15 years of investing experience - what do founders do wrong? By Ali Jamal

And today is a guest speaker, we have elija mile founding partner at 1st, Jack Ventures, and an angel investor with over 15 years of experience. And this episode will talk about Eli's major takeaways from his angel investment experiences.

And also.

What she got out of being a founding partner so only, let's kick it off by giving us some background on yourself and on 1st check Ventures.

Sure, sure. Well, I'm originally from the US I grew up in Minnesota, but I went to school in California. I did my bachelor's,
a masters at Stanford bachelors at Econ,
then a masters in statistics,

and I then moved to New York to start my career as an investment banker ID and mergers and acquisitions for 3 years.

I wanted to go to a place where I can have more of an impact to get my hands dirty. So I moved back to the valley and started working as a data scientist.

And I did that for the next 3 years and then in 2013 I made the jump into product and into mobile and I've been there ever since.

So I was a product manager at the gaming company, and then went to a competitor of there's called.

I was at Rocky for about 4 years helped build them from 40 people up to 400. they've got a chance to wear a lot of different hats and see a lot of different things. Just as you grow and scale of business to that size.

2017 car recruited by the travel company, a golden, and move to Bangkok, Thailand to lead marketing innovation for them.

I lied to their display marketing and their mobile growth teams, and then ended up leading all of their marketing efforts in China.

So, I was spending a lot of my time in China as well doing all the brand acquisition display marketing over there.

What was that a, go to for a couple of years and then in 2019 move to focus talk Columbia to lead performance marketing for wrappy.

Um, got in, right before SoftBank put their 1B dollars in, um, and had a team of about 80 doing acquisition and retention marketing across all of Latin America.

And then end of 2019 got recruited by a startup in Mexico called pay club and so I moved to Mexico City, and in January of 2022 leading performance marketing and growth for them.

So, it's basically clip it clip is basically the square of Mexico we make credit card readers and. Process payments, mainly for small and medium sized businesses are, um, you know.

Starting device is about 20 bucks and, um, you know, you can buy it and start taking credit card payments almost instantaneously. And that can have a huge impact for our small and medium sized businesses.

Um, which 90% of the businesses in Mexico are. Um, so it's having kind of that big, big impact. Right here in Latin America and I'm 1 of the fastest growing Finn texts and then,
like,
you mentioned on the side,

I've been an angel investor for about 15 years.
Mainly started out just putting a smaller checks into different friends startups.

Um, but then really over the last 4 or 5 have become more and more exposed to it and just kinda been able to tie that work.

I was doing on the startup side,

and with my day job to this passion for investing and understanding startups and understanding the ecosystem and so having putting more and more of my own personal capital into it and

started to get a unique deal flow from friends and friends of friends, but,
you know,
I think particularly because I've now in Latin America,

and,

you know,

I've worked in growth,

the performance marketing,

which are to the areas that that Latin America is.

Is a bit behind kind of other other, you know, the US and, um, and Southeast Asia in terms of having those kind of huge performance marketing growth machines.

And so I've had a lot of people approached me for help. And when I find those businesses that are interesting, I want to back them and support them. And, you know.

1 of the big things has kind of been, you know, I'm, I'm doing well, but I'm not doing so well that I can write 1500 K checks a year. Right? And so, um.

I needed to find a way to kind of do that where my 5 chair or 10 K check that I'm going to write into these investments could really be impactful. So that's what really led to starting 1st check.

I felt like I was meeting these companies. I was doing all this effort and due diligence, but, you know, my end of the day, my 5 K check wasn't really making a big impact for them and I wanted to be able to make a big impact for them.

And so started this angel syndicate.

You know, I'm kind of been growing it ever since so we, we went from 0T people in July so we now have almost 700 members.

Um, we, we did about 7 deals in Q4.

We've already started our 1st couple for, uh, for Q1 in January and so it's just gaining momentum and, you know, we're really being able to write some, um, some decent sized tracks and really help fuel the ecosystem.

1st question for me.

What is what's your major takeaway from being investment banker versus being an angel investor? And then more like, more of like, institutional investor who is writing bigger checks starts.

Yeah, so, you know, I think I think there's actually a fairly big difference between it. I'm, I'm very grateful to have had that exposure to the banking world.

But, um, you know, those are usually for.

You know, companies that are much more established and further along and so you have revenue and you have profitability and you start to use that to evaluate, you know, what these companies are worth.

But oftentimes where I'm coming in. Um.

You know, it's very, very early in the process to have it raised outside capital. Really yet. Maybe just a small family of friends around.

And so all those things kind of around valuation are are much more.

Kind of personal, right it's kind of up to the founder if they want to try to raise that 3 or 4 or 10 by oftentimes you'll see companies, you know, that will go and and, you know.

These wide varieties of evaluations, even at the same same level of progress or same level of revenue.

So, it is much more subjective, but you really have to kind of make the bet on what is the trajectory going to be and are these, the people to lead it.

So, I feel like when you're doing a transaction, usually you're making a bet on.

On the company and on their numbers and what those look like and hey, I can fire the whole exact staff, and we will increase our profitability by X percent by saving salaries, all that sort of stuff.

But when you're looking at.

A start up, you know, you're making the bat on the team, you're making the bat on.

You know, can these guys build.

A 100M dollar company, a 500M dollar company, a 1B dollar company. Do they have the tools? Are they willing to, uh, adapt and learn and ask for help.

Like, all those sorts of characteristics that you need in order to be.

A great, you know, executive and leader for a startup which of those skills to these people possess. And, you know, if you look at a lot of of.

You know, the great startups a lot of the people had to pivot or had to change what they were doing. And so you weren't necessarily making the impact on.

On that idea, but really try to make the pat on the team and their ability to get things done.

Absolutely, that's the most fun part of the start investing. So I wanted to I'll call them more about 1st check Ventures, but 1st, actually, I would love to talk a little more about how you evaluate these capabilities of these companies that you're investing in.

Especially your into cobit.

So, before that, I know that some investors were bringing out founders for dinners and watching how they, how they were interacting with the lawyers, how they were interacting with other people, how they were taking care of, you know, some stressful situations, et cetera, et cetera.

How do you do is now, how do you evaluate the teams? What are the major metrics within the team that you're looking at while you're evaluating a company.

So, you know, I personally try to look at what the dynamics of the team are and what they've accomplished and to me, it's actually.

More important that they kind of have accomplish something as a team, rather than as individuals. So, everybody kind of has this. Oh, I worked at this company and I did this and that guy worked at that company did that, but.

Yeah, just because your friends doesn't mean you guys can work together so, you know, as you guys have come together or.

Girls, sorry, I keep on using mail prone as, but for both sides um, you know, as the team has come together what.

Have you done? What did you build? What did you how did you approach it? What are.

1 of the things that you have, I mean, to be honest, want to be hustle towards. Right? What have you scraped together? Um.

You know, how do you view, how do you view the startup? How do you view what you can accomplish on your own.

Um, right, and why are you coming to me for money?

You know, so, if you've already been together for a year or 2 years, and you've put all these together by funding it yourself, and now you've started to get some initial customers but to really go out there and acquire new customers, you need help.

Hey, I got that I'm more than happy to help if it's, you know.

You guys have just come together, you've started the company a week ago, and now you're out there asking for money before you even have a product or a prototype, or have done any real market research or done anything. Right?

Like,
if you don't know who your competitors are, if you don't know who,

you know,
who else is in a space,

if you don't know any of those sorts of things and what their feature status versus what your feature set is and why somebody should choose you why should I choose you if you don't know your customers if you don't know your competition if you haven't put in a

basic legwork I'm just worried about what you're going to do when I actually gave me my money. Right that that's very accurate. And.

Yeah, at this point, let's talk a little more about the major mistakes that most founders do well talking to you or maybe to the investors, like, you know, so just off the bat.

What do you think is the major major, most common mistake that founders make while talking to investors or while teaching their companies to investors.

So, going back, right? I think we said, as I said, the most important thing is the team and.

You know, I think the team 1 of the things you really look for is their honesty and and their ability to build things. And so I feel like, you know.

I think I told you before 1 of the things is, I feel like, oftentimes boundaries come across as too salesy and, you know, in my mind, that's, you know, you're presenting these numbers you're presenting these things that aren't actually real.

And, and, you know, if I can't trust you on these numbers, if I can't trust you with these sorts of. You know, to be honest with me about what the situation is, how can I trust you with my money?

I and again, it's the trust thing on both sides. So I feel like oftentimes founders are so optimistic about, um.

You know, oh, what we're in, you know, we're in talks with these people so we're gonna sign a so, the contract is signed and they'll have their deck. Like, you know, these customers are already signed up when they're not or like, we.

Got funding from this person, or from his company, but they didn't actually get the funding yet, or they got the funding from some other small derivative of it not from that actual from Ryan or all.

Those sorts of things where you're trying to make this rosy story. And I got it, I would much rather have the truth and know what I'm working with.

And if I know what I'm working with, and I know where you need help, if you need help with, you know, you're not getting the retention, you want. That's fine. Don't just show me the retention for the top 1% of your users or something every time that's your overall retention, right?

Like, whatever we know what your strengths are and know what your weaknesses are and don't be afraid to ask that you need help with this or that.

The money's might go towards hiring a retention expert, or the money might go towards whatever other issues you're seeing in your numbers. But, you know, your numbers.

And be honest with them. Right? Sugar going, never works that sugar coat always gets discovered and then that's does this guessing investors hate that 100% of the time. So definitely do not do that

stuff.

Do not high information it will float eventually so definitely never never, ever do that. So, another thing that you mentioned in our preinterview call is that, you know, you're always looking for this uniqueness thing every single start, because that's.

I mean, that's what we're supposed to do as investors. So, what do you think qualify as a company as a unique company? So, you know, when.

Pretty much every single startup has at least 2, 3 competitors in the field already exists and most likely close to them in terms of development. So, how can a company stand out from that competition? What does qualify as unique feature or.

Unique no, uh, competitive advantage. I think it comes down to knowing yourself so.

Um, you know, I think it's the same kind of thing with dating, right? Like, there are millions of other billions of other guys out there. Why should a girl, you know, say yes. To going on a date with you right?

Or why should a guy, you know, say, yes to going on a day with you like, what is it value that makes you special? What is it about this company that you're doing that makes you special right? Everybody's special on their own way right?

But knowing your story, knowing why I should get excited.

You know, and and, you know, showing where that progress is. And so, um, you know, I think that's actually off at 1 of the, the most surprising things that I've seen. Um.

You know, kind of moving over to this side of kind of being, rather than just trying to help out my network, seeing a lot more pitch tax from a lot more people and just.

How few of them actually know what makes their company special and how many of them try to highlight the wrong things like.

So, how many people just try to highlight their team when.

You know, there are tons of teams out there with really, really smart, brilliant people that haven't been able to make an impact. So, like, the team is is important. And ultimately that's why, you know.

People are probably going to get excited, but, you know, we're excited probably more about what the team has done together. What sort of traction have you gone in and where have you got in it? So no matter what it is. If it's.

Yeah, how far along you are in the product in a very short time on a very small amount of burn. If it's how many customers you've gotten if it's how many people are coming and using your product. If it's, you know.

Whenever those things are no, what makes you special, and then try to play into that and try to tell that story.

Around what makes you special? Not what you think I want to hear.
Right. Can you give us a few examples of this? No good pictures that we're highlighting the right thing. Yeah, so.
You know, I think it depends on, you know, what you're really trying to do. Um, so, so, 1 of the big

things for me is, I tend to like, um.

I tend to like, fast follows of things that work well in 1 market and trying to adopt it into another market. Because that I think it's very clear to say, hey, this thing works really well in China.

And these are the dynamics that they used in order to make it, make it grow. And now we're trying to do that same thing in India or Indonesia, or in Brazil and, you know.

The Chinese company doesn't want to come here, or is it going to come here for at least 4 years? So we have 4 years to try to go in and make this into something. Right? And so having, you know.

Knowing your space that well, that you can say, hey, like, I've studied this thing, I know what it is and now I'm replicating it and this opportunity, and it's open market.

You know, I think it is huge, so, you know, again kind of know, Sean that you've done the homework as much as possible and.

In these decks, I think is extremely important. Like you have so much knowledge in your head, how can you simplify that down and put it into where you put your working? So, in that case, it's understanding the model that was successful somewhere else.

And another thing, it might be how many customers you've gone in and another thing, it might be. You know, how many downloads you've received, how sticky your product is?

What is the thing that makes your company your product, your marketplace special and how have you gone about trying to attack that? And what has the outcome been.

And if you can kind of show that you've had this.
Usually positive successful outcome based on, you know.

Whatever, that metric is, um, you know, it just makes it that much easier for me to believe that you're gonna have success in other things, you know, like a, if you have the ability to attract customers.

I think you're gonna have the ability at some point to point revenue on if you have the ability to, you know.

Um, build out a hugely.

A huge project very reasonably priced then I think you're going to have the ability to continue to expand your product portfolio and whatever on a budget as well and you have that desire to do it. Right?

So, whatever the things are that.
You know, make you special that make the company special.
Make sure you show it and make sure you understand it because I feel like. A lot of times people don't. Absolutely so.

On this point, let's talk a little bit more about people who do understand those things and, you know, you worked at a lot of startups you've invested in multiple stars, would you think so based on that experience?

What do you think is the most pronounced trade of a good start team or it goes start so when you see

those characteristics in the person, you're like,
okay,
that,

that company most likely will be successful or at least that person eventually will build something that's going to work out.

Um.
You know, I think the number 1 thing is, um, you know.

Being adaptable, and being able to take feedback. So how you respond to those challenges is gonna be hugely important right? I've been at a bunch of startups that have had to change their business model.

You know, they've had to go through lay offs that have had to switch what they're doing and and how that executive team takes that information or react to it adapts to it. I think is is extremely important.

Right. That's very accurate. I mean, that's the only benefit. I was started basically being able to move very fast and come a little different direction so yeah, that's very accurate. So now, yeah, now it's time to talk a little bit more about your investment preferences and specifically about 1st check venture.

So, 1st question is, what do you actually invest in? What field do you invest in? What's the average check size and.

At which stage do like to invest in? Sure. Um, so I like to invest, uh.

Fairly early on Pre, seed seed Series A, and I will occasionally do a series B or series C but most of the stuff we've done so far has been more of the seed preceed range. Um.

So so I think that's kind of the general area, you know. Industries and business models, I'm sort of agnostic again.

I think the biggest thing for me is seeing what you guys have accomplished as a team and you know what the traction is what the, uh, what you guys have built.

Um, and so that, to me, still kind of remains the biggest, the biggest thing and then, um.

The 3rd, 1 was the average excise. Oh, our average check size is 100 to 500 K. and the interesting thing is because it's an angel syndicate.

Um, I'm not the 1 who really decides that each individual investor decides whether they want to invest in in each deal that goes up. And so, you know.

I can't guarantee you that a deal is going to get 500 K. um, I can't.

Um, you know, guarantee that, you know, uh, what's what's gonna happen and when it's gonna happen. And so, part of what.

I'm also going through when I'm looking at companies is, you know.
Is this a company that I can explain to 700 other people? Can I explain it? Well, and are they going to

believe my explanation? Right?
So, I might have a great best friend who's doing something in biotech and I'm not a biotech expert.

And so, even if I try to pitch this to these people, are they really going to take my authority on it and that case even myself right?

Like, I have to sell what I know in which case I'm not a biotech expert, but I've known this guy for 15 years or 20 years or whatever it is and that's why I'm making the back and making it. Very clear to people.

Why, I'm excited about what this guy's doing and that, to me is the reason why I'm investing more cell then maybe the business model or more cell than than the revenue. Right?

And so I think that's an important thing to kind of understand that.

You know, when you're going through an angel syndicate versus a fund, the fund can write you a check, whatever size they want and it's up to them with me. It's not up to me. It's up to all these individual people and what they decide to do.

Right so 400 printers, I think it makes it doesn't make a lot of difference between reading from a fund versus raising from an angel group or syndicate. So, what do you think, what kind of founders should actually try to approach specifically? Angel St it gets instead of VC firms.

Yeah, I think there is value to, to having both.
And I think the syndicate is a nice way to kind of top off the investment.

If you already have a VC lead who actually, kind of give you their stamp of approval part of our portfolio, they have these kind of deeper connections to places and, you know, really kind of help.

You get to raise that next level of funding. But, you know, my syndicate, on the other hand. I have 700 other people, um.

Most of them are also working in tech, you know, all over the world a lot of my friends from Stanford, a lot of people I used to work with right? And they're now all over the place.

So, you're now having the ability to get all of these different people, um, you know.

Product managers from Facebook and,

you know,

data scientists from Google or whatever that are now looking at your product and then are now investing in you and when you need those next level of introductions,

when you're looking to hire your next VP of sales, when you need to get to the BD person at,
or whatever,
right?

Like, you have this network of people that have invested in you, that are now backing, you wanted to help you succeed. And so I think there's this huge network opportunity from.

From from coming in and and, um.

And coming in through an angel syndicate, but, you know that I'm not trying to discount the venture capitalists and there's also a huge benefit to them as well. I saw I typically say, try to do both if you can't.

Right yeah, that's true. That's accurate. Device. Both have their.
Own strings both have witnesses, so yeah, definitely. Having both on your cap table.

Does make sense very favorite frequently on these. Now, we're moving on to the last question of today's episode. We choose a call to action. So Ali, what is the 1 thing that you want to lose hinted at? Right? After that is over.

So, if you're interested in angel investing, I'd love for you to join my syndicate.

Um, you can just go to 1st, track Ventures dot com and click join syndicate. It'll take you to the AngelList page where you can back back us.

Um, and then, um, you know, I would love for people to connect with me on LinkedIn, you know, always happy to help out everybody, the ecosystem.

So, if you're a founder, if you're thinking about becoming a founder, if you're an investor or want to become an investor or just, you know, passionate about tech, reach out.

I'm available, especially now, during during the pandemic, um, you know, have I have free time. So, um, I think that's been 1 of the 1 of the, you know, upsides of this whole crazy environment is people are much more.

Um, available and much easier to contact so.

Absolutely, yeah, I mean, this specific episodes record on Sunday morning, so which would the most likely impossible on the normal in the normal days, but it's different dynamics.

So every single day is the same, so we can record this episode thanks to the cobit. And on this positive note, we're going to wrap it up. My call to action is going to be definitely check out the description of this episode.

I'll leave links to both linked in of Ali, and also to the 1st check Ventures. So if you are an investor, if you're 1 of the employee 1.

To this podcast search then yeah, definitely definitely. Checkouts for Jack Ventures is gonna be in the descriptions is episodes and.

As usually have a Gates.