Tuesday, August 20, 2019

Startup-People of Seattle: Michael Schutzler (Business Angel and CEO of WTIA)

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 third interview, meet Michael Schutzler:

“The intrinsic motivation of giving back really is an important part of angel investing to me. I became successful as an entrepreneur because others believed in me, and now I feel like it is time for me to do the same for others.” 
Michael Schutzler is serial entrepreneur, business angel and CEO of WTIA.

Q: Thank you for taking time for this interview! Your LinkedIn profile lists 23 positions. Could you please provide a quick overview of your career and how you got into startups?
A: Most of my career was in tech. I started coding computers when I was 14 years old, which was 43 years ago. I have had a couple of positions in established companies in the telco and in the printing and manufacturing industry for example, but when I moved to Seattle my interest in entrepreneurship deepened. I founded a couple of successful companies here and these successes provided me with the financial resources to be an angel investor today. As an angel investor I am jumping from one opportunity to the next launching products and creating companies.
Q: I’ve heard three different components related to startups out of this. The first was tech, the second being an entrepreneur and the third is investing in startups. Let’s talk about tech and your role as CEO of WTIA first.
A: Sounds good. WTIA is a nonprofit allowing 1100 tech companies to cooperate. These companies work on things together that they otherwise couldn’t do alone. For tech startups this is mostly related to their two primary challenges. These are access to capital and access to tech talent. When it comes to capital, WTIA is running pitch training programs. We also have an 18-month long training program that teaches selected startups on everything from raising capital to product management, marketing and building relationships with angel groups, VC’s etc. When it comes to talent, WTIA enables the member tech startups to offer benefits like healthcare to their employees. This is enormously important as competition for tech talent is very high. The reason WTIA is able to do this, is because by bringing together so many tech startups as a group, we can negotiate better terms with insurance companies. This makes offering healthcare affordable to our member startups.
Q: Great. You said that you have also been involved in founding several companies yourself. What are some of the things you have learned as an entrepreneur?
A: The same things that you can read in startup books. Based on my experience I find the literature to be very to the point. An entrepreneur must learn how to fail fast and learn from mistakes. A startup needs to be continuously adjusting their business model based on new insights. Not everyone is made for startups, so entrepreneurs must surround themselves with the right people. Recruiting people is one of the most important tasks of an entrepreneur. The last thing is, you must be a great storyteller. You can be very smart and have a great idea, but if you aren’t able to convey a good story, nobody will give you any money and nobody is going to work for you. So, you have to be a great storyteller to be a successful entrepreneur.
Q: What would you recommend someone who is new to the startup world? 
A: If you have never done a startup before, I think it is a good idea to join something like the Startup Weekend that Techstars offers. This brings like-minded people together who all have the desire to start a company. At the same time this is a great opportunity to get a first taste of what it is like to be an entrepreneur. I would also recommend going to coworking spaces like WeWorks, Pioneer Square Labs or Galvanize and start meeting people. If you have some subject matter expertise, like marketing for example, offer advice and fully immerse yourself in the environment that entrepreneurs find themselves in.
Q: Regarding the third hat that you are wearing, the hat of an angel investor, do you invest individually or in funds?
A: When I started 24 years ago, I only invested as an individual and I only invested in companies that I sourced. I didn’t follow or join anybody. I learned a lot that way and I did quite well. Over the last five years or so however, I have experimented with investing into angel funds like Alliance of Angels or Kereitsu. I am also a limited partner in a venture capital firm called Flying Fish LLC. So, in the last years I have experimented with this more passive form of angel investing, but most of my experience is as an active angel investor. 
Q: You said that especially through active angel investing you have learned a lot. What are some of the things you have learned about angel investing?
A: It is similar to what I have learned as an entrepreneur. It matters less what the product is, instead, what matters most are market opportunity and team. I have invested in brilliant technologies that have failed because the founders were not the right people and I have invested in great startups where it turned out the market just wasn’t ready.
Q: What is your investment thesis?
A: I don’t invest in things I don’t understand like health care, real estate or restaurants. I primarily invest in tech companies and I do an enormous amount of due diligence on the founding team. 
Q: If you say you invest in things you understand, what do you think of the tradeoff between this and diversifying your investment portfolio then?
A: The reason many angel investors, including me, invest in startups in their area of expertise is that most BA’s view investing in startups as a give-back. We hope for returns, but view our investments more as a grant that has a potential of a payback. We want to help startups be successful and the way we do this is not just by giving money, but by helping an entrepreneur in any way that they need. We offer our expertise, our network, and our money as well, but money is just one aspect of it. 
Q: How involved in a startup do you think an angel should be then and how do you think different opinions between angel and startup should be dealt with?
A: Most angel investors are a small percentage of the cap table. Therefore, the amount of votes an angel investor gets is small and the influence is limited. An angel investor should be respectful of that. To the extent that the entrepreneur wants and needs help, it is the angel investor’s opportunity to be as active as useful, but the entrepreneur should be the one asking for help. 
Q: As an angel investor, how difficult is it to lose money through investments, especially until getting first returns?
That’s a great question and with my answer I refer to the last two questions I have answered. If an angel investor as an individual is not prepared to lose the entire investment, then that angel shouldn’t be investing. The motivation cannot be just managing an asset class but must be helping startups be successful. The intrinsic motivation of giving back really is an important part of angel investing to me. I became successful as an entrepreneur because others believed in me, and now I feel like it is time for me to do the same for others. There is a psychological satisfaction in giving back to the system that made me possible. That satisfaction is much bigger for me than the one I get when I get returns. Aside from all that, angel investing also has helped me build a great professional network as well as network of friends, it has helped me become a better CEO and I have had a lot of fun.

Here are some things I learned from this interview:
  • Storytelling is a must-have skill for entrepreneurs.
  • Angels should not simply view their investments as an asset class. Instead, the component of intrinsic motivation is important for BAs. BAs should use their expertise and network to help startups whenever founders ask for help. 
  • The two key challenges for BAs are: 1) Having the courage of writing a check knowing the money will probably have to be written off, and 2) Having the courage of keeping the mouth shut when not being helpful/ when not asked for advice. 

In the interview Michael mentioned some resources and organizations that he finds helpful, find out more about them here:
SeaChange Fund: https://seachange.fund/

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.

Seattle Angel Conference:
SAC round XVI is about to start. Are you an entrepreneur looking to get about $200k in angel funding? Are you curious to learn more about pitching, to polish all the documents needed for investments and to receive great feedback? Or are you an accredited business angel who wants to learn more about angel investing and due diligence? In any of these cases you should consider reaching out to us. You can find more information here: https://www.seattleangelconference.com/
For any questions please reach out to: sechrest@gmail.com

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.

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