Ep #84: Why Most Founders Get Their Angel Round Wrong. With Vadim Gordin.

The thing that I want founders to take away from this is that just set a realistic expectation of this is, this is not going to be a, I do this for 2 weeks and all of a sudden I'm ready to get back to work. You really have to be, like you said, systematic, methodical, and know that it's good. It might take you 300 to 500 people to get to, okay, now I have $500K in the bank, I have $300K in the bank, I have $750K in the bank to go do my work.

Welcome to Startups Decoded. The show that gets real about what it takes to build a successful startup. I'm Andy Walsh, 2x exited founder, advisor, and your host. Each week I talk with great founders and top investors. We unpack the plays that drive real traction. If you're building something bold, this is where you'll get earned insights to scale with confidence. Let's keep growing together. Hit subscribe and share with your community. It would mean the world to me. Hello and welcome back to Startups Decoded. My name is Andy Walsh. For founders who are getting started, getting money in is the ultimate challenge to get momentum. And it could be family and friends, it could be a more formal angel round, but there's so many things that founders do repeatedly that they get wrong. So today we're gonna double down and really unpack it. And I've got friend and colleague Vadim Gordon here. Vadim, welcome to the show.

Thanks, Andy. Pleasure to be here.

I love the way that you think, and I say that in a sense of you have this perpetual curiosity in that you never rest on old information. It's something that I respect in humans, period, in whatever they do. And today we're going to talk a little bit about what you've done in your own career, but also more recently, a deep dive that you did in Claude, which I'll let you share later. But ultimately the insights that you've been able to ascertain, validating a lot of your experience and instincts. things that you've seen and observed over a period of time. And you've had more time in cap tables than I've had Sunday dinners is my assumption. And I can't wait to get into that. So to kick off, I'd love to get started with a little bit about you and just some of the things that you've worked on to let people understand a bit more about your expertise.

Sure, sure. So where this dataset and this post comes from is about 6 years ago, I was asked to lead initially a medical device venture studio at New York University, and then eventually was promoted to lead multiple accelerators at New York University. And so between my venture partner and I, we supported 300 teams who raised $2.7 billion and had 43 exits. And that's everything from SaaS to consumer tech to thin films for solar panels. And what I needed for that, or what I had for that, was a rubric for how I would coach founders to go out and raise their first dollars, their angel round, friends and family round, Pre-seed checks from VCs were relevant. And I had a really strong conversion rate of founders in my accelerators to closed rounds. So our pre-seed to seed accelerator, my last cohort, I had an 80% follow-on funding rate. And for that, I had just conversion rates of that. I knew if about 1/3 of the time, the first conversations turned into second conversations with, uh, with investors. And one-third of those turned into checks. That was the point at which I felt comfortable now no longer tinkering with a founder's pitch, no longer tinkering with the deck, with investor targeting, and just saying, look, this is strong. All you got to do is put more angels into the top of the funnel that are qualified and you'll close inside of 2, 3 months. And that happened multiple times. But then when I resigned from NYU to go start a fund, I needed a rubric that would be able to teach founders outside of New York City and outside of New York University how to work. And so I convened a custom dataset. So I had a bunch of Claude agents go out and tabulate first-person fundraising accounts. So this is somebody's Substack post, LinkedIn post, et cetera, where they talk about, here's what it took to raise my angel round. And I was trying to just collect data to instrument a funnel for a bunch of strangers that have raised over the past 15 years. And the cool thing is that in about 30% of the instances I needed, I needed additional data that their blogs didn't post. And so I would just reach out to them on LinkedIn and be like, hey, Andy, it's awesome that you wrote about how you raised a seed round for AngelTech in 2019. Could you look at your CRM and tell me how many conversations you had? And so what's wild is about 30% of the founders I reached out to actually filled the missing rows in my dataset. So to my knowledge, this is a unique dataset of the actual effort it takes to raise a funding round. So like Carta, AngelList, DocSend, they have datasets that are measured to when the transactions occur. This actually instruments, hey, I'm a founder. How much work do I have to do? And what does that work look like in terms of, uh, shape and structure to go from, I've got some early traction in a prototype to I now have the fuel in the tank to do my work.

I love it because I've gone pretty deep in the AngelList data and I have another show called Angels Decoded, which I create with Sheryl Kellen from Play Money. And she leans heavily into, his name's Abe, who's the data scientist at AngelList, super smart guy. And they're looking, as you say, at everything post-close, right? So you can look at how many deals angels are looking at, what they investing, et cetera. But the steps to get to that point, there's a huge void in actually understanding the effort that founders go to. And if you're a first-time founder, doing that is probably one of the most ineffective things that you would do is my instinct as a founder, 'cause you are just spraying and praying ultimately, right? So what you've been able to do is glean data from third-party sources, mix it with real-life founders, and then also instincts and things that you're seeing. And that collection of information is super powerful.

Yeah. And that's, and that, that's what I want to create is that like folks like you and I that have operated in the startup angel pre-seed space for a long time, like we have this as learned knowledge and I wanted to, in this series of posts on my Substack, just give that to anyone who's willing to consume the information. And so there's, there's a free video for subscribers on how to build a deck, how to communicate your story. This, this is a free post that talks about what the actual angel funnel looks like and Those 2 things together should be sufficient to get most folks who are capable of raising to the point of raising. That no, my goal is that nobody who could have raised an angel round fails to do so if we give them adequate information.

I love it. I want to run through a sequence with you and I want to start, and whether you touched on this or not, it could just be anecdotal from your experience, but if you are in a startup, you've got an idea, and obviously now with the likes of Lovable building a prototype who's never been easier. But more often than not, founders are struggling with managing cash flow. And when I mean cash flow, I'm talking about personal life savings and whatever you are living on before you start making money and money in becomes bigger than money out, which is the ultimate goal, right? And in that first stage, if you are thinking about that first round of funding, have you seen any information around the decision-making process? I love this in the sense of how these— Yeah. How do you start to think about making the right decision and what information do you need?

I've got my own bumps and bruises on from as a founder of things that there are startups that I did this well, there are startups that I did this poorly, where it created significant family friction, right? And the way in which, and then, so I've given a lot of thought and like deep consideration to how I advise founders, new founders that are making this decision. And in both cases, there absolutely has to be 2 things. One is guardrails, is you need to establish, hey, here is the number of dollars over the, over the amount of time that I'm putting into this. And 2, there has to be clear communication of that and agreement from that in terms of like spouses or significant others. And there's just, I've seen so many folks fail at one or both of those conventions. And it just, it can and has destroyed relationships and it Will make you a significantly less effective operator if you don't put those guardrails up. And it's just also just an external signal. Like if you cannot get strangers in an arm's length transaction or folks who know you and believe in you to bet on the thing you're betting on, you as a founder should be asking, why is that the case? Very rarely is it the case that you are the absolute smartest person in the room. who's the only one who understands the significance of a given insight, right? If you can't bring people over into your universe, then you need to be asking some hard questions.

That's so wise. And I've done it a couple of times over, and I'd have to say the first time I did, I repeat this story a lot because it never gets old and like still shocks me that I did it, but I moved from Australia to New York. So it was a new country. Starting a new business, and I had a 4-month-old child. So 3 new things that are all very significant moments in your life. And yes, and my wife and I did not at all talk through in any great detail what happens if we run outta money when we're living in New York with a baby. And it was a huge gamble and it paid off, but that's not always the case. And I was fortunate that I was able to navigate all of that. But the personal connection, like your own personal runway to pay rent, Put food on the table, all those things. And the other one too is the time tax of if you've got friends, family, a partner, 99% of the time you're gonna be spending so much more time on this than you would in a typical job if you've left a job to start something as well. So trying to navigate the time balance and expectations, there's a personal toll on that as well that everyone needs to be eyes wide open walking into.

The other thing I'll add to that is like making the intentional choice about when to leave a day job. Like if folks have a steady source of income, like most folks underestimate just how much traction and throughput for a startup it takes to replace an income once you've accounted for operating expenses. And there's a, like, there's a bravado chip on your shoulder, like who shoulder, hurrah, heyrah kind of vibe of, oh no, I'm going to, I'm going to go deep dive all in on this. But again, your straight up measured IQ will be higher if you're not worried about how the heck do I make rent next week? And I think that very often I've seen founders both inside and outside of academia make that leap. I'll put, I'll put clinicians in this bucket too, way too early. And like, you really should give your Give your project, give your startup the ability to prove itself as a worthy replacement for your job and for your time.

I have a couple of advisory clients and like 2 that have done the complete opposite. One has kept their full-time job and still building on the side. The other one has quit and is just doubling down. And it's interesting, just their frame of reference to build on what you were saying there is, let's call it like a mental health barometer. of each of them. One is very relaxed and confident and decisive. The other one is getting a little bit lost in the noise because the pressure and expectation and burden that they have created for themselves by making the leap is a lot. So it's not like you're the first person to make that decision. Talk to people, find ways to just glean all these things that you may or may not have considered because there's definitely not a one-size-fits-all. There's a lot of moving parts to consider.

Yeah, fully agree. Fully agree. And that's the theme for, uh, so for folks that don't know me, I've been running startup workshops in New York City, free, open to the public for about 5 years. And the theme across all those is called Only New Mistakes. It's that like, if there's someone else in your immediate vicinity who's already made the mistake you're about to, like it's on you to learn from them. And there's so many preventable mistakes that I see startups both in healthcare and broader Broader venture making that are just predictable, preventable things.

I have a framework I use with every portfolio company that I work with, and it's structured around 20 things that you have to do in every startup. It's not like you have to reinvent the wheel. These are consistent things and they're from basic process and operations to legal, to tax, to cash flow, things that, you know, that form part of a business and you run a sequence and you are prepared for all of those at the right time. But Not to digress too much, I'm really focused back on this capital play. And you have the Substack Killing HealthTech, which is everything that you're doing, and you're sharing a lot of the content that you talked about there for your events. And it becomes a really deep dive research. And what you've done now with the dataset that you've built out is this analysis. So let's go into the, we've talked a little bit around the decision-making process for the angel round, it can be friends and family, it can be formal. The nature of founders is typically an afterthought. How early should you be thinking about that? And we've touched on personal finances there. We've touched a little bit on cash flow and how long it takes to actually get traction and revenue and revenue to be greater than OpEx. What's the steps that you would recommend based off the data around how early to start thinking about it?

So the way I prefer that founders approach it is as a stack of increasing commitments. And so, and I'm actually going to do a separate post about this. It's called the Traction Funnel. It's a framework I've developed. But the idea is like, let's say you've got a hypothesis. Let's say you've got a, uh, I don't know, a hiring platform that can hypothetically find all the physical therapists in a given zip code that aren't on LinkedIn, aren't on Indeed. Right. Your easiest commitment you can get. And the customer for this is the head of HR for these, like, for both hospitals and like national physical therapy organizations. And so your first level of traction might just be they're willing to make time to talk to you, right? At the bottom of that funnel is, hey, they are paying you money for recurring subscription, right? Your next step of traction might be, oh, well, they'll share, here are the zip codes we're trying to hire, I don't know, stroke and neuro physical therapists. Then you might have a hypothesis and say, okay, well, I believe with my dataset, I can get you access to, I can get you access to physical therapists that aren't on Indeed or LinkedIn. And they say, okay, yeah, well, let's do an experiment. Maybe treat it like a consulting project, a one-off where you can give them the output that they'll hypothetically be paying for in your SaaS platform. Then from there you can say, okay, look, I did this once. Let's do so. Let's do some form of LOI. Let's do design partnership. Let's turn this one-off consulting thing into an actual, an actual like rudimentary software platform. And let's limit it to one zip code. Then it's 5 zip codes. Then it's across the country. And so what ends up happening is if you imagine a gradient of like how well, you know, a potential angel, how far down you have to get that funnel in terms of like the substantive commitments. will increase. And so neat example. So this is actually a company that I supported and coached in when I was at New York University called Pickle. But they, for several companies, did that like manual, I am just going to create an output CSV from our custom dataset of all the, you need to hire, I don't know, a stroke physical therapist in Omaha. Here are the ones who are ready to leave their jobs. In doing those, he had 3 national-scale physical therapy practice owners come on board as customers and angels, right? And the cool thing about doing it that way is that you can, at every step, and this is something I use all the time, even in my own work in the studio and the fund, is you use the words, listen, I'm going to make myself vulnerable here. Can you tell me what matters for me to get to the next level of commitment? Right. And so let's say you're talking to The office manager, like she will tell you what matters to the head of HR and how to get to her. You talk to the office manager, you're talking to the head of HR, and all of a sudden you want access to the data and IT folks. If they're interested, if they're bought in, they'll teach you how to work with data and IT folks. And the value of framing it that way is that your customer will teach you how to build your product. Your customer will teach you how to sell to them. And it's creating, I get the, it's called the traction funnel. Creating that framework grew out of my own frustrations as a founder of like, if you use the business model canvas, right? That framework doesn't tell you what to do next as a founder. It does not. There's no, like, there's no way to advance like chutes and ladders style on the business model canvas. It's just like, look, here's all these things. Everything's important. And it's like, well, what do I do? Like, how do I go from, how do I go from I've got a concept to I've got a paying customer? So to answer your question, We took a little bit of a trip there. The further down that traction funnel you can get, the more subsequent commitments you can secure from enterprise customers, the easier time you're going to have raising from angels. And the way you treat it is go talk to people who have raised in your space. Go talk to founders, go talk to active angels and get their feedback of like, listen, in this domain, in, I don't know, in the world of custom swimsuits or bike tires, Because there's niches for all this stuff, right? Like, what does it take to close an angel in terms of traction if I've got a custom bike brand? What does it take to close from an angel if I've got a medical device startup? Does that change for a surgical tool or some sort of a wellness device? And the goal is to find people who've done it before and they'll tell you how far that funnel you have to get before sophisticated angels will bet on you. The flip side, there's like, there's a class of angels called friends and family. Where those are people who I've known, Andy, I've known Vadim since he was a runt and I'm betting on him because I'm betting on him. And that is more of a personal question to answer, like when you're comfortable at making those asks. But that's the range of advice I tend to give folks at that stage of like, you know, when is it okay to start approaching, what's it called, approaching angels?

I love it. And for those of you listening, if you want to flip to the YouTube version available at Startups Decoded, Vadim has some great data and we will share links to his Substack as well. And there's a chart here around active weeks from basically 0 to just over 100 weeks. And you're pushing 2 years at that stage. You should not be spending that long fundraising. It's wild to think that that even exists because If you put 2 years into sales, you'd probably end up ahead of the curve than you would over that same timeframe is my sweeping statement, but my instinct. So to be able to look at that as far as what's achievable means that you have to have a structured approach to your network. And I talk about in my own coaching, a version of an ICP. Who is your ultimate investor? Friends and family is typically the softest way in. You need to think about personal relationships and, and not having Uncle Frank be really pissed off that he put in $5,000 to your startup and you went bankrupt. But the part that I focus on is who are the people that are going to do it? And I love your example from a PT perspective of when the sales target can become the angel investor as well, that feels hyper lucrative in the sense of getting feedback, seeding a product, getting someone who actually sees the opportunity because they live and breathe the problem. Like you're hitting a lot of unique things there all in one go.

So the thing I would point out to you here, so the bubble size here, so our x-axis is how long it took. The y-axis, the vertical axis is how much they raised. So it starts at $100K, goes up to $7 million. And then each bubble size is how many people they contacted. So the bigger circles, those are closer to like 300 to 500 people. The middle-sized circles are 100 people. And that's at the top of your funnel, qualified leads, if you hope to close 10, 15, 20 checks that it'll take to actually conclude your round. And so the thing that I want founders to take away from this is that just set a realistic expectation of this is not going to be a, I do this for 2 weeks and all of a sudden I'm ready to get back to work. Like you really have to be, like you said, systematic, methodical, And know that it's good. It might take you 300 to 500 people to get to, okay, now I have $500K in the bank. I have $300K in the bank. I have $750K in the bank to go do my work. Let's see what we come to next. And so that gets to this idea of like, well, how do we instrument a healthy funnel? So when you have a 1 in 3 conversion, From initial contact to a meeting. Actually, I misstated it in the beginning. And then a 1 in 3, 1 in 3 conversion from a meeting to a check. That means generally that 20 people you're reaching out to in the beginning, you should be, you should at the end of that have 1 or 2 that are converting into either super deep dive, high likelihood of a conversation, of a check, or have actually written a check. And so the thing from the data here is that nobody lives at the median, right? There is no actual middle here. Everyone has their own version of it. You might have a really strong brand and you might be really great at getting meetings, or you might have a really strong— and that would be the ones that have the blue bars that are larger, or you might have a really strong value prop that literally everyone who sees it is like, man, I can't wait to give Andy money, right? You will find some version of that. But generally 20 conversations should be 1 or 2 checks at the end of the day. And that's largely what checkout is. It's actually not that far off from the, uh, the way in which I instrumented funnels when I was, uh, when I was leading accelerators at New York University. The thing that I want to like sort of point out to folks in terms of like setting their expectations. So you pointed out like, listen, some of these folks are raising for 50 weeks. Some of them are raising for 25 weeks. The neat thing about starting from founder narratives is we were able to break down like, how did they actually spend that time? So the gray bars here are list building and warming people up, getting feedback, et cetera. The blue is the active raise of like, hey Andy, would you consider angel investing in Woodstock? And then the orange one, then this is one that very few folks talk about, is the wiretail. Is okay, I got you to sign a safe note. How long does it take me and what percentage of the time can I get you from you signed a safe note Do I have actual dollars in my, uh, in my account? And this is just, again, this is a lot of founders when they hit these difficulties, they think, oh man, I suck. Oh man, this is broken. I'm, nobody understands me. Like, no, this is just part of the fundraising founder VC game. This chart, this was one of the few spots where I was able to compare my data to one of the larger aggregators. So in this case, DocSend has a survey they run every couple of years from their internal data of how long does a raise take from someone sending out, what's it called, someone sending out initial decks to their signing documents. And the bottom line is that my data largely agrees with them. Generally about 30% of those are running past 6 months. There's going to be a blip in the beginning, but really just, you have to be in it. You have to be willing to put the time in for this. So the gray bars are the DocSend seed survey. The orange bar are the cohort of 50 narratives that I assembled. Next up here, I have a chart of average check size versus round size. So founders oftentimes want to know, well, like, how much is an active angel writing? Or how many, uh, how many, checks will it take to get to a closed round? And so the median number here is going to be about 30 checks for a closed angel round. And so on our x-axis, we're going to have our round size. So at the left, we've got $100K. At the right, we've got $5 mil. On the left, we've got our average check size per round. Folks in your network will largely draw, and the folks who have access to, and the folks that are relevant to your given subject matter will largely drive what you're able to get and how many checks it's going to take to get to a close. And part of this is like, you can and should be asking when you're qualifying an angel on the front end, like, hey, I don't know, let's say we're building sunglasses. Like, Andy, you're, you're an angel who's been investing in sunglasses for 30 years. Like, what's, help me understand, like, what's, what's your average check size and round size? Where, where feels comfortable for you for the last 5 times you've invested in a, a new sunglasses founder? And a lot of this is just like feeling out what's, what's market for your space, what you have access to, and what type of interest you're able to drum up. But the interesting thing is that the, the median really shook out at this 30 checks number across multiple, uh, Multiple fundraise sizes. Next thing I want to talk about is this idea of a marathon versus sprint fundraise. And this is something that I've seen multiple times that I never really had a name for. And there's a guy named Daniel Almeida who I saw, who was, he was one of the founders who described his own fundraise, who called it a marathon versus sprint fundraise. So this is what most people do, like the base of each one of these loops. Is, hey, I reached out to Andy. Andy, would you write me a check? We have 2 to 5 follow-ups. I get a check. I reached out to Jimmy. We have the same cycle and you kind of run it as this like ongoing thing that gets exhausting, et cetera. And the thing that I've seen multiple founders do is like a very different shape and it's called the sprint. And the idea is that, okay, well, every 2 weeks, Every month, whatever it is, you're sending an investor update. And let's say at day zero, I'm reaching out to Andy and I'm saying, Andy, the first 2 weeks of October, I'm going to be having follow-up meetings with my investors. Here's my traction today. Could we please have a follow-up? Like today is August 15th or sorry, August 17th. Could you and I please have a follow-up in the first 2 weeks of October? So before you get off that first call, you've closed and locked in your follow-up date. But then as you're thinking about this, as you end up being like, man, Vadim is a really handsome founder. I bet his good looks are going to make me a lot of money. I'm sending you updates of like, hey, look at all this great traction my good looks have gotten me. Like, I'm really attractive and my business is even more attractive. And then by the time you and I land at our October 3rd meeting, you're like, man, I cannot wait to write you a check. Shut up, take my money. So I've seen founders execute this. And again, this guy, Daniel Almeida, he described it as a sprint versus a fundraise. He had a version of these graphics on his site and it's like, this makes so much sense. This is something I've seen a bunch of times that I never had a name for. And now this is how I advise founders that we're working with that are going through our accelerator, our studio, et cetera. Just because it creates urgency. The lame version of this, like the half-assed version of this is, hey, I'm only going to take meetings in that green section. And when you try to do that, when you try to shoehorn both the first and second meeting into that active raise section, that's when investors look at you like you're just, you're trying to create scarcity where none exists. Like hot rounds, no hot rounds that I've ever seen were hot because the founder said so. Right? Like if you've got a round where allocation is difficult to come by, It's the, the world outside you's going to determine that. Not, not you deciding that's how you're gonna do it.

I would build on that. The market feedback element is critical, right? And if you are shifting from a friends and family situation where people believe in you and wanna support you on your journey into an established angel investor, they're, they're two very different stories as well, as far as what you need to tell. In the sense of what they need to know and why they're going to make a decision to back you. But there's something which is completely agnostic and universal, which is collective feedback. So the momentum that you build across multiple people at the same time is the secret sauce to close them all concurrently rather than running the sequence, which you talked about before on the marathon type framework.

And the useful thing about the, like, if we go back to Like this is largely where, like when I ran accelerators, where my coaching lived and why I had such a strong conversion rate from folks who had closed angel rounds to folks that had raised their seed by the end is that if you're like, if you're having difficulty at the conversion rate between contact to meeting, that's likely you're targeting the wrong people. Either there's something wrong with your pitch, et cetera, et cetera, et cetera. If you're having a hard time converting at 1 in 3 from meeting to a check, then likely the message is there's something in your customer feedback or your data room or in your market analysis where it just, it's things aren't connecting. And the usefulness of instrumenting your raise, and this is, you really can't read this until you've talked to about 20 strangers, is it tells you what needs fixing. Number one, but number two, once you get to that, like 1 to 2 people are writing checks out of 20 people in the top of the funnel, that also tells you, look, now I'm done. I'm done tinkering. I just need to put more people into the top of the funnel and keep on turning that crank.

This is not data-backed. It's my experience. And what I've observed is that that element of understanding your own data and own process and thinking with a funnel-type model of where you're looking at number of leads that you have in a pipeline, what stage they're at, a simple assessment of, is this person just wanting to stay close and curious or are they legitimate and trying to qualify that in a way that moves them to the next stage? But ultimately you're running a conveyor belt of sorts and you need to make sure that on that journey you're able to move them from one stage to the next. And understanding that conversion, I love that if you simplified it into ratios, which is Ultimately what you've done, you need to know that if you want to get 10 people at the end, you need to have 100 conversations at the start.

That's right.

And as people drop off and fall off the side of the conveyor belt, you just keep funneling more at the top and you have this active cycle running concurrently. But it's a quantitative way to have simple math in form based off historical data, which there's so much around as you've demonstrated with this great The other thing I would sort of touch on here that we have not really, uh, really touched on yet is the priority stack of like impact for intros.

And so if you say, look, who's going to have the most juice, the most impact when someone makes an intro, let's say it's Andy as an angel. By far the most impactful intro is a founder who they've invested, who's doing well. Number one. Number 2 is a co-investor that has invested, they're investing with. And I'll put a caveat out there that if you're prepping an investor for an intro to one of their investor peers, then they're supposed to be like, hey, Andy, are you also writing a check into Vadim? And if they're not, it needs— the only safe answer is, yeah, no, I'm not because this is outside of my thesis. I only invest in sunglasses and Andy's building hats. But literally anything else, an investor intro that's not also writing a check is really weak software. Like a bunch of my LPs, Came in because 2 of my LPs introduced me to a bunch of their co-investors. But if that person's not writing a check, it's really weak. Next up is professional contacts. And last up is just folks you reach out to cold. And so what I suggest founders do is really start that, like that, the hunt for those 100 names from existing investors whose portfolio you can ascertain through via like announcements on LinkedIn, If it's an accelerator, like go talk to companies and ask them, uh, ask them for feedback as to like, hey, how you went through your New York City Techstars, Andy, tell me, can I get feedback on my deck? Uh, you let me know what makes sense, what doesn't here. You remember what it was like to be a founder with more questions than answers. And then at the end of that, if it's going well, you say, oh, you know, can I get an intro to Christine? Uh, who's, who's the one who's making decisions at Techstars this week? And it's, it's really about being, it's not just a question of, okay, I've identified 100 angels, like the work. If we go to this thing, like to me, the work of an effective round is that gray section is like taking time to do the work to get warm intros into the folks who are actually writing checks. And so like I have a team right now in maternal health that's raising or that's planning to raise in the fall. And literally what I have them doing is every single week, There has to be 15 to 20 new outbounds to folks who can reasonably connect them to, or have a high likelihood of connecting them to their next angels or their next VCs. And it's just, it's the, the direction, the direction from which the intro came matters. And there's a, there's actually DocSend data on this where warm intros got twice as much eyeball time for the same pitch deck as cold leads. That makes sense.

What I love there too, and the gray component, the build part is preparation and preparation has multiple components to it. One of them is relationships. It's literally going through your own first-degree network of who's everyone that you know that potentially has like accredited investor status where they may invest into you in a friends and family type situation, the more formal angel individuals, and then there's syndicates and groups. and formalized entities that operate together and starting to build and nurture those relationships, whether you're going to have an angel around or not. It's good practice and good health for your business just from an awareness standpoint is to your point, if you are doing sunglasses and I invest in hats and you are not the person, there might be 5 people that you know that invest in sunglasses that will do it. So building an active database of people that you can start to get warm, seed your business, Keep them informed on what you're doing. So that reading rate you just talked about, when they actually do see materials at the point you are investing, one, you'll get better conversion on open rates and someone reading it. Two, you'll have a shorter path to conversion because they already feel like they're on the journey with you. And three, they're going to be educated enough to then go and share it with their peers. And you're compounding all of this human behavior and fundraising data and insights To scale and escalate a process that can be really demotivating and tough.

I would add one thing there, and I think it's a, like an important note that I hammer home on the dataset. So this number here that I had, I don't know if it's too small for it on YouTube, but 500,000 angels this year will write checks into 60,000 companies globally, right? Like there's folks in my dataset who raised in the UK, in Cambodia, in Estonia, only about, let's say, 3/5 of those are in the US. So like wherever it is you are, there are successful individuals who remember what it was like to be starting from scratch and who want to bet on the next cohort. And that I really, and I say this as someone who had the privilege of operating accelerators in the financial capital world at one of the most well-known universities in the world. Like the whole point of putting this data together was to quantify like, hey, you don't have to have that. Right? If you are, if you're a coffee shop, if you're that guy at the coffee shop in Estonia, awesome. There are local angels. There are also global angels who will write checks into European companies and like, go find them, go find out what they invest in. They're out there and you absolutely can. Like it is, The thing that I want people to take away from this write-up and the reason it's public, the reason it's industry agnostic is that it is absolutely possible, whether you are a man or a woman anywhere in the world to raise an angel round for what you're doing. Now, the question is, is what you're doing enticing enough to sophisticated investors? That's a whole other question. That's on you to figure out. But if you have a strong business, strong business concept, Then there are local people who will write it, who will write you a check. And it's, it's, it's very doable. It's very, it's very realistic. And it's just like the goal, the goal with this write-up is to give folks a roadmap of like how to execute that process and get to the point where you can get back to work and, and have the traction for the next 12, 18, 24 months to go, go build.

Impressive. And it's so insightful. And as I set up at the start, there's a lot of what you've observed and lived and breathed that is fed into this. And there's a validation that happens. Just by proxy of your experience. But the collection of data is fascinating. The other part too, and to give founders some insight into what happens on the other side of the fence, in the US alone, only 3% of accredited investors invest at an angel level. So you've got this huge group of people, 97% of accredited investors, which is approximately 20% of households in the US. So you're talking over 50 million households in the US that could do it. Do the math on that. And if you think about people that are relatively high net worth and accredited investor level is not that high relative to the net worth of folks in the US, there may be someone who is not an angel by definition, may not even know what it means, but is prepared to do an investment. But what it takes is not just the comms in actually engaging them, giving them context, giving them trust in what you're doing. Part of it is the structure, and I want to just touch on this very briefly in the sense of how you manage a SAFE node, whether it's an SPV, special purpose vehicle, in the sense of how you're pulling that together in your cap table. There's a lot of things that most founders don't even understand at a contractual and legal standpoint. Have you got any advice around how you become buttoned up?

This is going to be an unpopular answer in the age of LLMs, But the answer is Get Venture Deals by Brad Feld and spend a weekend reading it cover to cover. So Brad Feld is one of the original Founders Fund investors. He's been, he was early into a bunch of the Web 2.0 companies, but he, and I forget the co-author, they wrote exactly what you are talking about. And that is one space where I would say founders need to be solid. And just understanding the mechanics of like, what is a fiduciary duty? What is a, what is a preference? What is, what are all the moving pieces and the variables that will drive success or failure, both when things go well and when things don't go well? And so I would say, go get yourself a copy of Venture Deals. And it's, and I think the sub— what's the subtitle? I think it's something like, Like how to be smarter than your banker and lawyer in a venture round. But it's fantastic. I've recommended it a bunch of times over the years and it's just, it's in very approachable language. It walks through what those moving pieces are.

And for the people that don't get it, just the simple things of compliance around tax and reporting, communications, et cetera. There's so much that goes into it. So if you're able to remove friction, On the sharp end of the deal to be able to drive conversion faster and easier and give people peace of mind, that is 100% worthwhile investment.

Totally, totally.

This is so fascinating. Vadim Gordon, you have Healing Health Tech. All this information is available on your Substack, correct?

That's correct. So if you just go to healinghealthtech.com/subscribe, uh, it'll, this, this will be, uh, one of the first articles that pops up. And again, the goal here is to make Fundraises knowable and doable and approachable for founders in any industry, anywhere in the world.

I see it time and time again with people making the same mistakes, and it's ultimately what has inspired you to spend time to build this dataset out. And people should take serious note of this, and I don't say that lightly. It's not a plug, it's a genuine look at the things that can make your life so much easier and remove friction and stress and tension. And All the things that happen in that early stage, which can be overcome with just actually learning from history. And there's so much of it.

100%. 100%. There's a thing that happens when you're especially a first-time founder is like you are building in a vacuum, right? You don't know if you're doing the thing well. And all you see is, man, 95% of the people I've asked for money have told me that I'm not worth their money. And particularly for folks that don't have a strong support system or are at this for the first time, the goal here is to show them what effective looks like, what a process looks like.

I value your time today, Vadim. We've talked about doing an episode and I'm glad that we managed to do it now off the back of this great research. It's something recent that you've done and this is such a great concern. Consolidation of your knowledge and experience all wrapped up in one document here.

Appreciate you so much, Andy. Cool, man. That was fun.

Thanks for listening to Startups Decoded. If today's conversation helped you think differently, share it with a founder in your network. And don't forget to subscribe for real-world startup insights every week. We really value your support. If you're interested in sponsoring the show, email hello@startupsdecoded.com. At startupsdecoded.com. I'm Andy Walsh. I'll see you next week.