David Peterson (Angular Ventures) - What is venture capital?

In this episode we get to know David who went from entrepreneur and early employee to investor and from the US to Europe.

He talks about:
- Airtable, Peloton, Uber, Airbnb, Sequoia, Benchmark, Lightspeed etc...
- Esoteric SaaS
- Running a fund that is not yet top tier and the challenge of attraction
- His distribution of time between LPs, founders, advisors and admin
- How he is learning about coaching founders

...and Tamas talks about Dennis Rodman. 🤦🤷

Transcript

Spela 0:08

Hello and welcome back to Startups, People, and Equity. This is a space where we discussed topics well related to startups, people, and equity. We hope that you will enjoy listening to today's episode as much as we enjoyed recording it. Let's dive straight in.

Tamas 0:29

David is currently a partner at Angular Ventures. He spent most of his career in the States working on revenue acquisition at Google Comstack and Air Table. After Airable, he moved to. And to the other side of the startup tango and became an investor. Why I was really keen to have David on the podcast is that in my humble opinion, he's one of the best representations of entrepreneur turned investor. The conversations we had with David whilst fundraising were very understanding of our stage, both on a company and the human level. During his fact finding, I felt that he's on our side rather than someone external poking at us with a stick. And this was quite a unique experience for this approach and for his move from the US to Europe and the move from revenue acquisition to now finding the best revenue acquisition engines. I'm super to work on David to the podcast, and thank you very much for making the.

David 1:24

Thank you so much guys. Yeah, really excited to be here.

Tamas 1:26

That was a very professional intro. Tell us a little bit more about what you do when you don't do either of those

David 1:33

things. Yeah, sure. Here, let me give you the professional background, the quick resume and then, you know, can share some personal details too. So, um, I'm an American, as you might be able to tell, but now I'm based in London. I grew up in upstate New York, you know, spent most of my career working in New York City, Boston, or San Francisco. So really just. I'm one of the coastal elites, as they, they call'em in the, in the states. Um, but I've, I've spent my whole career as a early stage guy or entrepreneur. Like that's really what I've been focused on. So yeah, as you mentioned, uh, you know, worked at a company called, Well, started my career at Google, but then, uh, quickly kind of jump ship and wanted to do the startup thing. So worked at a company called Comp Stack, which is. B2B marketplace, but specifically for real estate data. So that was a super interesting company, which I'd be happy to talk about and is challenged in some interesting ways, but has also been doing, surprisingly well. So it was a really interesting case study, I think, but I led growth in expansion there. We were kind of a, a city expansion model similar to Uber or something like that. And so while I was there, we launched New York City, but then expanded to 20 other cities across the US and actually launched in, uh, the UK as well. And then after that, as you mentioned, I joined Air Table, so I was. Early employee there, the first growth person. So built the growth team, which that team kind of ended up becoming. So we, there's a lot of stories there, which I'm happy to dig into. But that team ended up becoming our growth marketing team, product marketing team, partnerships team. It all kind of emerged from that team. So worked on all of that kind of stuff from, you know, pre-revenue when I joined to. Well, I don't think any of the revenue numbers are public. So a, a lot of revenue since then. Um, let's say, you know, eight, nine figures and, you know, from few thousand users to millions of users from 10 employees to 650 employees or something like that. Um, so that was kind of the experience there at a really high level. And I was lucky enough with Airable to move from San Francisco to London, uh, with the goal of figuring. You know what our European expansion plan was gonna be, basically. So that was really exciting. I landed in London and Gallant around Europe for a few weeks meeting all of our customers who were here. Uh, it was a ton of fun putting together, like the plan for the executive team. Here's what we're gonna do, but unfortunately this was January of 20. So I, uh, I had a flight back to San Francisco booked, but I pushed it because, you know, there's this pesky virus going around, so we're like, Let's just move it a few weeks. I'm sure this'll be over soon. And we ended up pushing it a few times and I I never flew back. Basically I was in London the whole time. And then I left Air Table about a year and a half ago, a year ago, or. And yeah, as you mentioned, made the switch to investing and I've had an amazing time with Angular, which I'm, you know, happy to talk about a lot, but let me, let me stop there. That's the quick background, but excited to chat with you guys and, and dig into anything and everything.

Spela 4:45

That was a very good intro. I felt like I was there watching you go into an office building.

Tamas 4:51

I actually have a personal question from that line of resume and that. So you kind of had the plans to move back to San Francisco, right? So was it like a temporary assignment to Europe or how was that?

David 5:02

Yeah, so it was thought to be temporary but not like, you know, it was gonna be a year or two. Right? That is how we thought about it. So not months. Years, but we thought that it would be somewhat temporary. But you know, cause I came over here with my wife and she had a new role in London as well. So it really worked out well. We both had these new roles, but there were also both somewhat temporary roles where we were like spinning up new teams and then we kind of assumed we would just move back, you know? And it was a great adventure that we both got to go on. But two things happened, one. Well, one obviously is the Covid Pandemic. That's the the obvious thing that happened, which kind of kept us here for a while. But then surprisingly enough, we totally fell in love with London apocalyptic early pandemic London. Nobody on the streets we're walking around our neighborhood. We are looking into pubs, being like, Oh, it'll be so nice when we can, It's open and we can actually visit cuz we've never been to this place before. And yet we still fell in love. Like it was just such a great place and we made so many great friends really quickly and I don't know, there was something about it. So we kind of got sucked in and And now we're, now we're here. That's

Spela 6:11

beautiful. I like that story. You didn't get to experience the tourist side, You made the experience yourself actually.

David 6:16

Sounds like there was no tourism, I guess Yeah, definitely not.

Spela 6:21

But I see quite a few interesting things in the background of your camera. So I was gonna ask you about your hobbies. Are any of those things in the background?

David 6:30

Oh yeah. I do not golf at all. There are golf clubs there. I brought those from San Francisco actually. lus them all the way across the Atlantic, and I think I've used them once, so, I should just get rid of them honestly, at this point. And, But you are seeing app pellets on there? I do feel, unfortunately, like I'm in App Peloton ad whenever I'm on on Zoom calls, it's like right next to my head. Yes. And. I do love it. I, I've gotta say I do, I probably should be in App Peloton ad cuz it's great. I use it every day. I think

Spela 7:03

it would be worth it, especially if Ryan Reynolds had anything to do with it.

David 7:07

Yeah.

Spela 7:11

If we go to the storyline of going from an entrepreneur to an investor. Yeah. How was the transition for you?

David 7:18

I think the hardest part about it is that you know, when you've spent your whole career being super operational, you run the risk as an investor of getting really excited about an idea, or getting really excited about a company, I should say, not because you know, you love the idea and the team, and you think they'll do an excellent job and all that stuff, right? Instead, you fall in love with it because you love the idea and you think, Well, I could do this really well. You start filling in the gaps yourself. You start saying, Well, here's what I would do. Here's what I would do. Right? And you think, Oh, this could be huge, You know? But the problem of course, is that the team isn't saying that stuff to you. You're just filling in the gaps in their head. So that is the overwhelming risk, I think. And I, I think there's some investors who basically they can't make the transition because they just so badly want to go do. Operational stuff themselves that they end up just going back, right? And they're like, I just want to go build this. Or there's investors who find the balance right. They incubate companies or you know, they're able to start companies on the side, right? Like this kind of classic thing that let's say Mike Sp does at Sutter Hill, or Keith Ru Boy does at Founder's Fund or something, right? He's chairman at Open Door or at open store, but is also investing at a founder's fund. And you know, some very special investors can find that balance. But I think for me at least, just speaking about. Particular experience I've seen that happen to myself during specific conversations with teams about, you know, specific companies where I'll get really excited about it and then I'll have to like double check my notes and rethink about the conversation and be like, Hold on, were they telling me that they would do this? Or did I just think to myself, this is what I would do. So I really have to check myself. And I have truly loved the transition. It's been really. Interesting for a variety of reasons, but I think that's the big risk and the thing that I've. Paying

Tamas 9:18

attention to. That's really fantastic to uncover. I have a question relating to your previous form of existence, and that is, Yeah. Did you have any connection with investors and if so, what was that like?

David 9:30

Uh, yeah, yeah, yeah, yeah, definitely. I boots strapped a company, so I didn't have any connection with investors for that company, but I did with. you know, both Comp Stack and Air Table. It's somewhat unique in both cases. I was a very early employee, but I wasn't one of the founders. So the relationship is, it's funny, I now being an investor, I now like understand what that relationship was a little bit more because I had relationships with some investors, both of of Comstack and of Airable, but there were kind of like two different types of relationships I would have with investors. One was, We would get a new investor who would come on board and they would wanna meet with me and some other folks on the team. Right? They would wanna meet with us basically. And I now realize they were meeting with us to see if we were any. They were basically meeting with us to check if we were good at our jobs or not. And if not, they were gonna go talk to the CEO and be like, You need to get rid of these people, and here, I'll get other people from my network, you know, and come in. Obviously they, I'm reading between the lines. Nobody ever said that, but that's definitely what was happening. And the other type of relationship is you'd build relationships with investors over time because they looked at you as a, a potential expert in what you were. Right. Like I was working on growth stuff at Air Table and a lot of our investors just wanted to build a relationship. But for them it was because, you know, if they have another portfolio company that's running into some challenges and it seems like Air Table might have figured them out. They can ping me and maybe I can help, or they're ding a company and they want somebody's thoughts. Well, I'm somebody on the ground who could talk to them about it. I don't know if I fully recognized what all the types of relationships were when I was. On the startup side, but now as an investor, I totally get it cuz I do the exact same thing, right? Like I'll, you know, we invest in a company and I'm like, Oh, I wanna meet everybody at the company because they're all potential founders, right? They might leave and start a new company. So I'd love to meet them, but they also can help me understand the way the world works a little bit better cuz they're in the trenches and I'm not. So, yeah. I don't know if that answers your question, but that's my initial reaction.

Tamas 11:42

It completely does. Yeah. I was just wondering about that. And I'm actually wondering about something else. And this is more to your new hat. Yeah. Which is often I hear investors talk about the team, the topic and the timing as like this trifecta. Mm-hmm. the cocktail, of a startup. And if I draw an analogy between this and the execution trifecta of speed, cost, and quality. or you can only pick two. So, and then you can go back to the first one. And which one would you leave out? The team? The timing or the, Or The idea

David 12:15

Oh, interesting. Huh? Well, hmm. I mean, I feel like timing and the idea are kind of inextricably linked, so it might be hard to remove one of those. Right. But I look, what, what I will say is that, We haven't started talking about Angular yet. I know we'll get to that, but we are first check investors early. Right? Precede, whate first. Check, whatever you wanna call it. You know, it's as early as you possibly can get. And I, I think that, you know, the lesson that I have learned from working at Angular, and then prior I didn't mention, but prior to Anglo, I worked at a fund called Founder Collective in the stage, which is a seed stage fund on the East coast. Absolutely fantastic. Fund and I think from my experience there when you're investing really early team kind of matters more than anything else. Because here's the challenge. I think that there's a lot of investors out there who, who try to be thematic. You know, they try to say like, I have a particular belief about the future and I wanna invest in this theme. And I think one of the challenges with that, when you're early with your later stage, you can totally, I, I get how you can pull off being thematic. I think the challenge with that, if you're really early, is. The most interesting themes. Like once a theme becomes a theme, like once it's become obvious enough that you would even talk about it as a theme, the vast majority of the value that's ever going to be created within that theme has already been created. Like you've missed the boat. So here's a exercise you could do, You know, think about like, what's a hu, a massive theme of the teens, the like the 2010s. Right. Massive theme is ride sharing, right? The sharing economy, you know, whatever. Let's, let's call it the sharing economy so we can broaden it out a little bit, right? Um, so you go into the Google Trends viewer and search for the sharing economy and look to see when it peaked. Now I actually haven't done this, so I'm not sure. And you know, maybe we'll do this and maybe I'll be completely wrong, but this is my guess. You can test me. My guess is that it peaks in like 2015 or something like that right now, what are the biggest companies in the sharing economy? Uber and Airbnb. When were they founded? Right, like 2000. 2009, right? Like if you had a sharing economy theme as an early stage investor, you probably wouldn't have written that theme up until 2014 at best or 2013, and you would've missed the biggest winners by five years. So this is just a short rant that you're getting from me. I guess I just think early stage idea, all that stuff, like it kind of doesn't matter because if. I should say it does matter a lot, but you're not gonna be the one, as an investor coming up with it, the team is gonna come up with it. The challenge as an early stage investor, honestly, is to stay open-minded enough, stay curious enough. That when an amazing team comes to you and talks to you about the future, you know you're willing to hear it. You're not so biased or whatever, that you just can't, you can't hear what they're telling you. So anyway, I think what I would choose from your trifecta is team, because ultimately they're the ones who are gonna teach you about the future. And if you try to be too specific in what you're looking for, I think you're gonna end up missing all of the the amazing stuff that people are building. I think that.

Spela 15:45

100% since we have a good example, I think with LumiNova Tama, because they started as something else and then developed into a completely new company, all within the same team, but two different startups. With one backing. Totally. Yeah. I wanted to go one step back to the, the investor conversation. Yeah. Would you say that it's a bad sign if the investor doesn't want to meet anyone from the team except for, you know, the founder that they were talking to?

David 16:15

Oh, interesting. It seems kind of strange to me if as an investor you have the opportunity to meet more people, you do it like that seems like a great, you know, it's a great opportunity to get more data on the company that you're investing in, you know, and on the team. So, yeah, I, I would love to do that. I mean, very often I'm asking founders like, who else can I. You know, like, who else is free? Who else can you invite to this call? You know, let's say, is your mom

Tamas 16:44

available on short notice

David 16:47

Sure. You know, she'll probably have some interesting things to say, about who you are. Um, so yeah, I certainly want to meet more people. I mean, look, I can imagine a scenario where the investor is so high confidence and so excited that they're like, Look, I don't wanna waste your team's time. Let's just, let's move. I don't think that's a red flag. I wouldn't be concerned about that if I were the founder in that scenario, but as an investor, yeah. I love the opportunity to get more data points because look, the team that you as a founder, the team that you're able to assemble, That's a huge part of what investors are betting on, right? Is your ability to assemble an amazing team. So if you think your team is amazing, I mean, yeah, bring them to the second call just so they can show off. Convince the investor that yeah, they are, they are amazing.

17:36

I

Spela 17:36

would like to go. And talk about Angular as a fund now. Sure. So if we talk about you and how you think about investments, how would you describe Angular and how does Angular think about investments?

David 17:47

Let me share like the boiler plate, like what do we focus on? That kind of thing. And then you can follow up and dig in on lots of other areas, cuz I, otherwise I'm liable to monologue a little bit. So Angular is focused on a few things. We invest, as I said before, first. As early as possible most of the time. Pre product and pre-revenue. Not always, but most of the time I can say like one of the companies I invested in earlier this year, it was actually pre incorporation, you know, when we were talking to them. So it, it's early. We're totally comfortable with that. The second thing we focus on is sector. So we're kind of laser focused on B2B enterprise. It's usually deeply technical or deeply esoteric. That's what we're drawn. Like kind of weird stuff, usually. Hard to understand. That's our, Give

Tamas 18:41

an example of Esoteric sa.

David 18:43

Esoteric sas. Um, yeah, sure. So like, there's a, a company that we invested in called Crux ocm. Basically what you could think of it is, uh, you know, everybody knows rpa, robotic process automation, right? That kind of theme. This is industrial process automation, specifically targeting the oil and gas industry or any heavy industry. So it could be oil and gas, but it could be the others as well. The team is completely fantastic domain experts literally did these jobs in oil and gas. Chemical engineers, Right. And are have now started this company. The core insight is that if you want to turn on an oil pipeline, like I mean, there's some that are in the news right now, right? The founder is very experienced with a keystone pipeline, which is a pipeline in North America. Longest. Uh, I think the longest oil pipeline in the world goes from Canada, down through Texas, 3000 miles or something like, Anyway, she was a pipeline operator, right? And, uh, ran the control room for this pipeline. And the core insight is that to run this control room, if you wanna turn on the pipeline, it takes three hours to do it. Three hours of meticulously following a checklist. Incredibly stressful if you press anything wrong. The pressure might go off in the pipeline. Pipeline bursts, right? It's super high stakes and it's completely manual. And uh, the analogy that she always gives is, you know, just imagine, running, you know, heavy industry, oil and gas. The way that pilots flew planes in the fifties. Transatlantic flight and the pilot is wired the whole time, right? Looking at everything, making sure everything's, everything's ready to go. That is still the way that pipelines work today. Now, pilots have autopilot, right? Like we're trusting machines, We're trusting computers to do a lot of this manual work for us. Uh, we don't do that in oil and gas, so they've built a software that runs pipeline. Runs pipelines for, uh, these oil and gas companies, and it's like utterly revolutionary for these companies. It's an incredibly exciting company. I could go really deep on it. It's incredibly exciting. And also both technical and esoteric, right? It's super niche, super technical, but the amount of savings that they drive for these companies and the amount of value that they can capture is completely. Energy is the largest market in the world. There is a lot of money flowing through these pipelines, so the opportunity set here is just completely insane.

Tamas 21:21

Yeah, I think that was a very good example. Also curious and I think this is gonna give us, uh, a bit more insights on angular. On why you chose Angler compared to another fund?

David 21:31

Yeah, uh, absolutely. So the story here is, you know, I left Airtable a year and a half ago or so, to be honest, I didn't really know what I wanted to do next. I was talking with a lot of founder friends about joining them early. You know, I was thinking about doing my own thing though, uh, kind of quickly through that IDs side cuz there wasn't anything I really wanted to work on and. I've been down that path before, you know, starting something and then realizing that you don't really wanna do it. That can be a painful situation. And yeah, and I was also thinking about maybe making the jump to investing, but what wasn't really Sure. So as part of that process, I spoke with a bunch of different, Types of investors, you know, so larger multiage funds, you know, later stage funds, early stage funds, whatever. And the thing that really drew me to Angular is a few different things. One was I got to know Gill, my partner over there who had started Angular, and we just got along really well. It felt like we were very complimentary. I respected him a ton because of his experience. He respected me a ton because of my experience, cuz it was truly so complimentary. I've spent my career early stage, right, operating all the stuff we've talked about. And Gill is like a thoroughbred vc, you know, he's been doing venture investing for 20 years and he's seen downturns and he's seen huge successes in everything in between. So we just kind of immediately gelled, um, because we were both so excited to learn from one. And fill in the gaps of our own experience. So that was one thing and, and honestly, probably the most important thing is that we get along. The other thing is that I asked my friends who were founders across Europe, what they thought of Angular, had they come across Gill, you know, what was their point of view on it? And universally got very positive feedback. But it was very positive in a very specific way, which was, um, things like Gil was the most thoughtful investor we spoke. Gil asked questions that made it seem like he was actually listening, which is, that's a low bar. To be fair. That is a low bar That just goes to show you what founders are often dealing with, with investors. But I heard a lot of what, you know what I would want to hear. Founders say about me, you know, talking to them like I'm actually engaging, I'm thinking deeply with them. I'm asking good questions, like I'm being thoughtful. I think that is really, really important. So I was heartened to, to hear that feedback. And then the, the last thing is that, you know, Angular is a small firm. The only investment partners are me and Gil. Right? We, we are it. And I think Angler is an accelerating brand and it's a really exciting brand across Europe and Israel. But it's also like we're at the beginning of the story in some ways. Despite it, it's been around for a while. Right? He raised Fund one in 2018. But we're still at the beginning of this story. So there was this element of, you know, maybe this is something, I can have a hand in building, and as somebody who is ultimately quite entrepreneurial, and that's what I really enjoy doing. I basically came to the conclusion like, if I'm going to make the leap to investing, then I want to do it in the most entrepreneurial way. And being able to work at a really small firm where we invest super early. Right? Like that was super important to me because another thing I think is that, uh, Venture capital should be, risk capital, right? And that means you should be investing in companies that nobody else thinks are a good idea, but you do, right? Or in teams that nobody else believes in, but you do. If you're just investing in other things that everybody thinks are a great idea and you're like elbowing your way in to get money into a deal that everybody agrees is. That's not really VC anymore. Like, where is the alpha in that Everybody thinks it's a good idea, you know, So it's gonna be priced up. And that isn't the version of VC that I was excited about. And what I loved about Anular is that all the companies were completely insane like crux that I just told you guys about, right? All of them were these crazy ideas that were tru. Off the beaten path. They were contrarian in the best sense of the word, uh, and they were early. Like we invested in them as the first check, the first investor. We believed in these companies before anybody else did, and that's the version of venture that I want to be a part of. So that's why I ended up where I did. I

Spela 25:57

love the way you described it. I think it also shows not just your passion, but I can really see that you mean what you're saying behind it, because it always paints a story. I always like to say that if there's anything behind the words, it's gonna show up as a picture in your mind when you're listening to it. So, Oh, I like

David 26:15

that.

Spela 26:16

Yeah. I saw a few very good double clicking points and what you were just saying, but I wanted to first touch on, you said it's an early stage. And I also read your blogs about early stage companies, and I wanted to bring the comparison into this conversation. So early stage companies have different strategies than later stage companies, and so I'm guessing, early stages of the funds have different strategies than later stages. So what are you currently focusing on? In comparison to maybe a very old fund.

David 26:46

Mm, yeah. Good point. So to clarify, when you say early stage in this case, you mean, you know, years of existence. Yeah, Yeah. Right. Versus, uh, focusing on earlier investing versus later stage investing. Is that right? Yes. Yes. Stage. yeah, look, I, I think the big challenge if, if you, you're not an established brand, then you need to hustle. That's the truth, right? If you're an established brand, if you are. Benchmark. If you're Sequoia, then all the best founders in the world are going to be knocking on your door, and so your challenge is a selection challenge. You need to make sure that you're choosing the best of them, but you're also, you're looking at the cream of the crop and you just are kind of choosing the best from that. If you don't have an established brand, I mean, first and foremost, what you need to do is figure out how to build a brand. What's your strategy to do that? What is an authentic way for you to actually build a brand? And I think that's really, really, There's a reason that VC Twitter is all like meme lords now, right, like people are kind of desperate to figure out different ways to cut through the noise. Um, so that's really hard. And the second thing to, to the point I was making about these established firms with brands is when you don't have a brand, then your challenge is not just a selection challenge, your challenge is a sourcing challenge. You need to go find. The best possible founders out there. And I would say that if anything it's like doubly hard because you need to solve the sourcing problem for yourself. And there are lots of different potential ways you could go about that. Depending on the type of firm you have and how you positioned yourself, you need to solve the sourcing problem. But the challenge you have with selection is kind of doubly. Hard, Right? Because very often, you know, the people who are talking to you have already, you know, Pitched and been rejected by all the best firms. All the quote unquote best, right? They've, they already pitched Sequoia and Sequoya said no, and now they're talking to you. So the subset of the founder population that you're talking to is different than what Sequoia is looking at, or whoever else. I'm saying Sequoia is a placeholder, right? But I think that what that does, honestly, is it trains you to look for non obvious. Bets, right? It trains you to look for who is the team? What, what is the contrarian outcome here? Who is the team that, you know, nobody else wants to make a bet on, but they actually are amazing. So I think it's amazing training as an investor to be, to work at a non. Brand name, uh, firm, and, it forces you to do, I mean, I think what like classic venture capital actually is to our conversation before, right? It forces you to see the non-obvious to or to, to try to find the non obvious bets.

Tamas 29:38

For whatever reason, that kind of makes me think of Dennis Rodman, like catching the best rebounds, right? and, and yeah, you gotta pick a technique to even catch the ones that are oddballs it just

David 29:48

made me think, Oh, I love that. Yeah. No, I hadn't thought about that. But that's, it's, you know, it's totally true, right? Like, Gil always tells this story, which is his story, so I won't be able to tell it as well. But, you know, he worked at, in Israeli venture from, you know, 2003. 2012 or so. Right. So he was, he was in Tel Aviv back then. And look, this is an amazing era in Israeli venture. There were a ton of great companies that came out of that, but he was working at a few different firms. Then, most recently was Gemini, and you know who else was in Tel Aviv at that time? Benchmark was there. Light speed was there, Graylock was there, right? Like there were these brand name, us brand name firms that were, and they were all on the same street in the same buildings. And you know, the best Israeli founders, they wanna get backed by benchmark, you know, like they wanna get backed by Graylock or, by light speed. Uh, so he always talks about how this was like the best training in the world, because if a founder is talking to you, you know, they started the day on the 12th floor right? And they're like coming down and they finally meet with you after meeting with everybody else. You know that that's what's happened. So it's a really good training ground to, to help you see, like, you know, that everybody else has said no. So if, if you're gonna say yes, you have to be really sure about, it helps sharpen your instincts. I think

Spela 31:09

when you were just explaining this, it brought me back to your explanation of the oil company and. You said it's very niche. They're subject matter experts, and they're explaining to you what the problem is, but the problem is so niche, and I was wondering how do you know what they're telling you is true or what they're the founders doing that makes you believe them?

David 31:36

Yeah, that is both the art and the science of the job, truly. That can be the hardest part. And you know, part of what we do is we try to surround ourselves with experts in different areas that we look at frequently. So, we'll talk to a team and you know, we'll get really excited about it and we'll be like, This seems like the real deal. Like this is crazy, but it seems real. And then we'll forward it to a bunch of people we know. Who in the industry were super technical or, you know, whatever it might be, and just try to get their feedback as quickly as we can, you know, within, ideally within hours so we can kind of keep the momentum going. So building out that network is incredibly important. Finding people that you trust in niche, esoteric areas so that you can run ideas by them and get their thoughts is really valuable. The challenge with that I'll say is, it's all about how you ask the question to these technical advisors, right? If you ask them, Is this a good idea? That's probably not gonna be useful. Because very often early stage ideas don't seem like good ideas, especially to people who are really experienced in the area, right? They're gonna come up with a hundred reasons why it's not possible, which that's not actually that helpful. But what what's really helpful is for them to validate, like, yes, this is a real problem. Or validate that there's no other solution. The competitive landscape, it's empty. Like nobody else knows how to do this. Or they'll say something like, Look, if this was actually technically possible, sure it'd be great, but it's not. And then you can say like, Well, can we figure out, is this actually technically possible? Cause if it is, if they've figured something out that. Person doesn't think is possible. Well, that's, that's super interesting. Um, so I, yeah, it's both about building up that bank of trusted advisors and also asking the questions correctly. So you're kind of getting high signal output.

Tamas 33:30

I wanna understand a little bit more about your time distribution as a partner at Angular. How much time do you spend talking to LPs? How much time do you spend talking to founders?

David 33:40

Yeah, sure. So we spend, Hmm, I don't know what the actual breakdown is. One thing I'll say is it's very seasonal in so much as you know, whenever you're fundraising, you definitely are spending a lot of time fundraising. And one of the challenges with fundraising from LPs. Is that they're very slow to make decisions, right? If a slow process for founders with VCs is, oh, this is gonna take four weeks for us to make this decision. You know, with LPs it's like a year. Or 18 months or something. Right. It's a long process. I say this not to bemoan it or to beir their approach, right? Like it kind of makes sense given what they're doing because they invest in managers. Over a for a 10 year time horizon. They're investing in you and they're for fund one or fund two, and they're, in their mind, they're underwriting, investing in fund one, fund two, fund three, and fund four, right? It's a 10 to 12 year relationship that they're assuming that's the magnitude of the decision that they're making. Uh, so that's a, that's a big decision and it makes sense why you would take that really seriously. And they also don't need to make that many investments. You know, they're usually only investing in a handful of managers per year tops. So the time horizon, the time scale is completely different. So that's just a little bit of background. How we, you know, like the, those are the stakeholders that we have that we're working with now, how much time does that mean you spend with LPs, like on a week to week basis? The reality is you don't spend that much time with LPs. On a random week, right? Like the average amount is gonna be very low. I don't know, hour or two, like maybe you've met a new lp, you have an intro meeting, right? It's, but it's very steady state. But then there's some spiky stuff, like you'll have a, a general meeting maybe once or twice a year. Where you invite all of your LPs and some of your portfolio CEOs present and you know, and then you're gonna spend a ton of time for like a week solid, two week solid preparing for that. Um, and then when you go fundraise, then it's gonna ramp up a ton. And depending on the environment, fundraising could take six to 12 months, or fundraising could take two days, you know and it depends on the fund too, right? Some funds are. Completely oversubscribed. So they don't actually spend time fundraising they just send out an email and say like, Hey, we're fundraising, let me know how much you want. And that's the end of it. So it's variable but relatively low. I would say. We really spend most of our time with founders. Whether they're new or the portfolio like that is probably 75% of time is, is with founders. Again, either meeting new founders or working with the portfolio. And then there's probably, yeah, 15% that at least for us is like operations. You know, it's running the firm it is a startup. We have to deal with our finances and expense management, and I found a new office for us and I needed to put together all of the tables and the desks, you know, it's what you do when you're running a new business. Yeah, you're right about experts, advisors, all that. There's definitely a portion of that too, which honestly, I should probably spend more time doing. Yeah. And you even forgot to mention ordering your Angular branded Patagonia sweaters, that that must take up a whole lot of time. Uh, I mean, absolutely. You know, that's also, a significant portion of the fees. That we get to run the fund it, there's a line item, there's a Patagonia line item. Actually, it's standard in our LP agreement, you know? I'm obviously being facetious. Just if any LPs are listening,

Spela 37:21

Oh, that was amazing. I wanted to ask you about the dynamics actually between you and the founders. Not when it comes to investing, but when it comes to operating. So usually the founders see investors also as trusted advisors, and how do you go about that relationship

David 37:39

Ideal. Yeah, no. Um, good question. Look, I think this is something that I'm, to be candid, I'm learning how to do, you know, and learning how to get better at, I feel like, the analogy that investors often use is one of like, you're no longer a player on the field and now you're a coach and. Not all players or good coaches and good coaches are, look what they do is very different than good players. So I'm learning how to become a good coach. The framework that I try to use for myself is, one, I wanna be available very often. We're the only other people in the world, other than the founding team that believe in this idea and believe in this team. And. I know how stressful it is to start a company and how highs the highs are and how lows the lows are and everything. And if you're the only other person in the world that believes, you want to be there when people need to talk, if you're celebrating a win or if you are bemoaning some issue, you know, just being available I think is really important. Something else that I think about is sometimes your role as a lead investor, you know? Cause, we're pretty much exclusively lead investors, uh, early on. And ultimately my job, if you were to boil it down, my job is to get each of the companies that I'm investing in to the next round. That is success. It's like you've raised a seed. Now let's make sure you get a Series A and there's lots of different ways you can do that, right? Like it could be that your brand alone, does a lot of that work because the brand is such a positive signal that now all the series A funds wanna talk to the company. So you don't need to do anything. All you need to do is make the first investment and then announce it. That is the most valuable thing you did. But I think a lot about like, okay, how can I help companies chart that path? How can I help them get from where we started to together to to the next round? And I think a big part of this is trying to help founders figure out what needs to be true for the next round to be successful. So coming to some sort of agreement on what are our core hypotheses about this business? What do we believe about this business that nobody else believes? But if we could prove it, everybody would want to invest. What are those things and how can we prove those things? Because ultimately it's about focus, you know, So you have a limited amount of time. You have 12, 18, 24 months to prove something. And so let's agree on what we think we need to prove. And then let me be this kind of third party observer and I can be the one who helps you focus. I can be the one who tells you to do less. I can give you an excuse. You know, I can give you an excuse to do less. Cause I, I know as a founder, You just want to be doing everything because you're trying desperately to keep this thing afloat and it can be really hard to give yourself the ability to focus. And sometimes it's helpful for somebody to be like, Don't do that. Just do this. It's okay. Just do this. So that's something I think about a lot. And then the last thing related to all of that is, look, I think a big role of a lead in a lead early stage investor. Is being honest with founders when things aren't going well as early as you can, right? Look, being an honest observer and giving them the hard feedback as early as you possibly can. That something seems off here. Here's what we agreed we needed to prove. I don't think we're proving this. And being honest and being early, I think is probably the best possible thing you can do. But you know, that's a hard part of the job. It's much easier to kind of say, Yeah, everything's going great, and then, you know, stop answering emails or something when they, they need to raise the next round. But that is not how I would ever show up and that's not how you can do it as a lead investor.

Tamas 41:31

I'm gonna quickly jump in, that makes me think of a Hungarian immigrated psychologist to Canada under fell felta, who says it's more important to be honest than to be. I think that's

David 41:41

pretty much. Hundred percent. Yeah. Yes. That was a much pier way to say exactly what I say. I'm gonna you say that next time. That's great. That's absolutely right. Yeah.

Spela 41:51

There's one more thing that I wanted to ask you because we are a podcast that focuses on equity, and people things as well. And you are a lead investor. Mm-hmm. how do you discuss employee pool allocations or people things with the founder?

David 42:09

Yeah, so we talk a lot about how big the option pool should be, that is always a point of negotiation, right? During any round of financing is how big the option pool should be. Generally, I recommend to founders to err towards a larger option pool early on. Obviously founders don't want to cuz it dilutes them more. So this is the balance, right? Like this. This is why it's a negotiation, but I push for, for, uh, a larger option pool early on because, ultimately, Options in the company is the most, valuable currency that you have to hand out to potential employees. So you wanna have that currency on hand. Right? And the, the other thing is, you know, you go raise a Series A and they're gonna force you to ramp up the option pool anyway. So It's gonna happen eventually. So why not have that tool in your tool chest early on? I wonder if I just have a different point of view on this also, um, versus, um, Just because the way that equity is handed out is so different in the States versus across Europe, just generally, right? Companies are much more generous with equity packages early on, and it's used as a, a powerful tool by early stage teams, you know, much more frequently. So my point of view on it is, Make sure you have a significant option pool and make sure If this is a massive outcome, make sure your early employees are going to share in that upside. Because the best possible way to build a vibrant startup ecosystem, you know, is not with government financing or subsidy programs for certain share schemes or whatever else. It's none of that. The best way is to. Is to, you know, create wealthy startup employees who want to go start more companies or invest in more companies. We need more PayPal, mafia's, and, you know, whatever else we need more of those on this side of the Atlantic and that that only works if people have significant upside in these c. I

Spela 44:16

just wanted to share a thought because of your, the question that you posed that was more rhetorical, but you said the US grants more, equity than Europe and a thought that popped into my mind was when I talk to companies when they want to grant equity, And if they have this grand vision of becoming a hundred billion dollar company, a trillion dollar company, they don't have a problem giving a lot of equity because they're still gonna be remaining a lot for themselves. In Europe, it might be that they're dreaming a bit lower, and that's why every dollar counts. So they wanna remain in

David 44:52

their pocket. Mm-hmm. hypothesis to test. Interesting. Well, yeah, that's, Yeah, it's interesting. I wonder if there's a different mindset on, the size of the potential outcomes. That could be the case. I don't know. But you could imagine that being the case, if you look around and you look at your peers and you know, there aren't that many. 10 billion plus outcomes across Europe, there aren't that many. So pick up the average startup employee and do they know somebody who's been on one of those sorts of rocket ships? Chances are no. Whereas, you know, throw your blue bottle coffee mug at any direction in San Francisco, and you'll hit somebody who is roommates or themselves is, on a team at a company that is a hundred million ARR plus right company or something. It's just that that density changes the dynamics, I think.

Tamas 45:47

All right. I think in the interest of time it's a good point to leave at. We didn't discuss a lot of the topics that we prepped, but that's probably an invitation for next time.

David 45:56

Yeah. This was a great conversation. So glad we had it. Yeah, we, There's always more stuff to talk about.

Tamas 46:00

Yeah. Thank you so much for your time, David.

Spela 46:03

It's been a real pleasure. Yeah. Yeah.

David 46:04

Thank you both.

Spela 46:05

Thank you.