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VC10X - VENTURE CAPITAL PODCAST

Venture Capitalists (VCs) & Angel Investors share their investing thesis, screening process, value-add, exits, and more. Hosted by Prashant Choubey (@ChoubeySahab)

  • angel-investing
  • limited-partner

"The Dream Investor" - Jeff Wald, Angel Investor & Limited Partner at VC firms

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Jeff Wald is a serial entrepreneur, Angel investor in future of work and an LP in several Venture Capital firms. A couple of his past companies have been sold to ADP and Salesforce. He also serves as a board member to some of his portfolio companies.

We talk about:

  1. Jeff's story & how he started investing?
  2. What is the $1 Million “Future of Work” Prize all about?
  3. What do you look for while investing?
  4. How do you evaluate GPs while investing in VC funds?
  5. Being an LP V/s being an angel investor
  6. How do you track your investments?
  7. Exciting portfolio companies
  8. Why startups should not take money they don’t need?
  9. Rapid Fire Round

Jeff's story & how he started investing?

Well, I wish I could tell you the story that my parents gave me some money and I started investing as a kid and learned how to follow stocks and bonds, but I didn't. I remember starting my career at JP Morgan and we go through a training program, and I thought to myself, why do I need training? I just graduated from this wonderful university. And then I quickly came to understand that I knew absolutely nothing about capital markets, about investing.

I mean, I knew the difference between a stock and a bond, but I didn't understand very much. I certainly didn't understand venture capital or trading desks or derivatives or all these other things. And so I really began at JP Morgan when I got my first bonus. And I thought, I have cash. And so I immediately invested it into a bunch of tech funds because we were in the midst of the tech bubble. And I think I may have been the last guy to buy some tech funds, because those tech funds I bought for $5,000 each, and they very quickly dropped to $1,000 each. So not my best intro to investing.

And then angel investing started after I started working at a venture capital fund after business school.

What is the $1 Million “Future of Work” Prize all about?

I'll tell you this. We should all invest where we know, where we have some sort of knowledge and relationships that could help us really understand. Because I will tell you, my first few angel investments were people that I'd gotten to know and I just thought they were really interested in what they were doing was great. And I lost all my money on all those investments because I didn't understand their space. I didn't understand the competitive dynamic. I didn't understand all the other technologies and things like that. I just met somebody thought they were great and gave them 25 grand. That's a terrible way to invest.

We should be doing our diligence. And the best way to be able to do that, it is an area where you have some domain expertise. And as you point out, I do have some domain expertise in the future of work. So my last company WorkMarket, was enterprise software that enables companies to organize, manage and pay their freelance workers. So as people talked about an On-Demand labor revolution, we were helping to power that in the corporate world. I wrote a book on the future of work. And as a part of that book, I got 20 of the leading thinkers on the future of work, myself not included to write what they thought the world of work will look like in 2040.

One of my side gigs is I serve as an advisor to the XPRIZE which puts forward cash prizes to incentivize teams to come up with something innovative. So I thought, why don't I copy my friends at the X Prize and I will put forward a $10 million prize for whichever one of these contributors to my book. It's all in chapter ten in my book the End of Jobs rise of On-Demand Workers and Agile Corporations. So each 20 of them wrote four or five pages on what they think the world of work looks like in 2040. And we have a complex voting mechanism, god willing, to all be alive, myself included in 2040 one of them will be awarded the $10 million prize. And so all of that is to say that I built up a large network in the future of work. I've built up a large domain expertise in the future of work.

So when people come to me with an angel investment in the future of work, it's not, hey, I really like this person, but it's okay. Well, I've seen a lot of tech in that space. How are you guys going to be different? What you're going to market like? I can ask much more intelligent questions. And importantly, if I choose to make an investment, I can be helpful to that company in helping them find customers and partners and people in the ecosystem and buyers of their companies, clearly investors in their companies. And so that's kind of the future of work story. 

What do you look for while investing?

I'm not a professional investor. I am investing for my own account. If I want to be thesis driven and say, oh, I think that there's a big macro trend for this, a big macro trend for that, I think that this space is ripe for innovation. I will tell you what I tend to do is to find a fund manager in that space and pay them, invest in their fund, and they'll take two and 20 or whatever they're charging and let them do the work. Because a macro thesis is one thing, but understanding how that macro thesis is going to play out, what the existing supply chain is, who takes a lot of the value in the supply chain, how it's going to evolve, the different partners, the ecosystem, the supply chain, that's a lot, right?

And that is the kind of work you should do if you're going to be a professional investor. So in the future of work, I do make investments. That is one of the few areas where I will make, still make angel investments. I used to make them all over the place. Again, went poorly. Now I do them. Pretty focused on the future work going very well. But I don't sit there with a macro thesis and say, I need to go find a company that's doing remote work infrastructure. I don't do that. What I do is when people come to me because I do see tons of Future of Work deals, right? Like every startup in New York City, certainly, and in most other places, the VCs that invest in the Future of Work will come and ask me what I think and usually my angel investments will be alongside them. They're like, oh, we're going to lead this round. I'm like, great, I'll put an X or Y.

And so I am not thesis driven in the Future of Work. I am more opportunistic, which is such a terrible word, but it is what applies here. 

How do you evaluate GPs while investing in VC funds?

Based on all the pitches I get, apparently I only see the top decile funds. Or maybe they're all bending numbers and making stuff up because every fund seems to be a top decile fund which okay, maybe I'm just only seeing the top 10%, but that seems unlikely. It seems like people are just massaging numbers. So look, I will tell you, I do VC or fund investing because I've invested in some private equity funds the same way I used to do the angel investing, which are I'm investing based on the team and the people that are there, right? Like, all the better. If it's someone I've known for ten years, 20 years, somebody like that, that comes to me and says, hey, I'm starting a fund. If I have no exposure to that space or this or that, I generally am receptive to a conversation.

Look, if they're doing a blockchain fund or a crypto fund, I don't want more exposure to that space. So it's a hard pass for me. If they're doing something in the Metaverse or Web3, I don't understand it. I don't really think that it's that big of an opportunity, at least in the near term. And so I don't want exposure to that. There are very few circumstances where I'm going to allocate capital to somebody that I don't know. And I tend to double down with people I do know.

So as an example, union Square Ventures was the lead investor in WorkMarket, my last company. And I was fortunate enough that Union Square asked me if I would be an LP in their funds. When you get asked to be an LP in what is widely recognized as the best venture capital platform ever created, you just say yes. My only regret is that I didn't give them more money because they have turned what little money I gave them into many, many, many multiples of that money. I had known them for years because they were my investor and I knew what kind of people they were on the board and helping entrepreneurs. And I will tell you that without Union Square Ventures, I don't think WorkMarket makes it to its sale to ADP. I think I think we’d probably fail. And so knowing that those are the type of people they are, that you can count on them, that they are so entrepreneurial friendly, when they asked me to invest, I was like, of course I'm going to invest.

I'd say the same about Album Ventures out of Salt Lake City. They are the next group of people I have met. I wouldn't say the only other, but that are so entrepreneurial friendly. There are such wonderful good people that when they said, hey, we're going to raise our new fund and I had been on a board of a company with one of the guys from Album for four years, I was like, of course I'm going to put money into your fund. You're an amazing guy. You have been so supportive of the company that we work with together. Of course I'm going to do that. That is very different than every now and again, I make the statement to myself, wow, there's a lot going on in marijuana. Whatever our personal views of marijuana are, the societal trends towards legalization and the increased growth of that market are very, very clear.

I get shown marijuana deals all the time, but as an individual, I don't know where the laws are. I don't know where again that supply chain is, that competitive environment is. And that's an area where I put an email out to some friends saying, hey, I want to be in a marijuana venture fund. Who's got one? And I met with a few managers, and you just click with somebody, you just think, this person knows their stuff. They speak intelligently on the space, they're responsive, they're thoughtful. I'm going to allocate capital here. And that's what I did. Same thing with cybersecurity and a few other sectors where I just didn't think I had enough exposure from a portfolio approach.

And I will tell you this. If I had put $25-$50,000 into all the different marijuana deals that I saw, I am 100% sure I haven't tracked them, 100% sure I would have lost that money versus me putting a much larger check into the fund where they are doing incredibly well because they're just smarter than me in that space. And knowing when you are not smart enough is a very, very intelligent thing.

Being an LP V/s being an angel investor

If I were to just look at the return profile, I like being an LP many multiples of times more than I like being an angel investor. And there have been a few angel investments of mine that on paper were 200 exes, and then the company went bust. And so I'm sure if I were smarter, I'd figure out how to monetize those things when they were on the up and blah, blah, blah, blah. But yes, I do enjoy the angel investing, personally getting involved in these companies because, you know, these companies helping these companies in some cases, but there is certainly a trade off between the two. 

How do you track your investments?

I will tell you when I get emails from the funds that I'm invested in, even Union Square Ventures, I delete them. There are only two emails I want to see. One is the capital call notice because that means it's an action I have to take. And the distribution notice, which means send me some money. I love that email. Every other email like, we're going to have an LP event, we're going to go through the portfolio, we're going to have some of our companies present. Don't care. I don't care because I gave you a very big check for you to do work. I don't want to do any work. If I wanted to do work, I do this for a living. I pay you to do it. Just tell me when you need money for me and tell me when you're sending money for me such that I would say this.

I got a call from a friend and he said, oh man, you're in that USV 2012 fund. I was like, yeah, I'm in that fund. Why? He goes, well, that fund did Coinbase. You're about to get like a 20X distribution on your initial investment. I'm like, what? What are you talking about? I had no idea. I had paid no attention and this massive distribution was coming. Didn't even know. That's great because they are again the best in the world at what they do. But it just shows how little attention I had paid that I should have known that maybe I would have done some financial planning differently or done something differently. But that's number one.

Number two, when I make an angel investment, I again don't track it. Don't spend time thinking about it. I gave you the money. Look, as an entrepreneur who has started seven different companies, I know the last thing an entrepreneur wants is someone that wrote a 25 $50,000 check being like, hey, what's going on? Hey, how's the company doing? Hey, how was the last month? Hey, how was last quarter? Nobody wants that. If someone had called me every quarter asking how their money was doing, I'd be like, you know what, dude, your money back. You're too annoying. I can't spend time with you.

So my approach is very simple. I write the check, will send the wire, I email my accountant and say, here's the investment. I made X number of dollars into this company. The first chance you have, usually one year, write it off, I'm going to assume it's zero and I tell the companies, I said, look, I'm going to call my accountant and write this off. If you need me for anything, call anytime. I'm here. I will make introductions. I'm there to come whiteboard with you. I'm there just to talk if you're feeling bummed out and overwhelmed, because I've been there, but I'm never going to reach out to you, so you call if you need me. Otherwise, I'll see you at the IPO party. Like, that's it. So I don't spend time doing it, because I know what it's like, and I can't really influence that outcome, especially if they don't want me to.

Exciting portfolio companies

There’s a company called Nayaa. Nayya helps employees at companies choose the right benefits and use them appropriately. I point to this one, A. because they're absolutely killing it. I invested in a $4 million valuation. They raised money earlier this year at a 600 million dollar valuation. Just absolutely killing it. But more importantly, they are going after an industry that is so complicated, like insurance and benefits is so complex, and they have just built a better mousetrap, and they are substantively adding value throughout the supply chain. Insurance companies like them. The employers that have benefits for their employees like them. The employees like it. Like everybody is benefiting. And when you're able to do that, you're really on to something special, and they've been able to do it. And so I think they're great.

Another company that I point to is called Transfr VR, which is the largest VR training company, and they are helping right now thousands. Soon tens of thousands of people get the kinds of skills necessary to get a middle class job. So you put their VR skills training, put on that headset, and you can learn how to repair diesel engine from the comfort of your home. You don't have to go travel to a place that's got a diesel engine studio. You can learn how to become a nurse practitioner from the comfort of your home, because we have a virtual health clinic that you can learn all the trades. You still have to go get certified and whatever, but you can do your work on your own time without paying a huge amount of money, very little money. So it's a reduction in time and reduction in cost, and you come out of it ready to take a certification test. And so those kinds of things are just I don't know that I call Nayya. So mission driven, although it's got submission to it, but transfer VR is very mission driven, and it's just such an honor to be a part of. Bharanidharan Rajakumar is the founder. He's a very dear friend, and it's just an honor to be a part of his journey as he helps again now, thousands, soon to be tens of thousands, hopefully soon millions of people move from the classroom to a career and into a better paying job. 

Why startups should not take money they don’t need?

There was a company that I invested in. They were doing really well. Again, I was a super early investor. They're rolling along and they got a call from a VC saying, hey, we want to give you $50 million at a $250,000,000 valuation. I was like, Guys, do you need 50 million? They're like, no, but what are you going to do with it? They're like, well, but I mean, how do we not take it? I'm like, you don't take it, because now you have to live up to that valuation and you're in a box and blah, blah, blah.

And I said, the only valuation that matters is the last one. Doesn't matter that you take this money, it just doesn't. And it was interesting, because I had introduced them to a very large corporation. The corporation was signing a deal with them to distribute their product, this and that. I got a call from the head of Corpdev at that company and he says, hey, should we just buy them? I was like, you should definitely buy them. Do you know what their last valuation was? He said no. I said, well, it's matter of public record, 250,000,000. And he like, spits his coffee out. He's like, what? He goes, Look, Jeez, I would have bought them for 100. He said, I can't. I'm not going to buy them for 250. I said, oh, you can't buy them for 250. You have to buy them for 400.

And it's interesting because he said, all right, look, we're still going to do this partnership, but now we're going to build it ourselves. And in a couple of years, we'll just phase them out. I'm like, yeah. The thing is, if they had sold that company for 100 million, which the large company would have bought them for, that was a great exit for them. It was a great exit for their investors. Each of the founders would have made $20-$30 million. That's an insane amount of money. And now they can't and they've raised money at even higher valuation now, and now they have to exit at like a billion dollars. And I'm not saying they won't. I'm just saying they have massively curtailed the exit options they have, and they are going to have a root awakening at some point. And as an angel investor, having invested in a single digit valuation, maybe I'll be protected, maybe. Depends on the preference stacks and all these other things, but maybe not.

And so just because you can take money to ridiculous valuation doesn't mean you should. And a lot of people did. And that cycle is not fully turned yet, because all those companies have to go through their down rounds and have to be recapitalised and have to realize, shoot, there is no exit for me unless I do X, Y or Z. And we build these companies to change lives, to build teams and help those teams grow. We build them to exit them. And if you put yourself in a box and you don't have a lot of exit options, that's just not a great way to build a company.

Rapid Fire Round

What sectors and regions you invest in?

Future of work. New York.

What stage you typically invest in?

Pre revenue.

What's your typical check size?

$50K.

Where can founders or GPs pitch you?

They really can't. I have a 0% response rate to people that just reach out. I don't know you and you send me a thing, being like, I got your email from somewhere. Would you look at my deal? I am literally deleting it immediately. I don't care if it's in the future of work. I don't know you and you're sending me something. There's a 0% chance I'm responding if someone I've known for a long time. And you can know that by my connections on LinkedIn. Although you don't know if you really know each other, because LinkedIn, everybody connects to everybody. If a friend of mine says, oh, my gosh, you've got to look at Prashant and his company, I have a 100% reply rate and so don't come to me cold.

Where can listeners follow you?

LinkedIn is the social outlet of choice for me. I mean, I have a Twitter account. I don't tweet that much, but LinkedIn, I do spend a lot of time there. I think LinkedIn is underappreciated as a network. Jeffwald.com, which I bought in 1997, but finally put a sign up on last year, does have everything that I do.


Jeff's website- https://www.jeffwald.com/

Follow Jeff on Linkedin- https://www.linkedin.com/in/jeffwald/

Hosted by Prashant Choubey- https://twitter.com/ChoubeySahab

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