. Those users aren’t going to blame your app if it hangs; they’ll just curse their phone – the same one they drooled over just 18 months ago – and soldier on.
Hey, I know you want the cool toys but you’ve got a tech empire to build. So suck it up and get behind the curve!
Confession: I just ordered a Samsung S4. It’s a little ahead of the sweet spot but in the hyper-fragmented Android handset market, the S3/S4 models are as close to ‘standard’ as you can get. Besides, I’m not building a new app… right now. 🙂