- Jeff Clavier is a highly respected investor who has taught the speaker valuable lessons about investing and being a good partner to founders.
- Jeff emphasizes the importance of startups focusing on fewer things rather than having too many things on their plate.
- The speaker discusses their own background as an investor and the risks and timeline involved in angel investing.
- Asset allocation and corporate construction may seem boring, but they are crucial considerations for angel investors.
- The speaker advises angel investors to be modest and realistic, understanding that there is a high likelihood of losing their investment.
- The speaker discusses the ecosystem in which angel investors operate and the importance of valuations in reflecting a company's potential.
- The speaker suggests that angel investors allocate around 10% of their net worth to angel investments, with the potential to increase if successful.
- The minimum investment amount can vary depending on portfolio construction and the ability to participate through angel syndicates.

- The speaker suggests starting with an initial budget of $100,000 to $1 million for angel investing
- It is important to have a clear investment strategy and set high standards for investments
- Factors to consider in portfolio construction include check size, number of investments per year, sector focus, investment stage, geography, and follow-on investments
- Consistency in check size and pacing of investments is important for a successful strategy
- It is important to define characteristics and filters for deal flow based on investment strategy
- Spreading investments over time and across sectors helps mitigate risk
- The speaker shares their own investment approach and suggests having a sector and time-based approach to spreading risk.

- The speaker discusses the importance of asset allocation and portfolio construction.
- They emphasize the need to not put all of one's cash into investments to avoid losing everything.
- The next speaker, Jeff, is introduced as a transformational figure in early stage investing.
- They discuss the importance of building a personal brand in the angel investing space.
- The speaker, Andrea, talks about the concept of branding and its importance in business.
- They mention successful brands like Apple, Google, and Coca-Cola.
- The speaker highlights the qualities that embody successful brands, such as trust, loyalty, and quality.
- Integrity is emphasized as an important aspect of building a brand.
- Different paths in angel investing are discussed, including being a standalone investor or joining an angel group.

- AngelList Syndicate allows users to join or create their own syndicates
- The Angel Capital Association is an association of angel groups that can be searched for joining
- XG Ventures is a branded firm created by the speaker after making investments with Sandhill Angels
- XG Ventures is an evergreen fund that invests in early-stage startups
- The speaker emphasizes the importance of branding and building a consistent message
- Mistakes and failures are common in angel investing, and flexibility and perseverance are necessary
- Trust is important in building a brand, and having a strong team with complementary skills is beneficial
- It is important to define the focus and type of firm one wants to be, and to have the right mix of expertise and experience
- Former entrepreneurs, operators, and former VCs can bring unique value to angel investing.

- The key to success in angel investing is to carefully recruit team members who represent your brand and identity.
- It is important to align yourself with complementary firms and build a strong network through networking.
- It is crucial to have a strong referral network and be responsive to entrepreneurs' needs.
- Managing your online presence, playing well with others, and maintaining a reputation for quality are important aspects of angel investing.
- Trusting your instincts and being a resource for entrepreneurs are essential.
- Building a portfolio that represents you and being able to explain your investments is important.
- Consistency, excellence, and responsiveness are key qualities for angel investors.
- Attending the right events and being respectful of others' time are important.
- Trusting your instincts and thinking like a boss are crucial in angel investing.
- Building a long-term reputation, being a resource, and having fun are important aspects of angel investing.
- Having a strong brand and portfolio construction strategy is crucial for success in angel investing.

- The speaker discusses the changes in the angel investing landscape over time, with more micro VC firms now compared to before.
- They emphasize the importance of having high conviction when making investments and avoiding doubt or uncertainty.
- The speaker mentions regretting passing on LinkedIn and missing out on investing in Uber due to doubts about the CEO.
- They caution against getting ahead of oneself and investing based on positive signs, rather than waiting for actual success.
- The difference between being a super angel and an angel is explained, with super angels taking on more responsibility and playing a lead investor role.
- The speaker suggests starting with smaller check sizes when beginning angel investing and gradually increasing as confidence and experience grow.
- They emphasize the importance of doing the math and estimating the number of investments and potential returns to determine the appropriate check size.

- The speaker discusses their investment strategy and how they determine the check size for investments.
- They mention the concept of "gateway deals" and how they can be beneficial for networking and gaining access to other opportunities.
- The speaker shares their experience with a gateway deal they did in the early days of their career.
- They emphasize the importance of not investing in deals that are likely to be disasters and the need to focus on successful deals.
- The speaker mentions how they monitor their portfolio and make decisions based on the industry and concentration of their investments.
- They give examples of industries they pivoted from due to difficulties and lack of desired returns.
- The speaker advises having investment principles and strategies, but not being overly fixated on numbers.
- They caution against overlap or competition between companies in the portfolio and emphasize the need to stick with the chosen entrepreneur.
- The speaker acknowledges that not all investments will succeed and that a significant portion of the portfolio may not be the same at the end.

- Jeff Clavier is a respected investor who has taught the speaker valuable lessons about investing and being a good partner to founders.
- Startups should focus on fewer things rather than having too many things on their plate.
- Angel investors should be modest and realistic, understanding the high likelihood of losing their investment.
- Factors to consider in portfolio construction include check size, number of investments per year, sector focus, investment stage, geography, and follow-on investments.
- Building a personal brand and having a strong network are important in angel investing.
- Trust, loyalty, quality, and integrity are qualities that embody successful brands.
- Former entrepreneurs, operators, and former VCs can bring unique value to angel investing.
- Trusting instincts, being a resource for entrepreneurs, and building a strong referral network are essential in angel investing.
- Having a strong brand and portfolio construction strategy is crucial for success in angel investing.
- Super angels take on more responsibility and play a lead investor role.
- Starting with smaller check sizes and gradually increasing as confidence and experience grow is recommended.
- Monitoring the portfolio and focusing on successful deals while avoiding disasters is important.
- Not all investments will succeed, and a significant portion of the portfolio may not be the same at the end.

Startup Investor School is a free, 4-day course designed to educate early stage investors interested in investing in startups. We'll cover the fundamentals of investing, from investing instruments to legal and accounting basics to evaluating startups and managing deal flow. Our hope is that more people, from a wide range of backgrounds will consider investing in startups and that those who do will be better at it.

Learn more at https://investor.startupschool.org/

Jeff is someone that I met in the very beginning of my venture into venture, when I first started investing a long time ago.

And He is, he taught me as many lessons about how to be a good investor, and in 2 senses, how to be

investor by making good choices, and how to be a good investor partner to the founders with whom I would invest and and and become partners with.

I don't think anyone in the industry is as helpful as Jeff, an extremely smart, perceptive investor, and I've learned a ton from him.

His comments that I, that hits home and that you all should pay attention to with the founders that you work with is that he says I wish startups focused more there are always too many things on their plate it's actually true of Jeff generally there's always too many things on his plate I'm very grateful that he added 1 more and came and talked to us today Jeff Clavier

thank you so much He's a great investor without anyone else helping him.

It's super exciting to see so many people who are ready to do the most exciting thing that you can think of, which is see the eyes, see the future through the eyes of founders and try and help them, help them with a bit of capital, help them with a lot of help.

I decided to cover what seems to be a boring subject.

And yes, it's kind of boring, asset allocation and corporate construction.

But I hope that any of my talk you'll have realized why I decided to spend the next 20 minutes on that, because it's actually really important to think about all those things as you get on your Android journey.

Sort of brief bio, so I was born French, did a startup in the financial services market in France, got acquired, spent 7 years at Reuters as a senior exec, so, you know, did the big company thing, moved here 18 years ago to become a traditional VC.

And then in 2004, saw this emergence of Web 2.0 companies.

And at the time, believe it or not, there were just a handful of angels actually backing those entrepreneurs who were looking to raise a few hundred thousand dollars.

So I jumped in and became 1 of the then Super Angels.

Uncork, you might have heard of us as SoftTech, is now 14 years old, 200 deals, bunch of successes, some of the companies that we backed, blah, dee, blah, dee, blah.

Those are the funds, so we're now investing out of Fund 5, it's a $100 million fund, we have a growth fund as well.

But I want to spend time on is this part, 14 years ago, when I was investing my own capital as an angel.

So what I like to do in those kinds of events is go back in history and talk about, hey, this is what I wish someone had told me then, as opposed to me discovering it.

And it's kind of important to figure out how much of your net worth you should be investing, risking with entrepreneurs, because it's a pretty bold thing to do.

It's a very long game, I'm sure you've heard that already over the past couple of days, sitting with all those sort of awesome angels.

The thing that people don't always appreciate as angels is how long it is gonna take to sort of get this sort of massive outcome that you're hoping for.

And yes, there are billion dollar outcomes that happen within 1 or 2 years of the company being founded.

But that's the extreme kind of example that almost never happens.

For you, for most angels, it will take 8 to 10 years.

Obviously, it's very risky, so you're going to have losses.

And something which I've seen with our funds getting in the money.

So let's say you decided to invest 250K in a portfolio of companies.

It will probably take 6 years to get that cash back and then you will get into profits.

They get the fund back to LPs within 6 years and then they start getting carried.

It's really super risky And so at the end of the day, you have to be modest and realistic.

And understand that anything you invest has a high likelihood of just being wiped out, Which means don't invest money that you can't lose.

This if you actually get anything out of the stoke, that's 1 sentence.

If ever you need the cash back, don't invest it in startups.

So just to put things in context, your investment will be part of...

So it's supposed to show you an ecosystem with all the seed stage, pre-seed, whatever.

Unfortunately, it's not showing up for some reason.

So this is the kind of compressed ecosystem in which you guys will operate.

So you'll typically be at the top, right?

You invest at Preseed, Seed, maybe a bit later.

Most angels don't really sort of come into companies at series and so forth.

And you guys will sort of start figuring out your own comfort with valuations.

And a simple way to think about valuations is that they're a reflection of the traction or lack thereof the company has achieved.

The risks that are still on the table as opposed to the ones that have been taken of the table and the potential of the company.

And so when you invest as an angel, typically it's the highest risk, it's the lowest valuation, it's the longest holding, and it's the highest multiple potential, highest return sort of multiple potential.

It's important for you to figure out, and I'm going to give 2 examples.

Dropbox, you could have invested if you were lucky at 3Pre, but that was at the crazy time where there was barely a product and it was just the 2 founders.

Or you could invest at $4 billion, which is when the Series C sort of happened.

Clearly, most established, very established companies, founders, product, revenues, and so forth.

But obviously, the difference in terms of return potential between $4 billion and $3 million is pretty different.

How much of your net worth should you allocate to Android investments?

Obviously it's your choice, but I would really ask you to think about this framework, which is, okay, I'm going to lose everything that I'm going to put in, and I have to be okay with it.

That was sort of my pitch to my wife 14 years ago, when I said, hey, so we had made a little bit of money at Reuters when we sold the company and so on and so forth.

And I said, so I want to try and be a full-time Android investor.

I'm going to take 250K of our hard-earned savings and invest them in startups, consumer startups, and I'm going to do nothing but that for 18 months.

And the comment was, But you know nothing about the consumer stuff.

But you know, she loves me and so she said yes.

But I don't think I told her the bit about, hey, we're going to lose everything.

Everybody has, you know, sort of circumstances.

If you have a family, if your partner works, doesn't work, whatever, if you have, you know, whatever.

I think 10% is probably sort of a sound sort of number.

And when you think about the guys who have a lot of money to allocate to different asset classes like pension funds, typically they do 5% to 10% in VC and private equity, so 2 asset classes.

I saw that Stanford goes up to 25% in VC and PE.

And you can always sort of do more if you're successful, but at least put a cap out there.

There's always sort of a notion of, okay, so 10% fine.

Once again, it sort of depends on your portfolio construction, and we'll talk about that.

But obviously with the JOBS Act, it's possible for non-accredited investors, so all you guys are accredited, to actually participate through Android syndicates and so on and so forth.

You could decide to put like $1,000 per company and be an Android investor.

I would say for you guys who want to do this professionally or semi-professionally, I think that thinking about an initial budget of $100,000, which you would divide in a number of slots, up to a million dollars if you have sort of the means, is sort of a good way to think about it.

And you want to think about a certain investment horizon.

You don't want to sort of try and shove all this cash in the first few months of your activity.

Cuz the challenge, I mean, there was a question earlier about how do I bootstrap my deal flow?

That's a great question, which is, hey, how do I tell the world that I'm an angel investor knowing that now it's pretty popular.

The other is that because you don't have any sort of sense of what's good, what's not, everything's good.

Like I loved everything I was seeing back in the day.

The problem is you need to normalize, you need to sort of figure out what is the bar that you set for yourself in terms of investing.

And if there's 1 thing to do is put the bar high.

Segregating the cash and making it sort of move to a different account that you actually don't mentally think about.

It's not something that you use for paying taxes or, you know, your expenses or whatever, is actually sort of a good trick.

So portfolio construction, that defines the key factors of your investment strategy, right?

And so, there's a few sort of factors and there's more.

What's gonna be your average check size, right?

What is the target number of investments per year?

Do you want to have a concentrated portfolio?

What are the sectors you want to invest in?

You could be very focused on what you are an expert in and if you're building a company in a given sector and as he had sort of said, you write about it, people will come to you with things in that industry and that you know really well about, that's a completely legit sort of investment strategy.

Another could be, hey, there's 5 or 6 sectors I'm interested in, I'm just going to go for them.

Then figure out whether you want to be like super early, pre-seed as we call it, which is you actually help the founder to build the product, or maybe seed stage where we at Uncork invest, where we launch the product and invest roughly 9 to 12 months after the pre-seed stage.

Geographies, do you want something which is in your backyard so you can actually meet your CEOs, why not?

And will you only do sort of investments at whatever seed stage, pre-seed stage, your first check, or will you actually try and follow on and go into your company?

So those are sort of a few, 6 sort of factors I want you guys to think about as you sort of define your investment strategy.

And that's what we call corporate construction.

And By the way, that's how we do it as well.

So, when I started, I was writing 25 to 50K checks, right?

And there wasn't like a super hard rule as to whether it was 25 or 50, depending on the deal, what was available and so on and so forth.

If you have 100K here and 5K there, it's hard to have sort of a real strategy because obviously the 100K will take all your sort of attention because it will be a much larger check for you.

I like the 10 to 12 investments per year.

It's enough that you can actually put a bunch of points on the board.

It's roughly 35 to 40 investments over 3 years.

That's actually the size of our funds portfolio.

Some people want to do 1 or 2 deals a year.

It's OK as long as you build your narrative and your strategy around the number that you're comfortable with.

Those are the sectors we invest in, all of them.

We can do that because we've been around forever.

And people know that regardless of the sector, we'll do a good job supporting our companies, even some of the more adventurous today, like space tech, where I would like, I would lie saying that I'm an expert in space tech because I've done 1 company, but we know how to build startup.

It's up to you to figure out where you want to play.

Those are some early stage sectors I sort of mentioned.

So pre-seed, you build the product, seed, you launch it.

Post-launch means you start having sort of more data.

And some people are not comfortable investing before the company's in revenue.

The good news is the whole gamut is actually feasible today as an angel because there are so many companies which are actually going through funding and accessible to people.

Once again, figure out this equation of how much risks are you sort of comfortable taking on, and the later stage you invest, the more data you have.

Very different strategies, some people want to be local, that was very VC, right?

So investing in companies where you can actually drive for an hour or 2, or maximum 1 or 2.

Coast, so we do, Sea Company and New York Boston, so that's our strategy.

You could sort of decide to invest anywhere and figure out how to support your investments and figure out what to do through Scap Sessions.

And there's a new strategy, Steve Case is doing the rise of the rest, which is invest everywhere which is not a well-known sort of center for startups.

Once again, all the strategies are valid.

You have to sort of decide which 1 you're the most comfortable with.

And then, you know, on the follow-on side, so obviously, because you invest at the lowest sort of valuation, your multiple will be the highest, right?

But if ever you find an awesome company you want to double down and do the next round, you're going to sort of increase your price per share, but you're gonna increase also the amount of capital in which the return multiple will apply.

It's whatever you guys are comfortable with.

But that was also my strategy, which said, I assume that the return potential of angel investment will be higher than my follow on in a series A or series B.

And if I was running the math, which I haven't done, I probably would have sort of, it would have been the case for everything but the top 2 or 3 deals where even the series investment would have generated like a massive return.

This is what will drive the way you think about building a portfolio.

If ever you have a buddy who is building a company and you want to support her or him, yeah, I mean, no need to think too hard about this.

But if you really want to become a semi-pro angel, it's really important to define those characteristics.

It will help once you've decided, for example, which sectors, like all this narrative I shared with you, right?

This is something which becomes the natural filters for people who actually come to you with deals.

I will tell you that I'm doing seed stage investment, million dollar average.

Now you can send me deals because you know what I'm going to look at.

It's a very natural filter, so expose those characteristics.

It's true for your inbound deal flow, people sending you deals.

It's true for your outbound kind of when you reach out to an entrepreneur, you sort of know what to look for because you have defined those characteristics.

1 thing which is very important is, because it's super risky to make those investments, is have a sector and time-based approach to spreading risk.

So the reason why I suggest to say, hey, figure out your budget and invest it over 3 years, is because time diversification is good.

You never know, even though in this, In Silicon Valley, we don't really have the notion of everyone invests when the market is good and everybody stops investing when the market is bad.

It's always better to spread your investments over time.

And sectors, unless you really want to double down on 1 sector you know really well, spreading it across sectors is a good way to avoid tanking.

There was a time when there were like 12 or 15 meal kits companies.

Brewery prone and plated and so on and so forth.

You may have wanted to have 1, you don't want to do the 12, because the rule in those markets is always, the best 1 makes a bunch of money, the second 1 makes some money, and the rest wipes out.

I like the fact that because you have this strategy, it's going to force your calibrations, so what sort of deals will make it to the top of your funnel and the pacing because of what I just described.

That was your primer on asset allocation and portfolio construction.

And once again, remember, the worst that can happen is that you lose everything, and so don't put all your cash in there.

As I mentioned before, again, we're going to have both come up and talk and then we'll do a Q&A.

I realized after I sat down that I did, I just got so excited that Jeff was going to come speak that I did a terrible job of introducing him.

And what I really meant to say was, there has been this transformation in early stage investing that took place over the last decade or so.

And Jeff was actually 1 of the transformational characters in that story as these prolific angels emerged, who then often professionalized what they were doing, as Jeff has pointed out in his talk, and he became 1 of the very, very first super angels, and I think that was instructive to lots of us who are watching and trying to participate in the angel space.

And he did that, he understood very early on that to do that, and you've seen this with the other 2 investors you saw, they built personal brands, and Jeff built a very significant brand about himself.

And the next investor who's coming up, Andrea has built an amazing brand around her, herself, her investing organization, I guess I should call it, called XG, and she's gonna talk a bit about how you might think about building the brand that is going to allow you to become known, to become the sort of investor that great founders will want to have as part of your company.

Okay, so I'm Andrea, and, okay, someone needs to take this away from me, because I feel like, is it auto?

We've got to give Run DMC some props before I clear that slide.

This wouldn't be a video off of Yale School without the application.

So I didn't think I was that trigger happy, but okay.

Does everyone recognize, I hope, this band?

Okay, so for those of you that may or may not recognize them, so they kind of made a name for themselves I'd say probably in the 80s a little bit into the 90s rap artists band and Just really fun music that came out of that time period but I think The reason why I have them sort of as my starter slide is that not only did they build a brand around their own name and band, you know, as rock stars, as rap artists, they also leveraged other brands.

So if you can see in the slide, you know, they're repping Adidas basically.

And they also were wearing like these, the brand at the time was Kangaroo, and they were wearing Kangaroo hats.

And I thought they just did a really phenomenal job of making, you know, what basically were sports brands, their own brands, and kind of making them like streetwear brands.

And now to this day, Adidas is still a pretty popular brand and they continue to reinvent themselves.

So anyways, that's why I thought I would kind of take a fun, bright approach to today, because I'm sure you've been absorbing lots of content.

And I wanted to be able to impart some fun, kind of cool ideas that I'm hoping you can take away from today's presentation.

Okay, should I be brave enough to do the next 1?

I'm actually going to open that up to the audience.

Can 1 or 2 of you guys, in your words, identify what a brand is?

I would say it's a promise, promise of quality.

I like both of those terms, promise and quality.

It's the collection of all of your interactions with all your customers.

Yeah, also good, collection of interactions.

Yeah, so I just sort of have a smattering of exactly what everyone in the audience that participated sort of has already been saying.

So you know, obviously we have a few identifiers in here, not only consumer brands, but also tech brands.

I mean, obviously consumers like McDonald's, and we also talked about Adidas earlier.

Here in the Valley, we have tech brands including Facebook, Google, Apple, and 1 would argue that a lot of those brands, you know, to all the points we brought up today, you know, when you think of Apple, you think of product innovation.

When you think of Google, you think of search.

These are companies that have basically branded themselves based on what they are promising to deliver to their customers.

So I thought it would be fun to take a look at, you know, what are the world's most valuable brands?

Actually, before I put this slide up, I should have had you guys guess.

So can anyone without looking at this chart tell me what they think is like the top brand as of last year, 2017?

Yeah, Apple, okay, you probably already looked at the chart.

So anyways, sorry it's so tiny, but I just did a little screen capture.

So Apple's the top brand according to this particular research piece.

Apple followed by Google, Microsoft, although I would argue that.

But anyways, and then Facebook, Coca-Cola, Amazon, and Disney.

And then of course, obviously the list goes down.

But my point is, you know, these are the companies that we all recognize.

And so what I would ask the audience today is when you think of these companies and you think about building your own personal brand, you know, how did these companies rise to this list?

You know, how do they maintain themselves on this list?

What are the qualities that embody these particular companies?

And as you start to form your own brand and your own firm's brand, do you want to be seeing, you know, can you see yourself on a list of other angel investors and or micro VCs?

So when I was thinking about putting together this presentation, I was also kind of thinking about what does the term brand mean, and we've kind of already been talking about this morning, and I thought Jeff Bezos of Amazon did a really good job of kind of distilling in 1 sentence what a brand is all about.

And I really like this particular moniker.

And he's basically saying, your brand is what other people say about you when you're not in the room.

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Jeff Clavier and Andrea Zurek - Startup Investor School Day 3