Tremendous

An angel investor's take on life and business

  • What makes a great deck? Where can angels find deals? I dug into all that and more on the very first episode of the OpenVC podcast!

    Here are some of my favorite moments…

    2:03: How I got into angel investing and finding some early success.

    9:43: Helping founders after I invest.

    12:35: Where I find deals.

    15:44: What makes a great pitch deck.

    22:20: Continue as an angel or raise a fund?

    28:50: Why I no longer tell founders “Have a great weekend!”

    Right before we started recording, I got to talking with Harrison about British food. He lives in London, and I mentioned how much I love scones with clotted cream and jam.

    After the episode, he sent me amazing scone mix, clotted cream, and strawberry jam from England! They were absolutely delicious.

    Thanks so much to Harrison and OpenVC for having me on the podcast!

    What did you like about the episode? What did I get wrong?

    Leave a comment and let us know!

    If you enjoyed this post, subscribe for more like this!

    More on tech:
    Why I Don’t Pay for Angel Groups
    Meet My Latest Investment: Melengo

    Why I Passed: “ProductPreview”

    Save Money on Stuff I Use:

    Fundrise

    This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 with great returns.

    More on Fundrise in this post.

    If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

    Misfits Market

    I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

    I wrote a detailed review of Misfits here.

    Use this link to sign up and you’ll save $15 on your first order. 

  • I never pay to be in an angel investing group. Here’s why…

    I was chatting with a great up-and-coming angel investor this week. “What do you think of these angel groups that charge a membership fee?” she asked.

    Some angel groups charge thousands of dollars to join. When I look at these groups (also known as syndicates), I do the same thing I do when I look at a startup.

    I compare them to what else is in the market.

    And the market is telling me that this isn’t worth paying for.

    Setting the Bar

    I’m a member of almost 100 syndicates. So far, the one with the best track record and dealflow I’ve seen is Jason Calacanis’.

    Joining that group is free. So why would I pay someone else for an inferior product?

    I know that sounds kinda harsh. But this is a free market.

    I’m not going to pay for A when B is better — and free!

    Getting Paid Twice

    Never forget, syndicates are already getting paid.

    They generally take 20% of any investment gains you make. This is called the “carry.”

    Carry aligns incentives perfectly. They only make money if I make money.

    That’s more than fair. I have no problem giving someone 20% of an Uber if I get the other 80%.

    But paying just to be in a group and see some deals, then also paying carry? That doesn’t work for me.

    Great, Free Syndicates to Check Out

    Here are my favorite syndicates.

    Of the roughly 100 I’m in, these have had the best dealflow. I’ve done deals with all of them. And all are free:

    If you join all these, you’ll have access to tons of solid dealflow. And you’re never obligated to invest in anything.

    Always do your own research and make your own decision. Don’t rely on a syndicate lead, me, or anyone else for that!

    What Is Worth Paying For

    One program that is worth paying for is Angel University.

    Jason and LAUNCH run it a few times per year. I’ve taken both their 1.0 and 2.0 courses.

    I use what I learned in these classes every single day. And it’s very reasonable — just a couple hundred bucks, and it all goes to charity.

    Wrap-Up

    Some angel groups are more about socializing than anything else.

    I enjoy chatting with interesting people, but in the end, I’m here to make investments. And I don’t need to pay thousands of dollars in membership fees to do that.

    I’d rather give that money to a startup. 🙂

    Would you pay for an angel group? Leave a comment and let us know!

    If you enjoyed this post, subscribe for more like this!

    More on tech:

    Meet My Latest Investment: Melengo

    Why I Passed: “ProductPreview”
    “Not Yet”

    Save Money on Stuff I Use:

    Fundrise

    This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 with great returns.

    More on Fundrise in this post.

    If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

    Misfits Market

    I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

    I wrote a detailed review of Misfits here.

    Use this link to sign up and you’ll save $15 on your first order. 

  • I rarely tell a founder “no.” Instead, I say “not yet.” Here’s why…

    When I first started angel investing, I thought I had to give every company a yea or nay. But over time, I realized I don’t.

    Most any startup could be a great investment. It’s just a matter of whether it’s met my criteria yet or not.

    Keeping Your Options Open

    Saying “not yet” preserves optionality…or, as normal people would say, keeps your options open. 🙂

    Saying “no” is the end of a conversation. But “not yet” keeps the conversation going.

    That’s important, because none of us knows where the next Airbnb is coming from.

    “None Of Us Knows What the Future Holds, My Friend”

    Everyone thought Brian and Joe’s idea for crashing in spare rooms was stupid. And at first, they struggled to make it work.

    What if I’d met them in year one? If I’d said “no,” they might have taken me off their list.

    But if I’d said “not yet,” they might message me once Airbnb was starting to work!

    And that is exactly what I what a founder to do.

    It all comes down to the quote from Paulie Gualtieri in my favorite TV show, The Sopranos. None of us knows what the future holds.

    When I Do Say No

    I do give a clear “no” to some startups. Those are usually companies that are way outside my investment area.

    So biotech would be a “no,” as would a company in an unfamiliar market like Germany or Nigeria.

    I might also say “no” to a startup operating in an extremely small market. For example, an app to find firewood just isn’t addressing a large enough market to produce a big outcome.

    Wrap-Up

    Saying “not yet” keeps a company on the startup conveyor belt. In time, the company that wasn’t quite right might be just perfect.

    If you’re investing in startups, try saying “not yet” rather than “no.” You might be surprised how yummy some of those companies look in the future.

    Do you say “no,” “not yet,” something else? Leave a comment and let us know!

    If you enjoyed this post, subscribe for more like this!

    More on tech:

    The Startup Conveyor Belt

    Meet My Latest Investment: Melengo

    Why I Passed: “ProductPreview”

    Save Money on Stuff I Use:

    Fundrise

    This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 with great returns.

    More on Fundrise in this post.

    If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

    Misfits Market

    I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

    I wrote a detailed review of Misfits here.

    Use this link to sign up and you’ll save $15 on your first order. 

  • They were raising $5 million at a $30 million post-money valuation. I loved the founder and the product was innovative, but I had to pass. Here’s why…

    “ProductPreview” connects brands with consumers to give feedback on products before their release. ”ProductPreview” is a composite, not a real startup, and the name is made up. But it shows why even companies with great ideas and committed founders may not make good investments.

    The Good

    “ProductPreview” has a really cool platform that lets brands test products before they release them.

    If Acme Coffee is working on a new blend, they could send me some to test out. I brew it up and let Acme know if I like it or if this new blend is a dud.

    No business wants bad reviews and product flops. So testing a product in advance makes a ton of sense.

    When I met with the founder, I could tell how much she cared about the business. Her dedication was showing results. “ProductPreview” was closing in on $3 million a year in revenue.

    The Bad

    “ProductPreview” had significant revenue. But unfortunately, it was barely growing.

    In the past year, revenue had grown only about 20%. The best companies at this stage are doubling or tripling year over year.

    Worse yet, “ProductPreview’s” burn was out of control. The company was burning over $200,000 a month.

    It took “ProductPreview” $10 of burn to add $1 of ARR. A great company at this stage would be burning $3 or less to add $1 of ARR (a burn multiple of 3).

    The company employed 41 people, a huge number for a company its size.

    Decision Time

    I really liked this founder and admired her dedication. I also thought the idea had some real potential.

    But the combination of minimal growth, excessive headcount and heavy burn were too much for me. I passed.

    Wrap-Up

    When I have to say no to a founder I really like, it sucks. I wish I could say yes to everyone!

    But these investments have to make money. Otherwise, we won’t be able to keep making them.

    Then, there would be no venture capital for anybody.

    Would you have invested in “ProductPreview”? Leave a comment and let us know!

    If you enjoyed this post, subscribe for more like this!

    More on tech:
    Meet My Latest Investment: Melengo

    Why I Passed: “DoorTrack”

    Why You Need a Technical Co-Founder

    Save Money on Stuff I Use:

    Fundrise

    This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 with great returns.

    More on Fundrise in this post.

    If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

    Misfits Market

    I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

    I wrote a detailed review of Misfits here.

    Use this link to sign up and you’ll save $15 on your first order. 

  • “I need to be in that.” That’s the first thing I thought when I saw Melengo present at a demo day last October.

    Well, I just made it happen!

    Melengo makes it easy to develop an apparel line, get financing, and get the products made. You can go from a basic sketch to a beautiful piece of clothing in just a few weeks!

    Today, people wade through random factories on Alibaba and hope for the best. The process often takes 6+ months.

    In my research for this investment, I went on Alibaba myself and looked at hoodies. One called “cotton” in the description turned out to really be a “cotton/polyester” blend. Ahh, the old bait and switch.

    Who wouldn’t prefer Melengo to this?

    Founder Justin Kwong is approaching a giant market in a really innovative way. His intense focus on the problem and the strength of Melengo’s traction really stood out to me.

    Justin’s long term plan is to make the Uber of manufacturing. Making a product should be as easy as getting a ride – and not just for clothing.

    An ambitious vision with real traction today – that’s the kind of company I want to back. Check out Melengo and make some awesome products!

    Have a great weekend everybody!

    If you enjoyed this post, subscribe for more like this!

    More on tech:

    Meet My Latest Investment: Zest

    Why You Need a Technical Co-Founder

    Why I Passed: “DoorTrack”

    Save Money on Stuff I Use:

    Fundrise

    This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 with great returns.

    More on Fundrise in this post.

    If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

    Misfits Market

    I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

    I wrote a detailed review of Misfits here.

    Use this link to sign up and you’ll save $15 on your first order. 

  • Lately, I’m seeing a ton of startups with no CTO. Instead, they have a team of engineers with minimal equity. This is a mistake. Here’s why…

    Incentives Matter

    Startups have to ship new features fast. That’s how they make customers happy and beat competitors.

    Who do you think will do that better?

    A) A great engineer who owns a large slice of the company and stands to make millions if it succeeds.
    B) A great engineer working for a salary who makes pretty much the same no matter what happens.

    Humans respond to incentives. A big slug of stock that can make you millions or even billions is a powerful incentive.

    You want that key engineer working overtime for you. Stock is how you make that happen.

    The Limits of Hired Help

    “Francis, you don’t get it! My engineering team is amazing!”

    I’m sure they are. But what happens if you run out of money?

    Those people are gone, and you’re dead in the water. You can’t ship new features or even fix bugs.

    A CTO could help you here. You guys could both reduce salaries or cut them to zero temporarily and try to get the business on even footing.

    I’ve seen founders keep working even when their bank account is in the hundreds. But the only way someone will do that is for major equity.

    Having a CTO makes your startup resilient. Give yourself every advantage you can!

    How Much Should a CTO Own?

    By now, I’m sure I’ve convinced you that you need a CTO. 🙂 So, how much should he own?

    At the early stage, any co-founder should own at least 10% of the company. Anything less than that, and they’re a co-founder more in name than in reality.

    Usually, any founder or employee will vest their stock over 4 years. So if your CTO doesn’t work out or doesn’t stick around, you won’t have given away too much.

    Giving a CTO lots of equity means less ownership for you. But owning a smaller slice of a bigger pie is the way to go.

    Wrap-Up

    Building a startup is next to impossible. You need every single advantage you can get.

    A great CTO is one of the strongest advantages there is. Don’t be shortsighted — get someone awesome and give them a big chunk of the company.

    When you look back on it at the IPO, you’ll realize it was an incredible bargain.

    Do you have a CTO? Do you look for a CTO in companies you invest in?

    Leave a comment and let us know!

    If you enjoyed this post, subscribe for more like this!

    More on tech:

    Meet My Latest Investment: Zest

    Why I Passed: “DoorTrack”

    The Startup Conveyor Belt

    Save Money on Stuff I Use:

    Fundrise

    This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 with great returns.

    More on Fundrise in this post.

    If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

    Misfits Market

    I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

    I wrote a detailed review of Misfits here.

    Use this link to sign up and you’ll save $15 on your first order. 

  • They were raising $1.5 million on an $8 million post SAFE. They had a cool product and a dedicated founder, but I passed. Here’s why…

    “DoorTrack” is a platform for real estate investors. ***”DoorTrack” is a composite, not a real startup, and the name is made up.*** But it shows why solo founders struggle to raise money.

    The Good

    “DoorTrack” lets investors see all their properties in one place, view the rent rolls, and model scenarios.

    If vacancies go from 5% to 10%, what happens to my cashflow? If I refinance Building A, can I afford to buy Building B?

    The tool seemed really useful. Sophisticated scenario planning isn’t a part of a lot of property management systems.

    When I met with the founder, “Jim,” I could see that he fit the market perfectly.

    He was a small landlord himself, with 8 units. He created the tool to help him manage his own business.

    I could tell how excited “Jim” was about this problem. That’s awesome, because without that excitement, it’s hard to stick it out for 10 years and make this a unicorn!

    The Bad

    “DoorTrack” had a great product and a devoted founder. But unfortunately, “Jim” was all alone!

    “DoorTrack” was a single person company, something I rarely see. “Jim” had built the entire platform himself, which was super impressive!

    But he clearly needed help. “DoorTrack” made you manually input data from your properties, which users won’t want to do.

    “Jim” planned to add an import feature. But had he had a co-founder, this could’ve been done long ago.

    In this case and a thousand others, being a solo founder put “Jim” at a disadvantage.

    “DoorTrack” would need to ship countless updates rapidly in order to make customers happy. They also needed help with marketing and more.

    This was definitely not a one-man job.

    “DoorTrack” was also an extremely early stage company. Revenue was just beginning to roll in, sitting at a couple hundred bucks a month.

    Decision Time

    I loved “DoorTrack’s” product and I could tell “Jim” was smart and dedicated.

    But there were some significant negatives here. “DoorTrack” was a one man company with just a trickle of revenue.

    Looking back on my 30 investments so far, one trend stands out.

    When I invested very early with just a trickle of revenue, the results weren’t great. When I waited until they were over $200k ARR, I had much better luck.

    The combination of a solo founder and minimal traction were dealbreakers for me. I passed.

    Wrap-Up

    “DoorTrack” was a pretty good company in a lot of ways! But with every deal I see, I ask myself the same question:

    “Is this the best deal I’m going to see in the next month or so?”

    If not, it’s a pass.

    “DoorTrack” ultimately didn’t make it. I’m not sure what led the company to shut down, but it’s a shame — the product was really cool!

    Try to ignore the fact the company didn’t make it. Would you have invested in “DoorTrack” at the time?

    Leave a comment and let us know!

    If you enjoyed this post, subscribe for more like this!

    More on tech:

    Why I Passed: “FallDetector”

    Reply to the Updates!

    The Startup Conveyor Belt

    Save Money on Stuff I Use:

    Fundrise

    This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 with great returns.

    More on Fundrise in this post.

    If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

    Misfits Market

    I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

    I wrote a detailed review of Misfits here.

    Use this link to sign up and you’ll save $15 on your first order. 

    ·

  • Most investors don’t reply to updates. I think that’s ridiculous. Here’s why I reply to every single one…

    It’s the Least You Can Do

    Founders are working 80, 90, 100 hours a week. And they’re doing it on our behalf, at least in part.

    The least I can do is take 30 seconds to reply to an e-mail! It’s nothing compared to what they and their teams have to do every day.

    Here’s what such a message might look like:

    “Amazing growth this month Jim! I know you worked hard for this.

    Best,

    Francis”

    It’s that simple. A brief, positive reply is all you need.

    So it burns my butt that according to Dan Siroker of Limitless, 90% of investors don’t do it.

    Letting Founders Know You Care

    Replying to updates also lets the founder know that someone cares! If you’re just sending updates out into the ether, you must wonder, “Has everyone written this company off already? Does anyone give a hoot?”

    I do care, and I want them to succeed. A simple reply to a message is one way to show that.

    People want to work with people who care about them and appreciate them. I try to be that person.

    Being the Hype Man

    Some founders use investor update replies to hype up their team.

    One amazing founder I invested in last year puts all the replies into the team Slack. This gets everyone amped up!

    I bet those cheering crowds of Bulls fans made Michael Jordan jump a little higher. Startups aren’t so different.

    There’s nothing wrong with being a cheerleader sometimes. And if it improves a company’s performance even marginally, I benefit too!

    Keeping the Lines of Communication Open

    When you reply to updates, you are building a relationship with a founder.

    That’s valuable in itself. But there’s also a self-interested reason to do it…

    You might want to invest again! And if that opportunity arises, who do you think will get the first shot at it: an engaged investor, or an investor the founder never hears from?

    I don’t know where the next Uber is coming from. So whether a startup is doing well or struggling, it behooves me to stay in close contact with the founder.

    Wrap-Up

    Dan Siroker doesn’t get many replies to his updates. Neither do most other founders I speak to.

    There’s no excuse for this.

    Luckily for me, this is an easy way to differentiate. I may not know everything, but I can reply to a darn e-mail!

    If you’re a founder and you’re not getting replies, don’t worry! This is normal, even if it shouldn’t be.

    And if you’re an investor, reply to the dang updates! It’s really not that hard. Keep in mind everything the founder is doing for you!

    Do you get replies to your updates? Leave a comment and let us know!

    If you enjoyed this post, subscribe for more like this!

    More on tech:

    Why I Passed: “FallDetector”

    The Power of Small Checks

    The Startup Conveyor Belt

    Save Money on Stuff I Use:

    Fundrise

    This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 with great returns.

    More on Fundrise in this post.

    If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

    Misfits Market

    I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

    I wrote a detailed review of Misfits here.

    Use this link to sign up and you’ll save $15 on your first order. 

  • They were raising $400,000 on a $4 million post-money SAFE. The product was awesome, but I passed. Here’s why…

    “FallDetector” is a device to prevent falls in the elderly. ***”FallDetector” is a composite, not a real startup, and the name is made up.*** But it shows why even growing companies with awesome products don’t get funded.

    The Good

    “FallDetector” was incredibly innovative. A tiny device attaches to an elderly person’s clothing and if they fall or encounter any other large shock, it alerts staff on their phones in the “FallDetector” app.

    The patient doesn’t have to use a computer and the device isn’t obtrusive. This made it easy to get them to use “FallDetector.”

    “FallDetector” was beginning to catch on. Revenue was closing in on a $500,000 a year run rate — impressive for this valuation.

    When I met with the founder, I could tell how important this problem was to him. His grandmother had struggled with falls and he wanted to help her.

    The Bad

    “FallDetector” had a lot of revenue for a $4 million company. But it wasn’t growing as fast as some other early stage startups.

    MRR was doubling year over year. Sounds amazing, right?

    In a way, it is. But the best early stage companies are at least tripling. Some are even growing 10x year over year.

    “FallDetector” was doing well, but not best in class.

    What’s more, the founder wasn’t very forthcoming with information. When I asked what the sensors cost to make, he wouldn’t tell me.

    The best founders I’ve worked with are very transparent. I wasn’t getting that feeling here.

    As a minority investor, I don’t need to know every single detail about a company. But basics like COGS are important.

    I just wasn’t getting the impression the founder wanted a collaborative relationship. So, I probably wasn’t the right investor for him.

    Wrap-Up

    “FallDetector” was a really awesome product. I hope it helps a lot of elderly people to live better lives!

    But as an investment, it didn’t work for me. The combination of moderate growth and a founder I wasn’t sure I could work with were problems I couldn’t get past.

    Would you have invested in “FallDetector”? Leave a comment and let us know!

    If you enjoyed this post, subscribe for more like this!

    More on tech:
    Why I Passed: “PaintBetter”
    The Startup Conveyor Belt

    The Power of Small Checks

    Save Money on Stuff I Use:

    Fundrise

    This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 with great returns.

    More on Fundrise in this post.

    If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

    Misfits Market

    I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

    I wrote a detailed review of Misfits here.

    Use this link to sign up and you’ll save $15 on your first order. 

  • They were raising $1.7 million at a $20 million cap SAFE. I passed. Here’s why…

    “PaintBetter” is an app that teaches you how to paint. ***”PaintBetter” is a composite, not a real startup, and the name is made up.*** But it illustrates why even some startups with really cool products don’t get funded.

    The Good

    “PaintBetter” had a great app and the founders were very experienced painters themselves. They showed us some of the pictures users had made, and they were really pretty!

    “PaintBetter” charged $40/mo for their product and had thousands of users. I love the consumer SaaS business model — it’s produced some amazing outcomes like Duolingo, with an $8 billion market cap.

    But as cool as their product was, “PaintBetter” had some real issues…

    The Bad

    Of their nine full time employees, only two were technical. They were heavily staffed with expert painters, but light on people who could build software.

    The lack of tech talent led to a lack of product velocity. It took them years to move from web only to a mobile app, despite the popularity of mobile.

    That lack of product velocity showed in their revenue, which was flatlining. Annual recurring revenue (ARR) had grown just 2% a month over the last year.

    At this rate, they’d never get to the $100 million they need to become a unicorn.

    The founders didn’t have a good strategy to increase growth either. They were focused on adding more classes, but didn’t seem to know how to find users.

    Decision Time

    “PaintBetter” had a really cool app and some very talented people behind it. But the slow growth, thin technical team, and lack of a growth strategy were dealbreakers for me.

    I passed.

    To have any hope of making money on this angel investing thing, I need to find companies that are growing like crazy. I’m talking growth that’s ridiculous and unnatural: 3x, 5x, or even 10x a year.

    That’s what a best in class startup looks like. And even in those, we’ll lose our money most of the time!

    That’s how hard investing in startups really is.

    Wrap-Up

    I really liked the “PaintBetter” guys, but the deal just didn’t work for me. I hope they prove me wrong and grow like crazy!

    And if they do, I’ll show up hat in hand, begging to invest.

    Would you have invested in “PaintBetter”? Why or why not?

    Leave a comment and let us know! Have a great weekend everybody!

    If you enjoyed this post, subscribe for more like this!

    More on tech:

    Why I Passed: ReadMate

    The Startup Conveyor Belt

    The Power of Small Checks

    Save Money on Stuff I Use:

    Fundrise

    This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 with great returns.

    More on Fundrise in this post.

    If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

    Misfits Market

    I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

    I wrote a detailed review of Misfits here.

    Use this link to sign up and you’ll save $15 on your first order.