Elaine Gilde, Managing Director @ GroveStreet
Startup Grad School Stage
Ascent Conference 2020
[00:00:00] OK. Hi, I’m Elaine Gilde. Good morning. I’m an early stage investor, sometimes referred to as an angel investor. It’s a term that many of us who consider ourselves professional investors don’t particularly like. But that’s what we’re calling is actually an awkward term because it doesn’t really describe, well, what a professional angel investor does. We’re not just investing in the deal because our neighbor found the company or friend’s daughter is the CEO. We do a lot of work to understand the industry, the company, and what makes the founding team tick. Startups take a long time to go from starting up to a successful exit, and one of the comments we like to make is we’re in the exit business, but it can take a long time. Yes, I’ve had twenty four month exits, I’ve had shorter exits even, but on the other hand, most investments are together as investments for five years, eight years, ten years. And there are a lot of questions that we have to ask. Will the change how? Do they complement each other well and how will they interact when times are really tough? If you started a business in the past couple of years. You hit a speed bump in March, and it doesn’t matter how.
[00:01:55] Quickly, you were pedaling for. Everything came to a halt, customers start, start making decisions. And there were complete industries that effectively stopped.
[00:02:13] Now, let’s get back to the question, how do you find the right angel investors? We’re living in really unusual times. We’re not seeing people in person. I’ve done these presentations many times over the years to a large group of people and in groups and in person like I can read the audience, can’t read the audience, maybe you’re there, maybe or not. And it’s going to be a long time before we’re back to trade shows and other in-person events, these 10 people have done a pretty remarkable job replicating an in-person experience, but it’s still not in person. The good news is angel investors who invest. Professionally tend to do so in packs, we tend not to travel by ourselves. I invest with New York Angels where I’m a board member. New York, Angell’s has.
[00:03:25] A hundred and thirty members were active investors.
[00:03:32] We look at deals together, you’re not talking to one of us when you’re talking to one of us, you should think about it as if you’re talking to one person who represents one hundred. And that’s pretty efficient use of your time. When we work together, we have the sophistication of even the most sophisticated venture firms, because among us we’re experts in areas ranging from security software, fintech, vet tech, video gaming. My colleagues have built companies actually to companies and we invest. So as an example, put to work 13 billion dollars last year and we’re on track to do almost as much this year. I’m also a member of the Yes Angel Association of New York with her three hundred members. And if you get the attention of a group and you get money from a group, we tend to move deals across. To other groups as we work with each other on the right angel groups, and I may be giving the pitch that the angel person next session is going to be giving, we’re well organized and we work really quickly. Yes, it can be fast to get to know because that’s how the world works. It does take more time to work through an organized process to get a significant amount of capital. And I’m not I’m not talking about a fifty thousand dollar check talking about five hundred thousand dollar check. But seed rounds these days, right, a million to a million, and so you’re not going to get that money from one small venture firm. Those deals are syndicated effectively and similarly, we tend to work together among groups. To fill out around, we don’t want to have you end up with only six months of runway when you need two years of runway. So everyone is looking to accomplish the same objective. On almost two years, runaway’s best, we’re writing checks after this morning’s session. I’m going to work on getting a deal close to where we individuals are funding six hundred and seventy five thousand together out of a one million dollar around now.
[00:06:47] In the world we live in, this is the oddest fact that I have run across only one of my colleagues.
[00:06:59] Has ever met in person? One member of this management team, and so that’s not the way those rules work for decades, but we’re closing a deal to get to that where one member of the investment group has met one member of the management team in person ever. And that’s that’s really that’s really odd.
[00:07:34] It’s on.
[00:07:36] Last week, I needed to review a really complex side letter over the phone with the chief operating officer of the company. I never met the guy company was based in Las Vegas. I did my homework and I realized before I got on the call, the person I was talking to had grown up in New York City and it turned out he grew up around the corner from where I live when he was growing up. And that made all the difference in terms of breaking the ice on that phone call. Typically, I would have been in of meetings in person with a chief operating officer of that company, but not today. You simply need to do your homework. It’s more important now than ever to know when you do get an opportunity for conversation, to know who you’re talking to. It’s kind of simple and basic. I had just said that. We’re closing a deal where only one member of new angels has ever met a member of management. So the challenge today is where do you find that one person, that one angel? Who is not only interested, willing and able to invest? But is willing to move the ball forward if you’re looking for a significant amount of capital, that’s what you’re looking for and that’s capital. I have talked to in person at events like this over the years. And it’s. Easier for a founder. To get the attention of an investor type.
[00:09:46] And do an elevator pitch in person. I get to look you in the eye for sure. S half dozen rapid fire questions, see how you respond and I get to size you up. If you get my attention. I’ll say send me an email with the summary. Doesn’t have to be a bunch of slides semipermanent. Last year. I gave a presentation.
[00:10:23] Somewhat similar to this person on. How to script the perfect elevator pitch that’s in person? Well, I pulled out my notes from that when I was thinking about this, and I said, that’s irrelevant because no one’s making any better pitches anymore. So there go no elevator pitches. So you have to figure out. How you get to that right person when you’re not seeing them or making an elevator pitch?
[00:11:04] And the honesty of today’s world runs both ways for us and for you. So.
[00:11:13] To even get someone on a zoom car takes work, what do I suggest you do? You need to make sure that you have your pitch. But the pitch needs to be. Two paragraphs, three paragraphs, seven bullet points, it needs to be in writing and it needs to be. Cohesion, not academic writing, but the kind of writing that if you read it out loud, it would sound natural because you’re now depend upon getting someone to open an email and be willing to read it, because the odds are pretty good. You’re not going to get anybody on a phone call unless you’ve already convinced them that you’re worth talking to. Before they set up that call. So where do you find that one person? Or two people. It’s easy for me to say I’ll send your application to New York Angels, send your application to Los Angeles, send your application, but you need to have a company that already has pretty close to a working product, maybe first customers. And so the challenge is getting those folks to get their attention. You’re working in an industry and you’re doing a startup, so it’s an industry that you. I would help no attack fintech sports betting is probably left your job or your moonlighting while you’re still in your job. Probably easier to do these days because you’re not actually going into an office. I’ve been told there are a lot more startups that are starting now because people aren’t. Going into an office and it’s not clear what they’re doing, they’re not in their office. Take a look around. Is there someone who left your company? Earlier, you’re for two or maybe someone you don’t even know. That is a person you are likely to be able to get to within the email.
[00:13:44] Hoogervorst. Built a company. And.
[00:13:51] Industry that’s in your industry, but not at all necessarily in your product area. Who’s built a company and they’ve just had a successful exit. Those folks who just had a successful exit are probably the most likely to be interested in what you are doing. They have cash in their pockets. They have a sense of the industry they’re working in, and they are not likely to be looking for their next job right away. But they may be looking for their first of many investment opportunities. I think folks who are. Younger and doing start ups, it’s it’s easy to be dismissive of what I would call. Senior executives from last generation businesses.
[00:14:56] And.
[00:15:01] Those executives, though. Probably going to be the first to understand that these legacy approaches. Don’t work anymore. Hiring employees, training, reaching customers, advertising. You have to hunt these folks down. Because with some creativity. You’ll be able to get their attention and maybe find your first investor and your first angel investor, which will help get your ball rolling. I have kind of a strategy for getting emails, read, send an email. You’re really not likely to get a response to a first email, doesn’t matter how great the idea is, how much the person thinks they’re going to respond. It just doesn’t happen because life intervenes and anyone everyone has priorities. And so you’ll send an email, get a phone number, make a phone call, leave a message, and I’ll get the person on the phone, leave a message, say. I just left you. I just sent an email. This is why. And despite. A couple of days later, send another e-mail. It’s a very fine and delicate.
[00:16:32] Approach, I call it being politely persistent as an active investor who ends up talking to potential partners for companies or an investor working on exits where I’m an investor. It’s the same process. It’s the same process that you need to learn to do to find your first. Angel investors.
[00:17:00] You have to be what I call politely persistent, not a pain in the neck, but politely persistent because it works, you’re finding your first investors are it’s really a very similar approach to how you’re going to find your early customers. And again, you’re not going to be meeting people in person. You need advisers, but try to find advisers who will write checks they don’t need to be your checks. When I look at the deal and I see that there are just a ton of pictures, people on your visor. It doesn’t necessarily impress me unless I also know that some of these people have written checks where to go to college, where you go to high school. In today’s world, I have seen start ups where the funding all has gotten started because someone made a connection through an alumni association got. An entrepreneur interested in what they’re doing and that has taken that idea from zero to a million dollars of funding because of tapping into our online network. Study consulting firms. If there are people in consulting firms that are talking and writing about. Legacy problems in the modern era, solutions, you should be able to get to those people because consultants want to broaden their networks and many consultants or executives that come out of industry who are looking for their next live opportunity. Lawyers matter. They’re not simply there to draft papers, they know investors and can make introductions. Look for accelerators, incubators, any kind of formal program that can get you in front of an audience. This is more important today than it ever was in the past because you need to get in front of people and programs will help get you in front of people. It’s smart and I say, that is a smart read, OK, here come the books, I two them that I always talk about. Venture deals are Brad Feld. That’s one of them, second one. The start up checklist by David Rose, who happens to be the founding chairman of New York Angels. You need to.
[00:20:07] Professor.
[00:20:10] Email petch, because no one’s going to open a jack until you’ve already persuaded them. It’s interesting. And you have to be able to cogently and quickly explain your writing, what’s the business case? Are you reducing costs, enabling faster process, making it easier to sell you? Making better cement? Yes, I saw it last month with the entrepreneurs who are making better cement, more efficient water filtration systems. That was yesterday’s.
[00:20:47] You have to write your story, because now more than ever, it is important to be able to write. Your pitch. I’m your customer and I have a short attention span, that’s what happens. I am so used to being told. We’ll schedule a phone call.
[00:21:13] People like me typically won’t do that unless they there’s a reason why, because there isn’t any such thing as a short phone call, a 10 minute phone call is half an hour phone call, which then takes an hour. If you put together a deck, make sure that you have people look at it who have seen hundreds of objects. Because the first thing that we look at is what’s missing in that. There’s always competition, so don’t say there’s no competition and don’t explain that you’re going to be big by finding. Capturing two percent of the market, so that’s a theoretical. No matter what you do, you really have to sound authentic. We recently gave six to deal because after we listened and spent an hour and a half. The team just felt. Like they were hiding something. There is more to the story that we were hearing. If there is, you just have to wait out there. Maybe when you’re found that maybe, you know, you need a better marketing person, just lay out the problem because you’re actually going to win your investors over if you’re truthful and authentic in your pitch. I can assume calls over these months, I’ve done lots of presentations where I can at least see those faces on the screen, 50 faces, several faces, swollen faces on this is the first time for me or talking to screen on some of this was useful. I’ve been just told that we can’t do a Q&A because of the attack. So bottom line is. It will take you work to find your first couple real investors. Angel groups are remarkably effective ways to aggregate large sums of money. You have to get your. Business going for you’ll be able to do that, and that might mean. Bootstrapping the checkbook, however, you can scrape together that first fifty one hundred thousand dollars to get started, and if you’re lucky, maybe you are doing this while you’re still working a job. But that’s the world we’re living in. So I think I’m get here on time. No idea. So.
[00:24:22] Here I am now talking to Spain.