MT19 | Alex Dwek On Getting Started With Angel Investing

Discussion Topics: Alex Dwek on Getting Started with Angel Investing

• Angel investing – how it started
• What’s the inside connection you need to get started?
• How do you identify companies in which to invest?
• What are some ways people could increase their odds of success?
• Tips for protecting from the risk of losing money

Transcript: Alex Dwek on Getting Started with Angel Investing

Hi, everyone, welcome to another episode of MoneyTok, where we help make personal finance and investing simple and accessible through both my own experience. I’ve been doing this for about 20 years now. This show is about money and wealth creation. And we talk about so many ways of making money, bought retirement planning about stocks, bonds, gold, real estate, crypto, and so many kinds of things.

So Alex, thanks so much for joining me today. Would you like to introduce yourself and maybe describe your experience with angel investing?

Hello, I’m currently the chief business officer of Nas Academy, which is an online education platform for the creative economy. I spent the last four or so years working in tech. And about a year and a half ago, I started my investor journey. I started during the pandemic and since then, I’ve invested in close to 10 companies, in industries and problems that I specifically care about or know about or feel that there’s a problem that needs solving. As you mentioned, at Nas Academy, my current job, we just went through an $11M, Series A fundraising with 15+ angel investors.

$11 million dollars. Not exactly pocket change is it? Congratulations on the fundraiser and we really look forward to your rocketship growth! So how is it that you got into angel investing? It’s not exactly the first thing you think about when figuring out ways to invest your money.

The first thing that drew me into this was parallel with the idea of someone who is starting and building a company and taking a bet on them to be successful and achieve that potential. The second part was that people are building really exciting/game-changing things, specifically in Southeast Asia and Singapore and this part of the world. I was very fascinated with the idea of investing in a few companies now, regardless of whether that’s successful and learning a lot about the whole investing process. That’s how my whole journey started.

I like that you didn’t say anything at all about making money, haha, but I suppose that is a basic expectation. The other reasons you mentioned are pretty interesting, actually. And I’m sure a lot of people might view these additional elements as good reasons to consider angel investing along with other ways they might be deploying their savings.

But here’s the catch, right? Startups don’t exactly advertise their fundraises in the newspaper. So do you have to be a member of some secret club? What’s the handshake? Show me, so I can get in as well and hang out with all the cool angel investors like yourself. Or what’s the inside connection you need to get started?

People think that you need to be part of this exclusive network with people who are investing, fundraising, and being a part of a startup community. My experience is that I started looking for the people who are working in the industry that I was interested in investing in on Linkedin, the crowdfunding platforms (but not like Kickstarters, to clarify), and talking to my network. Once I saw a brand that I really loved and that reside in my city, so, I contacted them, offered some advice, and see if they are interested in getting some funding. The other thing I did was I offered some advice from my previous experience to the people who are going to invest in the same industry and I got to learn what others are doing and how they are doing and more importantly, co-invest.

Oh, so there’s basically no secret club? I must admit I’m a bit disappointed.

Well to be honest actually I did know there are angel investing groups in many countries. For example, there’s Angel Central in Singapore, Mumbai Angels, and The Indus Entrepreneurs in India. Chances are your university or company alumni network might also have a group focused on making angel investments. So if you are definitely interested, there’s almost certainly a way to find and invest in startups.

But that’s only part of the problem. The bigger question is how to find a good investment. How do you identify companies in which to invest?

You can never be sure that what you put money into at an early stage will end up being successful. So you have to be prepared for a bad scenario. However, from my experience, there are a few checks that I always do to identify companies or to make a decision on whether or not to invest. The very first and simple thing is that I do not invest in anything that I don’t understand or wouldn’t use. The second principle is that showing interest in opportunities more widely doesn’t mean that you have to invest.

I try to meet with founders to learn more about the company but as you do so more often, the opportunity to invest also gets higher. If you’re thinking about investing in a specific company, I encourage you to speak to a number of people to see what alternatives are there, and what other companies are doing the same thing. The last thing that would be the same for a lot of people is to always stay curious and meet new founders and meet new companies. You never know where it will lead. One really important thing for our listeners is not to be scared to say no. Otherwise, you will regret it.

I like the first point you made about understanding the product. Sure, there’s the risk you pass on something great because you’re just filtering based on your own knowledge but that’s ok if you are able to ultimately make money. Anyway, there is no way you’d have enough to invest meaningfully in everything so why not focus on what you know?

And, since the purpose is to ultimately make money, what are some ways you think people could increase their odds of success?

At an early stage angel investors, which are often the first investors in a company, it can be too early to tell whether this company will long-term be successful. However, what you can know is whether or not you believe in the founding team. The reason why that’s important is because many companies from the RD stage to success, pivot and change their product multiple times. So, what you’re looking at in the debt may not be what ultimately the product becomes.

Another piece of advice is to try and avoid the hype of the market (Like Crypto and NFT market in 2021) and to focus on why you believe that specific individual, company, founder, or product could be successful in that growing market. Don’t let FOMO (Fear of missing out) take the risk of putting money in a company that doesn’t go anywhere in the hype market.

The last quick piece of advice is if you have decided, to move fast. When the company gets the lead investor, suddenly everyone wants to invest and at that time, it becomes difficult to join the round. Sounds like the key point you’re making is to bet on the founders, not so much the idea. And if you truly believe in the people, you should commit early so they know you’re firmly behind them.

Now so far we have talked about how to find opportunities that have higher chances of being a success. But are there also things you should watch out for, to ensure you are actually able to join in an investment or have some protection from the risk of losing money?

You will be sent some documents from the founder’s lawyer to sign. I advise you to read all the small print. Some terms can be very founder friendly. But as an angel focus on what matters to you (i.e. economic substance rather than control). The second part is If you’re going to invest, then you should try and help the company. And I think this is something that founders I’ve spoken to really appreciate, and see the value of your investment and you will get to understand what’s happening to your money.

The final part is that if you want to reinvest in the next rounds, it’s best to keep in touch with the founders, introduce them to different stakeholders they’ll find helpful, and stay in the loop because often rounds get oversubscribed. Keep in touch, so, you are top of mind. I think these three things will get you more involved and also guarantee that you have a chance of being a success.

Wow, that’s some eye-opening stuff. Seems like in today’s market, the odds are loaded in favour of founders, especially the good ones. So you have to actually make an effort to ensure they accommodate your money, rather than assume they will be grateful for it. I guess it makes sense, given that there’s a lot of money around nowadays but relatively few founders you could bet on.

So Alex, just summarizing the key points for our listeners.

• They could get into angel investing in a variety of ways including crowdfunding platforms or angel networks or even friends and connections
• While the intent is obviously financial growth, there are other good reasons like learning an industry or playing a small part in building products people love.
• The main bet in angel investing is on the founder so make sure you bet on people on whom you have confidence and ideally in spaces you understand.
• Just because you have money doesn’t mean the founder will take it. If they are any good, there’s plenty of money chasing them and so you need to make an effort to ensure you are at the top of the list.

This is all great information and I’m sure at least a few people will walk away from this session with the knowledge they need to get started.

Alex, thanks a lot for joining us today. Really appreciate your time.

And to our listeners, thanks so much for tuning in. We were Alex and Amit with MoneyTok. See you next time.

Our Guest: Alex Dwek

Alex Dwek, who’s Chief Business Officer of Nas Academy, is someone with a unique viewpoint on the topic because he’s not only an angel investor in several startups, he’s actually been through the fund-raising process himself at the leadership level of a Nas Academy, a happening new startup based in Singapore.