Ep 16 - Alister Esam - Angel Investor and Founder of Angel6

0:01 Hi, welcome to the Founders and funding podcast. I'm your host, Philip Smith. On the podcast, I'll be interviewing founders, investors, startup advisors on how to fund the journey of your startup and some tips and advice they have for you along the way. This podcast is sponsored by Perfect Technologies and Laden. Enjoy the episode. Hi Alistair, welcome to the Founders and Funding podcasts. Thank you, Philip. Glad to be here. My pleasure to have you on to set us off, Alistair. Talk to me about your company and your role. So I'm not sure it's really a company, but I'm a, I'm an exited SAS founder. So I have my business with ball packs and we people used to turn up to board meetings with big paperbacks and now they turn up with iPads.

0:47 And we were the guys that did the tech around that. And I exited that in 2018. And since then I've, I've sort of been investing all sorts of things. I've tried everything on the investing front, ended up with a couple of things that I think work really, really well. One of them is kind of share trading and the other one is startups. And when I did that, I was quite surprised how naive the whole industry is with regards to investing. And it's a really, it's a really interesting area where it's not you can argue isn't very efficient at all from an investor point of view. So my first investment failed, my next investment suddenly gets a 10X. My third fails, my 4th gets a 10X. And I keep going because the 10X is making it worthwhile. And I start to see a pattern really amongst these investments that I'm making.

1:37 And the failures get less and less and the successors seem to come kind of more and more. And now I'm, I'm kind of like reviewing hundreds of start-ups every year and I'm picking the best 6. And so I recently found this thing called Angel 6 where investors can follow my track record, follow me, I will share the investments at no cost with them and they can. And that just helps helps me raise more money for the for the startups I'm investing in, which is which is which which helps them. Fantastic. Well, that's some really great experience. And I think a lot of investors, they probably envy, envy the 10 exports. Don't you know, they've had plenty of losses themselves. It's very hard to pick and choose.

2:19 And what does an average day look like right now? So are they typically start work till about somewhere between 10:00 and 11:00? So if I'm at home, I might walk in the dog with my wife. We'll go for a coffee every morning. I'm kind of, I kind of decided I've slipped into this not working very hard life and and the investment suits that. So we're a lot of holidays. We've got a holiday home. We'll go to a lot race cars. And so I have 50% of my time's leisure. But when I'm not doing that, I mean, really it's, it's talking to my start-ups, mentoring the ones I mentor on the board of a few. But a lot of my time is spent like sat on my desk. And I love doing this, looking at whether it's the start-ups or the share trading, just reviewing the investments and working out where the opportunities are and trying to apply an analytical approach to that, which not many people do. So I mean, that's, that's it really. I'm at my desk or I'm having fun. Yeah, well, at that, to be honest, I think it's a it's a good way to to be.

3:16 But I'm very much pro kind of a mixed lifestyle. I think some people can be too rich with the 9:00 to 5:00. I think have your mornings or your evenings and your weekends or even work weekends or take Mondays off. Just I think once the routine I think supports the the work. I think I'm a big believer in that. And I think you've earned that right to be able to have the freedom as well. So kudos to you. My wife quite well illness, my wife, my wife might argue with this, but I I like to claim that my calendar, everything in my calendar, I can just change it all and move it all and cancel it and postpone it because the start-ups will wait. Investing will wait. You know, nothing's nothing's urgent. So if we want to have a week off, we can. But she'll always say, oh, hang on, what about this? But.

4:01 I think that's, I think that's the dream life for myself. I think that's the way to have it and talk to me with some of these startups that you've invested in. And why Alistair? Yeah. So I've had some some great startups over the years and most of them are still in. So some some that are doing really, really well and astonishingly well really, you know, 2020 times returns on on all of them. So the, the ones that I'm investing in at the moment, I think it seems to get better and better because the ones I'm investing at the moment, I do this thing where I score the startup a few months after I've invested when the 1st update comes out. Because when you're investing, you get very excited. It's quite an interesting thing.

4:42 As soon as you sign the cheque, you go and you, I'm a very positive person, but you start to look at, oh, did I make a mistake there? And there's a few where I've gone, oh, oh, you know what? I'm not sure. I think that was, I'm not, and I don't realise it until the cheque goes out the door and you think, oh, big mistake. And, and so the way I've started to score them, it's really interesting. Is that like a month after the update comes out, everything has calmed down. You're now looking at it more objectively. What do I, what do I, what do I now think about that? I give them a confidence score of 100 and that's getting better and better. I mean, the, the three I've invested in most recently, Health key is a, is a marketplace for health services. There's Habitat Learn, which is an accessibility based ad tech focused ad tech company that is hopefully kind of being going to be driven forward by one of the IT phobal IT guerrillas. And another one is your future, which is, is Gen. Z entry level hiring platform with kind of a, an IP related patterns on on kind of how they match or with some IP on how they match kind of profiles to jobs. We ask to competitive space that I've been wary about going into it because there's loads of that stuff. But these three, what excites me about them is they've come from typically in essence of them has come from nowhere to something very, very successful in a very short period of time. They're not asking ridiculous valuations because they, they kind of short track record because they've come from nowhere and the growth rate is

6:13 phenomenal. And they're doing that growth typically without any sales team. You know, this is they're just about to, to raise to, to, to, to kind of accelerate. So I mean, they, they, they get, they, they get really excited, they're going to be really excited. Fantastic. Well, it's, it's interesting. I think there was a bit of I've always felt when you invested in a startup, when you when you first learn about it, when you know, it's that kind of new opportunity. It's a bit like when you maybe you're the car dealership and you know that he says someone else wants to buy the car to be gone tomorrow. There's always a new fear that window of opportunity will disappear, you know, But then when you take a breath and you get home and you think, actually, if I want to drive this scene and like, what's the what's the mileage of the problems with it? But I think there's some similarities there. And then what is the best way to find a startup journey in your opinion?

6:59 Have you found, you know that they're better if they they bootstrap or if they invest or get loans or is there certain types of investments or or ways to fund it that you appeal to you more? But I mean, if I, if I, if I look at it from Michael, is he as an investor? I like the ambitious ones that are looking to raise, raise, raise, raise, raise, get really big and grow. That's what I like because I know that's where the money is as an investor, it's exciting and you get amazing returns and you, you know, you that way you're working towards an exit. I think it's interesting because I met one of my, I met one of my investments the other day. That's one of doing, you know, I think they're, they're kind of onto series B now and they are the guy said to me, you know, do you think because it's a question as to as a business strategy, he was asking from a business strategy point of view, do you think we should, you know, we should grow like like massively take on money, just go for it? Or do you think we should sort of remain a luxury product, scale down and, you know, study off and get, get to profit and, and all this sort of stuff?

8:02 And, you know, from my point of view, if, if you're just looking financially, the answer was grow. But for, for the, for the actual founders point of view, it, it depends what you want, because taking on that money is risky. You know, quite often you, I've had some horror stories where you know, the, the, the startup has done OK, but the CEO got fired for underperformance. And this is the founder of their business getting fired from their own business. And, and you know, because they've signed a deal with the VCs that that that allows that to happen. And, and you know, they're ending up with very, very little as a result because they decided to go for it. So it's really, I think it's really about what your appetite for risk is and what your, what you know, what lifestyle you, you want as a founder. So, so I think it's a difficult 1, you know, and I think you have to look at it from that personal viewpoint. Yeah, I think that makes a lot of sense. But look, it's only, it's only right that of course when you're investing into a start up that you want to see that hunger for them to to want to invest and to get investment and grow more. But there is certainly some trade-offs and and it doesn't work out every time.

9:06 You know, it's kind of there's a bit of a kind of if you look at just LinkedIn post, you might think that everything was rosy all the time. What kind of reality is, is certainly not that and to to look at the founders themselves a bit, is there, is there certain skills that you think Finer should possess or that skills that they might have that would attract you to invest more Alistair? It's, it's, I mean, this is kind of, this is the crux of, I suppose my thesis and why I think it works, which is that most angels look at the investment and they guess 2 questions. They go, is the idea good? I think they do anyway, is the idea good? So is it a good idea? Does that work right? I, I'm, I'm, I'm crap at deciding if it's these things are a good idea, right? I think something's a good idea and it flops. And then I think something else is stupid and it does amazingly well.

9:53 I think it's really, really a skill that I don't know how many people have to judge that. And the second is all the question you're asking is, you know, do you look at the fan? Do you think they can do it? And I just think they're terrible, terrible in the generality. I think they're terrible ways to assess. You know, I've got somewhere I think and it doesn't come across as impressive, but I'm watching the nail it day in, day out. And you know, it could be that they've got a great sales team. Could be they've got something else about them. And I just don't think that what we, what we expect a founder to be is, is necessarily always the right thing that they need to be. So having said that, there are a few pass gates that I apply to, to the founders.

10:33 And one is these, these are obvious really, but I need to trust them. So there's an element of trust I have to build up. So, you know, always, every, every investment. I mean, I'm even for a coffee, I have a chat with them. They need to be willing to listen. We, you know, we obviously comes through on the first call whether they are or not, you know, because if they're not willing to listen to, to, to me and my suggestions, they're not going to listen to anybody. And that's just that's the recipe for disaster. And then there's there's a combination of investors that I really think works really well. And it's when you have two people found US1 is the kind of out there salesperson that you know, can go and get business. So if I look at that's, it's interesting when you, when I could learn about your future, which is a recruitment business, they obviously got recruiters working for them. Recruiters are just sales mad people, all of them and say you know that, you know that person's going to go out and get the business.

11:28 The second side of it is is the dev side. And when it's a tech, because everything I do is tech. And there was something Bill Gates said, I think he said something along the lines of the a great developer is 1010 thousand. I think you said times more effective than a good developer because they're a media developer, because they get the right architecture, they get the right structure, they go faster, they're just they can just kind of handle more in their head. And and so you know, you, you see that not necessarily when you meet the developer, you see it in what they've built in what in the time scale that they've built it. And if you put those two things together, they're the two things that I think that, you know, can swing it for me a little bit. But I I what I really need to see is metrics on the. Yeah.

12:14 Well, the metrics are the the biggest insight of all really. But that's an interesting point you made there because I think, yeah, like I see a lot of investors, they look for maybe, you know, maybe one sales guy, one kind of tech product guy. But you know, you raised a good point there that there's there's different ways that they can they can be ineffective. Some finders might love with the laptop which was working with terrible public speaking or vice versa. But they can also implement, they can have a augmented team of employees or freelancers they got to help fix something. So I think there's it's certainly there's room for all kinds of founders to succeed. And how can companies themselves attract investors more effectively? For me, everything's about the metrics.

12:55 So and when I tried it, like I say, I looked through, do I think this is a good idea? Because if someone's buying it, I don't do anything pre revenue. I want to see, I want to see traction. So if someone's buying it, who am I to say whether it's a good idea or not? They they're the, they're the customers and they obviously think it's a good idea. So I need traction, I need a a big growth rate. I want to see that growth rate and, and a scalable growth. So the ones I'd like that I just mentioned, you know, they're, they're doing that growth rate on, on the founder, doing so on founder LED sales. So, you know, when that changes, they should grow a lot faster. I want to see a market size from a bottom up that, you know, not, not a top down. This is £100 billion market. I want to see, you know, how many clients can, how many clients can you sell this to? How many clients are you likely to sell this to? What are they going to pay?

13:44 And you know, and does it translate overseas and and a reasonable evaluation. But I know, so that's what I want to see. But I do think that I do think that that's not necessarily that's might might not be the exact answer to your question because, you know, other people want to see other things. And I think if you do do an exciting picture, you put a vision forward and, and you've got the idea at Angel level and even at VC level, at Angel level, they people like that good idea thing. I think you will get investment. I see all the time and I'm amazed sometimes they're pre revenue things with with £7 million valuations that are just easily getting the money because the people like the idea. And then I think even at even at VC level, I think what people like at BC level is the is, is a believe, they're to believe that there is a massive market opportunity because they want the big, they want the big prizes. Sometimes I don't think that's necessarily sometimes I think that where there's a, where there's a huge market, there's a lot of competition and, and in a, and so there will be other players.

14:47 And then so big is good, but huge isn't sort of 10 times better necessarily. But I think VCs do like that. Yeah, I think that's a very good insight. And if you'd one key piece of advice to share and fund in the startup, what would it be? In funding a startup, I think it's like, give you an example. I mean, I had one of my own startups come back to me and it's one, it's one of the ones that I've got to be careful what I say is not going to give the name away, but it's one of the ones that I probably, I'd probably after investing, thought was that such a good idea? And I, I think they will make it. And I think they could be massive, but they, they are struggling a little bit and they have got their, their, they came to me with a, a new pitch deck saying we're raising again because we, you know, we need to raise and we're raising at the same valuation as as last time.

15:39 And, and here's the story and they showed me the story and it was just a fairy story. It was basically if we, if we sell five times as much as we have been selling, we'll be fine. And it's going well. Well, I don't know where you're getting that from because how, how's that, how, how are you going to do that? You're not explaining it. It's just like you've literally, you've literally just put the percentage growth figure in that gets you to, gets you to profitability and to and to have long enough runway. And so I think that, you know, you, you, I, I think that and if I look at that and that problem was that they were kind of trying to do that in isolation. And so I went back and I sat down with them and they said, look, let's look at this again. And they, they had ways to monetize what they were doing that they weren't doing.

16:22 And, and that's what they needed to do. And that's the only way out of where they've got to. And they're, they're doing that now. But you know, they were, they just put their head in the sand and they weren't really facing the brutal truth. And so I think, you know, I think before you go to market making claims that, you know, be honest if you're not going to, if it's not going to work, don't, don't go to market. Just work out how, how you can change it. So it does work because there's, there's always a way to, there's always a way to kind of monetize and, and, and revamp and pivot to make it work. And sometimes they, they just try to get more funding for what they're doing. So, yeah, yeah. I think that's kind of great advice to finish on. I think a lot of founders, definitely a bit of a reality check because there's certainly ways they can get there, but often they're just strong, the upward graph without too many ways to get there.

17:10 And Alexa, thanks so much for going to the podcast. That was a really great conversation. You should a lot of really viable interesting for both founders and investors, which is unique. So thank you for your time. Thank you. Good luck. Thanks for me. OK, best of. Luck. Thanks. Hi, thanks for listening to this weeks episode of the Founders and Funding podcast. If you'd like to be a guest or have a guest suggestion, please get in touch. Thank you.