Tuesday, November 12, 2019

Startup-People of Seattle: Eric Berman (Business Angel)

The blog-series “Startup People of Seattle” introduces some of the key personas in the ecosystem to learn more about what they are doing, to share their thoughts and ideas, and to promote networking.

In our 15th interview, meet Eric Berman:
“E8 was formed with the thesis in mind that sustainability and profitability often go hand in hand.”
Eric Berman started his career at Microsoft. Today, he is co-chair at Element 8 Angels.
https://www.linkedin.com/in/erberman/



Q: Could you shortly introduce yourself and talk about your background when it comes to startups?
A: I have been co-chair of Element 8 Angels for four years now. We are a Seattle-based angel investing group that primarily focuses on cleantech startups. So, startups we invest in are operating in the areas renewable energy, energy efficiency, energy storage, but also clean water, waste mitigation & recycling and sustainable agriculture are interesting to us.
My educational background is in electrical engineering and physics. I have a master’s degree in electrical engineering, however, I have never worked as electrical engineer. I started off my career as program manager at Microsoft. After that I was Vice President at Expedia. Then I spent a year in a startup that I’d rather forget about before getting involved in E8.
When getting involved in E8 my motive was to have some social or environmental impact. After starting to explore angel investing, I realized that I enjoy the investor-side much more than operating a startup. However, I am a very risk-averse person, especially when it comes to my money, and investing in early stage companies is about the riskiest thing you can do with your money. So, I calculated how much money I had to invest in order to be appropriately diversified. Then I pretended the money was gone already which made writing checks so much easier. I couldn’t lose anything anymore because mentally I had already lost all that money. 
Another mental trick of mine that has helped me overcome risk-aversiveness has been to call the money I lose “tuition”. When I started getting involved in angel investing, I considered going to business school to get more educated in startup financing, but then I decided to learn investing by making investments. I already had my professional network and there was no job I wanted that required some sort of degree, so there was no point in going to school. Instead of spending $80k on classes, I could spend $80k on investments. If I would get somewhat of a return, I would already be better off than had I invested all that money into a degree, and either way I would learn.
So, this is the story how I got into angel investing. By now, I have been doing this for over ten years and I have written a good number of checks. I am still waiting on a big pay-out, but many of the companies I invested in are still on their way. 
Q: You said you would rather forget about the time you were part of a startup, what have you learned from that experience?
A: There is no one thing that can guarantee success, but there are many things that in and off themselves can cause failure. Also, culture matters. It is very important that the values of the founding team members are compatible. Aside from that, hunger is key.
Q: E8 focuses on cleantech startups. Other investors have said to me before that they choose not to limit themselves to investing in one specific kind of startup only because that would limit their investment opportunities too much. What is your opinion on this?
A: If you are strictly looking to maximize your profit you’ll probably invest in tech and medical companies. E8 was formed with the thesis in mind that sustainability and profitability often go hand in hand. E8 is mission-focused, and a portion of my portfolio I want to invest in impact. But don’t confuse investing through E8 with philanthropy. We invest in startups because we want them to grow into successful businesses. If they are not profitable and don’t survive on the market our impact is zero. So, we do look for returns.
Coming back to your question, everybody involved in E8 can also invest outside of E8 in companies with different focuses. Being part of E8 doesn’t bind an investor to only invest in deal flow he gets exposed to via E8.
Q: How does the investment process look like at E8?
A: Either companies know E8 and apply by themselves, or we find companies and recommend them to apply. After that, they go through a screening process and the startups that look promising get the chance to present to the membership. If there is interest, members then collaborate to do due diligence. We write a brief (10-20 pages) due diligence report summarizing aspects that an investor should be aware of before E-8 members write checks individually. Recently, we also had a fund, but that is now closed.
Q: What do you think of Seattle’s startup ecosystem?
A: I think we have a great ecosystem fed by the tech giants Microsoft and Amazon. Because of those companies we have many people here who feel they have learned how established companies work and now want to try finding success as entrepreneurs. Also, many investors have been part of Microsoft or Amazon at some point in their career. So, mostly thanks to these two companies, we have many startups, talent, mentors and investors in Seattle. What stands out about the culture here is that many people really want to do good and try to give back to the ecosystem. People here are very engaged in the success of the startup community. However, from E8’s perspective, in order to get sufficient deal-flow in cleantech, we have to look in a greater area than just Seattle simply because there wouldn’t be enough companies here.
Q: What are some other impact-driven organizations that pop into your mind and that are good resources for startups?
A: Fledge is impact-driven like E8. Luni Libes would be the contact point for Fledge. Others are Powerhouse in Oakland, Elemental Accelerator in Honolulu, Greentown Labs, and LACI in LA.
Q: What recommendation would you give someone who is interested and new to all things startup in Seattle?
If you are interested in investing, I think SAC is a great place to get involved. Go to meetups, join groups, and network. Even if you don’t write a check, see if you can help with due diligence somewhere. You learn so much analyzing companies. Those would be my recommendations. Also, I should mention that being an angel investor is legally restricted only to “accredited” investors.
Wikipedia Def. Accredited Investor: “In the United States, to be considered an accredited investor, one must have a net worth of at least $1,000,000, excluding the value of one's primary residence, or have income at least $200,000 each year for the last two years (or $300,000 combined income if married) and have the expectation to make the same amount this year.” (https://en.m.wikipedia.org/wiki/Accredited_investor, Last retrieved on 10.30.2019)

Here are some things I learned from this interview:
  • Students overestimate the influence their degree has on their career. Eric’s work has never been related to his college degree. 
  • Learning-by-doing might be the better choice to learn about angel investing since college degrees are expensive and no degree is needed to do angel investing.
  • There is no one thing that can guarantee success, but there are many things that in and off themselves can cause failure.
  • Social or environmental impact and business success often go hand in hand.
  • Seattle’s startup ecosystem benefits tremendously from the tech giants Amazon and Microsoft.

In the interview Eric mentioned some resources and organizations, find out more about them here:

About Seattle Angel:
A strong ecosystem creates an environment that allows startups to thrive. Seattle Angel’s goal is to strengthen Seattle’s startup ecosystem by increasing the access to funding for entrepreneurs to push their ideas further.

About the author: Sven Goepfrich

Sven Goepfrich is currently finishing his MBA in Syracuse. His studies focus on technology, innovation and entrepreneurship. At his school, he is working for the department of finance. Sven was actively interning with the Seattle Angel Conference in summer 2019. He is currently looking for full-time career opportunities in this field.

Thursday, November 7, 2019

Finalists for Seattle Angel Conference XVI - Come on 11/3/2019

We encourage those interested in Angel Investing and Startup Fundraising to attend
Seattle Angel Conference on November 13, 2019, for the final presentations for SAC XVI. 
The event begins at 4p and awards made around 8p. 


Leslie Feinzaig, Founder of the Female Founders Alliance will be our keynote speaker.




SAC 16, Presenting Finalists:

Xemelgo: Combines cloud, mobile, AI and IoT data into a single solution with integration into
ERP systems.  Manufacturers save millions of dollars with real-time emerging production
issues, vendor managed inventory, and RFID tracking.

TrovaTrip: An eCommerce platform enabling influencers to monetize their following by
hosting group trips. 

Barcast: Interactive advertising and consumer insights platform that helps retailers and
brands drive sales while capturing data with TVs and smartphones. 

Refactr: Simplifying the DevSecOps process with an automation platform that allows you
to improve your solution delivery and enforce security controls.

Deep Cell Industries: Cannabis-focused technology company with two business lines:
technology licensing in adult-use THC markets and product sales in hemp-CBD markets.

Visom Technology: Mobile visualization assistant for patient education and (someday)
surgery. 






Tuesday, November 5, 2019

Startup-People of Seattle: Jon Staenberg (Business Angel and VC)

The blog-series “Startup People of Seattle” introduces some of the key personas in the ecosystem to learn more about what they are doing, to share their thoughts and ideas, and to promote networking.

In our 14th interview, meet Jon Staenberg:

“Selling is an important skill I want to see in an entrepreneur.  Selling is selling not just your product but your competence so others want to be part of your team. A red flag to me is if a startup raises money but the founder’s friends and previous coworkers haven’t put money in the deal. That means he hasn’t sold those who know him/her the best!”
Jon Staenberg has raised and managed multiple funds and is an experienced angel investor having invested in about 400 startups.
https://www.linkedin.com/in/jonstaenberg/


Q: Could you please introduce yourself and talk some about how you got into startups considering your background at Microsoft.
A: I moved to Seattle in 1988. I always wanted to do Venture, however, I got the advice to first get some operating experience. So, I was working with Microsoft for six years before going into Venture Capital. Eventually, I created my own fund. My fund focused as a differentiator and value proposition on connecting Seattle and San Francisco, which at the time meant connecting Microsoft to the Valley. This helped startups either partner with Microsoft or learn more about Microsoft as a competitor. Focusing on connecting Microsoft and the Valley was my way of differentiating my fund from all the funds already existing at the time. I raised two funds in which I invested alongside some of the great Sandhill VC’s. Later I joined a larger fund and became the Seattle partner for that fund. That fund was called Rustic Canyon with offices in Seattle, Silicon Valley and Los Angeles.
Aside from my fund activities, I am one of the most active angel investors in Seattle having done some 400 total investments. I have also started several companies. I am passionate about startups, investing in them, mentoring and even starting them!
Q: What startup stage do you invest in?
A: I have done investments in startups at all stages, from first money in to very late stage. I am more of an opportunistic investor. I see the world as very dynamic; Things are changing all the time. A strategy that might have made sense two years ago might not be the best anymore in the present. That concept of moving strategies is going to be even more relevant in the future because things are changing at a faster and faster rate. I should note that all this only applies to me as an individual investor. In a fund, following a clear strategy is expected. I am most excited right now about the use of Big Data in improving performance of venture investing.
Q: Would you say you don’t have an investment thesis then?
A: I would say I don’t have a traditional investment thesis. I don’t say, for example, “I only invest in blockchain.” I do have a strong focus on people and product/market-fit and market sizing, though. I also prefer investing alongside a group of value-added investors.  
I am raising a new fund right now, and instead of a thesis we have an approach. Unlike traditional venture funds, which don’t use much data, our sole approach eliminating all but 100 companies is using data. So, at this stage we are not analyzing business plans, talking to entrepreneurs, looking at markets, etc., but we have a 40 Terabytes database of 500.000 companies around the world and we use AI to select the most promising ones. Finally, we evaluate and stack-rank the last 100 companies but ultimately select using more traditional methods of conversations and traditional due diligence.
For the last 30 years in venture, there are so many VC firms using similar methods and doing similar things, but the biggest ones are winning because they see all the deals. Many smaller VCs on the other hand struggle to see good deal-flow. In such a competitive environment you need to do something different. So, using data makes that difference for us. A benefit of data also is that it changes. In a traditional fund the strength, weaknesses and biases of the people involved in the fund stay with the fund. In comparison, AI allows us to learn constantly from our past decisions. The more investment decisions we make, the better we get. The old way rarely improves. Marginally yes but not really much. We can refine and tweak and get better and better. That gives us an advantage over everybody else.  
Q: You said you pay a lot of attention to people. So, what are you looking for in people?
A: I am looking for sheer talent, passion, willingness to learn, and willingness to go the extra yard.  And I want a great story-teller. Many of the things I am looking for in an entrepreneur are like what you want to see in an athlete. I also want to know why success is important to a founder. That informs me of what happens if things don’t go as expected, because they never go as expected. Aside from all that, I prefer working with entrepreneurs I know and have some history with…but there is nothing more exciting than finding the next great young entrepreneur.
Q: How does your personal due diligence look like?
A: It is not very structured. I really want to spend time with the founder going on walks and getting to know each other. Of course, I also look at the market etc., but the founder or founding team are what matters most to me, especially when it comes to early stage startups. Selling is an important skill I want to see in an entrepreneur, so a red flag to me is if a startup raises money but the founder’s friends and previous coworkers haven’t put money in the deal.
Q: What challenges do you see startups face regularly?
A: Entrepreneurship is hard. There are many challenges and they make it easy to get overwhelmed. One of biggest challenges in my eyes is prioritization. Considering resources are limited, you must make sure you work on what benefits you most. You must be effective. You also always have to expand your skill-set as the company grows. Mark Zuckerberg and Steve Jobs are great examples for people who grew alongside their companies. Integrity is another challenge. People don’t usually talk about this, but entrepreneurs constantly have opportunities to bend rules, so integrity matters. Another difficulty is attracting talent. Founders need to surround themselves with an amazing team.
Q: In your opinion, what are typical mistakes startups make?
I think not raising enough money is a big one. Also, founders must plan ahead for raising the next round and have conversations way before needing money. That way they can establish relationships. Another mistake is to react too late to issues/ignoring them for too long. Finally, being an entrepreneur is hard. HARD! I encourage founders/CEOs to have some kind of personal board of directors so they can have ways to share ideas and feelings.
Q: From your experience, what is the difference between being an individual angel vs. running a fund?
In a fund you have much more responsibility, so you must document much more, do background checks etc. before investing. You must also be committed to a fund for 10 – 14 years. As an individual investor, I can simply invest in what sounds good. It is less restrictive and at this point in my life I enjoy that freedom…still being involved but not having the commitment of being a GP in a fund.


Here are some things I learned from this interview:
  • Data and AI might be the future of startup investing.
  • Deal-flow is key for successful VCs.
  • People are key for startup success – the founding team as well as the first employees.
  • Selling is a must-have skill for an entrepreneur.
  • Startups should be careful with their financials, plan ahead and build relationships with investors way before needing money.
  • Investing through funds is much more structured then individual angel investing.


About Seattle Angel:
A strong ecosystem creates an environment that allows startups to thrive. Seattle Angel’s goal is to strengthen Seattle’s startup ecosystem by increasing the access to funding for entrepreneurs to push their ideas further.


About the author: Sven Goepfrich
Sven Goepfrich is currently finishing his MBA in Syracuse. His studies focus on technology, innovation and entrepreneurship. At his school, he is working for the department of finance. Sven was actively interning with the Seattle Angel Conference in summer 2019. He is currently looking for full-time career opportunities in this field.


Tuesday, October 29, 2019

Startup-People of Seattle: Edward Un (Business Angel)

The blog-series “Startup People of Seattle” introduces some of the key personas in the ecosystem to learn more about what they are doing, to share their thoughts and ideas, and to promote networking.

In our thirteenth interview, meet Edward Un:
“The one thing that is key to understand early on is the portfolio approach. You cannot expect a return if you only invest in few companies, because they could all fail. So, you must invest in enough companies to minimize the risk of all of them failing.”
Edward Un is working as Senior Program Manager, Cloud + AI Speech & Language, at Microsoft. In his free time, he is involved in Angel Investing.
https://www.linkedin.com/in/edwardun/



Q: Could you shortly introduce yourself and talk about your background when it comes to startups?
A: I studied computer engineering and I have been in software all my professional career. Following a job in a larger company in Silicon Valley I joined my first startup, a less-than-ten-person-company. After spending three years in this startup, I met someone in the Valley, and we decided to co-found a company with one more person. We started growing organically, bootstrapping our company by doing consulting work while figuring out what kind of product we want to build. By the time we had figured out a problem and had created a solution, we were already 30 people. We then raised a few series of Venture Capital to continue growing with our new business model. We managed to grow this company to 150 people at its peak. Eventually, I left the company to work at another startup in Hong Kong, which was about to go public at the time. Today, I work at Microsoft as a Program Manager. On the side I am involved in Angel Investing.
Q: You have experienced working for one of the largest companies in the world, but you also worked for startups. What would you say are some of the differences?
A: Because there are so few people involved in a startup, a difference is that in startups you wear a variety of hats. At Microsoft, I focus on one area. Another difference is that in startups you reach out to people outside the company a lot more than in big companies. Working for a big company, you interact mostly with people within the company or with customers. One more aspect is that money and resources are omnipresent worries in startups. In large companies, resources are less of a concern in the daily operations. Because startups are in a constant race with running out of resources, startups also need to move at a faster pace and be more agile.
Q: You mentioned having been involved in the execution of startups, but how did you get involved in angel investing?
A: Like you say, for a long time I was much more interested in the execution of startups. I thought of investing in startups as boring, and I did not want to constantly hear pitches and be in meetings, etc. But about two years ago, I picked up a book by Jason Calacanis called “Angel” and also started listening to his podcast called “This Week In Startup”. After reading his book I became much more interested in angel investing. Therefore, I read more books, like “Angel Investing” by Davide S. Rose for example. I also started going to meetups, etc. About one year ago, I started going to the Seattle Angel Conference workshops and I then participated in SAC 14. The Seattle Angel Conference introduced me to Keiretsu Forum, a network of angel investors, which I am actively involved in today.
I have met many people being part of Keiretsu and SAC and I learn a lot from that. One thing I learned is that, especially in the beginning, you must resist the urge to invest in companies. A lot of founders are very talented in presenting their companies, but you should develop your investment thesis and learn more about angel investing before spending a lot of money without understanding yet what due diligence is etc. You need to remind yourself that investment opportunities will keep coming and that there is no rush to invest in everything right away that looks interesting. In my first year being involved in Keiretsu I have invested in two companies.
Keiretsu has a screening process that startups must go through. If they are chosen, they get the opportunity to present to the membership. The members ask questions and in the end each investor decides individually whether he/she wants to invest or not. 
Q: You mentioned patience being important for a beginner in angel investing. What are some other key things you have learned as an investor?
A: Listening to a variety of pitches from companies in different industries naturally has taught me a lot. But in terms of investments, the one thing that is key to understand early on is the portfolio approach. You cannot expect a return if you only invest in few companies, because they could all fail. So, you must invest in enough companies to minimize the risk of all of them failing. 
The importance of due diligence and that you should try to become aware of your biases are other things I learned as investor. A bias could lead you to convince yourself why to invest in a certain company overlooking arguments not to invest. To overcome biases, I always look at a company asking myself: “Why shouldn’t I invest in this company?”
I also built a habit of writing down my thoughts on every company no matter whether I decide to invest or not – an investment memo. In a few years’ time, I hope I will be able to see which companies became successful and which ones not. I then will be comparing this with my notes to draw conclusions and learn from that. I think just seeing a lot of companies and then following whether they become successful or not is a great way of learning about patterns, and I hope this will eventually help me become a more successful investor.
Q: You brought up the term investment thesis. What is your investment thesis?
A: I would say that I am still developing my investment thesis. At this point, I like to invest in companies that take advantage of an emerging trend. The company must also do something in an area that I understand. Therefore, most of my investments are in technology companies, because that is my area of expertise. Another thing I pay attention to a lot is the team. I must feel like this is the right team to invest in to solve a certain problem.
Q: You said you like to invest in areas you understand. What do you think about the trade-off between investing in your areas of expertise and diversifying your portfolio as much as possible?
A: I think that portfolio diversification is more important, but I do try to find a middle ground. I enjoy educating myself about different areas, so I have relatively broad knowledge. As a result of that there are enough areas that I feel comfortable investing in from a knowledge-perspective, that I am still able to create a diverse portfolio while limiting myself to those areas.
Q: How closely do you work with startups that you invest in?
A: This depends. Companies I invested in through SAC, I don’t really interact with at all. It’s the fund manager who does that. Companies I invest in individually through Keiretsu, I can be more involved with. I am in touch with both the founders I invested in directly. One of the companies I support through my expertise a lot, while the other company is more interested in my network. Either way, I try to be a resource for them and support them, however, I think at this point I can contribute most if a company needs my expertise simply because I am new to angel investing and my network is still relatively small.
Q: How difficult is it as an angel investor to see many startups fail early while waiting for the 10x-return investment? How do you convince yourself to keep putting more money into more companies in the face of failures?
A: You must have the right mindset. This is why many people who legally are accredited investors practically are not suited to be angel investors. They cannot deal with the risk involved in angel investing.
Personally, I view angel investing as a way to diversify my overall investment portfolio. Angel investing is the portion I put into high risk, high reward opportunities. This portion should not be too big. I should be okay with losing all that money. In fact, my mindset when writing a check is that the money is gone. At the same time, by building my portfolio I decrease the chance of loosing all my money put into angel investing opportunities. Chances are that if I invest in enough companies, eventually I will be cashing out on at least one investment that makes up for the many failed investments. This is why successful angel investors have been investors for a long time. It simply takes time to build a portfolio, so you need to be committed to that. In the end, I trust the portfolio theory, and the companies that are still running give me hope.
What also helps me is thinking of angel investing as an investment in my education. I have learned so much through being part of this community. Doing angel investing is almost like getting an MBA. You do a lot of case studies, look at different companies, listen to their pitches, talk to CEO’s and learn how they run their company, think about different business models and different markets and you analyze financials.
What I also like about angel investing is that you can do this no matter the age. By learning how to do angel investing today, I can be a full-time investor after I retire from Microsoft. So, angel investing to me is an alternative after-retirement occupation to teaching or writing a book, which are things many other people consider doing after they retire. 
Q: What are some of the challenges you faced as an investor?
A: I think the biggest challenge for me is time, especially with balancing angel investing with my day job at Microsoft. Another challenge is deal-flow. I am trying to figure out whether I should limit myself to local companies or not.
Q: When you face challenges, what are some resources that you seek advice from?
A: I use books and podcasts to build my knowledge. Podcasts allow me to listen and learn from the top-experts. Other than “This week in startup,” I listen to “a16z” by Marc Andreessen and Ben Horowitz, and I listen to “Masters of Scale” by Reid Hoffman. 
To get advice on a specific issue, I reach out to communities like SAC or Keiretsu. John Sechrest is someone who has answers to everything related to angel investing, so I often reach out to him. I also ask questions at workshops on things I need advice on.
Q: What advice would you give someone new to angel investment?
A: Only do this if you are willing to commit long-term. If that is the case, I would refer him/her to the Seattle Angel Conference as a starting point, and to David Rose’s book “Angel Investing.”  I find this book to be an easy read and easy to understand.


Here are some things I learned from this interview:
  • You must be committed to becoming an angel investor for a long-enough time to build a portfolio.
  • As an investor you should question whether there are any reasons not to invest in a startup.
  • Only invest a small portion of your wealth into startups. You must be okay with losing all that money.
  • Angel Investing doesn’t only offer financial returns, but also educational returns.
  • Angel Investing requires time, so doing it on the side can be challenging.


In the interview Edward mentioned some resources and organizations, find out more about them here:
“Angel” by Jason Calacanis:
“This Week In Startup” by Jason Calacanis: https://thisweekinstartups.com/
“Angel Investing” by David S. Rose:
Seattle Angel Conference: https://www.seattleangelconference.com/
“a16c” by Marc Andreessen and Ben Horowitz: https://a16z.com/podcasts/
“Masters of Scale” by Reid Hoffman: https://mastersofscale.com/


About Seattle Angel:
A strong ecosystem creates an environment that allows startups to thrive. Seattle Angel’s goal is to strengthen Seattle’s startup ecosystem by increasing the access to funding for entrepreneurs to push their ideas further.


About the author: Sven Goepfrich

Sven Goepfrich is currently finishing his MBA in Syracuse. His studies focus on technology, innovation and entrepreneurship. At his school, he is working for the department of finance. Sven was actively interning with the Seattle Angel Conference in summer 2019. He is currently looking for full-time career opportunities in this field.