Investing in Unpopular Ventures - Peter Livingston, General Partner, Unpopular Ventures
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Jed started Angel investing 5 years ago. He got his first exit in year 2, and his first unicorn 2 years after that.
He saw syndicates as a way to scale capital, diversify risk, and earn more upside through carried interest.
He learned that it's really HARD to build a syndicate from 0. So he started Angel School as a passion project to help others start their own angel syndicates.
This is a passion project that I've been quietly working on for a number of years now. I basically started on the operator side of the table as a venture builder. My last venture was an API marketplace that I started with a company called Rapid API back in 2017 or so. Rapid was this little known startup that ended up raising capital from Andreessen Horowitz, and then today is a billion dollar company, and we built the world's largest API marketplace together.
Around that time, I found myself in a position to begin angel investing. It was something I was just interested in, and I was willing to stick my own capital to learn. I got a little bit of success quite early on, and I got my first exit in my second year investing in the second very company that I put money in.
Then I also invested in Turing.com at a seed stage. So Turing became a unicorn at the end of 2021. So however you count it, I've done the seed to unicorn journey two times now, and I hit this point in angel investing where you keep deploying capital and it starts to look a little bit too risky or skewed relative to your portfolio of assets. And I arrived at this conclusion that most angels do, which is I should go build a syndicate.
So I started on that process, and over the last two years, I built this LP network that is today we're between 800 and 850, completely organic, no marketing spend, and our average check is probably about half a million. And that kind of became the catalyst for Angel School. It's this light bulb moment that there's something here that we are doing that's going really well. Why not share those learnings with other investors who want to have that same ambition? That’s how Angel School got started.
Angel Syndicate is a loose collective of individual investors who look at deal flow from a particular lead, the syndicate lead, and they can decide if they want to invest on the recommendation of that lead. It's a collection of angel investors with somebody assuming a leadership role.
The difference between a VC fund and an Angel Syndicate is that in an Angel Syndicate, the LPs are active. They are actively making the decisions, do they want to invest or not? But in VC fund, it's the GP, the general partner, making the decisions for them. That's the basic difference.
That is the basic difference.
The way we think about people who choose to do syndicate or angel investing versus investing in a VC fund. People invest in VC funds, it's a bigger check, and it's also basically a blind choice.
Fundamentally, you are trusting in the fund manager to make the right picks and return that money. It is a very passive vehicle. Whereas angel investing in syndicates, it's smaller checks. It's for investors who want to own and control that investment decision because they believe in their own ability, they want to learn the process and they want to retain control. So that's how I describe the difference.
Our mission is to help angels build and scale syndicates. That's the first component. The second is it is a bunch of work, so let's make sure it's worth it. So I want the people I help to be able to deploy capital at $100,000or more. And that should grow. And the third piece is they should invest in their own investment thesis.
For example, Prashant might say, I believe in education tech in the Indian continent at the seed stage. And if that is where what you believe in and what you're passionate about, let's go out and make that happen. Because I invest in a very small corner, a very small slice of the world, and I don't believe that I'm not jealous of somebody else having a syndicate.
This is about us as investors helping out our local ecosystem in the ways that we believe in. That is our mission. And so we basically decompose everything.
We think about running syndicates like an OS. There are things that we cover that are super obvious. For example, how do you source a deal flow? How do you perform due diligence? How do you set up an SPV to move that capital? And then there are other things that we cover and teach, like how do you pitch LPs and convince them to join your syndicate? It's a very soft intangible skill.
So in this area, things that I help with are like, okay, what is your professional messaging? How do we optimize that? I'll even get on calls with all of my students, right? If you bring somebody from your network sitting, introduce me, I'll watch you pitch. Or you can watch me pitch and I'll show you how I do it. Then we can reverse the roles, watch how you do it. And it's kind of like training.
These things move the needle a lot in my view. For sure. And that is an important part of building a syndicate, that you need to find the angel investors that are willing to partner with you and then pitch them. That way you are the right person to partner with.
I think that the nice part about building syndicates is that you already know your LPs and they should be sitting in your network. These are people that you can reach out to and speak. And of course you have to be targeted about who you reach out to and how you message them.
The thinking honestly is very simple. If you cannot convince somebody in your network, somebody with a warm connection, to pay attention to the deals that you're bringing, you don't have a chance of convincing a stranger. So let's start easy. So if you can build your base of initial investors in that network, then we can think about scaling.
The most powerful scaling lever is referrals. This is the approach that I advocate for. I think that if you built a syndicate right, with a core network of LPs that know and trust you, you can rely on them to basically introduce their network to you over time and that's how you expand.
Think about that one step further and how powerful that effect is. Once you get that to a certain scale and the referral effects take off, you basically have solved one part of the equation. You no longer need to go find LPs because warm connections, it's like in sales, it's like an SQL is being referred to you already.
Which means that now as a syndicate lead, you just focus on deal flow. That one piece of the puzzle is solved for you and you just focus on finding great companies and presenting that to your investors.
Caveat: I'll share my view and I'm biased. I love syndicates and so maybe my view colors my response.
I'll basically say that I think it is incredibly hard for first time fund managers to raise their first VC fund. And it seems attractive. Because there's a lot of prestige associated with it. Like, I have my own VC file, I'm a GP, and that's great. It is very attractive. But I've seen a lot of investors who are far more experienced than me, much better pedigree go out and try to start their first fund. They end up getting kicked around and they raise a five or $10 million fund just to get started to prove out the thesis. And what happens is that with a $5-10 million fund, your average check size might be 100-150k.
I easily deploy more capital than that per deal already. You are in effect, I think, with a micro fund subsidizing the fund in order to prove that it works. So my argument is really simple. You want to go from angel to build your own syndicate. The syndicate will quickly allow you to deploy as much or more capital than a micro fund. You get to get going right away, build your track record, prove your thesis without spending 12 or 18 or 24 months fundraising.
You build that track record, then you go raise your fund if you still want to do it. But now when you do have a fund, turns out you still have a syndicate on the side. And so you can now enlarge your position. In addition to whatever the fund is investing, you can still market that same deal flow to your investors, you can double down and it's additional upside.
Yeah, so this is one of the things that we cover in the program as well. Right. Running syndicates is always going to be a heavy lift. There is going to be work involved, especially on diligence. Unfortunately, there are limits to technology.
You can't use it to automate and solve for everything. I think with syndicates, if you don't set it up correctly, there's a very real danger of being drawn into Ops too much. So as an example, some investors who kind of reach that point where they want to build their own syndicate, they might go, I have a network of people around me, they all know me. I'm just going to create a WhatsApp group.
It probably will work for your first syndicate, but it doesn't scale very well because now you're messaging people one after the other. So for successful syndicate management, theoretically or in principle, what we want to do is to outsource as many things that are non-core as possible. So, for example, the idea of running SPVs, you don't want to do that yourself. Because it's heavy, it's burdensome, it's probably going to be more expensive doing yourself or with a corporate secretary rather than outsourcing it to an SPV provider.
The other part of successful management of syndicates, I think, is just having lightweight check. It doesn't have to be super complicated and expensive. In fact, you want to keep the running costs down. So you want to have something for email automation. That is my recommendation for communicating. You want to have some sort of solution for data rooms, and something like Google Drive will solve the problem for you. So those are the tools that I would recommend.
My view is that I think syndicates, the principles or how you set up your syndicates are really important. So it's this idea of, I'm an angel investor, I've got a small group of people who know me, and that's a great start. I'm not knocking that. It's a great start. But the real test is how do you expand beyond that? You don't want to keep going to the same pool of eyeballs. Because at some point it's going to get tapped out. So what is your lever for growing the LP network.
The second thing is approaching things in a non scalable way. I gave the example of using WhatsApp groups or Telegram groups to do that. I don't think it's a very good approach. It's great that you have a personal connection, but you need some way to automate as you scale. And I think the third mistake that I've seen is when people try to build the LP network, they have this spray and pray type strategy where you’re just cold emailing or sending LinkedIn messages. I think it's like a horrible thing to do. Your hit rate is extremely low, and in the end, those people that you reach out to, chances are they're not even going to never look at your deal
I do this education program because I want to genuinely help other angels be successful. My motive is for this is never going to be profit driven. I don't want to be an education institution and make that my primary KPI. Right. Because then it's like, have as many people and crank them through like a factory. That's not what we were about.
So the cohorts are extremely small and selective, and we know each other on a personal basis. So some of the people that have been through the program are:
I have somebody in Singapore who started and built rental business to a 9 figure P&L in India. I have somebody who was former PayTM and now is a product manager or product VP at Byjus. I have Airbus's former CEO in the Philippines. In my next batch, I have a committed student who runs AWS for startups globally. So, like, super high caliber people who just are passionate about this space.
So some success stories I'll share with about somebody in Spain that I taught. This particular student, he used to run competitive strategy and Ops for Uber in Europe. And on the side, he had this informal syndicate of his own. And he took the program and basically his learnings was that, you know, what this program, in three months, he managed to double his LP network and he's cut down his Ops time, his admin overhead by 50%.
I have another entrepreneur in South Africa. He built an ecommerce company, exited to Walmart, and we're having a conversation about him launching his own syndicate now. So there's some traction and data points. It does take time for everyone, once they've been through the program, to sort of get to the right stage and lay the right groundwork. But we're encouraged.
Our website is AngelSchool.vc .So the program is eight weeks long. It's going to be 2 hours of live sessions every week. So it's face to face, mandatory attendance to complete. On the side, we expect maybe two to 3 hours of your own prep and homework and follow ups that you have to do.
So all in for eight weeks. You basically spend about 5 hours a week or 40 hours to complete the program. After that in the program, we're asking for the program fee of $3,500. We think it's great value. Right. Because imagine being able to run your first syndicate. If you raise $100,000, you basically have upside on $20,000 with zero capital outlay. Super powerful.
I guess the final thing to say is that once somebody completes the program, I invite them to sit on my investment committee. So this is a forum where we get together on a weekly basis. We actually work on real deal flow. I let the students build track record alongside me, and I also share carried interest with the team if they contribute meaningfully to what we do. So these are some ways you can get involved with us.
Industries, sectors and regions you invest in:
So we invest in non consumer software, so no mobile apps, but B2B SaaS enterprise. We tend to focus on seed to series. We primarily look at US companies, although we are expanding to other geographies this year.
What stage you typically invest in?
Typical check size:
So our average check at a precedent level is maybe 250K. Seed stage is 500k to maybe a million dollars.
Where can founders pitch?
Angel School Website: https://angelschool.vc/
Follow Jed on Linkedin: https://www.linkedin.com/in/jedng/
Follow Jed on Twitter: https://twitter.com/Jed_Ng1
Hosted by Prashant Choubey: https://twitter.com/ChoubeySahab
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