In this edition of Lived It, we sit down with Renee DiResta, Vice President of Business Development at Haven, an online platform that streamlines ocean freight shipping. Renee may be a new mom but she’s certainly not new to the investing world.
Renee is adamant about investing in what you know and cultivating communities. It’s proven to be a successful model for her with six investments and counting.
The Female Funders team chatted with Renee about the differences between individual investing and partnering with a syndicate, active and passive investing styles, and why you’re actually investing more in the people than the product. In this interview, Renee shares solid insider information about group investing and how women don’t have to know it all in order to start investing.
Years as an angel investor: 6 Number of investments: 6
Renee’s first investment was the result of the years she spent meeting new people and making friends in the tech space while working on Wall Street. Her network of tech friends included a gaggle of Googlers who moved on to start their own companies. After years of working as a market maker on Wall Street, where it was very complicated to trade individual stocks due to the potential conflict of interest, she wanted to make investments where she would be more involved.
“I didn’t trade actively in a personal portfolio, so I had index funds mostly and ETFs. And I looked for diversification after I left – diversification in the form of interesting alternative assets, rather than public-market verticals. I got really into Lending Club and other peer-to-peer lending. Angel investing was one more way to diversify.”
Mitro, Renee’s first personal investment, was a password manager for individuals and teams that securely saves your login, and allows users to login and share access. The company was founded in 2012 by Vijay Pandurangan, Evan Jones, and Adam Hilss and acquired by Twitter in 2014.
“Since I’d known them personally for a very long time and had very, very high degrees of confidence in their work ethic, their real passion for the projects they took on, [and] their technical expertise, I wanted to be involved. I wanted to help. I did it not because I was expecting an amazing financial return, but because I thought it would be really fun to be involved from day one,” she said.
Renee spent a lot of time in an advisory capacity, capitalizing on the fact that she was already a venture capitalist (VC) and an accredited investor.
“I wanted to be involved. I wanted to help. I did it not because I was expecting an amazing financial return, but because I thought it would be really fun to be involved from day one.”
This was not a decision made lightly (she talked it over with her husband Justin), but the expertise and advice Renee was able to offer the team made her feel more connected to the project, like she was committed to something bigger than herself.
Mitro also offered some of the biggest lessons she learned as a new angel investor.
“I felt a little nervous asking to invest because I didn’t have a sense for what was an appropriate amount to offer, or how to offset a smaller check with more time commitment. I had this idea that every angel investor was writing $50k-100k checks and I didn’t really feel comfortable risking that. At the same time, as a VC I knew that founders didn’t really want a whole lot of tiny checks – nobody wants to fill out their round with 50 people writing $1,000 checks and chase everyone down for signatures. So I wanted to make sure that what I was doing was a combination of money as well as bandwidth, so that my investment would actually help them.”
“The companies I’ve invested in are just a couple of years old right now. I’m still new at this. I started doing this maybe two years ago. And when I was a professional VC, I should also mention the caveat that O’Reilly AlphaTech Ventures (OATV) had to pass before I could write an angel check. Usually that wasn’t an issue, because they invest at the Seed and Series A stage and most of the companies I considered angel funding were earlier.”
Renee was a Principal at OATV, a seed stage investor at the time, and was “really, really happy for the guys” when they got picked up by Twitter. She was happy with the outcome but cautions that the situation could just as easily have gone the other way, since most early-stage startups fail.
The Mitro team kept her and their other investors in the loop throughout the whole lifecycle of the company.
“‘Do you need me to put in a good word? Can I help with this?’ and ‘How can I help?’ I think that’s the most important question you can ever ask as an investor. While sometimes it’s easier to help as an institutional VC – particularly if there is a strong professional and portfolio company network and support staff – angels can make things happen too.
“I have made three as an individual angel, and then another three via AngelList Syndicates. These three as an individual investor, they were larger personal check sizes than I’ve done on AngelList Syndicates, but the AngelList Syndicates pull together much larger rounds overall. They’re exciting to me because they help angel investors scale their capital and diversify. I work with Gil Penchina and Helen Zelman Boniske and Jeremy Conrad on the Flight.vc Internet of Things (IoT) Syndicate. Gil has a phenomenal background as an angel investor, just a fantastic track record, and he has a reputation for being no-nonsense and very capable that attracts a lot of start-ups to him. His group, Flight.vc, has some professional investors and some angels, and then other folks who are just passionate about helping to fund good companies even if they work in a totally different field.
“As an angel with a full-time job entirely outside of investing, I don’t have the bandwidth to keep up to date on a ton of different sectors. I prefer to be specialized, so I have a mental map of the landscape of what’s out there and how a new company is going to fit. As a VC, I appreciated the opportunity to leverage the expertise of the whole team, to be broad. I loved learning about entirely new technologies and markets. But as an angel I feel like specialization works for me. If you have tons of money, you can deploy it into dozens of different companies and spread out the risk a bit more. As someone who makes a handful of investments a year, I think domain expertise is important.”
“When I invest directly, first and foremost it’s a bet on the people. I’ve known the founders and am excited by the opportunity to help. I’m excited that these founders are going to accept a check from me – especially since it’s usually the smallest check that they’re going to accept! It’s a good feeling to back someone because you believe in them and their vision. When people found out I was leaving OATV for Haven, a few angel investor friends reached out and said, “Hey, we’d love to invest in you in your next round. We want to bet on you.” It was a huge vote of confidence.
“The companies that we promote via the Syndicate, they’re usually much further along…so the bet is on the team, but also on what they’ve managed to achieve so far. I like seeing products that can change the world come to life, and enjoy backing the founders who are making that happen.
Renee likes to start off the partnership casually to get a sense of the potential interest in the project, for both personal and AngelList syndicate investments.
“Most deal flow comes through referrals, or via a LinkedIn or AngelList email. I like starting with a call. Again, it’s because I don’t have a ton of time since I have a non-investing job. And I do the coffee shop thing – a coffee shop or a co-working space – for an in-person meeting. A lot of times it starts as a fairly informal conversation. I do really like when people send me a deck to frame the conversation. Sometimes inexperienced founders feel wary about that, or entrepreneurs think it’s something you only do for institutional VCs. Or they’re concerned it’s going to be spread around. I’ve had people looking for angel money ask, ‘Are you going to sign my nondisclosure agreement (NDA)?’ No. I’m not. Nobody is. But I also am not going to forward your deck; relationships and reputation are very important in angel investing.
She takes turns doing the first screening meetup with her IoT Syndicate partners. Then they’ll report back to the others and evaluate the potential investment together. It’s a different process for individual angel investors versus a syndicate. There needs to be a better understanding of the startup and a stronger belief in the product because the Syndicate lead angel’s accountability reaches a higher level.
“I’ve had people looking for angel money ask, ‘Are you going to sign my nondisclosure agreement (NDA)?’ No. I’m not. Nobody is. But I also am not going to forward your deck; relationships and reputation are very important in angel investing.”
“For the syndicate, I actually feel that there’s a slightly higher bar, because if I’m writing a personal angel check, it’s only my money that’s on the line. If I’m writing a syndicate check, we’re asking a whole lot of other people to participate and I really want to be absolutely sure that all diligence is done and all homework is done. I will also always, 100 percent of the time, personally back the company that the syndicate is backing and that’s really important to me. I think that’s an absolute necessity. I think that if you’re going to participate in a syndicate you really, really want to see that the syndicate managers have skin in the game. At Flight.vc we have a very high bar; we evaluate those deals the same way I used to evaluate a venture investment.
“I also like when the Syndicate is invited to participate in larger rounds where an institutional VC is doing due diligence; I feel even more confident that all rocks have been turned over and we really know what we’re asking people to put money into.”
“I am very fortunate to have spent four years as a VC getting mentorship and training from the best people in the industry. But more importantly, over the years I’ve gotten to know many people in tech who are building great companies. I’m just an investor; they’re actually working in the industries I dabble in, and have deep knowledge of the technologies and forces driving the market. I really respect and value their feedback.
That deep knowledge is something that I think Syndicates are really great at. Angel investing is one of the few investment areas where a “follower model” can work. I don’t think highly of ‘replicate-the-guru-portfolio’ as a strategy for public market trading. But in angel investing, a follower model is interesting because most of the people running the syndicates had successful exits themselves in the sectors that they’re focusing on. They have great reputations and they have strong personal brands that draw entrepreneurs to them. Founders actively want these people participating in their deals because they can really help the company grow. If you’re a new angel investor, who maybe doesn’t have a strong tech network or deep expertise, ‘following’ is a way to feel more confident that you’re investing in good deals.
“I invest in founders that I believe in sectors that I understand, and ideas that I can envision changing the world.”
“I don’t think angel investment is for everyone, and I want to be really clear on that. It’s incredibly risky and if investing is a financial reach, then investing in startups is not for you. An angel strategy can be part of a balanced overall portfolio, but it should not be something that people do because they think, ‘Oh, I’m going to get in on the next Facebook.’ There’s a lot of ‘survivorship’ bias in the success stories that capture the public’s imagination, and I actually feel that in some ways the tech community and the tech press have done a disservice by implying that making angel investing accessible to everyone is something we should be striving for. The narrative around the JOBS Act read like a fantasy: suddenly everyone would be able to back the next Facebook, Twitter, Uber. The reality is that for any given deal, you’re much more likely to back something that’s going to fail. Something like 80% of startups fail.”
While Renee will continue staying true to her hardware tech and logistics roots, the new mom to Xander, born in December 2013, doesn’t have much time to explore new markets as she spends her downtime taking Xander to the park or colouring with him. She now has a self-declared “soft spot” for mommy tech.
The most important thing is finding access to good deal flow. This can be hard outside of urban hubs with tech sectors. Renee recommends leveraging your personal network and strengthening it through communities like Meetup.com, where you can join entrepreneurship clubs and meetings that can be tailored to suit your interests, or finding “bands of angels” in your neighborhood. Having some kind of expertise in the sectors you’re considering will let you get a better sense of the industry in which you’re investing, she said. Backing “random start-ups” is a bad idea, she added.
“If you’re going to do something very general, like “social” apps…those are really, really tough. Really tough. It’s just hard to predict what huge masses of people will love. But finding areas that are core to your interest or expertise where you might have an edge on how to evaluate a deal and pick a winner, that’s a good place to start. Get out there and meet the entrepreneurs in your community who are working on those problems.”
But being an active angel investor and doing extensive research and legwork is not for everyone. Renee said taking a passive approach is “absolutely the right choice for many people” and if that sounds like you, then sit in your living room, pull out your laptop, and get on AngelList. Syndicates allow you to either back people or sectors. In Renee’s IoT Syndicate, backers are investing in hardware, software, and services combined into a platform. That covers everything from drones to home outfitting.
This method of investing is more passive, thanks to the guidance and experience of the syndicate managers of course, but it’s not without its risks.
“And then say, ‘Hey, these are the sectors I care about. This is how much money I have to lose, and this is how I’m going to deploy it. Do I want to do ten companies at $1,000 each or two companies at $5,000? AngelList can handle both. If you’re investing directly as an individual, honestly, very few founders want checks under $10,000 unless you have real value-add. But there’s so much flexibility and great opportunity on AngelList right now.”
“Set a firm budget and assume that you’re never going to see that money again. Roll like you’re going to Vegas: take out however much cash you’re willing to lose.”
“I’m not totally sure where the JOBS Act is on the new accreditation requirements these days. It’s worth your time to check and make sure that you are staying on the right side of the law. It’s something to be aware of.”
Renee’s range of experience working as a VC, angel investor, syndicate investor, and as a Principal at O’Reilly AlphaTech Ventures (OATV) has given her a unique perspective on investing. Her number one tip for the newbie investor?
“I think it’s probably just to take your time. You don’t have to rush. If the deal doesn’t feel right to you, don’t do it. There are other companies out there, other good opportunities will come up. Don’t let fear of missing out lead you into bad decision-making processes. As it is, you’re not going to have a lot of information to analyze. Let’s be honest. Angel-stage companies almost never have real cash flows. If you find one that does, jump on it. But no, seriously, you’re really not going to see much in the way of cash flows. You’re not going to have a whole lot to model with. Even people who have Wall Street backgrounds, bankers, people who have taken Finance 101, those DCF skills don’t really matter much here. So take your time. Watch a sector for a while before you do your first deal.
“There are syndicates that focus on later stage so if you want to invest in something that’s been “de-risked” to some extent, you can write a check to a syndicate that’s investing in B-round companies. That’s something that seems to really appeals to people who aren’t in tech or don’t have a deep knowledge of the ecosystem. It’s a company they’ve already heard of, a company that their friends are using. You have a much smaller ownership stake but the risk is lower, too.
“Knowing what you’re willing to lose, gauging how comfortable you are with an illiquid investment and very little information…these things are key. Take your time to familiarize yourself with what’s out there before taking a leap.”
“Don’t let fear of missing out lead you into bad decision-making processes.”
Email always. I also keep an active profile on AngelList and get AngelList emails.