2022 Investment Letter
This is our 2nd annual letter and the conclusion of 3 years of angel investing. We wanted to continue to give transparency into our investment portfolio and our thought processes. As a reminder we are ‘operating executive’ who angel invest in our own names (to benefit from the SEIS and EIS schemes) and continue to be LPs in Outward VC’s FinTech focused fund [Thanks to Vauban for our first exit!].
Dealflow
It’s fair to say that deal-flow, like nearly anything else in life, be it parties, restaurants, bars, gigs, etc. is all about ‘access’. The ‘hottest’ deals are always over-subscribed and dominated by the ‘famous’ angels who have been doing this a lot longer than us or are part of the ex-founder clubs.
As we are ‘none of the above’ we’ve taken our own path to finding the best deal-flow and we do this through the following mechanisms:
Co-investors. As we have now made many investments, we have amassed quite a lot of co-investors, who we then reach out to, speak with and discuss investment philosophies and agree to exchange deal-flow with.
Networking. It’s amazing where you can find fellow investors or scouts who can pass you on deal-flow; industry events, parents at your kids school, colleagues (former or present) etc.. By being transparent with what we do, it’s become a topic of conversation that is often raised with us.
VCs. As our investments are now getting to Series A and attracting institutional investors, we are building relationships with VCs who ask us to send them similar deals in the future and in return they introduce us to investments they are making that need ‘value-add’ investors for guidance.
Inbound. Our airtable is now regularly attracting ‘cold’ pitches, with 133 submitted to date and countless more through LinkedIn messages or direct emails. Note: please do always use airtable!
When we then speak to the founders, we explain our thought process but also where we can potentially add value for them. As such, we are confident our investment portfolio continues to be different to that of other angel investors.
Investment Philosophy
Our 3 basic core principles have not changed but we have added a new 4th one:
NEW - Is the problem in an area we understand, can evaluate and (potentially) and value to?
Is the problem described a real one that needs to be solved?
Is the solution being pitched a possible and likely solution to the problem?
Is the founding team capable of executing on the solution and do we think we can work harmoniously with them to help them?
Note: We obviously do granular due diligence to confirm all 3 principles too!
Over the past 3 years, we have learnt that it’s important to give more weight to the quality of the founding team. What time has shown us is that great founders can pivot, adapt and deliver an idea to success but rarely do weak founders execute well on even great ideas.
We continue to invest across verticals, though acknowledge many investors choose to specialise. For now, we continue to believe that a good investment is one regardless of vertical and that having cross-vertical exposure is a good thing from a risk balance perspective.
Performance
Even after 3 years, it is difficult to provide any empirical evidence to know if we are doing well or even taking adopting the right strategy. To date we have not had any investments fold or any of them exit. Again, we don’t know if this is good or bad, I believe some investors prefer a “blow-up or rocket ship” performance from their investment portfolio.
A number have had multiple new funding rounds, (Howbout has had 2 since we first invested) all at higher valuations, but I would say that it is too early to judge any as guaranteed successes yet. As most people experienced in 2022, we have had a few hairy moments, with a few founders being down to their last few days of runway but they have each time, managed to ‘pull it out of the bag’ and achieve funding and always at a higher (post-money) valuation.
Our value-add
Our differentiator is the value we can add in terms of direct and relevant operating experience at the biggest start-ups and technology firms in the world, at the executive level. This also means that due to our network we can construct an angel team, who together have all the applicable skills that will super charge the investments we make. These ‘consortium’ deals are very fun to assemble, and the founding teams seems to be very appreciative of the people we bring in with us.
Lastly, we must acknowledge that there is a clear pattern in that the ‘best’ performing investments seem to require the least advice and the ideal has to be, that the founders / start-ups outgrow and leave us behind and we become the dumb money. I.e., we put ego aside. There is nothing better than only hearing from the founders when they need something specific or getting the monthly update showing their (forward) progress.
2022 Investments
Though we had far more deal-flow in 2022 compared to the previous year, we ended up investing less. In 2022 we did 5 investments into new start-ups (vs 8 in 2021) and 2 ‘follow-on’s (vs 1 in 2021). We think this was due to a few factors, including incredibly inflated valuations in the first half of the year, a noticeable drop in the quality of start-ups pitched (ideas not thought out enough / not enough work put in, weaker teams etc) and in the second half of the year when valuation expectations dropped, more caution from us in terms of wanting to be sure the founders would be able to raise the next round.
Bunsen
As a huge and long-time fan of B2B marketplaces, it was great to start off 2022 with investing into Bunsen, which is in the school supplies space and was the first investment which Amir scouted himself directly (rather than being inbound or from advisors).
Bunsen itself is a rare breed solo founded business, so it’s good that founder Alex is one of the most impressive human beings you will meet. The space itself is clearly nascent in terms of disruption and as such, we had no hesitation in investing. Marketplaces are always difficult businesses to scale and for anyone looking to do so, we always advise starting with reading up on everything marketplaces and breadcrumb.vc. We look forward to seeing how Bunsen develops post-launch..
Yurtle
Our investment in Yurtle is our first foray into InsureTech and employee benefits. It was an introduction from Outward, who always send us interesting deal flow which is usually too early for them. Yurtle is the first UK based insurance offering supporting family / informal carers, through both a policy that pays for back up care in emergencies and a network of resources that helps family carers thrive at home and at work.
With our ever-aging population, this is rapidly becoming a mainstream area of concern and Yurtle offers employers a way to protect their employees and themselves from unnecessary productivity drops and turnover. We’ve already seen Yurtle make great progress, signing their first client contract and attracting a lot of interesting from both high value angel and institutional investors.
Push that button (PTB)
We can’t really say too much about Push That Button as they are about to launch, and we don’t want to steal their thunder. What we will say, is that we invested at the end of Q3 2022 with some incredible co-investors including Ant & Dec, the founder/CEO M&C Saatchi Performance, the founder/CEO of deltaDNA (acquired by Unity), the co-founders of Aquila Insight (acquired by Dentsu) and also our AdTech advisor Fintan Gillispie. The are some more highly relevant (and related to the creator / celebrity world) investors who will be joining the next round shortly too.
Push That Button is a social widget that combines competitions with digital rewards (inc. voucher codes) to drive sales, increase ad engagement & capture unique first-party data amongst Millennials & Gen-Z. PTB has solved the regulatory issues of running competitions on social media, and enables Talent/Brands to run legally-compliant competitions across multiple social touch points. Set for launch Q4 2022, we are excited to this one evolve: 'See It. Push It. Win It'.
FROW
FROW is building the cultural marketplace for Gen Z, focusing initially on the vinyl record market. Their first feature, the shoppable livestream, has been adopted quickly by leading vinyl dealers, record stores and collectors. FROW believes in the "slow culture" where authenticity, spontaneity and engagement are compatible with technology. A great example was The Charlatans front man Tim Burgess doing a live stream / signing session of his latest EP on the app in December.
FROW approached us directly and as it was an area we had been exploring in general, we were instantly interested. We actually met up with one of the founders (Seb) while we were all on holiday in France and we ended up investing early Q4. We are very excited about the co-investors; Arnaud Massenet (Net-A-Porter co-founder), Sébastien Borget (The Sandbox co-founder), Francois Callens (Depop COO), Moody Jones (Empire Records) and one that is under NDA!
HomeFans
Homefans, a very recent investment, is a marketplace where sport fans can connect, plan and book sports trips and experiences hosted by fully vetted locals. We were introduced to them by Sameer Singh who said he was investing on behalf of the Atomico seed fund and the round was announced at the end of this year. We have very high hopes for HomeFans based on their engagement stats and are hopeful they will be able to execute on their potential without weakening them.
Follow-ons.
We also did 2 follow-ons in 2022, which we think are going to become a more common occurrence as our portfolio grows, so this is a consideration we need to take into account when managing our investing pot.
Our first follow-on, was in our 1st ever angel investment Howbout, our 2nd follow-on and 3rd investment into them overall. They are accelerating now with extraordinary engagement stats, coupled with incredible (organic) growth. They are now in the top 10 or 20 in the app store in over a dozen countries without ever marketing outside the UK!
Our 2nd follow-on in 2022 was in Aura Fertility, who we first invested in, in 2021. We are incredibly proud of what the team have achieved, with their first clinics signed up and rapidly growing MRR. Partnering with fertility clinics to improve the IVF experience and patient support, Aura have tapped into an underserved market and are set for rapid scale. We are very happy in this B2B Enterprise SaaS investment in FemTech.
PS
Every year we use AI to create a new image for our investment letter. Last year we used ‘Wombo Dream’ app. For 2022 it seemed only appopriate to use what everyone is talking about: Dall-E. We originally asked Dall-E to create “an oil painting of Amir and Claire making investment decisions”. Every picture had Amir with a full head of hair, so we then tried a ‘bald Amir’ and that generated an old man, so we ended up with the input: “an oil painting of a young bald Amir and Claire making investment decisions”!
