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Forbes Books presents the Startup Science Podcast with Gregory Shepherd,
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brought to you by Startup Science dot Io. Greg is
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an entrepreneur who's built and sold twelve businesses, a recipient
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of four Private Equity Awards, featured ted X speaker and
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ben Bella Publishing and Penguin Random House author Pere's Gregory Sheppard.
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My guest today is Marcia Dawood, a visionary early stage investor,
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author of Do Good by Doing Well, and passionate advocate
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for empowering diverse founders and impactful innovation. As a ted
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X speaker and host of the Angel Nextdoor podcast, she
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bridges the gap between ideas and thriving companies while investing
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in over fifty startups and funds. Marshaw, Welcome to the show.
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Well, thanks for having me. Happy to be here.
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Yeah, I want to start out with your career. It
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is absolutely fascinating and chock full of just pretty much
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everything in the startup eco system. What inspired you to
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become an early stage investor and how did you get
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started in the space like originally?
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Yeah, so one day in twenty twelve, I was invited
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to an angel investing meeting and I thought cool, what
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is that? What's angel investing? I have no idea what
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that is. So I wasn't sure if people like sat
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around in pickstocks or no idea, but I decided I'll
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go and see what's going on. And I was just
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so fascinated. I was living in Pittsburgh, Pennsylvania at the time,
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and I met these entrepreneurs that were doing these really
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cool things and they lived right in my backyard. I
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had no idea, and I thought, wow, but I can't
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be a part of that, because you know, that's for
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rich people, and that's for people who are well connected
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and things like that. Like I, what am I going
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to add? And I start to realize that, hey, entrepreneurs
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are everywhere in every city, in every town, and it
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would be really cool if I could get involved. And
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so I became a member of this particular angel group
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in Pittsburgh, and I started going to meetings and meeting
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entrepreneurs and learning about it. And then about a year
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or two later, I moved to New York City and
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became a member of a different group and found out
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that less than two percent of venture capital funding or
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angel investing money, any type of early stage funding goes
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to women. And I thought, wait a minute, So women
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were like fifty percent of the population, so you can't
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really tell me we only have like two percent of
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the good ideas, Like, so what's going on here? So
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I started getting more involved and learning about it, and
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then I was just so fascinated by like all the
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different ways that you could invest. I learned about funds.
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I became a fund manager. I became I went on
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to the investment committee of several different funds, and I
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just learned about all of the different ways that you
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could invest. I learned about equity crowdfunding, and through that,
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I just thought, Wow, how come more people don't know
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about this? And it's really because they all thought what
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I thought at the beginning, or they that's what they're
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still thinking. So I decided to start my own podcast
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called The Angel next Door, and then from there I
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did a ted X talk in Charlotte in twenty twenty two,
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and now I wrote a book called Do Good While
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Doing Well to demystify this whole crazy early stage investing space.
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I think it's amazing. You're also the chair emmers of
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the Angel Capital Association, So what changes have you seen
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in the angel investing landscape over the past I don't know,
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five years. I mean considering where you came from and
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your perspective on things, and then I do want to
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spend a little time talking about women in not just
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investing about entrepreneurship. It's one of my passions to try
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to like level out that gap. So let's start out
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with your experience with the Angel Capital Association, what you've seen.
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Yeah, So when I got started and actually joined the
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board in twenty fifteen, I went to my first Angel
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Capital Association summit. It's like our annual meeting, and lots
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of angels get together and it's a little bit like Disneyland.
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You get all these cool different sessions that you can
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go to. There's keynote speakers, you get to meet other
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angel investors, and there was a line at the men's room.
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So I remember thinking to myself, Huh, this is a
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little bit odd. I'm not used to this. Not very
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many women here. And to your point about women getting
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funding and why that does or doesn't happen, it really
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still to this day. Here we are in twenty twenty five,
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and we really don't have a whole lot of women
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getting funding from the venture capital dollars that are out there,
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but it has changed slightly when it comes to angel funding.
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So the Angel Capital Association does do their own data report.
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It's called the Angel Funders Report. You can get it.
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You can get it for free on their website, the
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Angelcapital Association dot org. But in there it basically has
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said that now instead of it being just two percent
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for angels and going to female founders, it's more like
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twenty five thirty percent, So we're making progress. Now why
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are we progress? I think it's because we're starting to
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see more investors that look like the people that we
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want to see getting the funding. So if female founders
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are out there really trying to get funding for their startups,
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there's a couple of different ways that they can go
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about doing that, but one of the things is really
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needing to get more women to actually be sitting and
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writing the checks.
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Yeah, I agree, one hundred percent. I remember when I
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was doing the research for the book, I ran into
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this as well, and I was just like floored and
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I couldn't believe it because there are so many amazing
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founders that are starting these companies that are women, and
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then I'm looking at the checks being written and it
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just didn't line up right. There's the founders are definitely there,
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So why are the women not getting the checks? I mean,
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that's I get. Do you have any answer for that,
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because I was just I couldn't understand it outside of discrimination,
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I couldn't understand it.
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Well, those are a couple of reasons. One is because
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we don't have enough people writing checks that look like
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the people we want to have funded, like I just mentioned.
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But the other thing is women in general. Again I'm
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making generalization statements, so bear with me here, but women
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sometimes come across that they are creating a lifestyle business,
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that this is something that they're going to do until
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they have a baby. I mean, it's really horrible that
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those are the kind of societal norms that we can
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come across. But really, a woman, especially a female founder CEO,
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is really going to struggle to get her voice heard,
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to get her point across without sounding too overly aggressive.
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So in this particular case where really I when I
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coach female founders, I usually talk to them about, look,
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you have to know your numbers, you have to know
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your business inside and out better than any of the guys.
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But then stand on that and know that you do,
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and now you're going to just show people how much
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better you are, because there have been studies that have
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come out now that have shown that women they can
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stretch a dollar farther, they can raise less capital and
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produce more revenue for their startup businesses.
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I absolutely agree, and I actually ran into the same
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numbers when I was doing my research, which was one
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of the reasons why I was so dumbfounded. I've seen
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them going, am I the only one that reads? Why
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aren't more people aware of this? But on the heels
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of that, and this made your previous statement there may
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be part of the answer. But what is the most
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rewarding part of being in this space, not just as
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an angel investor, but all of the things that you
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do and what keeps you motivated?
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Yeah, I mean I think a lot of it has
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to do with I thought to myself. You know, even
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as I was growing up, going through college, you know,
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you hear the saying be the change you want to
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see in the world, and I would think, yes, yeah,
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I want to do that. I want to be the
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change I want to see in the world. But how
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do I do that? And how can I'm only one person?
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How could I actually do that. So to me, that's
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really the reward. If you want to see change in
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the world, for profit companies are really the companies that
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can help to bring that change at an accelerated rate.
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What I worry about is there's a lot of nonprofits
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out there that are doing some amazing work and we
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absolutely one hundred percent need to support them, But they
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are underfunded, they are not appreciated, and they are not
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given the resources that they need in order to solve
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some of these very very big problems like heart disease, cancer,
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all of these things, poverty, all these things that we
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need to have solved with children. So we need to
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help them, but we also need to get the for
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profit companies working on some of these problems as well
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and back them so that together we can have a
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much better world.
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So moving on to a different topic, how do you
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balance I'm like looking at your bio here and this
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is insane. I mean, sec Advisor, you have this really
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successful podcast, you're an angel investor, you sit on boards.
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How do you balance all of and do all of
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this stuff at the same time. I mean, you're like
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a superwoman.
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I like that. I'll take it. I'll take, I'll take it.
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Keep the compliments flowing. It's all good. No, no, So
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a lot of things ebb and flow right, just like
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anything in life. So there's sometimes that companies will need
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my help, you know, my portfolio companies more than others.
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And then also with the SEC Advisory Committee, that's that's
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a whole lot of fun because what we do is
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there's twenty of us on the committee and we are
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helping to think about how we can get more capital
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to small businesses. And when I say small businesses, it's
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all kinds of businesses, not just startups, but every type
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of business, mainstream businesses, and there are a lot of
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different types of companies and people that are represented through
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that committee. So we have some really awesome discussions. If
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you ever wanted to see any of the discussions, they're
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all recorded and put on the SEC's website. But there's
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a lot of resources, and I think that entrepreneurs don't
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realize how many resources the SEC has. They put on
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an annual report that's also free on their website SEC
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dot gov and it has a lot of information about fundraising,
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about how people are doing what they're doing. And I
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think from an entrepreneur's perspective, there are a lot of
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things that they could get for free, and a lot
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of information that they can get for free without necessarily
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having to waste so much time. You know, one of
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the reasons that I wrote this book and one of
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the things that I am really passionate about. And then
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one thing that keeps me motivated is how can we
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get this to be an easier process? Why does it
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have to be so hard? It shouldn't be so hard
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for any entrepreneur, but especially for underrepresented entrepreneurs. They are
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are really really struggling, and we have to as a
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whole figure out how we can change that.
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Amen's sister, I feel the exact same way. It's it's
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staggering when you look at the data. I spent so
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much time looking at this, and I was just sitting back.
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I can't tell you how many times I was just
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sitting back in my chair just going, Wow, this is
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really bad. Uh, you know, it's it's it's it's really bad.
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The the the numbers are all white men, right, It's
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just white dude, white dude, white dude all over the place.
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And it's it's really scary. Actually, when I look at
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it because the diversity just isn't there, and I think
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of startups as being a way to help with diversity,
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with help with wealth inequality of wealth equality, you know.
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So I really love your focus on this when you
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think about the Small Business Capital Formation Advisory Committee and
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your perspective of the whole startup ecosystem. Has it changed
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since you've been on that board.
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I don't know that it's changed, but it's definitely interesting
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within the committee to hear the different perspectives. So we
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have someone on the committee who works with a nonprofit
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and also that also has a for profit arm related
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to entrepreneurs with disabilities, and I know that was one thing.
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You know, I'm always the first person to say, hey,
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we need to get more funding to women, people of color,
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you know, all shape sizes, but I didn't really think
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about the disabled community. And to me, that's been such
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an eye opener. There are so many entrepreneurs who are
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working to help solve problems in this particular space and
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it isn't even on the radar. So we need on
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the radar. We need to really be helping all entrepreneurs
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who are solving all types of problems to be able
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to get to the capital that they need. So that
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I think it's It's changed my perspective a little bit
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because I think I was living in my own little
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bubble of whatever I thought was going on, and now
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my perspective has been broadened.
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It's you and I have we have so many So
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I got to tell you this. So last week I
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was doing research trying to find incubators and accelerators, you know,
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entrepreneur organizations that specialized and so I looked up blind
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and I looked up people that are in wheelchairs and
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disabled in that fashion, and deaf people, and I was
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looking up autistic people and all the neurodivergent community, and
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I found nothing in most of the space, like nothing,
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like there's nobody right, And then I found like a
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couple in other areas. And one of the things that
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I know is that you know, if you're experiencing the problem,
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you're probably the best entrepreneur to fix it. And so
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we are to your point, right, we're not empowering the
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same people that can fix all the problems that the
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whole community has. And I agree with you wholeheartedly. I
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just love you. You're just my people. So I want to
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change a little bit. So let's move into let's say
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you're a brand new investor and you were going to
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give that investor one piece of advice that maybe you
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had received earlier in your career. What piece of advice
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would that be.
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Watch for a while, do not make an investment right
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off the bat. So many times I see new investors
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come in and they'll meet an entrepreneur, They'll like what
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the entrepreneurs doing, They'll kind of fall in love with
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a company, and the next thing you know, they're like,
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I can't wait, I'm going to invest this is my
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first company. It's like and it's been like five whole
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minutes that they've been even like getting any exposure to
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anything that has to do with diligence, term sheets, anything
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like that. So I always tell people, you really want
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to look around. You want to wait before you write
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your first check. You can still do that same company
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that you really liked at the beginning, but let's take
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some time to really learn about the company, learn about
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the process, kind of get your feet wet, talk to people,
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ask a lot of questions. Those are the kind of
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things I think every new investor should do.
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I lost a million five on because when I first
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did that, I did the exact same thing. I was
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just like, I'm going to go back this company, and
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then I just didn't give up, even though I knew
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the game was over at some point. You know, It's
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like I went the kite surfing one time, and you're
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not supposed to hold onto the kite when you crash,
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and I held on and I got dragged through the sand.
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I feel like that happens to founder to investors sometimes.
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How do you know when it's time to pull the plug?
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You know, that's a good question, And in a lot
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of cases, I don't know that I actually see angel
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investors or individual investors who even get to that point
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of a decision. And I say that because if you
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are talking about a fund manager and a little bit
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more sophisticated investor, if they do invest in a company,
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in a lot of cases, they're going to set aside
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some extra mind, either in the fund or maybe if
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they're an individual, they might set aside some extra money
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in order to follow on. We call it like be
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able to get to a point where they can help
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the company later on if they're doing well. But in
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so many cases I've seen where angels are what I
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call in my book, they have shiny halo syndrome. They're
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like squirrel squirrel, like, what's next, what's new, what's exciting?
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Right?
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And they don't necessarily even get to the point where
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they can decide if they're going to pull the plug
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because they've moved on to something else and while that
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company could still be operating, they might need their help.
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So I always also encourage in new investors, like, really
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be thoughtful in the companies that you're picking to invest in,
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and don't just think about, Hey, I might have to
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invest in this round, but I also might have to
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invest in future rounds, And where's that money going to
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come from? Do I have that set aside in the
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little kiddy that I have, you know, in order to
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keep the company going and to be able to help
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them if in fact they do get in trouble in
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the future, which usually does happen.
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So this just popped into my mind. What is the
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biggest misconception that you think the people or the new
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angel investors have about investing into private equity in the
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startup ecosystem.
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Well, some of the biggest misconceptions of people who are
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learning about the space I think has to do with
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you know, how much money am I going to set
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aside into this asset class. So at the Angel Capital
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Association we talk about it being like five seven percent
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of your investable assets. So what I hate to see
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is when people get a little over zealous at the
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beginning in making investments and then they realize, whoopsie, I
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didn't really mean to invest my kid's college education money
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because you know he or she is now like seventeen
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years old and going to go to college, and don't
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do that. It's a big no no. Like so a
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lot of things about you know, how much and when
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and all of those things. So I think having a plan,
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having a thesis. That's a lot of what I talk
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about in my book is I didn't really have a plan.
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I kind of went into it like, hey, here I am.
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You know, I'm a new investor, let me see what happens.
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And then I quickly ran out of my own money
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in order to invest because I was like, wait a minute,
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now I'm starting to get it. You know that this
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asset class is risky, and we want to make sure
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that we're diversifying properly and we are protecting our other assets.
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So I think That's one of the big myths that
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people have at the beginning. They don't really think through
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what is this going to mean and how can it
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help me down the road? Make sure that I don't
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get myself into a pickle.
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So on that, right on the heels of that, how
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do you approach evaluating these early stage companies, Like how
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do you look at them? What questions do you ask
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the founder? What documents do you look at? How do
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you assess the whole situation As an angel investor yourself?
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Well, first of all, never alone, that's my number one role.
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Never ever, ever would I do diligence and make a
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decision about a company by myself. And the reason why
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is like I have so much expertise in so many areas,
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but like that's it, you know, I don't have expertise
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in all of these different areas. And I tend to
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like companies that are solving big problems, especially in the
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science area. And I am not a scientist, okay, So
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I have no business doing diligence on a company that
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is a science company because that's just not for me. So,
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but I would love to gather around with a lot
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of other people who have this type of knowledge and
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together we can gather the people that we need in
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order to really evaluate the company, because the things that
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you're really looking for. My biggest thing is, is this
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a company that is really solving a big problem? Way
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too often I hear companies talk about their solution and
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that their solution is so great, and wait until I
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tell you all about them and tell you every single
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thing about what I just built. But if I don't really,
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as an investor, understand the problem that they're solving, I
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don't know the people will buy their solution. So you know,
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that's a big part of it too. And then, of course,
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like you said, the team, the documents, you know, you
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get into all that. But really, some of the high
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level things that entrepreneurs could kind of hook an investor
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with at least to get another conversation or at least
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have them take a look at the opportunity is to
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really start to think about, Hey, what is it that
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the problem is and who is it that can actually
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solve the problem.
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So I always talk to on panels and everything. I say,
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there's a difference between the horse and the jockey, all right,
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the horse being the business, the jockey being the founder.
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The founder can't ride the horse, you still have a
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broken business. When you think about the horse and the jockey,
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which of these do you focus on more or do
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you focus on one or the other more?
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Well, I mean there's a big saying an angel world
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to your point, you know, you bet on the on
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the jockey, not the horse, because it is about the team.
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I think I would rather take like a really really
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stellar team with kind of a mediocre idea and bet
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on them as opposed to a mediocre team that has
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a really stellar idea because it's really really really really
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really hard to build a company, very hard, and you
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need to have that team that is balanced. So all
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too often, and this is something that we see in
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the tech world, especially where you'll have you know, a
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very technical founder comes up with a buddy who's another
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technical founder, and maybe a third buddy, and then they
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start a company. But they all have the same skill set.
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So they're all writing code and they're all making this
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incredible thing that's going to save the world or whatever
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it's going to do. But who's actually going to build
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the business, who's going to run the business, who's going
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to sell the product? All of those things you need
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that balance. So there has to be the executor, the
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operations person, the salesperson. So being able to really take
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a good look at the team and see who's doing
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what I think that's super important.
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That's awesome. All right, hang on, Marsia, we have to
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stop right there, but there's more to cover next time.
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On Startup Science, podcaster and author Marcia Dawwood shares the
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qualities she looks for when deciding whether to invest in
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a founder.
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I think one of the biggest things that I've seen
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has really made an entrepreneur successful is humility. And you
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don't see it very often, and it's a little bit
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of a balancing act because remember, entrepreneurs, they have to
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be visionaries. They have to be ready to go and
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just take it all the way to the end and
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they've got it right. But at the same time, if
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they're a little too overzealous, if they're a little bit
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too big for their breches, then you know, in a
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lot of cases, I don't see them succeed.
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This Startup Science podcast with Gregory Shepherd is brought to
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you by startupscience dot Io. Founders can log on to
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startupscience dot io and use code Forbes to get free
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00:23:12.960 --> 00:23:16.720
access to connect and find out more about Greg go
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00:23:16.799 --> 00:23:21.599
to Gregory sheepherd dot com. The Startup Science Podcast is
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00:23:21.640 --> 00:23:23.640
a production of Forbes Books.
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00:00:01.520 --> 00:00:06.160
Forbes Books presents the Startup Science Podcast with Gregory Shepherd,
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00:00:06.559 --> 00:00:10.400
brought to you by Startup Science dot Io. Greg is
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00:00:10.400 --> 00:00:14.599
an entrepreneur who's built and sold twelve businesses, a recipient
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00:00:14.720 --> 00:00:18.719
of four Private Equity Awards, featured ted X speaker and
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00:00:18.960 --> 00:00:24.160
ben Bella Publishing and Penguin Random House author Pere's Gregory Sheppard.
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My guest today is Marcia Dawood, a visionary early stage investor,
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author of Do Good by Doing Well, and passionate advocate
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for empowering diverse founders and impactful innovation. As a ted
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X speaker and host of the Angel Nextdoor podcast, she
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bridges the gap between ideas and thriving companies while investing
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in over fifty startups and funds. Marshaw, Welcome to the show.
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Well, thanks for having me. Happy to be here.
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Yeah, I want to start out with your career. It
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is absolutely fascinating and chock full of just pretty much
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everything in the startup eco system. What inspired you to
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become an early stage investor and how did you get
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started in the space like originally?
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Yeah, so one day in twenty twelve, I was invited
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to an angel investing meeting and I thought cool, what
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is that? What's angel investing? I have no idea what
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that is. So I wasn't sure if people like sat
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around in pickstocks or no idea, but I decided I'll
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go and see what's going on. And I was just
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so fascinated. I was living in Pittsburgh, Pennsylvania at the time,
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and I met these entrepreneurs that were doing these really
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cool things and they lived right in my backyard. I
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had no idea, and I thought, wow, but I can't
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be a part of that, because you know, that's for
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rich people, and that's for people who are well connected
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and things like that. Like I, what am I going
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to add? And I start to realize that, hey, entrepreneurs
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are everywhere in every city, in every town, and it
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would be really cool if I could get involved. And
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so I became a member of this particular angel group
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in Pittsburgh, and I started going to meetings and meeting
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entrepreneurs and learning about it. And then about a year
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or two later, I moved to New York City and
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became a member of a different group and found out
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that less than two percent of venture capital funding or
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angel investing money, any type of early stage funding goes
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to women. And I thought, wait a minute, So women
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were like fifty percent of the population, so you can't
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really tell me we only have like two percent of
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the good ideas, Like, so what's going on here? So
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I started getting more involved and learning about it, and
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then I was just so fascinated by like all the
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different ways that you could invest. I learned about funds.
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I became a fund manager. I became I went on
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to the investment committee of several different funds, and I
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just learned about all of the different ways that you
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could invest. I learned about equity crowdfunding, and through that,
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I just thought, Wow, how come more people don't know
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about this? And it's really because they all thought what
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I thought at the beginning, or they that's what they're
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still thinking. So I decided to start my own podcast
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called The Angel next Door, and then from there I
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did a ted X talk in Charlotte in twenty twenty two,
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and now I wrote a book called Do Good While
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Doing Well to demystify this whole crazy early stage investing space.
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I think it's amazing. You're also the chair emmers of
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the Angel Capital Association, So what changes have you seen
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in the angel investing landscape over the past I don't know,
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five years. I mean considering where you came from and
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your perspective on things, and then I do want to
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spend a little time talking about women in not just
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investing about entrepreneurship. It's one of my passions to try
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to like level out that gap. So let's start out
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with your experience with the Angel Capital Association, what you've seen.
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Yeah, So when I got started and actually joined the
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board in twenty fifteen, I went to my first Angel
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Capital Association summit. It's like our annual meeting, and lots
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of angels get together and it's a little bit like Disneyland.
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You get all these cool different sessions that you can
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go to. There's keynote speakers, you get to meet other
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angel investors, and there was a line at the men's room.
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So I remember thinking to myself, Huh, this is a
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little bit odd. I'm not used to this. Not very
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many women here. And to your point about women getting
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funding and why that does or doesn't happen, it really
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still to this day. Here we are in twenty twenty five,
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and we really don't have a whole lot of women
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getting funding from the venture capital dollars that are out there,
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but it has changed slightly when it comes to angel funding.
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So the Angel Capital Association does do their own data report.
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It's called the Angel Funders Report. You can get it.
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You can get it for free on their website, the
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Angelcapital Association dot org. But in there it basically has
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said that now instead of it being just two percent
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for angels and going to female founders, it's more like
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twenty five thirty percent, So we're making progress. Now why
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are we progress? I think it's because we're starting to
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see more investors that look like the people that we
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want to see getting the funding. So if female founders
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are out there really trying to get funding for their startups,
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there's a couple of different ways that they can go
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about doing that, but one of the things is really
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needing to get more women to actually be sitting and
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writing the checks.
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Yeah, I agree, one hundred percent. I remember when I
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was doing the research for the book, I ran into
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this as well, and I was just like floored and
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I couldn't believe it because there are so many amazing
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founders that are starting these companies that are women, and
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then I'm looking at the checks being written and it
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just didn't line up right. There's the founders are definitely there,
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So why are the women not getting the checks? I mean,
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that's I get. Do you have any answer for that,
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because I was just I couldn't understand it outside of discrimination,
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I couldn't understand it.
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Well, those are a couple of reasons. One is because
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we don't have enough people writing checks that look like
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the people we want to have funded, like I just mentioned.
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But the other thing is women in general. Again I'm
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making generalization statements, so bear with me here, but women
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sometimes come across that they are creating a lifestyle business,
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that this is something that they're going to do until
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they have a baby. I mean, it's really horrible that
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those are the kind of societal norms that we can
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come across. But really, a woman, especially a female founder CEO,
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is really going to struggle to get her voice heard,
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to get her point across without sounding too overly aggressive.
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So in this particular case where really I when I
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coach female founders, I usually talk to them about, look,
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you have to know your numbers, you have to know
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your business inside and out better than any of the guys.
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But then stand on that and know that you do,
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and now you're going to just show people how much
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better you are, because there have been studies that have
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come out now that have shown that women they can
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stretch a dollar farther, they can raise less capital and
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produce more revenue for their startup businesses.
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I absolutely agree, and I actually ran into the same
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numbers when I was doing my research, which was one
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of the reasons why I was so dumbfounded. I've seen
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them going, am I the only one that reads? Why
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aren't more people aware of this? But on the heels
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of that, and this made your previous statement there may
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be part of the answer. But what is the most
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rewarding part of being in this space, not just as
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an angel investor, but all of the things that you
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do and what keeps you motivated?
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Yeah, I mean I think a lot of it has
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to do with I thought to myself. You know, even
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as I was growing up, going through college, you know,
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you hear the saying be the change you want to
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see in the world, and I would think, yes, yeah,
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I want to do that. I want to be the
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change I want to see in the world. But how
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do I do that? And how can I'm only one person?
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How could I actually do that. So to me, that's
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really the reward. If you want to see change in
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the world, for profit companies are really the companies that
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can help to bring that change at an accelerated rate.
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What I worry about is there's a lot of nonprofits
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out there that are doing some amazing work and we
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absolutely one hundred percent need to support them, But they
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are underfunded, they are not appreciated, and they are not
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given the resources that they need in order to solve
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some of these very very big problems like heart disease, cancer,
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all of these things, poverty, all these things that we
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need to have solved with children. So we need to
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help them, but we also need to get the for
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profit companies working on some of these problems as well
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and back them so that together we can have a
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much better world.
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So moving on to a different topic, how do you
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balance I'm like looking at your bio here and this
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is insane. I mean, sec Advisor, you have this really
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successful podcast, you're an angel investor, you sit on boards.
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How do you balance all of and do all of
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this stuff at the same time. I mean, you're like
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a superwoman.
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I like that. I'll take it. I'll take, I'll take it.
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Keep the compliments flowing. It's all good. No, no, So
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a lot of things ebb and flow right, just like
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anything in life. So there's sometimes that companies will need
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my help, you know, my portfolio companies more than others.
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And then also with the SEC Advisory Committee, that's that's
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a whole lot of fun because what we do is
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there's twenty of us on the committee and we are
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helping to think about how we can get more capital
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to small businesses. And when I say small businesses, it's
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all kinds of businesses, not just startups, but every type
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of business, mainstream businesses, and there are a lot of
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different types of companies and people that are represented through
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that committee. So we have some really awesome discussions. If
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you ever wanted to see any of the discussions, they're
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all recorded and put on the SEC's website. But there's
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a lot of resources, and I think that entrepreneurs don't
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realize how many resources the SEC has. They put on
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an annual report that's also free on their website SEC
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dot gov and it has a lot of information about fundraising,
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about how people are doing what they're doing. And I
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think from an entrepreneur's perspective, there are a lot of
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things that they could get for free, and a lot
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of information that they can get for free without necessarily
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having to waste so much time. You know, one of
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the reasons that I wrote this book and one of
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the things that I am really passionate about. And then
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one thing that keeps me motivated is how can we
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get this to be an easier process? Why does it
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have to be so hard? It shouldn't be so hard
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for any entrepreneur, but especially for underrepresented entrepreneurs. They are
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are really really struggling, and we have to as a
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whole figure out how we can change that.
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Amen's sister, I feel the exact same way. It's it's
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staggering when you look at the data. I spent so
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much time looking at this, and I was just sitting back.
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I can't tell you how many times I was just
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sitting back in my chair just going, Wow, this is
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really bad. Uh, you know, it's it's it's it's really bad.
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The the the numbers are all white men, right, It's
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just white dude, white dude, white dude all over the place.
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And it's it's really scary. Actually, when I look at
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it because the diversity just isn't there, and I think
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of startups as being a way to help with diversity,
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with help with wealth inequality of wealth equality, you know.
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So I really love your focus on this when you
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think about the Small Business Capital Formation Advisory Committee and
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your perspective of the whole startup ecosystem. Has it changed
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since you've been on that board.
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I don't know that it's changed, but it's definitely interesting
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within the committee to hear the different perspectives. So we
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have someone on the committee who works with a nonprofit
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and also that also has a for profit arm related
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to entrepreneurs with disabilities, and I know that was one thing.
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You know, I'm always the first person to say, hey,
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we need to get more funding to women, people of color,
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you know, all shape sizes, but I didn't really think
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about the disabled community. And to me, that's been such
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an eye opener. There are so many entrepreneurs who are
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working to help solve problems in this particular space and
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it isn't even on the radar. So we need on
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the radar. We need to really be helping all entrepreneurs
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who are solving all types of problems to be able
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to get to the capital that they need. So that
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I think it's It's changed my perspective a little bit
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because I think I was living in my own little
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bubble of whatever I thought was going on, and now
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my perspective has been broadened.
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It's you and I have we have so many So
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I got to tell you this. So last week I
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was doing research trying to find incubators and accelerators, you know,
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entrepreneur organizations that specialized and so I looked up blind
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and I looked up people that are in wheelchairs and
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disabled in that fashion, and deaf people, and I was
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looking up autistic people and all the neurodivergent community, and
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I found nothing in most of the space, like nothing,
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like there's nobody right, And then I found like a
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couple in other areas. And one of the things that
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I know is that you know, if you're experiencing the problem,
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you're probably the best entrepreneur to fix it. And so
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we are to your point, right, we're not empowering the
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same people that can fix all the problems that the
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whole community has. And I agree with you wholeheartedly. I
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just love you. You're just my people. So I want to
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change a little bit. So let's move into let's say
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you're a brand new investor and you were going to
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give that investor one piece of advice that maybe you
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had received earlier in your career. What piece of advice
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would that be.
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Watch for a while, do not make an investment right
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off the bat. So many times I see new investors
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come in and they'll meet an entrepreneur, They'll like what
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the entrepreneurs doing, They'll kind of fall in love with
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a company, and the next thing you know, they're like,
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I can't wait, I'm going to invest this is my
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first company. It's like and it's been like five whole
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minutes that they've been even like getting any exposure to
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anything that has to do with diligence, term sheets, anything
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like that. So I always tell people, you really want
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to look around. You want to wait before you write
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your first check. You can still do that same company
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that you really liked at the beginning, but let's take
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some time to really learn about the company, learn about
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the process, kind of get your feet wet, talk to people,
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ask a lot of questions. Those are the kind of
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things I think every new investor should do.
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I lost a million five on because when I first
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did that, I did the exact same thing. I was
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just like, I'm going to go back this company, and
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then I just didn't give up, even though I knew
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the game was over at some point. You know, It's
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like I went the kite surfing one time, and you're
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not supposed to hold onto the kite when you crash,
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and I held on and I got dragged through the sand.
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I feel like that happens to founder to investors sometimes.
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How do you know when it's time to pull the plug?
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You know, that's a good question, And in a lot
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of cases, I don't know that I actually see angel
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investors or individual investors who even get to that point
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of a decision. And I say that because if you
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are talking about a fund manager and a little bit
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more sophisticated investor, if they do invest in a company,
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in a lot of cases, they're going to set aside
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some extra mind, either in the fund or maybe if
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they're an individual, they might set aside some extra money
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in order to follow on. We call it like be
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able to get to a point where they can help
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the company later on if they're doing well. But in
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so many cases I've seen where angels are what I
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call in my book, they have shiny halo syndrome. They're
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like squirrel squirrel, like, what's next, what's new, what's exciting?
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Right?
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And they don't necessarily even get to the point where
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they can decide if they're going to pull the plug
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because they've moved on to something else and while that
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company could still be operating, they might need their help.
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So I always also encourage in new investors, like, really
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be thoughtful in the companies that you're picking to invest in,
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and don't just think about, Hey, I might have to
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invest in this round, but I also might have to
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invest in future rounds, And where's that money going to
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come from? Do I have that set aside in the
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little kiddy that I have, you know, in order to
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keep the company going and to be able to help
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them if in fact they do get in trouble in
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the future, which usually does happen.
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So this just popped into my mind. What is the
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biggest misconception that you think the people or the new
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angel investors have about investing into private equity in the
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startup ecosystem.
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Well, some of the biggest misconceptions of people who are
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learning about the space I think has to do with
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you know, how much money am I going to set
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aside into this asset class. So at the Angel Capital
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Association we talk about it being like five seven percent
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of your investable assets. So what I hate to see
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is when people get a little over zealous at the
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beginning in making investments and then they realize, whoopsie, I
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didn't really mean to invest my kid's college education money
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because you know he or she is now like seventeen
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years old and going to go to college, and don't
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do that. It's a big no no. Like so a
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lot of things about you know, how much and when
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and all of those things. So I think having a plan,
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having a thesis. That's a lot of what I talk
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about in my book is I didn't really have a plan.
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I kind of went into it like, hey, here I am.
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You know, I'm a new investor, let me see what happens.
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And then I quickly ran out of my own money
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in order to invest because I was like, wait a minute,
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now I'm starting to get it. You know that this
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asset class is risky, and we want to make sure
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that we're diversifying properly and we are protecting our other assets.
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So I think That's one of the big myths that
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people have at the beginning. They don't really think through
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what is this going to mean and how can it
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help me down the road? Make sure that I don't
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get myself into a pickle.
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So on that, right on the heels of that, how
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do you approach evaluating these early stage companies, Like how
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do you look at them? What questions do you ask
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the founder? What documents do you look at? How do
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you assess the whole situation As an angel investor yourself?
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Well, first of all, never alone, that's my number one role.
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Never ever, ever would I do diligence and make a
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decision about a company by myself. And the reason why
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is like I have so much expertise in so many areas,
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but like that's it, you know, I don't have expertise
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in all of these different areas. And I tend to
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like companies that are solving big problems, especially in the
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science area. And I am not a scientist, okay, So
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I have no business doing diligence on a company that
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is a science company because that's just not for me. So,
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but I would love to gather around with a lot
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of other people who have this type of knowledge and
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together we can gather the people that we need in
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order to really evaluate the company, because the things that
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you're really looking for. My biggest thing is, is this
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a company that is really solving a big problem? Way
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too often I hear companies talk about their solution and
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that their solution is so great, and wait until I
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tell you all about them and tell you every single
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thing about what I just built. But if I don't really,
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as an investor, understand the problem that they're solving, I
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don't know the people will buy their solution. So you know,
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that's a big part of it too. And then, of course,
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like you said, the team, the documents, you know, you
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get into all that. But really, some of the high
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level things that entrepreneurs could kind of hook an investor
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with at least to get another conversation or at least
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have them take a look at the opportunity is to
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really start to think about, Hey, what is it that
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the problem is and who is it that can actually
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solve the problem.
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So I always talk to on panels and everything. I say,
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there's a difference between the horse and the jockey, all right,
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the horse being the business, the jockey being the founder.
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The founder can't ride the horse, you still have a
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broken business. When you think about the horse and the jockey,
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which of these do you focus on more or do
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you focus on one or the other more?
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Well, I mean there's a big saying an angel world
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to your point, you know, you bet on the on
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the jockey, not the horse, because it is about the team.
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I think I would rather take like a really really
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stellar team with kind of a mediocre idea and bet
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on them as opposed to a mediocre team that has
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a really stellar idea because it's really really really really
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really hard to build a company, very hard, and you
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need to have that team that is balanced. So all
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too often, and this is something that we see in
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the tech world, especially where you'll have you know, a
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very technical founder comes up with a buddy who's another
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technical founder, and maybe a third buddy, and then they
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start a company. But they all have the same skill set.
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So they're all writing code and they're all making this
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incredible thing that's going to save the world or whatever
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it's going to do. But who's actually going to build
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the business, who's going to run the business, who's going
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to sell the product? All of those things you need
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that balance. So there has to be the executor, the
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operations person, the salesperson. So being able to really take
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a good look at the team and see who's doing
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what I think that's super important.
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That's awesome. All right, hang on, Marsia, we have to
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stop right there, but there's more to cover next time.
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On Startup Science, podcaster and author Marcia Dawwood shares the
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qualities she looks for when deciding whether to invest in
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a founder.
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I think one of the biggest things that I've seen
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has really made an entrepreneur successful is humility. And you
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don't see it very often, and it's a little bit
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of a balancing act because remember, entrepreneurs, they have to
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be visionaries. They have to be ready to go and
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just take it all the way to the end and
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they've got it right. But at the same time, if
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they're a little too overzealous, if they're a little bit
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too big for their breches, then you know, in a
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lot of cases, I don't see them succeed.
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This Startup Science podcast with Gregory Shepherd is brought to
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you by startupscience dot Io. Founders can log on to
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startupscience dot io and use code Forbes to get free
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00:23:12.960 --> 00:23:16.720
access to connect and find out more about Greg go
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00:23:16.799 --> 00:23:21.599
to Gregory sheepherd dot com. The Startup Science Podcast is
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00:23:21.640 --> 00:23:23.640
a production of Forbes Books.
