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Cultivating Confidence in Startup Investing: A Comprehensive Introduction to Angel & VC Investing with the CEO of Investor Playbook & Founder Playbook
497 Plays1 year ago
Update: I recently launched my newsletter, The Sheconomist, and would love for you to subscribe: sheconomist.com - I share so many tools and resources that help young, high-achieving women with radical money and career self-advocacy.
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Are you new to the world of startup investing? Then this episode is for you!
In this episode, Thamina sits down with Bridgette L. Smith, the CEO of Investor Playbook and Founder Playbook. Bridget's mission is to empower underrepresented founders to access capital and grow their businesses.
Bridgette's journey into startup investing began with curiosity and a desire to learn. A few short years later and she is now invested in over 150 startups and is hosting workshops to make startup investing more accessible, especially for minorities.
Bridgette sheds light on the evolving landscape of accredited investors, the different stages of startup investment, and the distinctions between angel investors and venture capitalists.
She also shares valuable insights on creating a personalized investment thesis, finding diverse investment opportunities, and the importance of asking the right questions when evaluating startups.
Recommended
Transcript
Generational Wealth for Women
00:00:00
Speaker
I am truly excited about that potential for your audience and for anyone in the United States to be able to create generational wealth much earlier in their career versus having to wait till you reach such a high bar. I'm Tamina and I'm extending a heartfelt invitation to you as we join forces in reclaiming economic power for women in a world that is often structured against us.
00:00:29
Speaker
We'll dive into the minds of accomplished female leaders, investors and entrepreneurs to equip you with the confidence and knowledge to build wealth for yourself and other women. So buckle up, get ready to learn and be inspired to take action. Hello and welcome back everyone. I am so excited for you all to listen to this week's episode.
Special Episode with Bridget L. Smith
00:00:50
Speaker
not only because our guest is so fabulous, but also because the format of this particular episode will be just a little different from previous ones because we just have so much ground to cover.
00:01:03
Speaker
And because of that, I will be doing a lot less talking than usual. And this is basically going to be a masterclass on startup investing. So without further ado, I would like to introduce you to the one and only Bridget L. Smith.
00:01:22
Speaker
Bridget is the founder and CEO of Founder Playbook, a micro accelerator for founders where she helps women, BIPOC and LGBTQIA plus founders become investor ready
00:01:37
Speaker
get access to capital and scale their business. Her popular Investing with Confidence workshops provide guidance and tactical education for women interested in investing in pre-seed to serious seed startups.
Bridget's Workshops and Initiatives
00:01:53
Speaker
In June of 2023, she expanded her wings and launched Investing with Confidence Angels, targeting 1,000 accredited women in her network.
00:02:03
Speaker
Together, the group leverages their collective financial and social capital to invest in and support startups and VC funds led by BIPOC, Women or LGBTQIA founders. Bridget began investing in startup assets in 2021. Her current portfolio includes hedge funds, private equity funds, VC funds, SPVs,
00:02:28
Speaker
solo investments and multiple alternative assets. And when Bridget is not creating impact and generational wealth through investing, she serves as chair of the Berkeley Sky Deck DEI committee and is serving on several special committees at Golden Seats, the fourth floor,
00:02:45
Speaker
Women in BC and 50-50 women on boards. She's also a board advisor for multiple innovative startups and provides assistance to founders in various accelerator and incubator programs. Prior to navigating the startup ecosystem, Bridget worked in tech for 25 years, starting as a tech writer and working up to the C-suite.
Transition to Startup Investing
00:03:08
Speaker
Then she landed in a senior leadership role at Google and later retired.
00:03:12
Speaker
Prior to joining Corporate America, Bridger shined in journalism. Her journalism career includes working as a print reporter, news reporter, on-air commentator, talk show host, and a creator and executive producer of an independent television talk show. Today, she's earned over 100 awards and has been featured on the cover of the inaugural edition of Who's Who in Black Milwaukee and the Small Business Times Magazine.
00:03:39
Speaker
Her educational background includes UW Milwaukee School of Engineering, Yale School of Management, Harvard Business School, and UC Berkeley School of Law. On this episode, Bridget will walk us through what each and every one of us can do to become a more confident startup investor. What a resume, Bridget. Welcome to Give Her Dollars. It's so good to have you. Thank you. I'm really, really excited to have this conversation today, and I want to applaud you
00:04:09
Speaker
for just being a catalyst in this space to help young women understand what it takes to be an investor and to break down all the barriers and the myths that people think and really just help them become more affluent and comfortable in this space. So I applaud you for this conversation and for the work that you're doing as well.
00:04:27
Speaker
Thank you, Bridget. That really means a lot. And that's exactly the type of impact I want to have. So thank you for echoing that. And yeah, so excited for our audience members to absorb all of your knowledge. It's going to be fantastic. Bridget, before we dive into all the nitty gritty details, because again, we have a lot of ground to cover today, I would love for you to briefly share how you got so passionate about the startup investing space and educating people around all of that.
Starting from Scratch in California
00:04:57
Speaker
Well, the interesting story is prior to 2021, I had never invested in startups. I had only invested in real estate, my 401k through my previous employers and my IRAs, right? Individual retirement accounts. And so that's it. I didn't know anything about startups, but then I moved to California, joined the startup
00:05:21
Speaker
what feels like a planet of startups. There's so many startups everywhere you turn. And so my environment changed and therefore
00:05:30
Speaker
I was exposed to something new and different. And so as people were talking about startups and talking about unicorns, I didn't know what that meant. They were talking about, you know, people were leaving tech, the tech industry, Google or Meta or Amazon, all these big companies to start startups or to invest in startups. So I just became curious. And so I started to ask questions about wool and do research for my own self. What I learned
00:05:58
Speaker
is that there's so much information out there that it becomes overwhelming. It becomes almost paralyzing because you don't know where to go and who to ask questions and where to find answers. And so I asked, I started to poke around and I found people in my inner circle and the various organizations where I'm a member, there were communities of investors and communities of women looking to learn more. And what I learned is that they were learning as well. So I asked questions, I tried to find information,
00:06:28
Speaker
I bumped into a lot of complex answers and I decided to just dig in. So I watched YouTube videos, I bought books, went to a lot of webinars, joined angel workshops and learned that this is a very complex space. But then I started to distill it down to what do I really need to know and how do I really get started?
00:06:50
Speaker
And so that's where the rubber met the road for me, which was, okay, all of this stuff is out here, but what do I really need to do as my next step? And it turns out it was really about, it boils down to finding startups and finding deal flow, which I'm sure we'll get into, and then understanding what to look for within those deal opportunities and how to evaluate those deal opportunities.
00:07:15
Speaker
And then how do I reduce my risk so that I don't lose my money, which is a common.
00:07:22
Speaker
comment that you hear when you're in the startup's ecosystem is that this is a high risk asset class and be prepared to lose your money. Well, if you hear that, anybody in their right mind would run away. But at the same time, this was a space I wanted to be and I wanted to learn more. So I decided not to run, but to lean in and run towards. So that's what I did. So that's really how I got started. And prior to just wanting to quote unquote invest,
00:07:49
Speaker
I was already doing the work of coaching leaders, coaching entrepreneurs and founders as just something I did on the side. I was always answering questions, giving them direction, making connections. I was doing it informally before I really knew that this was something that I could do as a business opportunity. I was already in a space, already doing the coaching and the advising type work, but never really investing. Then when I started to invest,
00:08:18
Speaker
I had to learn from zero how to navigate this space and what to look for, how to do due diligence, et cetera, et cetera.
Early Education for Young Women Investors
00:08:27
Speaker
Now I've got my rhythms. I've gone from knowing nothing and having zero investments in the startup space to where I am today, where my portfolio is now literally 150 startups and counting that I've personally invested in.
00:08:42
Speaker
Thank you so much for sharing that. And I think some of the themes we can already pick out here are curiosity, community, and just having a growth mindset and just being willing to learn and absorb knowledge, which this is what this platform and my podcast is all about. We're already talking about this earlier, but as you know, most of our listeners
00:09:03
Speaker
are young women in their 20s and early 30s, which means that many of them don't qualify as credited investors just yet. Some of them maybe, but the majority won't. Providing education and resources early on on their personal journey is something that I'm really passionate about because I want them to start generating wealth quicker
00:09:24
Speaker
So they can become startup investors as early as possible. Right. And obviously, legislation varies across different countries. So what might be applicable here in the United States where both of us are based might not be applicable in
00:09:38
Speaker
European country, for example, but Bridget would love for you to briefly clarify what an accredited investor in the United States is and why it's important for us to mention that in this context specifically. I'll definitely provide the definition, but let me also say there is consideration and there is a strong potential within the US for the definition that's provided by the Security Exchange Commission, the SEC.
00:10:04
Speaker
They're the ones who define what an accredited investor is or isn't. And so there is a push to widen that funnel to allow more people to become accredited investors. And if they open up that spigot and they say, instead of the current criteria, which is that your income be individual income be at least 200,000 per year income,
00:10:30
Speaker
or your household with your spouse combined income of $300,000 per year over the last two years. Or you have liquid assets not including your primary residence. You have liquid assets of a million dollars or more to be an individual accredited investor. And then they have other categories as well. So for groups, for family, for, et cetera, larger institutions accreditation for them.
00:10:59
Speaker
But as an individual, that is the definition. However, as I mentioned, there is a potential, a very real potential that the SEC could change their requirements and loosen their requirements and allow people to quote unquote take a accreditation test or some kind of requirement that doesn't relate to your income that will allow you to invest in this particular asset class. So should that happen?
00:11:27
Speaker
that would be a massive opportunity for individuals who are able to pass whatever that requirement looks like from the SEC to become investors in startups.
Regulatory Changes and Investment Opportunities
00:11:39
Speaker
So I am truly excited about that potential for your audience and for anyone in the United States to be able to create generational wealth much earlier in their career versus having to wait till you reach such a high bar. Yeah, absolutely. And I love that you pointed it out because
00:11:57
Speaker
if that regulation were to actually change that would, as you pointed out, unlock opportunity for historically overlooked members of our society to become active in this space, specifically younger people, but also people who might not necessarily be able to cross that threshold. But there's that weird assumption that people make when you make a lot of money that automatically correlates with
00:12:26
Speaker
being able to take care of your personal finances in a very smart and sound manner, but that's not necessarily the case always, right? You might be able to only make, let's say 100K a year, but you're able to manage your finances in a way that allow you to save or invest like 50% of your gross income versus someone else who might be earning half a million dollars is spending all of that and might be in debt.
00:12:52
Speaker
that income threshold is not necessarily a good indicator for how good you are at actually managing your personal finances. It basically locks people out. If I didn't meet that criteria, I would not be able to invest in this asset class, period, no matter how smart I am, no matter how advanced I might be in my career, etc. If I didn't meet that criteria, that door would be closed to me.
00:13:17
Speaker
and I would have to choose the other asset classes that I mentioned earlier as my primary source to build wealth for me and my family and generational wealth for my extended family. I'm keeping a close eye on that as many people are in this ecosystem as hopefully your listeners will do some research and find and just kind of keep up with that because it will really, really unlock potential
00:13:40
Speaker
to invest early, even with a small amount. I can't wait to tell you about my first investment and then how I got to 150 startups, but it will really, this is not a closed environment where it's only for the rich or only for people with certain wealth.
00:13:58
Speaker
Even if you do meet the current criteria for an accredited investor, you can start with as little as $2,500 investing in startups. And then of course the sky's the limit if you have those resources to invest more. So even if you are accredited, you still can start at a very low dollar amount into startups that you feel have potential and that meet your certain criteria that you have.
00:14:24
Speaker
and that you should look for. The opportunity is an amazing opportunity. So I really want to encourage the folks listening today, the folks watching today is to pay attention to what we're about to talk about in terms of thesis and deal flow and how to learn about this ecosystem so that you become more comfortable. Because if I had started, oh, if I had started when I was in my twenties, where would I be
Understanding Startups and Funding Stages
00:14:49
Speaker
today? I'm 54 today.
00:14:51
Speaker
where would I be if I had started 34 years ago? I can't even imagine it really. 34 years ago, I had no idea that this asset class was even available to me. So anyway, it's something that we should all be excited about and want to learn more about because it is a game changer for sure. Game changer for sure.
00:15:11
Speaker
Absolutely. And on that note, let's dive right in. I want our audience members to learn as much as possible today. So let's talk about the fundamentals of Startup Investing Bridget. Startup life cycles, funding stages, different funding instruments that are out there. What do people who are completely new to the space have to know?
00:15:32
Speaker
Yeah. So the first thing is what is a startup? So again, when I came to Silicon Valley, I never heard the word startup. Really. I heard entrepreneur all the time. That was more.
00:15:44
Speaker
in my wheelhouse of where the conversations I was a part of. But a startup is a company, a young company that has a business model that supports innovation. So it's a disruptive business idea. And so there are common companies that we probably engage with every single day that started as a startup. Zero employees, zero revenue, just a great idea. And it was going to be different and new to the marketplace, right? Companies like Google.
00:16:14
Speaker
Companies like Uber, companies like Amazon, companies like Dropbox, Microsoft, Facebook, you name it. There's so many companies that we use probably in our everyday lives, even products in your kitchen. I named a whole bunch of tech companies, but there's products in your kitchen. There's products that you put in your car. There's products that you probably use within your household, common things that you use every single day that started with a person with an idea.
00:16:39
Speaker
who wanted to introduce a product to the, to the, to the marketplace. And that product actually was scalable and generated revenue and began to grow over time. And so, but it started with an idea with the person and then something that would disrupt the marketplace, which would be innovative. So that's the definition of a startup. So that's where you should think about the second part is what are the stages? So the basics are a pre-seed seed,
00:17:09
Speaker
and then it goes up from there. So Series A, Series B, et cetera. And so when you're thinking about investing in startups, you will more than likely be introduced to startups that are in the pre-seed category or the seed category.
00:17:27
Speaker
In the pre-seed category, that is a company that has a business concept and they're working to identify their product market fit. So they have a product, but is there a need for it in the marketplace? And are people willing to pay for that product or service? And usually they're looking in the pre-seed stage, they're pre-product, so they don't have a product developed yet because it's an idea.
00:17:51
Speaker
And they're pre-revenue, so they don't have revenue generated yet. Sometimes they do, sometimes they don't, but most of the time they may not. And they're looking to raise funds in order to build their company, this new company that they're starting called a startup, startup ABC. And so they usually go to their friends and family, or they do crowdfunding.
00:18:13
Speaker
I highly recommend crowdfunding for startup founders. Founder is the person who is the owner of the company or the person who is building the idea. They came up with the concept, et cetera. So that's what they call a founder in the startup space. In most places they call them entrepreneur, but startups call them founders.
00:18:32
Speaker
So the founder may ask their friends and family, or in many cases, if you're in your twenties and thirties, a lot of startups are started by people of all different ages. You don't have to be a specific age to even come up with a business idea. But if you're a younger founder, you may not have, or a specific demographic of a founder.
00:18:53
Speaker
say people of color or disadvantaged individuals, you may not have friends and family who can invest in your idea. So many people go to crowdfunding. So that is an excellent way to raise capital for your business idea. So that's pre-seed. Seed is the next stage. So seed is usually the stage where
00:19:15
Speaker
there is a minimal viable product or a prototype. So prototype just means that they don't have an actual product that they can market. They may have one version of it that they use and they use that one version to showcase it to others to show this is what they're thinking. Or if it's an app that they're thinking about building, they might have pictures of that
00:19:39
Speaker
They call them wireframes, so pictures of what that app might look like if it were to be developed. So they either have a prototype, which I just described, or they have a minimal viable product, MVP. And MVP is a product that is in the early stages of development, but they actually have a real product that you can touch and feel.
00:19:58
Speaker
And you can use it. It's functional. And they can use that as their early version of their product. So they now have a product of some type. They're getting closer. And they also have probably more funding at this point as well because they built their product. So they probably have funding at some point. And they are scaling. They're beginning to get more traction, get more users, get more customers, get more feedback, understand how to refine their distribution channels, et cetera.
00:20:28
Speaker
they're still raising capital. In the seed stage, you'll see more of those founders going to ask investors like myself, either an angel investor or a venture capital investor to invest in their business at this point. I'm going to talk you through the differences of those categories shortly, but
00:20:50
Speaker
But that is basically the framework for pre-seed and seed. And then there's other more advanced startup categories that are Series A, Series B, Series C. To the general public, if you're using a product, you don't have a clue what stage the company is in, nor do you even care. But if you're an investor, it matters because where they are in the life cycle of building their company determines how far along they are
00:21:18
Speaker
in terms of their potential to exit. And exit is a successful exit, which really just means the company has been purchased, sold, acquired by a bigger company or a company that says, we love what you built and we'd like to buy it. And then we'll give you a check for it, Mr. or Mrs. Founder. And the investors, people like myself who invested in that company, then we receive our return on investment
00:21:47
Speaker
at the point of a successful exit. So that is the framework that the beginning stages of a framework for how a startup starts and how they get funding and then the life cycle of the ultimate goal for any investor and hopefully the goal for a founder would be a successful exit. I've talked to founders
00:22:08
Speaker
who were looking to raise capital, they contacted me as an investor. And I always ask the question about what are you thinking in terms of exit? And usually a fast exit is outstanding. Fast meaning three years from the point of the company starting. So three, five, seven, 10 years, the odd numbers, three, five, seven, 10.
00:22:31
Speaker
So five to 10 is usually the average, right? For a startup to have a successful exit between year five and year 10. And so I was talking to a founder in particular who I asked the question about exit and her answer blew me away. She said, I don't, I don't plan to sell my company. I created this company for my grandchildren. I want to leave something, a legacy to my grandchildren.
00:22:55
Speaker
And I posit with all due respect, you're, you're not looking for an investor. If you're looking to keep your company within your family, you know, for, for your life and for generations to come and invest or invest so they can create an impact and so that they can generate revenue or income for themselves, right? A return on investment. And so I'm unable to invest in your company.
00:23:20
Speaker
if you never plan to exit because that's the point where I can actually make money as an investor. So just to give you a little flavor of the life cycle and the expectations from an investor perspective versus a founder or entrepreneur perspective.
Developing a Personal Investor Thesis
00:23:37
Speaker
Okay, so Bridget, we just talked about the different funding stages. Now, I would love to talk a little bit more about what an angel investor
00:23:47
Speaker
actually is. And on that note, we can probably also talk a little bit about investor personas and investor thesis. That's something that I particularly love when I attended one of your fantastic workshops a couple of weeks ago, just learning how you personally think about creating your own investor persona. So I would love for you to share with our audience what an angel investor is, what an investor thesis is, and why it is important to have one. And also what your investor thesis looks like.
00:24:17
Speaker
Absolutely. I found it interesting, again, the definition of angel investor is pretty straightforward. It's an individual who is an accredited person through the SEC definition that I mentioned earlier, a person who has a certain income level or liquid assets. Then there's the category of venture capitalist. A venture capitalist is the next stage above,
00:24:42
Speaker
which is an individual who's still accredited, but they are investing more so in venture funds. So funds that are allocated for multiple startups who participate in a fund. So a venture capitalist is like a lot of people pull their money into a fund. And then there is another entity called a general partner
00:25:08
Speaker
of that fund who then allocates that money in the fund to multiple startups according to the fund's focus. So I'm both an angel investor and a venture capitalist. So as an angel investor, I invest in a range of startups. I invest in pre-seed
00:25:30
Speaker
So that's idea stage, pre-product, pre-revenue. I invest in seed stage, so they have a product, they have traction, they're monetizing it to some degree, and they're gaining some market share. And then there's Series A all the way to the point where the company goes public.
00:25:50
Speaker
So I invest in all stages of startups as an investor. When I started though, I did not have a thesis, which was not a good idea, but I didn't know what a thesis was. And it sounded very academic to be honest with you. I'm like, I'm done with school. Why do I need a thesis? But I learned that a thesis is all about strategy and focus. So let's just say you are going to the grocery store and you have $200.
00:26:18
Speaker
And you don't have a grocery list. You're just going to, oh, you're going to stop on your way home from work. You're going to go and pick up a few things that you can remember, and then you come home and then forget what you, you forget so many things because you didn't have a list. Well, a thesis is literally a list. It's a, it's your focus. If I have $200, how am I going to use that $200 to say invest in something? $200 in a startup is not even a realistic number, but let's just
00:26:48
Speaker
Keep it simple, $200. So if I had $200 and I wanted to invest, but I had no idea what I want to invest in, I'll probably just attach it to any startup that comes my way that I think sounds good, looks good. Let's give it a shot. And that's so random. And it's also the wrong way to invest in anything, whether it's a startup. And it's also, in my opinion, the wrong way to go grocery shopping. You should also always have a list. So, but that's just me.
00:27:17
Speaker
A thesis is your focus and your strategy as an investor. And so what I do is I created my own thesis based on these, this framework that I'm about to share with you. I highly, highly recommend this framework to get you started and it will help you tremendously. Again, you can invest with very little money if you're an accredited investor, as low as $2,500.
00:27:41
Speaker
So you don't have to invest big chunks of money to help these startups to grow. And for you as an investor, hopefully get a return on investment when they exit in three, five, seven, 10 years from today. So here's how to create your thesis. So the first thing you do is on a piece of paper, you write down three circles. You write down your hobbies and interests.
00:28:03
Speaker
In another circle, you write down social impact. So what do you care about? Do you care about human trafficking? Do you care about mental health, homelessness, et cetera, social impact? Do you volunteer at the local food pantry, social impact, right? The third circle is your career expertise area. So whatever that might be for you at this stage in your life, write down the categories or the kinds of businesses that you've worked at.
00:28:31
Speaker
So if you worked in retail, write down retail. If you worked in fast food, that's a restaurant, right? Write down restaurant. So write those three circles down. In each of those circles, you should have a list of things. So in my circle for hobbies and interests, I wrote down, I love to save money. I love to try to cook. I'm not a good cook, but I try to cook. I love beauty. So getting dressed up and trying different beauty brands. I love fashion, et cetera, et cetera. So once you have those three circles,
00:29:00
Speaker
Then the next thing you do to create your thesis is you layer on top of those things that you wrote inside the circles. How does that translate to this startup in the community of investing? So for me, saving translate, it's about money. So startups related to money are called financial tech.
00:29:23
Speaker
startups related to cooking. I mentioned I love to try and cook. I'm a sous chef with my husband. He's the cook in the house. So when he's cooking, I help. And so anything related to fresh food and non-toxic chemicals in food, all these food related conversations, I'm really interested in learning about. So cooking. So in the startup space, that translates to what?
00:29:44
Speaker
food tech, agricultural tech. So in your circles, when you wrote down, whatever you wrote down, you may have wrote down, yoga is a hobby. You may have written down a walking your dog as a hobby, whatever your hobbies are. I'm happy to support you and help you figure out how does that translate to tech? But let me just give you some examples. If you wrote down yoga, yoga is health and wellness. So you would be more interested
00:30:10
Speaker
naturally in health and wellness because you already are interested in yoga. If you wrote down you love to walk your dog, you love animals, then you're probably interested in pet companies, right? So pet, I would call them pet tech. A lot of things are connected to the tech space these days. So let's call it pet tech, companies that startups that are related to animals and pet parents, et cetera.
00:30:35
Speaker
Same thing in the social impact. If you're interested in domestic violence, that's your thing. You're part of a prevention efforts in your community. Those things are also connected. There are startup companies that also focus on those categories as well. The bottom line is three is three circles are going to help you focus on what you should be looking for when startups come your way. What you do with that information,
00:31:03
Speaker
is you then create your persona, which is the Mina just mentioned that you create your persona. So that's one layer of knowing what you're building your thesis. So the next layer is once you understand the stages, remember I talked about pre-seed and seed and then further advanced companies become Series A, Series B, et cetera. Think about the stage of company that you're comfortable investing in. So we're going to assume that $200, you're going to put it someplace. So where are you going to put it?
00:31:33
Speaker
Are you going to put it in a pre-seed company? That is an idea, pre-product, pre-revenue, or a seed stage company that has a product or prototype and they're monetizing, they're getting traction. So what's your comfort zone? So that's part of your persona. The other is what's industries or sectors. So remember those three circles we just created? Now you're going to look at those
00:31:53
Speaker
um, circles and how you translated your hobbies, such as yoga to healthcare and health and wellness. Now you put in your persona matrix that you're interested in companies that you're more interested in companies that are in the healthcare space and the wellness space and maybe the pet care space or the pet space period. Right. And if you say you're in your career circle, you put retail, you put restaurant.
00:32:18
Speaker
because you have some degree of experience in those spaces, you do not have to be an expert, but because you have some degree of experience, you put that into your persona profile as well, because you have a little bit of experience and you know a little bit about those industries, so therefore that you can say that you'd be interested in companies who are also in those spaces. Now, let's say a company, you built your profile, and there are a few more pieces to your profile. How much are you comfortable investing in terms of dollar amount, your minimum and your maximum?
00:32:48
Speaker
So your minimum might be 2,500 and your maximum may be 50K for an individual investment, right? So let's just pause there. So let's just say that is your profile. Now, if a company approaches you and say you're accredited, a company approaches you and they are in the quantum computing category or the software enterprise category. If that company doesn't fit your profile in the circles that you created,
00:33:18
Speaker
You should either one say, no, thanks. It's not something I'm interested in. Or if you're curious, of course you can take some time to assess the startup and have a conversation, but more than likely you're probably going to take a pass. Why? It's not in your wheelhouse. It's not something you're even interested in. Quantum computing for me is so far outside of my wheelhouse. I don't even get it. I wouldn't say never, but the chances of me investing in that particular
00:33:44
Speaker
sector is very low because it doesn't fit my profile. So once you do the three circles, once you assess your profile and your persona, the way I've just described it, those fundamentals that I just mentioned, put that on paper, then you can write down your thesis.
Personal Branding and Deal Flow
00:34:01
Speaker
And your thesis, what is your strategy and your focus? So my thesis, very simple, is I invest in
00:34:11
Speaker
industry agnostic, pre-C to series C startups founded by underrepresented founders who are women, BIPOC or LGBTQIA. That is my thesis. Let me break it down in terms of how to structure your thesis. I'm going to say it again, but this time I'm going to frame it out for you because I know this is, you're not looking at my screen and you can't see what I'm looking at.
00:34:37
Speaker
But this is my thesis and this is how you structure your thesis. I invest in the kind of industry goes in parentheses. So it could be healthcare, it could be beauty, it could be consumer packaged goods, et cetera, or it could be industry agnostic like me. Even though I have preferences of various categories, according to my three circles, I'm still interested in opportunities outside of those circles. I will entertain those conversations.
00:35:07
Speaker
Rather than have 15 different industries in my thesis, I put industry agnostic because I have such a broad range of industries that I'm interested in. So I invest in the industry. The next parentheses is the stage. So my stages are pre-seed to series C. Your stage might be pre-seed and C.
00:35:29
Speaker
or it could be precede to something else. And then the type of founder, right? So the profile of the founder for me is startups founded by, and then in parentheses, underrepresented founders who
00:35:45
Speaker
are women by Pac or LGBTQ. So you can further add to your thesis, geography, such as based in the United States or Africa or Asia. So geography, you can further add other differentiators as well to further refine. So you don't want to have
00:36:05
Speaker
a one page document, you want to have a sentence. And so in your sentence will evolve over time. The very first thesis that I ever wrote when I figured out I needed a thesis was I invest in women.
00:36:19
Speaker
that's way too broad. So you need to focus a little bit more and say, well, is that all women? Is that all industries? Is that all stages? Bridget, come on. And so then I said, okay, wait a minute. I invest in black women. And I thought that was an improvement. Well, it wasn't. It's still too broad. And so all kinds of startups were coming
00:36:41
Speaker
to me asking for support and help, but I realized I was still being too narrow because I don't just invest in women and I don't just invest in black women. I invest in a certain industries, certain stages, and a broader swath of underrepresented founders. And so that's how I came up with my thesis.
00:37:02
Speaker
So everybody has a thesis who's a savvy investor. So even right now as you're listening and watching right now, if you had $200 to invest in a startup that you're really excited about and you wanted to help move forward and help them
00:37:20
Speaker
their company to grow and scale, what type of company would you invest in? If you had $200, what type of company would you invest in? And so that's the thesis that will help you frame that out. The other thing I wanted to share is after you create your thesis, I know most of you listening and watching probably are on LinkedIn. I know I am. I'm very, very active on LinkedIn.
00:37:41
Speaker
You have a brand, whether you're on LinkedIn, TikTok, Instagram, Facebook. I don't know what they call Facebook these days, except Facebook. I think people call it a book, whatever. If you're on whatever social platform you're on, you have a brand. And if you become, decide to invest, your brand has now expanded to be an investor. So maybe you're a retail consultant, you're a mom, you're a sister, you know, community servant, et cetera.
00:38:10
Speaker
but you're also now an investor once you decide to join that space and after you're up, of course, accredited. So how do you leverage your thesis to then get opportunities to invest that $200? And I'm just using $200 as a metaphor for whatever the amount is that you would choose to invest if you did, but $200 is the metaphor. So if you were to take that $200, how do you then tell people that you're an investor?
00:38:38
Speaker
and that you want to invest and you want to help companies grow and you're looking to create impact and you're looking to create generational wealth for you and your family or your future family. So that's where branding comes in. There's a number of ways to leverage and tell people that you're an investor now. And believe me, there are 20 and 30 year olds who are investors. You can be an investor at any age and you could be a founder at any age. So basically you put this information in your profiles, right? You're in your title on LinkedIn, for instance,
00:39:08
Speaker
in your about section, et cetera, et cetera. And you are basically, the more you do that, the more people will find you. Just saying the word investor and having a clear thesis, people will find you. And then eventually your deal flow will begin to diversify as well, because why you're telling people that you're an investor. It also just attracts people to you as well. So I'll pause there and just make sure I've answered your questions.
00:39:36
Speaker
Very, very thoroughly. Thank you for that Bridget. I think this is fantastic. As you probably know, because it's how we met initially, I was giving a presentation for the fourth floor, which were both part of that community about building a personal brand, specifically leveraging LinkedIn, right? So I love what you just shared about.
00:39:53
Speaker
the importance of attaching that investor status to your overall personal brand and thereby attracting investment opportunities. I would love for you to elaborate a little bit more on that whole notion of creating deal flow as in being able to find companies that you can then consider investing in and ideally in a way that allows you to diversify your investment portfolio. We already heard
00:40:17
Speaker
that you've invested in 150 startups to date, which is incredible and amazing diversification. Aside from LinkedIn and then investors, or not investors, founders, proactively reaching out to you after seeing that investor in your bio, what are other opportunities to diversify your own deal flow?
00:40:38
Speaker
Okay, so this is exciting. So once I started to learn the basics of what it meant to be an accredited investor, I did not even know I was accredited. When I was going to calls, again, I'm a member of various communities, including the fourth floors, as you just mentioned, and many other spaces. And I just started going to investor
00:40:59
Speaker
calls and Zoom calls and meetups and things like that just to listen. I would say nothing. I was always on mute. And if you know me, you know, that's, that's unusual. So I didn't, I didn't know what was, I didn't understand. I was learning. And so I just muted myself and I was listening, taking notes and paying attention. So the key to understand and find diverse deal flow is to one, find spaces where they're talking about investing.
00:41:26
Speaker
And I'm a very, very frugal person. You do not have to join and pay memberships if you cannot afford it.
00:41:36
Speaker
So for instance, say you're a college student or a MBA undergrad, what have you, or you have a community business incubator in your community or things of that nature. Accelerators for startups are also another good source because they have usually free workshops and things on investing. So the point is find spaces where you can listen and learn about investing.
00:42:02
Speaker
And so for me, it was again, circles that I was already a member of. And I just found that they had groups for investing. So I listened and learned. I was so confused. They were using so many terms, so much, so many acronyms, and they don't slow down for you, by the way, if you're on the call, they don't slow down at all. They talk so fast. And I was taking so many notes afterwards, I would have to go and research every little word that they said so I could connect all the dots. So the first thing is find the spaces where you can learn.
00:42:32
Speaker
and at no cost, they're available, they're out there, do some research and you will find them. And then once you get comfortable, you'll realize that deal flow
00:42:44
Speaker
because deal flow comes from so many sources. So it's like going to a fruit stand at the local grocery store. Where I live here in California, I didn't realize there were various kinds of cherries until I moved here. I only thought there was one type of cherry at the grocery store, but here they have multiple types of cherries at the grocery store and they have multiple types of apples. There's multiple of
00:43:09
Speaker
you know, all these fruits and vegetables. And that's what deal flow is like. There's no one type of one source for deal flow. Deal flow comes from so many different sources. So there's free sources. I believe AngelList is still free.
00:43:23
Speaker
So you can go to AngelList and log in. They'll, you know, become a member. I believe it's free. And then you'll start to see automatic emails come to you with opportunities to invest in startups. The key is, and what you should know is as soon as you sign up for all of these different newsletters and
00:43:42
Speaker
communities that talk about investing, your inbox will be overflowing, overflowing with deal flow. And so it's up to you to have a very clear thesis. That's what we talked about thesis earlier, because it will help you filter out all that noise so that you can only click and read about and search the companies and the startup potentials
00:44:05
Speaker
you're interested in that fit your thesis because you will be flooded. It won't take you long at all. If you spent a day, let's say, researching communities in your area that focus on investing, whether they're virtual or in your immediate ecosystem, either way, there's an abundance. Then when you sign up for their newsletters,
00:44:29
Speaker
You sign up to go to a free to sit and watch a pitch competition or pitch day, demo day they're called, et cetera. And you may not know anything. You're going to be a fly on the wall, but that's okay. That's how you start. The more familiar you get with the vocabulary, how the ebb and the flow of how these conversations go, the Q and A's that are asked, et cetera, et cetera. And then you begin to get more comfortable and more comfortable. So deal flow is literally all over. It's everywhere around you, whether you know it or not.
00:44:58
Speaker
Now, the other thing to realize is all of that deal flow, what does it mean for you as an investor? Well, say you have a hundred emails that come in as you sign up for newsletters and circles in your area or virtual circles.
00:45:13
Speaker
that talk about investing and now you get all this influx. So you get say a hundred different sources for deal flow. And out of all those hundred sources, you may come across a 25 pitch decks that match your thesis. And out of those 25, unless you have a lot of money, you probably are not going to invest in all 25 startups.
00:45:34
Speaker
The data shows that investors who are wise, who have a thesis, who are diligent with how to assess whether the deal is a good deal or not, and we'll talk about due diligence shortly. The funnel, it starts wide like this and it goes in and then you end up only investing in about 1%
00:45:55
Speaker
of the deals that matches your thesis, matches your budget, passes all of the criteria for due diligence and risk assessment, et cetera. 1% of those deals actually get financed.
Due Diligence and Investor Empowerment
00:46:10
Speaker
So that means for you, if 100 come your way and it's filtered down, filtered down, you'll probably invest in one.
00:46:17
Speaker
Right? So, so keep that in mind. The funnel is so wide, the spigot is like Niagara Falls, but you only need a cup. You only need a cup of all of that water. It's a really exciting funnel to be a part of because you get to see so much innovation coming your way and so many opportunities that come your way. But in reality, based on your budget, based on your thesis and where you are overall,
00:46:44
Speaker
1% is the number that even the big, big investors, the big companies, 1% of what they see is what they invest in.
00:46:52
Speaker
Yeah, love that. Thank you for sharing some very tangible advice there. We do have to wrap it up very, very shortly, but I did want to briefly touch upon the due diligence because that's also one of those terms that gets thrown around in the world of finance and investing very frequently. But again, many of our listeners are still quite new to the world of angel investing venture capital.
00:47:14
Speaker
What does doing due diligence means and do you have a couple of questions or things to look out for as you're being flooded with all of these decks and emails that successful investors should look out for the types of questions that they should ask? Sure. When I started two years ago, I was looking for the questions that I should ask in these rooms and spaces. I would hear people ask questions and I'm like, wow, they sound so smart.
00:47:43
Speaker
I would never have thought of asking that question. And so I said, wow, there must be a list somewhere because investing in startups is not a new thing. It's been happening for hundreds and hundreds of years. So I dug and dug and I found that one list anywhere. It's not even available on chat GPT. Most experienced investors didn't even have a curated list of questions that they were asking. And I thought, well,
00:48:05
Speaker
Are they just not being transparent? They don't want to share with me or they really don't. There is no list. And what I learned is most investors don't really have a list of questions. So I created my own list of questions just based on being a fly on the wall. Every time somebody asks a question, I typed it into my little list. Somebody else asked a question, I typed it into my list. I now have a curated list of all the questions to ask around product, around go to market strategy, around exit potential.
00:48:33
Speaker
advisors, team construct, you name it, I've got a whole list of questions. I use that now as the first level of vetting, whether a deal is a good high risk, low risk based on my questions. And my questions are pretty standard. I mean, any startup that comes across your way or any deck that comes your way, you can look at the list of questions and regardless, industry agnostic, you can just ask the questions and
00:49:01
Speaker
and listen to the answer and then you'll begin to understand whether or not, if it's a deal that you're interested in or not interested in based on the founder's answer or based on the deck itself. So at the end of the day, questions are critical and happy to share the list of questions that I've curated. The other part is after you evaluate the deck and listen to the pitch and made an initial, you're initially interested. Again, you're only going to invest in about 1% of what comes your way.
00:49:30
Speaker
So after you've done that initial due diligence, the deeper due diligence is what people often talk about as whether or not to truly write a check, send a wire or send an ACH or not. The real due diligence is when there's a group of people who get together.
00:49:45
Speaker
Say there's a startup that multiple people have expressed interest in it's past the initial criteria or requirements. Well, the next stage is that a small people, maybe five or so people get together and they divvy up the work and they begin to evaluate the information in the deck. And that was shared by the, by the founder in greater detail. So that includes looking at the financials in greater detail.
00:50:14
Speaker
That literally means the founder provides and opens up their accounting books and stuff to make sure that what they have in the deck and what they say that their forecast or projections are truly are in alignment with what the data shows in their own records. They also assess the valuation of the company, for instance. So if a founder says their company is valued at 30 million, what is that based on? So in due diligence, there is a formula and a structure on how to
00:50:44
Speaker
assess the valuation based on the market conditions, based on the sales and revenue generated and the future generated revenue or expected revenue in the future. So we look at a number of different things. We look at if there's debt on the balance sheet or not. Again, those are the financial numbers, market opportunity, et cetera. So there's a number of things that as a first time investor or new investor, I would strongly recommend, again, you just be a fly on the wall.
00:51:13
Speaker
Just join a due diligence group on investor committee of due diligence where you can actually just listen and learn. And then you do it once or twice or three times, and then you'll get the ebb and the flow of it all. And realize, number one, the best way to reduce your risk when you're a new investor or even a seasoned investor is to invest as a group, right? A group. So that's an angel group. That's if you invest in a fund, that would be another way to reduce your risk. I talk about that venture funds earlier.
00:51:43
Speaker
So anyway, due diligence is always, always a part of the life cycle of whether you choose to invest or not. And if you do it individually, you're probably, it's not going to be as thorough of a deep dive rather than if you do it as a group. So that's what due diligence is. And that's the value. It's all about reducing your risk. And many times after a due diligence process is complete, the team may say, and they'll do a deal memo. A deal memo is just a one pager that says,
00:52:13
Speaker
or two pager that kind of breaks down what they found. And then they share it out with other investors. And then those investors then make a decision whether to invest or not. So many times after due diligence is done, people may say, I'm going to pass on this one. Or others may say they're interested. So due diligence is a way of pulling back the sheets and figuring out what's really going on. And then if you like what you see in your research, then you make decisions based on that.
00:52:42
Speaker
So, so insightful. We could probably have a whole separate podcast episode on the topic of due diligence itself. This was amazing, Bridget. Thank you so, so much. I know this is going to be so, so valuable to our listeners, especially new investors or people who are thinking about becoming
00:53:01
Speaker
Angel and start up investors in the future so thank you so much for make sure to link to all of the incredible resources in our show notes thank you for all the amazing work that you do educating people but also. Moving the needle by making investments in social impact companies and founders so excited for audience to listen to this very soon.
00:53:23
Speaker
Well, I'm excited as well. I really, really hope that folks who have listened and watched and picked up a few tips here and there, share what you liked the best out of this conversation. It's always helpful for me to know what their takeaways were and what they would like to learn more about. And then from there, I just create a program or a workshop or something. And we dive into that because again, this is not unobtainable. It is obtainable.
00:53:51
Speaker
Again, if I was in my 20s and 30s, I wish somebody had even told me remotely about this asset class because I would be so much further along now.
00:54:00
Speaker
And so if you can invest in real estate, yes, of course you can invest in your 401k. People always say, put money away and your employer will match it or in most cases, and then the individual retirement accounts. But unless somebody introduces you to other ways to grow and to create wealth for you and your family and your future family, you have no idea that it exists. So that's what we're doing. We're empowering the listeners and viewers here.
00:54:28
Speaker
to think outside of their traditional boxes and to explore investing in companies that could use your capital. But at the same time, we want to help you make good decisions as well. Absolutely. Wonderful. Thank you so much, Bridget. This was incredible.
00:54:46
Speaker
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00:55:11
Speaker
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