San Diego Angel Conference Opens Access to Local Capital

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Cox Business and welcome back to the Tacos and Tech Podcast. I'm your host Neil Bloom. We are doing the special Corona Economy, a version of the podcast all virtual. I've got a special guest co host with me, Amy Chang, entrepreneur, investor. Amy, thanks for being here.

Thanks for having Me. This is so much fun.

We are going to have a really special show. We got a. This is the Investor show, the angel Investor show. We got six angel investors here and we are going to get to talk about the San Diego Angel Conference. So, Misty, Amy Benton, Jason, I think you'll be talking a little bit. Thanks all for joining here. Welcome.

Thank you for having us.

Awesome to be here.

Great to be here.

Why don't we dive right into it? One, Misty, how are you doing in these new virtual world times? All virtual all the time?

Well, I've realized that there's a couple of great things that happen. There's no more traffic to deal with and I can just schedule back to back meetings and be only half dressed. So I'm just looking at the upside. I try and take all my afternoon meetings in the yard and get a little sunshine and I have freckles that I haven't seen since I was a kid. So in some ways this has been great. And we have seen some fantastic companies putting things together to try and take advantage of this opportunity.

That's really great. Miss, do you want to give us a little bit of your background, a quick intro?

Sure. I've worked all over the west coast and have been an angel investor for the last 15 years or so, a little longer than that. I invest with my family primarily and I fell in love with the notion of angel investing as a way for a community to take back control of its economic development. And so growing startups and seeing local economies and local communities jump in and support startups, that's been a big part of what I've been doing the last 15 years.

Awesome. We're really happy to have you in San Diego building out a whole new ecosystem with us. Benton, you want to give us a little bit of background of yourself?

Sure. First, great to see Anil and Amy and shout out to the school of rap and the first rap song to ever contain the words La Jolla Shores. It's awesome to be part of this. Yeah. So I'm the fund manager for the San Diego Angel Conference this year. I'm a startup consultant at the brink and an angel investor with Techcoast Angels. My own fund, Seadragon Capital, and soon to be announced the Torero. Before I joined the gig economy with all these jobs, I just had one job. I was an entrepreneur until private equity put the checkbook to my head and made me work for them for a little while. So I threw myself at retirement, missed badly for about a week and landed as an angel investor that's awesome.

We're happy to have you and fun to be part with you in techos angels as well too. So thanks. Amy Duncan, you want to give us a little bit of your background?

Sure.

So I'm the fund manager for SDAC3. That's 2021 following Benton and I have a life science marketing consultancy here in San Diego. So I've been doing that for the last 13 years. I work with biotech companies, helping them with marketing and business strategy. Before that I was at Life Technologies for 10 years and I came to San Diego and I worked at the Bench over at Scripps and I saw all of the biotech companies that are formed and growing and I just have always been interested in this innovation economy.

Awesome. We're happy to have you. And Jason, you want to give us a little bit of your background too?

Sure. So I'm a co fund manager both on the past two years and continuing forward for SDAC 3. I've also like Amy, been in the life science. I spent my entire career in strategy, marketing, biz dev type of roles at diagnostic drug makers, genomics companies. And then about two years ago, kind of started looking around a little bit, saw an article in the San Diego Business Journal about, hey, there's this thing called the San Diego Angel Conference. Why don't you come and learn about being an angel? And since they're kind of dived in, join TCA as well and then also at the NextCube Digital Health Accelerator.

Awesome. Well, we're hearing so much about the angel conference fund managers. Misty, why don't you take us through what is the standard angel conference and how did it come to be sure.

So an angel conference is an actual angel investing fund that is based on an event. So what happens is you create the fund and you say a group of investors are going to get together, they're going to pool their money and they're going to make, they're going to make their investment decision on a specific day with a specific group of companies that they're going to take from start to finish. So in many other ways it's just like other angel funds that you see, but for ours it's a six month cycle that culminates with, with the, with the main event in March. So the angel conference kind of came to be. We started looking at this back in 2018 when we opened the Brink SBDC at University of San Diego and realized there's just not, there wasn't enough angel investing going on in San Diego to support the number of really Good deals that we were seeing and we were looking for more opportunities. Looking for, you know that people were telling me, oh, we funded three deals last year and we saw 400 deals, or we funded eight deals out of the 1100 that we looked at. And I just thought there's gotta be a better way for us to fund more of the good deals that we're seeing in San Diego. So that was kind of what started, kicked off the idea of the angel conference.

Just question a little bit on the decision to create it. Create the conference. You say you weren't seeing enough angel investments. Who is we? Is that the sbdc, the Small Business Development center that says we would like to see more companies created and that's going to take more angel funding or what's the process around that?

Right. So I guess when I say we were looking at it internally from the group of consultants that work at the Brink SBDC. So the Brink SBDC now serves just over 800 companies in the San Diego metro area primarily. And for the deals that we were seeing and the ones that we were seeing get funded, we had a lot of companies that were fundable companies but weren't competitive in the San Diego market because really it's an investors market. The investors could afford to be very, very choosy. And there wasn't a really great. TCA has done an amazing and wonderful job working with investors that are willing to put money in at a higher level. There was no entry place where you could spend a few thousand dol and getting a bunch of exposure and education and be able to get into a deal. So that's sort of the magic of what an angel conference does. For a few thousand dollars, an accredited investor purchases a unit, then works with a group of investors to look at deals over a period of time in a pretty structured way. And they see companies in a lot of different industries, they see companies at a lot of different stages and they have to make decisions about, you know, which ones they let go and which ones they move forward. And we do that about four times during the cycle before we get down to the six. Once we get down to the six, we'll spend five or six weeks in due diligence and negotiating the terms of the deals with each of those six. So that when we arrive at the day of the angel conference, nobody knows who's going to win. And we hear the pitches for the last time and the investors go off and, you know, sequester themselves and they make, they make the investment decision that day and they can invest in the way our fund is structured, they can invest in one company or they can invest in up to six companies that participate in the. In the event that day. So SDAC1. SDAC is our. Our nickname for our program. San Diego Angel Conference 1 invested $295,000 in the winter. That was Aqua Cycle. And the next week, that same group of investors came back and did two additional deals. So a total of three companies for year one. Year two, we structured the documents a little bit differently, so we were able to fund three companies directly out of the fund, and we moved about the same amount of money. So at the end of the day, it was a substantial amount of money and people were able to get into investing in three companies for $6,000.

That's really awesome, Misty. Thanks for explaining to us the process and everything. Would be interesting to know. I think, Benton, you're the fund manager. Maybe you can talk a little bit about what's like over the last two years, how much capital ended up getting raised, how many angels were activated. I know Misty touched on how many companies were invested in, but do you have anything to add to that?

Of course. Thanks, Amy. Yeah. It was a remarkable startup story from Misty's brilliant, daring idea. And over the last two years, we raised over a million dollars in two funds. We invested in six companies, and out of that, we reviewed and met with 198 startups and companies from diverse industries. We ironically, year over year, we invested in a clean tech and ag tech and a biotech company both years. So we have six companies from diverse industries, which is a great starter portfolio for new angels. Outside of the million dollars from the fund, those companies that came through SDAC raised $17 million in funding over the last 12 months. So we like to say we activated the ecosystem at a lower level before companies get to venture capital and Tech Coast Angels and the normal investment rounds. In that time, we activated new angel investors, investors who'd never done any angel investing. 32 in the first year and 52 in the second year. 18 were returning angels. We had 66 new angels in 12 months join the ecosystem. A lot of them are our friends at TCA and other funds. And it's just been amazing. These 66 angels have invested over 2.3 million in 50 deals over the last 12 months. 13 months.

Wow, that's really awesome, Benton. It's very inspirational as well. Whenever people are thinking about being an angel investor, I always refer them either to the San Diego Angel Conference because I know you guys have a great program for teaching and so you can invest, like Misty said, you can invest a little bit of money and then do due diligence alongside other people that are accustomed to it. I always tell people Techcoast Angels is another great vehicle because you can always put some money into the TCA fund and buy a unit and then watch other folks who have been angel investing for a long time do due diligence and invest alongside them. But that number of activations is really quite fantastic. And I didn't know that, so thanks for sharing that. That I'm curious, you talked a little bit about the diversity of the companies that we're being invested in and I'm just curious, do you feel like the SD angel conference attracted any companies that you normally wouldn't have seen come through Techcoast Angels? Is it a different set of founders or what are some comparisons and contrasts that you guys might have seen?

Yeah, it's between the two years, 198 startups ranging from every industry in the world. And a lot of the companies we saw came out of the brink so they were geared towards innovation and some of them were post revenue and 5 to $10 million cap. And we invested alongside Tech Coast Angels and other angel groups and VC and we saw a diverse number of companies from different indust and also from the investors. We encourage diversity. All accredited investors are welcome. It's educational, it's inclusive and we have a lot of impact investors in our group, USD Changemakers and our investments are really industry agnostic. We look for great startup companies that will be great investments, whether they're at a low level, angel investment, Tech Coast Angels, venture capital, private equity. A great company is a great company and we train our angels to grow and we also train our entrepreneurs. We have an entrepreneur track in the fall where we spend three months getting entrepreneurs comfortable with presenting, getting them angel pitch ready. So it's a six month process from the first day we start talking to the entrepreneurs to the day that we write checks on the day of the conference. And we have companies representing every industry in San Diego. It's pretty awesome. And the one thing about diversity in our, in our investment group, I'll say is women make up about 40% of our group, which is double the average in America. So we'd love that to be 50, 50 at least. But we're making great strides.

That's incredible. A lot of obviously a ton of pre work, right? You guys are working on this for months before and then boom, pandemic happens. What was that like then going through the huge pivot to this conference, which is the culmination of so much work.

Well, it was a tremendous opportunity to practice what we teach, and that is pivot and lean into chaos. And I'm wearing my shirt. That is my mantra that I tell every entrepreneur, embrace the chaos. And, and that's what we did. First of all, we had to decide were we going to cancel it, postpone the conference. And we didn't take very long to say no. We thought, innovative startups need us, we carry each other. We've already gotten down to six finalists. We're ready to go. And we pivoted. We had nine days and at least 20 iterations, I think Misty, to pivot from physical to digital. And we did it a lot faster than the music industry, I'd say. And we, we, we ended up doing a lot of it in the can, recorded. Misty did the entire thing live without a net so we could have social distancing. But we, we made the, the switch. We were one of the first conferences to not Cancel on the 19th when Governor Newsom said they were pulling the plug on all gatherings. We scrambled into a different mode and hired a production company and went online and managed to pull it off. It was nerve wracking, but we rolled up our sleeves and the show went on. And out of it came, I think, a nice respite for anyone tuning in on YouTube on that Saturday. And we were able to fund three companies over a half million dollars who are charging ahead instead of going behind. And the one stat that I will, that I'm proudest of from that whole pivot is 100% of our investors stayed with us. They did not ask for their money back. They didn't want to delay funding. We all agreed, 53 investors, 100% agreed this was the right thing to do. And that just is a snapshot into the mind of angels. Right?

That's pretty incredible. I have just a follow up question on the diversity piece. I think it's amazing that you're able to achieve a diverse nature of companies. And I'm just curious, number one, was that intentional? And so, for example, to achieve that. So was it happenstance or was it because you were purposely trying to recruit founders from diverse parts of our community, or was it more that you tried to take out any unconscious bias that might have been a part of either the selection committee or the decision or investment committee? And so I'm just curious what your approach was on that.

As I said, it's very inclusive and open minded. I'll let Misty talk to that because a Lot of it comes from the brink in the way we approach entrepreneurship to begin with.

Yeah. And I think overarching. We start and finish with the same goal. And the goal is to get to yes. Right. So we feel like there's easy ways to be able to look at any single deal and get to know, like, you can find fault with anything. But when you start out with the premise that your goal is to get to yes, you look for risks and you figure out how to mitigate them. You see if the company knows how to do it. You see if you can develop the partners and you embrace everybody. Resource that you've got, which includes diversity. At the end of SDAC 1, we put together a women's investment group, and that group has continued to meet outside of our regular San Diego angel conference activities for the last year. And so when it came time to launch the second fund, we had a group of women that had been working together and. And not just women, but really diverse women. We have really pretty dramatic diversity in our women investors group. And we had all but one investor from the women's group come back for year two. So we thought we were going to be at 100%. We're really, really close. It's like 93% return rate of women year over year. And I'd give a lot of that credit to the women investors group. Now, that women investors group. We sat down when we started and we said, okay, Sylvia Ma, who, Dr. Sylvia Ma, who was the fund manager for SDAC1, she certainly has a heart for diversity and really, really pushed for that women's group. But when we sat down to do it, I said, I don't want to hear any complaining. I don't want to hear how hard it was for anybody to get where they're at. I don't want to relive any history. I want to figure out how we go forward. And so when I opened the conversation up and said, what topics do we want to tackle this year? They said, we want to figure out how to judge contests, and we want to figure out how to connect with each other around events. We want to figure out how to become speakers in the space. Right. Like, so that's a really different approach than a lot of these other things that I've seen over time. And I think that that group of women became. Developed a really high degree of trust and found ways to work together. That that had an overall impact on our numbers for SDAC2. And again, that group meets on Tuesday. If anybody's interested, they can reach out. Neil can figure out how to help us get that information out to people. But that group continues to meet and I think it will have an impact on the San Diego Angel Conference 3.

That's pretty great. Really, really cool to see that follow through besides the local. And then obviously now with going to kind of this virtual this year, are you seeing a bigger reach outside of just the San Diego community which is now interested in investing in San Diego companies?

Benton yes, we are. The upshot of this pivot during crisis is we managed to fund the companies we're investing in first, but then our reach became expanded. On the day of, we had 700 registered attendees on YouTube and that was double of we had anticipated. So that was an immediate big reach success. And we had people from investors come in from San Diego, of course, and then San Francisco and Boston up to Alaska and Nevada and then we had YouTubers who tuned in and stayed the entire time. So it was engaging. And we had people digitally engaged and would even stay afterwards for breakout sessions so that we could have some semblance of networking. And it's a model that Misty and I have talked to a number of angel groups now who are trying to emulate that. And Misty and I were up in Alaska working with their group and she's working with Las Vegas as well. So I think we proved that the model would work. Maybe a little clunky out the gate because we didn't have any time to refine it, but we've shown that people outside of San Diego are very interested in what we're doing, want to be involved, not just as investors, but other entrepreneurs who are interested in participating next year.

Benton it sounded like you had a pretty good exit and could have chosen your own path to investing, right? Finding your own company. There's a few other groups. What was the initial actual attraction to join the Angel Conference?

Well, Misty lured me in with the promise of free tacos. That was pretty much it. I was back at USD on campus. I just finished working for private equity and sold my company and hadn't slept in a couple of years. My idea was to return to USD and give back. And I really was fond of what was going on at the business school and the Brink and wanted to boost the San Diego scene through USD. So it was just really good timing and then, and I thought it would be for a couple of months, put my money in the kitty and have some fun. And I made some lifelong friends. And now it's just become so rewarding that I couldn't imagine not being a full Time, professional investor.

Pretty awesome. We're lucky to have you. Amy Duncan, what about you? What drew you in and did you join this year or last year, which is your first year? Part of it.

I joined at the end of SDAC 1 and then I went through the all of SDAC 2, which just ended. And really what attracted me was, as Benton mentioned, the entrepreneur track, it mirrors the. I'm sorry, the investor track, it mirrors the entrepreneur track. So we have the boot camp kind of training for the entrepreneurs, but we also do that with the investors. So it's like a little accelerator for the angel investors. There's nothing else like it. You learn, you do and you invest. By that, I mean, you take a deep dive and you really learn what angel investing is and then you actually go through the deal flow. As Benton said, there's this very diverse deal flow that comes through. It's not just life science or tech or consumer products. It's all of it. And all the other investors are from just a diverse background. So you get to interact with them, you get to do the due diligence. It's roll up your sleeves, it's hands on. And in the end you come out with an investment or maybe even a mini portfolio because we invested in more than just the one winning company. So it's definitely a true end to end program.

So speaking to kind of that program of where it sits in the community, right. There's kind of the flow you said for the entrepreneurs. Right. They've got kind of their life cycle where ideation you're curious, going to committed to crushing it. Hopefully as your company grows, the entrepreneur, there's the same flow for angel investors, right, where you may start investing or you may want to one day, but you never actually know how to get there. Can you speak, Amy Duncan, a little bit about where you think SDAC kind of sits within the community specifically for the ecosystem, for building out more angel investors in the community.

Yeah.

So because you go through this program, once you come out, you're ready and primed to join groups like tca. And we have lots of, as we mentioned, we have lots of members in SDAC that are also members of tca. We also have like Jason, he's a mentor. You can do mentorships, you can mentor at Evo, Nexus or nextcube. Lots of our angel investors serve as mentors and as Misty said, they get invited to judge pitch competitions and they can even start their own fund. So it really is like a seed that lets you expand into the ecosystem on any one of those facets.

That's pretty great. I'm just curious, from a trend that you saw from. So you joined kind of, let's say, about a year ago. You got to know, I'm guessing, some of last year's angel investors. Any specific trends you're seeing, what they're doing a year later?

Yep. So a lot of us went on to join tca. I'm going to join tca, judging the competition, speaking at events, being engaged with Startup San Diego. So because we have such an ecosystem of entrepreneurship and innovation and there's new kind of programs starting all the time, we're really seeing a lot of the angel investors from SDEC just start to join all these other programs.

So what's next? This was a big year. You learned how to pivot. Right now I've done an in person, done an online, you know, who knows what's going to get thrown at us a year from now. What do you think the angel conference does from here on out?

Yeah. So SDAC 3, it's in March 2021, and we had such a great response with the online program. We want to have it in person as well. We're able to do so and also have this online component where we can expand our reach like we did this year. So we want to bring it together and get the both. The best of both worlds. Some other things that we have in mind for next year or in the future is to start a fund manager mastery program. There's really nothing out there to train you to be a fund manager in any formal way. So Misty's been thinking about how he might start putting a training program together like that.

That's awesome. I love how you guys are looking at the ecosystem holistically, saying, what are the holes? What do we need to fill? And iterating every year. And not just iterating, but adding programs to that. So kudos to all of you. But something we're also all missing is our tacos in person. I know I am. And so for the first time with Taco Tuesday, recently hitting Cinco de Mayo through a big home Cinco de Teco party for myself using Seaside Market crack. You know, the best tri tip I could find around. What about you guys? You guys have some favorite tacos, whether that you're making at home right now or as soon as we get out back to life as normal, you're gonna go, hit it. Amy, what about you?

So I have to go for Roberto's Del Mar. It's right here at Torrey Pines Beach. And they are open. You can get a carnitas taco, fish taco. They got them all. Just walk up to the window.

Jason, what about you? You've been a little quiet. You got a favorite taco spot? I know you've been thinking about this answer the whole episode.

This is the one that always listening to your podcast made me nervous because on one hand, the last few years I've tried to be keto, which is not very connected to tacos, but I know back at least in college, so I went to ucsd, both undergrad and grad. The Roberto's down on Miramar was always the spot I would end it up at.

That's awesome, Benton, how about you? Favorite taco spot?

Oh, I could fill a whole show with this. I'll pick one Cantina Mayahuel in Normal Heights if you haven't been there. They have Yucatan seafood stew with 700 ingredients and mole one day of the week and they spend all day making it. Homemade tortillas and the best margaritas in town with tequila made by the owner in Mexico.

Whoa. Okay. Awesome and Misty pairing out the favorite.

Yeah. So I got so excited about this question that we had tacos four nights in a row last week and I learned to make my own tortillas. I got that. Enthusiastic about it. I suppose we make our own fun when we're all in this lockdown situation, but I'm going to go with Libertad in Hillcrest, which has a speakeasy in the back. So you order your tahyas in the front and then you go through the freezer door into the most incredible speakeasy in the back.

Oh, that's cool. Miss that place, especially the speakeasy. That one's a little harder to do social distancing, but I know we can get still, we can get tacos delivered and we can send gift cards to people that we know are missing tacos too. Shout out to a few local businesses like Bitmo, that are offering a way to do gift cards to local restaurants. Guys, thanks so much for being on. Thanks for what you're doing, for building this ecosystem up, for creating the next version of our funders while helping our founders. And I really hope that we all get to get together soon and have some tacos together. So thanks everyone for joining. Thank you, thank you.

Thank you, guys. We'll see you soon.

Thanks for joining us on the Tacos and Tech podcast with Neil Bloom. Thanks again to Cockroach Business for helping make this possible by expanding the reach of the San Diego tech ecosystem. Big shout out to School of Rap for our rad intro music. And thanks as well to Nest Podcast Network where we are recording live inside their studio at Nest Co working in Bankers Hill. You can find Neil Bloom on Twitter ibloom as well as Fresh brewed Tech and Tacos and Tech Pod on Twitter too.

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