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Angel investing is the lifeblood of many startup businesses. And for High Net Worth investors, angel investing is a form of alternative investing in private equity that is more accessible than venture capital.
David Olivencia, CEO at Angeles Investors, discusses his angel investing journey, and some of the habits that have helped him acquire equity in 70+ portfolio companies.
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- What angel investing is, and how it relates to venture capital.
- I want to hear about you and your group Angeles Investors. What do you do exactly, and how did you get into angel investing?
- The habits of a successful angel investor, and how to analyze companies during the due diligence phase.
- How the SEC regulates angel investing with its definition of “accredited investor.”
- Examples of some of David’s top performing angel investments to date.
Today’s Guest: David Olivencia, Angeles Investors
About The Alternative Investment Podcast
Hosted by WealthChannel co-founder Andy Hagans, The The Alternative Investment Podcast is the #1 alts podcast reaching RIAs, family offices, and High Net Worth investors.
Jimmy: Welcome to the “Alternative Investment Podcast.” I’m Jimmy Atkinson, filling in as a guest host for Andy Hagans. And today’s episode is part of our mini-series on venture capital and angel investing. I’m very excited to be joined today by David Olivencia, CEO at Angeles Investors. David is also the author of a forthcoming book, “Networking Excellence: Building a Strong Value-Based Network in an Accelerating Digital World.” David, thanks for joining us today. Welcome to the show.
David: Jimmy, it’s great to be with you.
Jimmy: Oh, great to have you here with us today, David. You may not know this, and I think some of my listeners and viewers are probably familiar, but a little bit of background on me, I’m an LP investor. I’ve invested in more formal vehicles than angel investing is typically done in. I’m an investor in some venture capital funds and some private equity real estate funds as well. But today, you know, I’m glad you’ve joined us today because I wanna dive into the world of angel investing and learn a little bit more about that type of investing and who it’s open to, and what types of entrepreneurs it helps. So, David, to start us off, real big picture, what is Angel investing exactly and how does it relate to venture capital?
David: Yeah. So, the way I view it, and you’ve probably talked to a lot of different people, Jimmy, and get different definitions. But angel investing is in investing…Well, it’s for accredited investors who invest in early-stage startups, whether they’re just starting out, a little bit mature, all the way to, you know, then there’s different kind of levels, but all the way till they get a certain part of maturity, but you have to be an accredited investor. I think currently, the accredited investor definition, a salary of $200,000 a year as an individual, $300,000 if you’re married, or assets over a million dollars or so. So, if you have that, you can then do angel investing in any startup in America. I mean, you can do it around the world, but that’s the definition if you wanna do that in America.
Now, to participate in venture capital, you also have to be an accredited investor. But in that case, instead of putting your money directly into an individual company or companies based on what you like, you give your money to a venture capital firm or a general partner at that firm, and they also reach out to multiple, what they call limited partners, aggregate that money, and they make the decisions on what they’re gonna invest in you based a lot of times on a thesis or a direction, whether it’s an industry, expertise, the geography, etc..
So, angel is individual making the checks, venture capital’s where you have a general partner who makes the checks or cuts the checks to startups or a venture capital firm that does that.
Jimmy: Sure, sure. I think you’re right, different people may give different definitions of these two different terms. There’s probably a little bit of overlap as well. There are angel investing groups as well, so you don’t always have to just be a single angel investor writing a check informally to your buddy’s startup or some other colleague of yours, a startup or somebody that you might find online. It could be done through a group, is that correct?
David: That’s correct. And that’s the best way to do that because you find deals as a group, you vet deals as a group. And then once you invest in those deals as a group, you can leverage the collective power of the group to help that startup grow, and really, I mean, in kind of sense, be an angel to them, really help them. But I’m a big proponent of investing in groups. And myself, I’m also a limited partner in a couple funds, Chingona Fund, Vitalized Fund, Motivate Fund. I think those are the three funds that I’m a limited partner in.
Jimmy: Good. So, angel investing, I guess, correct me if I’m wrong here, it’s not quite to the level of venture capital. Venture capital sounds like a more institutionalized type of investment coming, in with larger dollar sums, typically aggregating from maybe dozens if not hundreds of LPs and forming a larger fund that then selectively invests into different portfolio companies, where angel investing just on a smaller scale, it’s kind of the same thing, but on a smaller scale, is that right? But you need to be accredited investor to do either one, it sounds like.
David: That’s right. Maybe the only caveat would be you could be like an ultra-wealthy angel investor and put as much capital and do other things to work. But in general, I think you hit it on the head.
Jimmy: Got it. David, why are you an angel investor?
David: Yeah, that’s a great question, Jimmy. You know, I started when I got my MBA at Notre Dame, my eyes opened up to this whole startup space, kind of on one side. The other side, I saw all the great things that were happening in Silicon Valley. I think that’s another kind of dimension that kind of started to open up in my eyes about startups and venture. The third is my executive career has always been in the technology industry. I’ve been senior executive in technology at companies like Accenture, Oracle, Verizon, NTT Data, and I’ve always seen, you know, the massive disruption that technology has been causing, and help clients and others leverage that, you know, to win. So all of those coming together, I saw, really, startups are, you know, the place, to be, they’re exciting.
And then I say, well, okay, “Well, how do I participate and, and potentially you know, not only learn, but also potentially get some economic gain from that?” So, when I got my MBA at Notre Dame, there was a group called The Irish Angels that were l looking at various investments as a group, vetting them and investing in them. I was a part of that group and then formally became a member, and that kind of started my journey. I started out maybe doing three or four a year, and then that kind of increased over time to where I was doing maybe 8, 9-ish, 10, 10 a year over the last 10 years and have developed, you know, a portfolio about 70 or so angel investments that that I’ve done.
But I initially started out primarily through Irish Angel and kind of seeing all those things coming together and say, “You know, I can learn, I can hopefully make a good return. I know this, it’s a risky asset, it’s a high-risk-high-reward asset class.” And I said, you know, “This is how a lot of those companies made it in Silicon Valley.” It’s like the investors, the companies, and they get the exits and they keep recycling and, you know, you get this big bubble. And I wanted to see if we can, you know, do that in my angel investing career. We’ll talk a little bit more about that, but yeah, that’s how I got into angel investing and a little bit of where I’m at now.
Jimmy: You know, you mentioned getting involved with, you know, 9 or 10 different companies a year. You’ve got a portfolio of about 70 different companies that you’re involved with now. Do you also enjoy being a mentor to some of these entrepreneurs or some of these executives at some of these smaller companies? Is that part of angel investing you get to step in and mentor some of these individuals who are starting these firms?
David: Yes. It’s one of the things I enjoy most and I, you know, probably shouldn’t mentioned. It’s kind of like the thing that happened last, because when I look at investing, it’s like, can I help them? You hear their pitch, you know, but can the resources that I have, the experience I have really help these companies? And I’ll tell you, when you’re…
Jimmy: That’s part of creating the return, right? And it’s, it’s not just that these companies need a little bit of capital to get their tech or get their operations or whatever, that little boost that it needs, but also, you’re providing value, not just in terms of the capital, but also in terms of your expertise, bringing in a way of thinking into the company, or different processes into the company or just your brain power to help unlock some things for them, right?
David: Yeah. No, no. And also the network…
Jimmy: Networking, of course.
David: But like, you know, hey, can you connect them with potential employees, potential advisors, customers, and really help fast track? The early stage is really about kind of moving at speed. So, yeah, it is a very rewarding part of it as well. I mean, and this is tough because being a startup is not an easy thing. So to the extent you can help them and mentor them, it’s great. And when you see the rewards at the end, you know, and some of these are a little bit more mature and they’ve received your help, it’s really helped them get to the next level, it’s extremely rewarding as well.
Jimmy: I’m sure. I have no doubt about that. So, I wanna hear now about your group that you’re involved with. Now, you mentioned Irish Angels, but you have your own group now, Angeles Investors. What is that group exactly and what do you do?
David: Yeah. So, Angeles Investors is an angel group focused on finding, funding and growing the most promising Hispanic and Latinx ventures in America. We’re three years old. We are about 150 members nationally. We’ve invested in about 20 different companies, so roughly about, you know, seven or so a year. Our average check size is about $200,000, and our largest check size is one 1.6 million. 35% of our members are female or Latina, as we like to say, which is rare for a non-female-focused angel group. It’s really probably one of the highest. We’re probably one of the largest, or we’re probably the top 10% in terms of size of angel group. And then in terms of fastest-growing, probably in the, you know, top 3% or so in terms of just size and fastest-growing angel groups, you know, in America. Yeah, that’s Angeles Investors.
Jimmy: Sorry if I missed this. How many investors do you have in that group?
David: About 150.
Jimmy: 150. And are they consistently writing you checks over time? Or do they kind of pick and choose which portfolio companies that they want to invest in? How does that work exactly?
David: Yeah, no, that’s a great question, Jimmy. Well, in general, we do quarterly pitch nights. So, every quarter, we get 150 companies that are presented to us through our website, through our members, through various leads. We have a sourcing and a selection committee that kind of narrows that down to three or four companies that we present to our members on a quarterly basis. At these pitch nights, and we were just in Miami, beautiful Miami this past weekend. In February, it’s not a bad place to be, Jimmy. And they’ll pitch to our members. And then our members, you know, they hear the pitch, we give them some due diligence and background, we have a discussion about them that we’re gonna do actually later today.
And then our members, if they like, they raise their hand. You know, it’s an online platform, but they’ll say they’re interested, they’ll indicate what the amount is. And if we get an aggregate amount of 70,000 or so or more, we’ll pull together an SPV or a special purpose vehicle that we can then use to invest in that company. So, we had five companies pitch to us this past Friday. We are right now in the process of seeing which companies are getting interest, and we’ll likely know by the end of the week which companies kind of get past that threshold. Then after that, it’s just working through the process of documents signing and then actually cutting the check to the startup.
Jimmy: Got it. And you create that SPV, which might have the name like Company ABC, Fund One LLC, or something like that. And you collect the money from all the folks who raised their hands and pledge that initial commitment. What’s the typical check size from the folks within your network? Are they writing checks like 5,000, 10,000, 25,000 at a time, something like that?
David: Yeah, that’s great. Minimum is 5,000, but we’ve had members cut checks as high as 100,000, so it kind of varies, but I’d say the average is probably $10,000 to $15,000 or so is what we’ll cut.
Jimmy: And then if you get five or 10 of those, that’s enough money to kind of push you over that 70,000 or so threshold, and then you get the ball rolling and get the docs signed and then you make that investment into that company and get some equity in return. What do the pitches look like? You mentioned you were just in Miami, you had a pitch night. Was it five companies that pitch to that evening? Well, what’s the duration of the pitches? And what types of companies are you looking at typically?
David: It’s diverse industries. The pitches range anywhere, roughly about 10 minutes or so and then 10 minutes of Q&A. If it’s more of a follow-on type, like we’re familiar with the company and they’re just kind of growing, they’re raising another, it’s a little bit shorter pitch, but in general, it’s about 10 minutes of pitch and 10 minutes of Q&A. But the types of companies are different. We had a company that’s building an application called Storybook. It’s an application for parents in the evening that you can do like kind of massage techniques and also read. So it’s kind of really helping kind of the mental health around kids, but also helping with parents. And so that was one.
The other one was a company called Ugami. It’s operating at the intersection of financial services, gaming, transactions, and cards. So it’s kind of like a rewards point system for gamers. That’s an interesting one that they pitched to us. This was a little bit un little bit out of our norm, but a company called Mural, which is a unicorn. They were raising a round, and they decided to allocate a little bit of that round, I think it’s series B or series C, I can’t remember, but allocate give us a certain allocation in that round for us to participate and help them. And there’s a company that’s automating testing. If you look at software, and this whole big space around how do you test software, a lot of it’s done manually. So how do you create au an automated way to do that? So they’re operating in that space.
And the last one was a, like a beauty, hair startup that kind of has a little bit of an organic twist to it and an interesting sales model that’s kind of works with the individual, I guess it’s ladies in this case, for the most part, that are selling this, you know, to their individual friends. So, some diverse industries, diverse parts of the country. That’s an idea of some of the companies that pitched to us that we’re in the process of evaluating that.
Jimmy: Yeah, a pretty diverse array of different industries that you’re drawing from. So those were the five or so that were able to advance to that pitch night that you had in Miami, but they all were able to pass through the screen. You might look at a lot more companies prior to getting to that end list of five or so per quarterly pitch night. How do you do that exactly? I guess what I’m asking is, what are some of the habits of being a successful angel investor? If you can kind of break down the process, how do you do it? How do you go from having to curate just those five from an initial screen of maybe you’ve got a dozen or more companies?
David: Yeah. There’s a lot in there. So, I mean, I think using habits. This is why groups are so important. Because you can come at it with different levels of experience, different ideas and questions or so on. The one habit is do it in groups, is one. There’s an acronym that I’m pulling, I’m calling it time, T-I-M-E. I like to look at traction. So, does this company have some kind of month-over-month growth in revenue and they’re getting some traction? The team. Is this is a very competent team? Do they know this space well? Do they got great leadership? That’s the other one. The TAM. So, is a big market? So is this a big market that the team and the traction can kind of attack and-
Jimmy: Then total addressable market, right? TAM?
David: That’s right. That’s right. That’s right. The total addressable market. And then the terms. So, what’s the valuation? And what are they looking for? And is this valuation reasonable? So the terms. So that’s the T in TIME. The I in TIME is like, okay, well, if you got all that, I’m pretty smart, but the I is for investors. Well, who else is investing in this thing? Because I’m pretty smart, but I’d like to see if there’s other smart investors. And typically, as an angel, you know, we like to top off the round, so we like that there’s a lead investor, maybe one or two other strong investors, and there’s a little bit left over that we can come in and add. So that’s the I.
The M, I call it the moat. So, do you have a competitive differentiator? And the business model, you know, does a business model make sense? It’s easy to understand. So that’s, that’s kind of the M. The E is, okay, well then, do they have the energy, excitement around this? And then the other part of the E is the exit. How do we foresee an exit in this thing? So that’s kind of TIME. I call that TIME. And then there’s two aspects under TIME. The first one I say is, well, how’s the velocity of my money gonna work in this investment? So looking at that from a time perspective.
And then the last part of time is how does this founder spend this time? So, if I go and I check out the founder and founder’s, you know, putting social media posts about, you know, politics, basketball, everything else that has nothing to do with their business, and that’s how they’re spending their time, I don’t invest them. So, that’s kind of my little bottle around what I look for. I don’t know if it’s best habits, but those are just kind of things that I…I’ve tried to encapsulate all the things that I look for into that, and that’s the model that I have. Jimmy.
Jimmy: No, I love it, David. I don’t know if there’s a right or wrong way to do it, but that sounds like it’s working for you for sure. Now, going back to that acronym, the T-I-M-E, I think there were three T’s in there, if I’m not mistaken. Do they need to check every single one of those, or do you let them slide if they’re missing one or two, or?
David: Well, yeah. So, when you do it in groups… We have a group within Irish Angels and within Angeles, I mean, you’ve got kind of committees a bit that kind of, they go in… And even venture capital firms also kind of have a bit of committees too that they have criteria. Some of those criteria, they have, you know, waiting on them and you can look at that. But my big ones and my priority ones are, I mean, the Ts are really big. You know, do they have traction? Do they have the right team or what at the terms? And, and the TAM, the addressable market.
I mean, if you have those, you know, that’s important. Then the other stuff I think is nice to have. I think those are nice to have an important. But when you start getting all of those to line up and, you know, you say, “Wow, this is looking like a good investment.” You know, sometimes you can have all them line up and still, this is high-risk, high-reward asset class, and you can still have them all. It just minimizes the risk when you have them all lined up.
Jimmy: That’s great. Okay. We’ve discussed why you’re an angel investor, what you like about it, both the returns and the ability to mentor these different companies. We’ve talked a little bit about Angeles Investors, your process for vetting these different potential portfolio companies that you invest in. But I wanna talk about angel investing more broadly now, and specifically who you have to be in order to participate in angel investing.
You mentioned near the top of the show that you have to be an accredited investor, and you even gave the accredited investor definition. So, I wanna spend a few minutes now talking about what an accredited investor is, about that definition, and about some rulemaking by Congress, both on the legislative side, I guess, Congress, and also potentially some regulatory changes that the SEC might make regarding that definition, how it might change and who that may impact. But first, before we kind of get into those technical weeds, David, I want to just actually hear more about your story. You went back to the beginning of your career, but I want you to go back a little bit further, if you could. How did you grow up and what were some obstacles that prevented you from doing angel investing early on?
David: Yeah, that’s a great question, Jimmy. You know, I had the opportunity to also testify on Capitol Hill on one of these committees on the credit investor. But I was mentioning that, you know, I grew up very humble beginnings. My grandparents’ parents came here from Puerto Rico with nothing. Almost less than nothing if you come here not speaking the language. And my father didn’t finish high school. And then I was the first of my family to graduate from college. And then I had this fast-tracked career, you know, in engineering, in the tech industry, and then got in the MBA at Notre Dame and all this kinda stuff.
So I’ve been very fortunate. But even as I was getting my MBA, you know, to get to $200,000 even, you know, it’s not like everybody gets to, you know, get there. And just because you get there you’re an executive, by the way, doesn’t mean that you have $10,000, $5,000, $20,000 to just invest in some of these companies.
I think once you become an executive, I think that you’re pretty much at the accredited investor status. But, you know, then you have to prioritize. I mean, there’s a lot of things you can invest in, and is this an asset class you wanna go after? You can do real estate, you can do stocks, you can do a lot of different things. But then you have to choose, you know, like I did. I love startups, I love disruption, I love the opportunity, I love learning, and I love helping. And so that’s why I said, “Ah, this asset class just kind of meets my needs.”
But as I also testified, there’s a lot of people who I would like to invest in this asset class and can’t because they’re not at that accredited investor level. And I think, you know, now with the advent of angel groups and platforms that make it a lot easier, you know, it’s a lot easier to then pull money together and put out to a company, not like it was, you know, 10, 15 years ago. So, you know, that’s a bit of my journey, Jimmy, to, you know, from the start, you know, to angel investing. And then make more specifically, I guess, maybe just last point. If you look at, you know, the Hispanic community in America and what we’re doing at Angeles too, it’s a new asset class to a lot in our community.
We’ve come up very similar to myself. And so, a lot of it is just educating and training on this asset class and, you know, how do you minimize risk and increase reward and open it up to more in a very safe way, which was what we were talking about on Capitol Hill. And my last point, I think I mentioned this too, there’s a lot of issues that are partisan. This should really be, you know, bipartisan issue, I mean, so I’m hopeful that we can get some change in that as well.
Jimmy: Yeah. Well, Andy and I actually did a live episode of the “Alternative Investment Podcast” reflecting on the accredited investor definition, and it got a little bit political and philosophical at times. We kind of meandered through because there really are, I guess, there’s two different ways of looking at it. One, the unsophisticated investor or the investor who doesn’t have a lot of net worth to lose, need protected from the regulators or from the government. But on the other hand, there’s the other group that says, “Well, that’s too restrictive.” And it’s potentially disproportionately affecting minorities, women, folks of that nature from participating in some of these types of investments that have outsized returns oftentimes.
So, you know, where do you draw the line between being too restrictive and over-regulatory versus being too less fair and letting people potentially get swindled by an asset class that isn’t regulated as much as, say, stocks or other types of investments that are regulated by the SEC and have a lot of oversight. So, anyways, you mentioned David, that you testified just a few weeks ago in front of the US House Financial Services subcommittee on capital markets. It was a two-hour-long hearing. I actually watched quite a bit of it. I didn’t watch the whole thing, but I watched quite a bit of it. And that’s how I learned of you, David, and I connected with you on LinkedIn, I think later that day and asked you, “Hey, let’s bring you on the podcast and talk about this.”
It’s interesting different argument on each side of the accredited investor definition, but in your mind, David, I want your opinion now, do you think that definition, accredited investor is too restrictive? And if so, how should it change?
David: Yeah, that’s a great question. A lot of the panelists we were leaning, and I think a lot of the recommendations from the Angel Capital Association would be, it was directional, but like, no more than 10% of your, you know, your assets or annual salary should be able to be invested in this asset class. It was a directional thought. There was a directional thought to lower it to 150,000 to be accredited, was the second one
Jimmy: That’s lowering the annual income threshold from $200,000 here to 150. Okay.
David: That’s right. That’s right. And then there was some thoughts around, some like certification or, you know, maybe on top of that, some certifications either coming from the Angel Capital Association or being recommended as part of groups, you know, be doing this within a group. Because if you’re doing it by your… I mean, I think if you’re doing it as a group, it minimizes the risk. There’s risk and all that. So, those were the directional recommendations, you know, that were put out there. And I agree with them, I think we should move in that direction. I mean, you know, and we can go in a direction over time, maybe instead if it’s 200, maybe let’s go to 175 and let’s see how it goes.
Jimmy: No, David, unfortunately, I think the SEC has a mind of moving in the opposite direction though, because their thinking is…
David: They do, I think. Yeah.
Jimmy: Their thinking is, this accredited investor definition was made in the early 1980s and it has never been updated. So that income threshold of $200,000 was set in, I think 1982 if I recall correctly. And so, if you were to adjust that for inflation it might be, I mean, I don’t know what $200,000 in 1982 is worth today. Is it 350,000 or 500,000 somewhere in that range, maybe?
Jimmy: That would really restrict the number of investors who would qualify. Because I think as it stands today, David, maybe you can correct me if I’m wrong, it’s somewhere between 10 to 15% of US households meet this accredited investor definition. So, if we update it in that direction, it’s really gonna bring that number down significantly.
David: That’s right. Yeah. It’s like 10% or something. It was like 10%. Yeah.
David: And it would just disproportionately impact, you know, minority communities which we don’t want that to happen. So, I think…
Jimmy: And when you say, sorry, just to pull on that throw a little bit more too, when you say disproportionately affect minority communities, I think you’re talking about from both sides of angel investing too. Fewer investors from minority communities would be able to participate, but also fewer entrepreneurs who are starting up companies that need this type of early-stage or pre-seed capital from angel investors wouldn’t receive that capital as often either. Is that true, do you think?
David: Yeah. That’s correct. I mean, there’s the data that, you know, well, in our case because we know the entrepreneurs, you know, they’re in our communities, so it’s a lot easier. And it’s on the flip side too, if you’re not, it happens that way. So, yes, that would as well. It’s on both sides, you’re right.
Jimmy: Yeah. I mean, it is a really charged topic, because on the one hand, hey, probably when the regulators first came out with this definition, they probably should have pegged it to some sort of inflation metric, maybe CPI, I don’t know, something like that, but they didn’t. So, now the definition is now 40 years old. So, if you look at it logically, well, surely it needs to be updated, it needs to be revised upward, but as you and I have been pointing out for the last few minutes, it’s gonna maybe make things worse for certain individuals, for certain investors. Maybe it cuts the number of credit investors by a significant amount in the country further restricting the amount of opportunities that investors have to receive outsize returns, further restricting the number of entrepreneurs that get funded at a time when we’re thinking, “Hey, let’s make things more inclusive. Let’s have capital flowing to folks that maybe otherwise wouldn’t be flowing into.” Is that right? I mean, what are your overall thoughts there?
David: Yeah, I mean, I think we should open it up more because, you know, I think we’ve got better angel groups now, we’ve got a lot more information that’s available for these companies. So, I tend to think that the SEC should be more lenient in this area in terms of letting more people in. I mean, I do think, you know, there’s risks involved and there’s, you know, all that kind of stuff. Well, I think what a lot of times what people forget to mention is that all the successes, you know, like when we were talking about in the hearing, it was a lot about FTX and this and that, you know, and all the issues with FTX, but what a lot of people, you know, the hundreds and thousands, more like the thousands of companies that have grown, scaled and have exited and really given the investors an outsized return. So, I mean, I believe it should be opened up. I don’t believe it should be opened up all the way.
I think there should be safeguards. And I don’t know who or why they said, “Oh, just because you make $300,000, you’re smarter than this person,” basing it on, you know, income. So, that’s why there’s a bit of this certification, there’s a why there’s a bit of the groups because, you know… I think when I got my MBA, I think I barely made the accredited investor different. I don’t think I made the accredited investor difference when I got my MBA and from a leading university. Sorry, those are my thoughts there, Jimmy.
Jimmy: Yeah, yeah. It’s interesting, the regulators, the SEC is using income levels or net worth levels as a proxy for investor sophistication. And I’m sure there’s some correlation there, but you know, as you mentioned, you graduated with an MBA from one of the top programs in the country and you didn’t meet the definition, but somebody who may have won a big prize in the lottery and doesn’t know anything about investing might have met the definition. So, those are two different examples there where the accredited investor definition doesn’t really work. Well, it’ll be interesting to see what the SEC decides to do if it’s later this year or sometime further down the road how they amend the definition. I think it’ll definitely be a charged topic.
David, we are starting to run out of time, but I had a few more questions for you, kind of getting us off of the accredited investor definition topic for the last few minutes of the episode. I was wondering if you could tell us about some of your angel investing investments to date. Maybe you can give a few examples of your biggest successes and the types of returns that you received from them.
David: Sure. So, unfortunately, I have two unicorns in my portfolio. One’s called ShipBob. So, there are three TL kind of logistics platform where Amazon has these sophisticated warehousing that, you know, pick, pack, and ship. ShipBob does this for Amazon competitors, so Walmart and others, and they’re doing the warehousing, the pick, pack and ship, ShipBob. So, that’s done. GRIN is another one. GRIN is a kind of platform that on one side you’ve got influencers in this world that’s becoming more social media. On the other side, you have companies. And so, GRIN is the platform that brings both of them together, you know, to help companies scale their brands. In Angeles Investors, we have an amazing one called Canela Media. They are kind of Netflix for the Hispanic community from the United States through Latin America. Unlike Netflix, they serve up ads and they’re on like Roku and your mobile and, you know, all that stuff, and they’ve done really well.
And kind of a more recent one, well, I say recent one, I mean I’ve invested in them maybe five, four or five years or so, was a company called Hallow. And that came to us through Notre Dame IrishAngels. And Hallow is a Catholic prayer meditation app, and they raised, I don’t know, I think it was $50, $60 million, like a year and a half ago or something like that. And we invested ’em. They were, you know, they were just starting out for the most part. And they just announced a big deal with Mark Wahlberg and they’re like the number three app in all of the Apple Store, obviously because of the lenten holiday, they had a big boost and they’re doing really well. So, that’s another one. Wolf & Shepherd’s another one, so I don’t know if you’ve heard of them. So, they’re that kind of the athletic shoe…
Jimmy: That’s a shoe company, right? Yeah.
David: Dress shoe, athletic shoe, Notre Dame, decathlon. We invested in them very early and they kept growing, growing, growing, and now they got the Gronk and all these other… You can see their ads on, you know, ESPN and NBC and all that stuff. So, it’s amazing. And then the one that I…is called The Mom Project, so I invested in them. So, it’s a hiring platform for women and moms. And I invested in them early on, because I knew in corporate America there was just such a lack of women and key executive and managerial roles, and they’re great and I invested in them, but then helped them, mentored them, coach them. And you know, when you have a great CEO, you don’t have to do much of that too, but if you just open up a door here and there and help them out, it’s been great. And they’ve had an amazing run.
You know, Serena Williams now is an… you know, this is before. And then Serena Williams became an advisor, and now, you know, they’re big and we’ll see what they have in store, but they’re likely gonna be a very newsworthy company. And then there, there’s a bunch of others, but those are some of the ones that you know, I wanted to highlight.
Jimmy: Those are some great examples. You know, some of the more successful portfolio companies that you’ve invested in over the years, David, what types of returns do you typically see from some of the bigger successes?
David: From those five, I’d say the average would be probably 50, anywhere 40 to 50 or so X, maybe more like 40. Some are higher, some are lower, but for those top, whatever, five or six. Now, you’re gonna have…
Jimmy: You don’t always get that.
David: You don’t always get that. You’ll get, you know, another 10 that die. So, you know, I never wanna do that. So, you know, you invest in 10, three are gonna do well, maybe one’s gonna do really well, three are gonna do average and then three or four are gonna die. I can also have another session where I talk about the ones that died, you know, as well, but those aren’t as fun to talk about, but you can talk about those as well.
Jimmy: Yeah. Maybe one question there actually, what are some common threads that you see from the ones that die? Is it something with the founders or something with the work ethic, or is it just a bad product-market fit sometimes? Or are there any commonalities, or is it kind of all over the map why some companies end up going to zero and dying?
David: Yeah. You know, it’s a little bit of everything you mentioned there, but kind of the essence of it is they run outta cash. And I’ve seen scenarios where, you know, they kind of wait, wait, wait and then maybe somebody’s gonna give them some cash and they hope, they hope, they hope, and it all falls apart. So that’s happened kind of multiple times.
Jimmy: Well, they all run outta cash, that’s how you go to zero, but that happens because you don’t have enough sales or you’re paying too many people on the payroll, you’ve got the wrong headcount there, something like that, right?
David: That’s right. Or poor kind of fundraising or fundraising planning. And so, you see a bit of that. I think the other way, the reason they fail is they don’t get enough, kind of going back to that traction. They don’t get kind of that right product, what they call product-market fit and start getting some momentum, you know, in traction and sales. And so they kind of swirl a bit and you know, they kind of swirl and they swirl and then, I mean, obviously, the money goes up, but that’s another area. Those are another area. And then just kind of goes back to just, you know, the other things you mentioned, you know, not sales, maybe they make a mistake, they don’t pivot right, there’s a couple of different ways.
Jimmy: Yeah. Well, just to zoom out here in the last couple of minutes, I wanted to get your thoughts on, David, since you’re a leader in the angel investing space, you know, you head up one of, you mentioned probably top 10% angel investing networks in order of the number of investments you’ve made, assets, however you want to term it. What are some trends in angel investing or venture capital more broadly that you think will play out over the next two to three years?
David: Yeah. I think there’s software and platforms that are making it easier to pull together groups of money, easier, more efficient and cheaper to pull together pools of money and invest in startups. So, I think that’s one trend. I mean, if you think about all these legal docs that need to get put together, for the most part, you know, they’re becoming more standardized. You can, I don’t know, you’ve got this, the safe note, you know, get produced in the last, I don’t know, whatever, 10-ish years. But even underneath it, there’s software now, like we use this platform called Allocations. And, you know, you push a button and it automatically creates all these legal documents. You get ’em out to people. They’re connecting with, you know, they’re connecting with the banks to wire the money, they’re connecting this to bring it in.
So, it’s like automating of all of those processes, the prices of that coming down, which should make it easier for people to pull money together and invest. So, I think that’s a big trend. I think Latin America is an interesting place, if you look at… There wasn’t a lot of investment in Latin America. I think global, I think you’re gonna, you know, see more global type deals come together. I think this asset class is gonna be more… I think people are gonna become more educated and aware of this asset class and it’s gonna open up… Even with the current accredited investor, I think there’s a lot of opportunity and more people are gonna come into this asset class. Those are a couple of big, like for angel investing. And then, you know, all the tech, you can see a lot of artificial intelligence, quantum computing, augmented reality, metaverse, all that kind things to invest in on top of that, information like health, you know, we’re gonna get tons and tons and tons of data.
If you think we’re getting a lot of data now, you haven’t seen anything yet in terms of… So, products and companies that parse through that data and put out some insights on anything, different industries, wherever are gonna be very valuable. So, that’s what I see coming.
Jimmy: A lot to keep an eye out for. Well, I mentioned in the intro that you’re the author of a forthcoming book, “NetWORKing Excellence: Building a Strong Value-Based Network in an Accelerating Digital World.” Tell us about your book, David, and when it’s coming out.
David: Yeah, thank you, Jimmy. So, the book can be pre-ordered on Amazon right now. It will be released March 10th. In the pre-order phase, it’s already become Amazon hot new bestseller across like two different categories. So, I’m really excited about that, Jimmy. I’ve learned a lot in my life and I’ve done a lot of interesting things, whether it’s executive ranks at some of the largest technology companies in the world, or investing in unicorns and others, and starting up these technology organizations. The underpinnings of all of that, Jimmy, has been networking. And I have an approach that I’ve learned through my years, through mentors, through hundreds of books I read and people I interview as part of the book, and I pull all of that, you know, together in this book. I’m really helping people achieve networking excellence.
And Jimmy, and if you ask people, well, what’s the top skill to help yoin u accelerate your career and move up in promotions? Or what’s the number one skill or top skill to find a job or more rapidly accomplish your goals? Like overwhelming answers is networking. You say, “Oh, it’s networking.” But, you know, they don’t teach it in school. There’s some kind of books out there, but most of us just kind of learn by doing. And so, I wanted to, you know, kind of share my experiences, give back, fill this demand for a very needed skill in a digital world that we’re operating in as well with so much information, truly help and give back, you know, to those and help them much accomplish those goals that I mentioned.
Jimmy: It sounds like a great endeavor. And I think you’re right, it’s not always about what you know, it’s oftentimes as equally important who you know, if not more important. Well, David, it’s been a pleasure speaking with you today. I can’t wait to read your book by the way. I’m gonna make sure I get a copy of it at some point. Before we go today, David, can you tell our viewers and listeners where they can go to learn more about you and Angeles Investors?
David: Sure, Jimmy. So, at Angeles Investors, you can find us on LinkedIn at Angeles Investors in a very easy… angelesinvestors.com is the website. So, that’s very easy. For myself on LinkedIn, David Olivencia, and for Facebook and Twitter, @dolivencia, O-L-I-V-E-N-C-I-A. And I think we’ll have some show notes where we can put some links out for the viewers as well.
Jimmy: Yeah, we will. For our listeners and viewers, as always, we will have show notes available for today’s episode at wealthchannel.com/podcast. David, it’s been a pleasure speaking with you today, David. Thanks so much for being on the show.
David: Thank you, Jimmy. Appreciate it. Had a lot of fun.