David Tisch shares insights from 350+ early-stage investments in companies like Plaid & Roman, importance of reputation, dealing with sharp-elbowed investors & more | Angel S5 E1

Episode Summary

Executive Summary: David Tisch, general partner at Box Group, discusses his decade-plus experience as a super angel investor, having made over 350 investments. He contrasts the early days of angel investing (post-2008 recession) with today's mature ecosystem, emphasizing the long 10-15 year timeline for returns and the importance of founder empathy. Tisch shares insights on portfolio strategy, reputation, and the evolving venture capital landscape, including the rise of large seed funds and the impact of technology on society.

Main Topics: Evolution of Angel Investing (Priority: 5/5): Comparison of the angel investing landscape from 2008-2012 to today, highlighting the shift from a 'rebel job' to a mainstream career with more capital, resources, and competition. Portfolio Strategy and Returns (Priority: 5/5): Discussion on the super angel approach: making many small bets (250-500K), expecting 10% of investments to drive returns, and the long 10-15 year timeline for exits. Reputation and Founder Relationships (Priority: 4/5): Importance of maintaining a good reputation through backdoor references, treating founders as partners, and avoiding bad behavior that can harm long-term deal flow. Pattern Recognition in Investing (Priority: 4/5): Criteria for evaluating startups: team, market, idea, product, and the ability to attract talent. Emphasis on funding the best founders who can execute and build great teams. Impact of Technology on Society (Priority: 3/5): Defense of big tech companies (Facebook, Uber, Amazon) as net positives, creating opportunities and democratizing access, despite criticisms about inequality and disruption. Challenges of Large Seed Funds (Priority: 3/5): Skepticism about very large seed funds ($400M+) due to the impracticality of meeting enough companies and maintaining quality deal flow.

Key Arguments: Angel investing was a 'rebel job' in 2008-2012, with few investors and slow deal velocity; now it's a mature ecosystem with abundant capital. A super angel portfolio of 350+ companies expects 10% to drive returns; the rest may fail or be mediocre, but each founder deserves respect. Reputation is critical: founders should do backdoor references on investors, and bad behavior (e.g., squeezing pro rata) will be remembered. The best investors (e.g., Sequoia, Benchmark) are consistent and relationship-focused; tier B/C firms often act selfishly. Pattern recognition: invest in founders who are 'strategic thinking geniuses' and can attract top talent; identify the key risk (tech, sales, etc.) and ensure the team can solve it. Technology companies like Uber, Facebook, and Amazon have created immense net positive impact by democratizing opportunity and enabling independent work. Large seed funds face math challenges: deploying $400M requires meeting thousands of companies, which is impractical.

Data Points: Number of investments by Box Group: 350 deals - Over the first decade of investing, averaging 25-35 per year. Check size range: $250,000 - $500,000 - Typical check in seed rounds; can lead sub-$2M rounds with $500K-$1M. Fund size raised in 2019: $165 million - Two funds of $82.5 million each, after a decade of investing internal capital. Percentage of investments that drive returns: 10% - Target for fund drivers; 9 out of 10 may not live up to expectations. Deal acceptance rate: 1% - Box Group invests in about 1 out of every 100 companies they see. Venture capital deployed globally in 2010 vs 2019: $47 billion vs $295 billion - Approximately 6x increase in a decade. Plaid merger value: $5.3 billion - Proposed merger with Visa that was blocked; Plaid remains private.

Pivotal Quotes: "It's their company. I'm not in the company building business. I will help, I will advise. If they don't want my advice, they don't have to call me. If they disagree with it, hopefully we can have a productive conversation about it. But it's their company." — David Tisch: On handling disagreements with founders and respecting their autonomy. "My lifeblood in this business is my reputation. And if we, as a firm, don't have customer satisfaction across every company that we invest in, we're screwed." — David Tisch: Emphasizing the importance of reputation and founder references. "I think the media does this world no service. ... All that happened in our world was: it used to be startups are cool. ... And then what happened was it shifted to unicorn hunting." — David Tisch: Critiquing media narratives that focus on failures and negative aspects of startups.

Implications: For angel investors: prioritize reputation, long-term relationships, and pattern recognition over short-term gains. For founders: vet investors thoroughly via backdoor references. The venture ecosystem will continue to evolve with larger funds, but the core principles of investing in great people and maintaining integrity remain timeless.