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S3 Ep20: The Art of Angel Investing with Nicholas Wickes
39 Plays15 days ago
In this episode of the Dial It In podcast, Trygve Olson welcomes Nicholas Wicks, an entrepreneur, investor, and business strategist, for an in-depth discussion on angel investing. Nicholas shares insights on evaluating business investments, the importance of advisory boards, the role of values in partnerships, and the distinctions between angel investing and venture capital. They also address the key components of an effective pitch deck and the due diligence process. The episode concludes with a plug for Nicholas's tool 'CheckThisOut.IO,' aimed at helping service-based businesses, especially in the restaurant industry, enhance their marketing strategies.
Find Nicolas:
LinkedIn
checkthisout.io
…
Dial It In Podcast is where we gather our favorite people together to share their advice on how to drive revenue, through storytelling and without the boring sales jargon. Our primary focus is marketing and sales for manufacturing and B2B service businesses, but we’ll cover topics across the entire spectrum of business. This isn’t a deep, naval-gazing show… we like to have lively chats that are fun, and full of useful insights. Brought to you by BizzyWeb.
Links:
Website: dialitinpodcast.com
BizzyWeb site: bizzyweb.com
Connect with Dave Meyer
Connect with Trygve Olsen
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Transcript
Introduction to Dial It In Podcast
00:00:08
Speaker
Welcome to Dial It In, a podcast where we talk with fascinating people about marketing, sales, process improvements, and tricks that they use to grow their businesses. Join me, Dave Meyer, and Trigby Olson of FizzyWeb as we bring you interviews on how the best in their fields are dialing it in for their organizations. Let's ring up another episode.
Trigby Hosts Solo - Cabin Woes
00:00:32
Speaker
Hey, everybody, welcome back. It's me, Trig V. Dave is not with me today. He is stuck in his cabin in northern Minnesota without heat. It's just me today, which is good, because I have lots of nefarious things to talk about today.
Business Aspirations and Sponsorship
00:00:46
Speaker
I'm thinking about opening my own business, so we're going to talk about how to get investing, and we're going to talk to our old friend Nicholas Wicks. But before that, want to talk a little bit about our sponsor today. Our sponsor is wefixhubspot.com.
00:00:58
Speaker
is your HubSpot portal clutter and inefficient WeFix HubSpot powered by BusyWeb specializes in customizing and optimizing your HubSpot experience. Our team of certified experts offers tailored solutions, including training, re-boarding, architecture reviews, and data restructuring, ensuring your portal aligns perfectly with your business needs.
Guest Introduction: Nicholas Wicks
00:01:18
Speaker
Don't let a disorganized HubSpot system slow you down. Visit wefixhubspot.com to schedule your complimentary and consultation,
00:01:26
Speaker
and start transforming your HubSpot portal today. Normally I'd read a long bio, but this is a guest that we're having. I think one of the first guests we've ever had back for a second time, which I'm super excited about because he's a longtime friend and he's got an amazing tool that we'll talk about again. But Nicholas Wicks is an entrepreneur, investor and business strategist dedicated to helping startups scale.
00:01:48
Speaker
through smart investments and referral-driven and growth. As the founder and CEO of CheckThisOut, he has developed a platform that helps service-based businesses harness the power of word of mouthmark. Beyond his own ventures, Nicholas is also an active angel investor, serving as a ah voting board member and vice chair in collaboration with the governor's office in Montana, where he helps evaluate and fund promising startups.
Montana Politics and Kevin Costner
00:02:12
Speaker
Thanks for ah coming back, Nicholas. I'm excited that you actually volunteered to come back a second time.
00:02:18
Speaker
It's an honor to be back. I really appreciate the the invitation again. And just one correction, i I sit on a board that advises the mayor of Bozeman, not the mayor of boman quite the governor of Montana. Montana, maybe one day. Okay. Yeah, I saw the show. The governor governor of Montana was killed in nefarious ways and by his children, right?
00:02:41
Speaker
the governor of Montana, like way back? No, just recently, because Kevin Costner didn't want to come back for season six. Oh, yes, of course. Right. Yes. Thank you. ah Yeah, it was a bummer handund yeah on Earth two. Yeah, it was. It was a bummer how that end. I i really, I really ah didn't. I hope for better things for Kevin's character. So I know. Well, I'm super excited that
Investment Strategies - Bootstrapping vs. Investors
00:03:03
Speaker
you're here. I think what we're going to be talking about today is investment strategies. If you have a really good idea for a company,
00:03:09
Speaker
and you will need to get it off its legs. You can do what you can self-fund it, which is out of your own pocket, which is usually called bootstrapping, or you can find an investor and get them to give you some money and then and build it out and run with it, which is when a when what you do, which is why we're excited. There's a whole mess of questions that go along with that. and What is it and how do you do it and how do you How do you, where do you start? Where do you look? How do you find people? Where, what what do you need to know? Let's play, ah let let's, for giggles, let's create a hypothetical business and say, i I have a friend of mine, his name is David, and he has an e-commerce business selling Aztec death whistles. And if you're not sure what an Aztec death whistle is, it's it's something that's about the size of your fist.
00:03:56
Speaker
that looks like a skull and you can, if you blow into it, it sounds like a woman's a blood curdling screen. and David is getting too big for his britches and I really feel like just having a death whistle isn't enough. We really need to add an AI component to this. Something that sort of listens in and then any awkward silences during your day or if anything really scary happens, then the AI will fire and you and and you'll hear a ah scream from your phone, which I just think is ah is a fantastic idea.
00:04:24
Speaker
Spoiler alert for those of you at home, I don't actually think this and B, this is an actual thing that you can get on Amazon and it's a hoot to have. So I've got this idea and I know what I'd want to do is I'd probably want to start with a prototype and figure out
Evaluating Business Ideas - Problem, People, Product
00:04:40
Speaker
how to do that. But in order to do that, I'm not a programmer. So I'd probably need to hire a programmer to help me build it out.
00:04:49
Speaker
I need money to do that, which means that before I hire a programmer, I need an investor as an investor. I want to start with how do you evaluate what's because everybody's got an idea for their great to make a million dollars in America, especially.
00:05:08
Speaker
A lot of them are great and a lot of them aren't. So what is your evaluative process, Nicholas, of whether or not a business is it it really has merit or not? ah what Let's start there. All right. Hold on a second. Let me get on my napkin and turn it over so that it's the back. And I do some quick. Perfect. OK. First thing is, so I take the three P's approach. Actually, there there are lots of P's that are involved in starting scaling and running a successful business. There are a lot of P's and really just one Q, right? The Q is always quality, and but whoa, that's way down the road. So the first P is problem. What is the problem that David is trying to solve? Is it just earpiece ear piercing silence? Is it something that you have attached to your key ring with your mace? What is the problem? okay then Then it's people
00:06:04
Speaker
than its product. So David already has the has already has a but the the company up and running, has his initial product. He has a brick and mortar thing where he sells through the website. You can buy the thing and you get the tangible thing. Yeah.
00:06:18
Speaker
But even if you're introducing a new accessory or a new product line, right, such as the AI app, you still want to follow that process, right? You always want to start with the problem. What is your problem statement? What is the problem that you're trying to solve? Other terminology for it is your niche.
00:06:37
Speaker
the The market is a broader term that gets into things like TAM, total available market, SAM and SOM. SOM is serviceable obtainable market. These are all kind of the numbers behind the opportunity, if you will. But start with bare bones. What is the problem that you're trying to solve?
00:06:59
Speaker
and And ideally, you are in the problem. like Ideally, you're in the weeds and you get it, you feel it. It's a problem that that you have to solve. kind and this And this is almost taking a page out of Warren Buffett's book. right He is famous for only investing in product services companies that he whose products that he uses, right almost on a daily basis.
00:07:25
Speaker
Okay. I didn't know that. Yeah. He's famous for right his Coke investment and McDonald's and all of these other companies that he uses their products and and services.
00:07:36
Speaker
more often than not. I haven't seen his entire portfolio, but that's kind of part of his, one of his maxims is really, you want to be so familiar with the product or the problem. If you're an entrepreneur or if you're an investor, that reduces risk. And this is something that I'm going to keep coming
Types of Investors & Advisory Teams
00:07:53
Speaker
back to. Everything that we're talking about here is all about understanding risk, doing your homework on what the risk is, and then mitigating it as much as possible.
00:08:05
Speaker
So it sounds like my silly idea ah is probably going to be almost immediately without merit. So maybe we're going to have to turn this into the hypothetical because if we have to solve a problem, having an Aztec death whistle AI probably isn't it, but we'll roll out the changes. But David's, David's idea should be is, I don't know, it's worth exploring. Yeah.
00:08:29
Speaker
i think it sounds I think it sounds like a son ah fun product to think about, maybe over a couple of beers, but maybe not over three beers. Right, exactly. in it yeah More than that, it's it get where gets weird. I think you talked about an interesting thing there is at what part in the process so Do you really want to bring in an outside funding source? What makes sense for a business? You talked about risk. and so Can you blow that out a little? When should somebody really look to bring in an investor?
00:09:02
Speaker
I'm going to blow up the whole narrative of an investor to start with. So you can have investors that don't put any money in your business. but and and so think So you can have investors. And quite often, and this is my personal experience, but I've learned from some of the gurus in the business, one and one of the maxims is asked for Money, get advice. Ask for advice, get twice the money.
00:09:35
Speaker
I like that. and And that's when you're dealing with kind of more seasoned angel investors, because most of them, let's just say 99% of angel investors have already run their own companies or still started have have started and run their own companies. So they have a lot to give, a lot of intellectual asset to invest in your company. And so all of that to say that one and that one of the earliest things that an entrepreneur can do or somebody that has an existing product product line and and wants to expand their business is build that team around you, right? So for an entrepreneur, a solopreneur, or maybe a couple of folks, build your advisory team as as soon as possible.
00:10:21
Speaker
get and And those are folks who sometimes sometimes you want to give them some sweat equity, right? So they invest their time. They invest their intellect. They invest their lessons learned into your business for a piece of the pie.
00:10:38
Speaker
and Okay. Time is money. they It's you can get. I have some advisors for, I won't say which business that have exceeded their contract, if you will, but they have stayed on as advisors, right? So they they they have nothing more to gain in terms of the agreement that we have for what they've earned, but they they're they're happy to hop on a call every couple of weeks and just continue to give advice.
00:11:05
Speaker
Does your advisory form board become a marketable asset for investment? So if I have my friend Nicole, producer Nicole on my advisory board, that's a little different than I have like Dave, who's a CEO of 25 year business, right?
00:11:26
Speaker
Yeah. Yeah. and And this is further down so one of the other kind of, this is the p the people pee, right? You want to make sure that no matter whether it's advisory board, whatever stage your business is in, that you have the right people with the right skills doing the right jobs. And so when you're building an advisory board, it's really important to get folks that have subject that are subject matter experts in those parts of your business that that in those core areas of your business. If you're a startup, if you're you have your Aztec scream whistle and you want to get that scream authentic, maybe you have an anthropologist or maybe you have a Mesoamerican specialist on your advisory board, and then you have your AI and you're building out to the AI piece, the AI ai app, you're going to want somebody that has has some chops in AI. You're going to want a technologist on your advisory board. it's It almost always helps.
00:12:23
Speaker
to have somebody with legal background, but then maybe also has some experience starting and running their own businesses. ah um And ah you don't want to build it. You don't want to have too many cooks in the kitchen.
00:12:38
Speaker
But yeah, have those folks that have that experience that you can derive value from for the first, I don't know, let's say two to five years as you're getting your company going. And if they have some cachet, I think to your point, that's even better, right? If they have some experience in the industry that when it does come time to raise different rounds of funding, and when you have to go and pitch to investment groups, to a an angel or investment group or a VC group, that your advisory board helps to validate right and helps to provide some some assurances and and some level of trust that you that you can deliver right on what you're pitching.
00:13:21
Speaker
so I know one of the common things in any sort of business pitches is is a deck with all the the appropriate requisite information in it of who's the advisory board, what's the idea, the founder background, things like that. What what constitutes a really successful deck?
Crafting a Successful Pitch Deck
00:13:40
Speaker
what do you want to look What are you looking for? If somebody, you say, hey, send me your deck and I'll review it. What are the things that you want to see?
00:13:47
Speaker
Yeah, so a pitch deck and they come, it's the horse of many colors. There's so many different variations on pitch decks, but there are some fundamental kind of pieces to that to an effective deck. And that is, again, we'll go back to those P's. You clearly state the problem, you articulate who are the people involved, and then what is the product that you're presenting that's going to solve that problem. there' There's more there're more pieces there, but I'm just thinking the first pitch deck that I created for a startup was ah was a pitch deck to go out to those advisors, was to present my idea to those advisors to sell them and to get them excited. It doesn't need to be this deep cavernous rabbit hole that you will iterate through it, and it's definitely a working document, but it shouldn't be something that the old adage, don't let perfection get in the way of success.
00:14:43
Speaker
My dad, when I was very young, told me that he said generally the process of getting a loan from anybody, getting money out of anybody is you have to prove you don't really need it. And is that sort of a good work working hypothesis for a pitch deck?
00:15:01
Speaker
to show that the company it will inevitably succeed. And boy, it'd be great if you came along for the ride. yeah That's thematically what the people are going for. Yeah. And economics, but it's called option value. You always want to have option value. You never want to appear as if you need the audience that you're talking to, but to your point that you're providing an opportunity for them. that's you you that That's how you want to, that is the script that you want to follow. But obviously, preferably you want to be living, you want to be to be authentic in and in that presentation. and for i've I've had companies that have pitched to me or to groups that I'm part of that they actually haven't
00:15:42
Speaker
come to present, to pitch, to raise money. They've just come to the group or they've sent me a deck as more of an informative in kind of exercise. Hey, this is what we're doing. I just wanted to introduce you to the company. where We don't actually want your money. Maybe down the road we'll come back. It's it's that kind of exercise of building trust, validating building trust and providing an opportunity for investors to get on board. If you're like if the problem is clearly stated and and you have the right people with the right skill sets and you have a compelling solution or compelling product, most angel investors, if they see what used to be in it,
00:16:26
Speaker
they'll get excited and you can start to see. And the answer is in the question. they They'll start asking questions and if they're engaging and they're then and they want to dive deep, then the hook is in.
00:16:39
Speaker
And then it's just a matter of setting the hook and reeling them in. And it's not it's definitely a partnership. I'm throwing out all these P's, planning, partnership. This is all super important all along the trajectory or the evolution of a company, is you want to bring everybody in as a partner.
00:16:57
Speaker
It's really funny that you're talking about your subset of P's because I talked to another angel investor about a month ago on a different project and he was, he had 10 T's that he runs through in order to evaluate a business. So maybe everybody's got their, maybe everybody gets, assigns their letter. Okay. So hypothetically, you've seen the pitch deck and you said, okay, yeah, I want to invest and I want to talk further. What's the due diligence process look like that you go through?
00:17:23
Speaker
yeah Yeah, that's super important.
Due Diligence and Risk Management
00:17:25
Speaker
Do your homework is just massive. it's that there's no There are no cutting corners in that part of making an investment because that due diligence is checking all of the information that's in the pitch deck. Let's just hiring somebody, just taking a resume and going out and checking their references.
00:17:44
Speaker
First of all, it's, did they actually do what they say they did? It's a quality step. It's a verification step. So you just want to verify that everything in the pitch deck is actually based in reality. And then you want to dive a little bit deeper. You want to go into the the market opportunity. So if you can call, if you can call some of the customers and do some take an auditor approach and just get some just get some frank conversations with some existing customers for that business,
00:18:14
Speaker
Certainly calling the board of directors or calling their, or calling the advisory board and talking to some of them. You want to crunch the numbers, obviously, right? If the entrepreneur is provided a five by five, which is basically and very it's a very rudimentary pro forma, you want to check their numbers.
00:18:33
Speaker
As an investor, I have a very crude bat in the napkin kind of calculation that I do in terms of discounting because I know that as an entrepreneur, when I put that hat on, it's all about projecting of value and opportunity and just the excitement of this huge marketplace that we are going to capture 10% of or 30% of or whatever it might be. As an investor, that risk mindset, I discount a lot. So I'll cut the market opportunity by a certain percentage, I'll increase the cost by the projected expenses by a certain percentage, and I'll increase the timeline by a certain percentage.
00:19:16
Speaker
And if that still pencils out, then they've ah overcome one of the hurdles. It's because everybody thinks that their product is going to be universally loved, right? it's and But in unless you're food, heat, or love, it's not a universal axiom.
00:19:31
Speaker
Yeah, ah exactly. And you want, and I don't i don't besmirch you and entrepreneurs and anyone who's pitching, I want them, investors want them to be excited. You want that energy, but part of the manifestation of that energy is maybe a little bit unrealistic projections.
00:19:48
Speaker
Not once. I've invested in close to 40 startups and not once has a startup, let's see, maybe one startup has come, has actually over two to four year period has actually met their projections, their revenue projections.
00:20:06
Speaker
Wow. Cool. That's fascinating because I think everybody has that sort of optimistic view and that shark tank view of it's a billion dollar industry and if I just get 1% of it, then everything's going to be rosy. But it's the getting the 1% that is often the most challenging thing.
Diversifying Investments and Humor in Angel Investing
00:20:23
Speaker
Oh yeah. Oh yeah. And this from for those folks who are listening who are interested in investing, putting on their invest investor hat. And being an angel, the name of the game is, and this ties in the risk, is diversify that portfolio. And I know that's tough because it's explicit in diversification is, okay, having enough resources to be able to put, make investments in lots of different companies.
00:20:47
Speaker
But that's what you're getting into as an angel investor, is that if you're only going to invest in maybe two, three, four companies, you're taking on a lot of risk. There are a whole bunch of other factors that you need to consider. Maybe be pretty involved in the company. So they're smart money and and dumb money. Dumb money is not involved. and They're just making a financial investment. Smart money is somebody that that tends to provide advisory role or sit on the board or mentors, the founders. So if you're only going to dip your toe in, you need to and if you don't have the opportunity to diversify to reduce risk, then reduce risk by being active in those companies.
00:21:32
Speaker
So we we've reached the point in the narrative where it's it's check and giving time. So first question is, when you invest in a company, do you have one of those giant novelty checks? And if so, do they come in a book or do you have to have them printed individually? <unk> not When it's presented to the founder? Yeah. Like like the old Publishers Clearinghouse one. Do you get the big james giant novelty check or not so much?
00:21:58
Speaker
Yeah, no, it's ideally you want to get it and it's on styrofoam so that the founder can like break their head, break the check with their heads. And that's all part of the celebration. I'm sorry, Trigby. It is totally, it is very anticlimactic.
00:22:14
Speaker
It's just a wire transfer. I'm sorry, it is just a wire transfer. It's like the investor, there's a little shaking involved if it's one to one and it's not through an investment group. There's a little bit of buyer's remorse.
00:22:29
Speaker
But my my friend Tracy this last fall won a $50,000 pitch competition at a big giant conference. She lives in Ohio, the conference was in Boston, and they gave her a big giant check and she very proudly put it under her arm and took it through TSA and checked it to to get on. Everybody saw that she was a winner. so it what You're making
Returns on Investment and Startup Growth
00:22:52
Speaker
the investment. What do you get for it? Do you at do you get a percentage of the company?
00:22:58
Speaker
And how big of a percentage do you usually ask get depending upon the money? what How does that calculate it? Yeah. This is a little bit of the dark art of valuing companies of how founders value themselves and then how investors value them. And it's, it's the law of mutually inconsistent expectations where somebody wants this and somebody is offering this and you meet. And yeah, there's.
00:23:23
Speaker
There's an investment that's made, if we're talking about a financial or any sort of an investment that's made, with the expectation of a return on that investment. And that return in angel investing is captured through an ownership stake in the company.
00:23:38
Speaker
And angel investing de and venture capital, there's really only two ways to get your money out and that is through an exit of some sort, right? And so an exit would be either going public IPO or acquisition.
00:23:58
Speaker
Gotcha. And so then so that's a pretty large part of the the valuation, the due diligence process, is what is the market out there? What are the comps? What is the general and economic environment? and And how is liquidity looking? How might it look? So the timeframe generally for private placements, which are investments that are made in non-public companies,
00:24:23
Speaker
is seven to 10 years. if you' look If you're looking at it as an angel investor, yes. I don't think you've seen Shark Tank recently. but Yeah, I read something that's, yeah, angel investors should expect a return within two to four years. Yeah, no, that's not, nope, that's not generally how it goes. It takes time and and this is part of angel and part of investing certainly in startups is that they're like the fast money is not a strategy, right? It's not a strategy for success. It's a strategy for losing a boatload of money of your hard earned pocket money. But if you really want a company to succeed, you have to provide the runway is what it's referred to. You have to provide the opportunity for them to make the mistakes they need to make to be successful.
00:25:17
Speaker
And I think we've touched on this before. That is a foundational ingredient in successful companies, is this notion, and I heard a founder recently in a workshop, they refer to it as falling forward. You want to provide resources, financial capital to founders and companies to be able to fall forward to make all the mistakes they need to make to be successful.
00:25:43
Speaker
i I want to pick on this a little because I think this is a fascinating juxtaposition of about three things, because you talked about risk management, you talked about protecting the money. On the other hand, you also talked about advising somebody. And something that somebody said to me recently, which has just really stuck in my craw, is he he told me that sometimes it's important to let a problem develop before you start to solve it.
00:26:08
Speaker
So how do you weigh, if if you can if if you're invested in a company and you're advising them in some capacity and you see something coming, do you let it go or do you intervene and say, no, because i this is my company too? is what right you chart where where How do you draw that line? Because I think you're right. I think most really valuable lessons in life, not just in business, are learned from callusing and getting a callot because you made a mistake. and if yeah when there's But when there's your money involved and somebody else is callusing, how do you reconcile those things?
00:26:50
Speaker
Yeah, and so right, callusing the path of self-discovery, the absorption rate ah of that experience and the lessons learned from that experience, it's I've got a four and a six-year-old and maybe I'll let them touch a hot surface and experience what's that what what that's like ah instead of telling them not to touch it, right?
00:27:11
Speaker
Yeah. I had that experience with my son recently where he wanted to do something stupid and I knew there wasn't going to be a consequence. So instead of telling him, don't do it, it's not it's there I just let him do it. and Exactly. He did it. He was like, oh, that's it? Yeah, that's it. Right.
00:27:29
Speaker
But that, that, that is so powerful and that is a really, it's really important for advisors. And that's in my mind, what makes a good mentor or a good advisor is to your point is knowing when to let those mistakes happen. And certainly as an investor, because there's, there's an uptick in awareness and just, we call it the the the maturity, the the and maturity of a founder. And so this kind of goes back into due diligence, even though we're talking about angel investing, which Really early on it's maybe not it's maybe the second phase first phase as friends and family.
00:28:06
Speaker
um some Some folks will lump that into angel investing. I tend to look at angel word investing as the next step. And so part of the due the due diligence is working with entrepreneurs who have already had some sort of startup experience. That's one way to reduce risk. And because they've made a bunch of mistakes already, and it doesn't it almost doesn't really matter how that company, ah obviously if their previous company has done well and exited or they're still running it and it's profitable, that's a great indicator. But just the fact that they'd gone through the process and that they've already made some mistakes and they've had the opportunity to learn from them, that's hugely valuable.
Shared Values in Investor-Entrepreneur Partnerships
00:28:49
Speaker
It sounds like from a business standpoint, it's and it's almost, and I just had this light bulb go on because
00:28:58
Speaker
My job is in client acquisition and sometimes I'm evaluating a client just as much as a client is evaluating me because if you're not a lot of fun to be around or if you don't find me funny, we're going to have problems. And it's not that I can't play things straight, but I can't play things straight for very long because I'm just, I'm naturally a funny guy and I'm on a, I'm unapologetic by it. So it sounds like.
00:29:25
Speaker
It's important as you're considering taking on an investor to make sure that you, it's it really is more of a partnership as opposed to a checkbook. Definitely. And what's a core ingredient in a partnership is shared values. This is stepping back from angel investing and just looking at investing in general. I really, I like to, the frame that I like to look at investing through or the lens is always a values-based approach to investing. yeah And I know that's not always easy and that, that and and that part of mitigating risk is spreading out your portfolio.
00:30:00
Speaker
It all depends on how you want to make money, how you want to generate return. And so when you're an entrepreneur and you're building a business or you're an investor, to your point, it's ah it's a partnership and that partnership, there has to be some shared values.
00:30:15
Speaker
as part of that partnership. And so that's something else that I look at and that and angel investors will look at with a company is what is what is their value system? What is their their philosophy? What is their vision statement? That's really important. That's an important part of Pitch Deck is a vision statement and a mission statement, but the vision statement should be pretty clearly defined. The mission statement, can there there are tasks.
00:30:37
Speaker
right? There are attacks and pivots involved that might where the mission statement might adjust a little bit because that the the mission statement is the what the vision statement is the lie. One of the most important like lessons I learned in my life from from a business standpoint and from being a fatherhood stand standpoint, I learned from Dave, who isn't here today. And I was presented with an opportunity with somebody needed a website and it was an e-commerce based website. I'm going to generalize this as much as possible.
00:31:09
Speaker
She was a performance artist and it wasn't in the adult industry, but it was, it was adult adjacent and she makes a fortune. And I brought it into Dave and I said, Hey, should we do this? And he's like, I don't really feel good about it. And do you feel good about it? And I was like, no, I don't really feel good about it. There's a lot of money involved. And he said, who do we really want to be? And I i said, he said, what the North star that I usually follow is when I go home at night, I want to tell my kids what I did today.
00:31:38
Speaker
would you feel comfortable going home and telling your son what what, what son about this? And I said, no. And that was a really important lesson for me because that money is always gettable, but partnership isn't and your own value system is not something to give away lightly. And I, I've something really changed my thinking in almost in large part because of that whole off end conversation for Dave. And if you probably, if you ask him, he'll say, I have no idea of what trigger he's talking about. I don't remember that at all.
00:32:07
Speaker
it It was really important to me. But he obviously lives it and it's how you guys run your company and how yeah he runs this company and how you run your side of the business. and it's yeah It's part of why we we why we're friends and why we appreciate each other and it reduces. It is a great way to to getting back to legal investing. It is a great way to reduce risk. and there's It's just starting from a really solid kind of foundation and then building up from there as ways to make the best use of everybody's time and cut through the BS and just give the enterprise the greatest chance for success as possible. ah what is and Normally, this is where I make a fun joke about how well I know, but Dave doesn't, so can you help him out? But i in this case, especially since I just said, know something nice about Dave, I'll continue it to say, I don't know. so What is the difference between angel investment and venture capital be back funding?
Resources for Angel Investors
00:33:04
Speaker
Yes, and and but before I don't want to forget to make this plug, the angelcapitalassociation.org. That is a great place. It's probably the predominant resource to go to for anyone interested in angel or investing. There's an angel capital university, this gentleman, Bill Payne, who sadly passed away a little over a year ago. He's the grandfather of angel investing.
00:33:29
Speaker
and really formalized a lot of the model and was a mentor and and actually was a co-founder of the ah Frontier Angels group that I'm part of here in Montana, ah one of the four angel groups around the country that he helped co-found. But Angel Capital Association of is a great resource to go to for folks.
00:33:49
Speaker
Angel investing in venture capital, angel investing is earlier on in the life cycle of the business.
Angel Investing vs. Venture Capital - Intellectual Engagement
00:33:54
Speaker
Generally less than $250,000 checks that are cut per person, right? So they the overall investment and in a company through an angel group or an angel fund might be larger than that, but as an individual, that's the threshold. And then $250,000 and up would be where venture capitalists get into the game. And that's later on in a company's evolution, where they have much higher valuations and they're They may not be generating, they may not be profitable, let alone generating revenue, but the market is is huge. And that's where you might get unicorns and you most likely will not. But that's why a lot of people invest is for that one company that might generate 50X, 100X, 200X kind of thing. And that's 200 times what you put in. That's what that that value X means. This is mean means as bracketing the discussion. I made the joke about a shark tank earlier is are would they be an angel investor or they'd be a a VC funder? Is it really dependent on that threshold?
00:35:02
Speaker
Yeah, it does. Some of the companies that I've seen pitch there are on their way, but I would say that they tend to be more on the angel investing side. Seed rounds, angel rounds, those are lower dollar amounts earlier on in the life cycle of a company.
00:35:21
Speaker
And yeah, and so just to break that down a little bit, that that that threshold, a lot of angel investors per company, they will put in, they'll invest maybe 5,000, 10,000, 20,000 if they're looking at building a broader portfolio.
00:35:38
Speaker
But that threshold, that $250,000 threshold is tends to be the upper limit. But most of the angel investors that I know, and to be fair, Bozeman and most of my investments have been local Montana, maybe some in Idaho and Washington. But these these are smaller markets, right? And so they're but lower dollar investments, lower dollar valuations, just smaller opportunities.
00:36:05
Speaker
If they're SAS, they're nationwide, and that's the opportunity to blow up. So then what's what's a series funding? I hear about Series A and Series B. I genuinely don't know. what Can you help me understand what those are? Yeah. And it's so I i haven't done i haven't you know stepped into the DC world.
00:36:23
Speaker
I have once to refund, but theories A, B, C, D, that's the venture capital kind of model. That's the venture capital world. And you will get also various rounds of seed funding. And so that that's prior to venture capital.
00:36:40
Speaker
And so, yeah, Series A, B, C, D, E, F, they'll just keep going as the company needs needs more capital and and as the opportunity really fleshes itself out. That's more on the venture capital side of things.
00:36:54
Speaker
Gotcha. You've seen both sides. So you've built a business. You've also invested in a lot of business. What do founders often misunderstand about what an investor is really looking for? it it Is it really just a a return on the investment or is it something? Are you in it for the fun? Are you in it for the Lego build of it all? Or you just want more money?
00:37:14
Speaker
No, that's a great question. And so a lot of founders, especially with angel investors, it's really incumbent upon the founder to appreciate that they're providing an opportunity for investor cannot just return, have a financial return, but also a an intellectual return, right? And and and and that that tends to be a lot of kind of the ethos around angel investing is that those folks, they just love the ecosystem. They love helping out entrepreneurs. They love helping smart people solve clearly defined problems and being part of the mix.
00:37:53
Speaker
And maybe they miss it maybe maybe they've had their one or two companies and exited and they miss the enjoyment of it because I agree it's a little bit like I imagine like being a grandparent and being able to think.
00:38:08
Speaker
go home, spend time with the kids, and then and then hand them back. Bye. Over to over to you guys. Good night. Yeah, exactly. we Got them all hopped up in candy. Good luck. So yeah, so I think it's really important for founders to recognize that they, and this is the advice part, is making sure to really treat that relationship as a partnership where they can solicit and just leverage the experience and the advice that investors to look at investors not just as a financial resource, but as an advisor, as an an intellectual resource as well. it's It's bringing on a fun uncle who's also going to help you grow.
00:38:48
Speaker
Yeah. Fun or on, as the case may be. Yeah, definitely. Okay, so two two things in response. After listening to you talk for about 45 minutes, I feel confident that my Aztec death whistle AI company probably doesn't have a lot of legs. So I think I'm going to put that back on the shelf, but I appreciate you taking this little trip with me.
00:39:13
Speaker
so yeah yeah the And this has been just astonishing in the illumination of understanding the basic nature of things. And normally we end the show by allowing people to have ah blatant and naked self-promotions. I'm not going to do that at this time. Instead, I'm going to do the promotion for you.
00:39:32
Speaker
and say if if you have a service-based business, especially in the restaurant industry, I can't recommend Nicholas's tool. Check this out. It's CheckThisOut.io. It is probably one of the smartest ways to ah market and put more table covers on you were in your restaurant than I have ever seen. And I've done marketing for a long time and it is hands down one of those few force multiplier tools that I can see, that I know of that really can make a difference for a company very quickly. I'd absolutely encourage you to go to check this out.io if you're a restaurant owner, absolutely take the half an hour and sign up for a a demo to see it yourself because I think it will be a game changer for you.
00:40:15
Speaker
Thank you for that, Trigby. I really appreciate that. and Yeah. And we partner with our customers. but we help We help them just crudely get butts in seats and we are directly tied to to top line. That's where it's very easy, simple to use software that leverages its SMS marketing. But the way that we do it is really easy to use and it delivers results remarkably quickly.
00:40:40
Speaker
It's you got to spend a little bit to get a lot. So it's definitely more expensive than social media and email, but it's really effective. And I love partnering. We just onboarded that techs a restaurant group in Texas, um, a couple of weeks ago. And, and it's really fun to see them and see all of our other customers in embracing it and really giving them a boost beyond just surviving, but thriving in their businesses.
00:41:05
Speaker
It is truly a game-changing tool for that industry. Nicholas, thank you so much for joining. I think we'll have you back again for we'll figure find out another reason. It's always such a joy to talk to you. I feel like i every time I get the opportunity to talk to you, I get 45 minutes mark. So thank you for that.
00:41:21
Speaker
Yeah, you too, Trigby. It's really always fun to to sit down with with that with you guys, and I really appreciate your lots of great questions and happy to answer any follow-up questions that any of the viewers or listeners have and about Indio Investing. Thank you. This has been another episode of Dial It In, produced by Nicole Fairclough and Andy Matowski. Dave Meyer will be back for the next episode. My name is Trigby Olson, and like always, with apologies to Tony Kornheiser, we are hoping to do better the next time also.