Meet Curie, Grist Analytics, Hal9, Instinct, Pure Blue Tech, and Skip Technologies, SAC21 Finalists!
The blog-series “Startup People of Seattle” introduces some of the key personas in the ecosystem to learn more about what they are doing, to share their thoughts and ideas, and to promote networking.
In our thirteenth interview, meet Edward Un:
“The one thing that is key to understand early on is the portfolio approach. You cannot expect a return if you only invest in few companies, because they could all fail. So, you must invest in enough companies to minimize the risk of all of them failing.”
Edward Un is working as Senior Program Manager, Cloud + AI Speech & Language, at Microsoft. In his free time, he is involved in Angel Investing.
Q: Could you shortly introduce yourself and talk about your background when it comes to startups?
A: I studied computer engineering and I have been in software all my professional career. Following a job in a larger company in Silicon Valley I joined my first startup, a less-than-ten-person-company. After spending three years in this startup, I met someone in the Valley, and we decided to co-found a company with one more person. We started growing organically, bootstrapping our company by doing consulting work while figuring out what kind of product we want to build. By the time we had figured out a problem and had created a solution, we were already 30 people. We then raised a few series of Venture Capital to continue growing with our new business model. We managed to grow this company to 150 people at its peak. Eventually, I left the company to work at another startup in Hong Kong, which was about to go public at the time. Today, I work at Microsoft as a Program Manager. On the side I am involved in Angel Investing.
Q: You have experienced working for one of the largest companies in the world, but you also worked for startups. What would you say are some of the differences?
A: Because there are so few people involved in a startup, a difference is that in startups you wear a variety of hats. At Microsoft, I focus on one area. Another difference is that in startups you reach out to people outside the company a lot more than in big companies. Working for a big company, you interact mostly with people within the company or with customers. One more aspect is that money and resources are omnipresent worries in startups. In large companies, resources are less of a concern in the daily operations. Because startups are in a constant race with running out of resources, startups also need to move at a faster pace and be more agile.
Q: You mentioned having been involved in the execution of startups, but how did you get involved in angel investing?
A: Like you say, for a long time I was much more interested in the execution of startups. I thought of investing in startups as boring, and I did not want to constantly hear pitches and be in meetings, etc. But about two years ago, I picked up a book by Jason Calacanis called “Angel” and also started listening to his podcast called “This Week In Startup”. After reading his book I became much more interested in angel investing. Therefore, I read more books, like “Angel Investing” by Davide S. Rose for example. I also started going to meetups, etc. About one year ago, I started going to the Seattle Angel Conference workshops and I then participated in SAC 14. The Seattle Angel Conference introduced me to Keiretsu Forum, a network of angel investors, which I am actively involved in today.
I have met many people being part of Keiretsu and SAC and I learn a lot from that. One thing I learned is that, especially in the beginning, you must resist the urge to invest in companies. A lot of founders are very talented in presenting their companies, but you should develop your investment thesis and learn more about angel investing before spending a lot of money without understanding yet what due diligence is etc. You need to remind yourself that investment opportunities will keep coming and that there is no rush to invest in everything right away that looks interesting. In my first year being involved in Keiretsu I have invested in two companies.
Keiretsu has a screening process that startups must go through. If they are chosen, they get the opportunity to present to the membership. The members ask questions and in the end each investor decides individually whether he/she wants to invest or not.
Q: You mentioned patience being important for a beginner in angel investing. What are some other key things you have learned as an investor?
A: Listening to a variety of pitches from companies in different industries naturally has taught me a lot. But in terms of investments, the one thing that is key to understand early on is the portfolio approach. You cannot expect a return if you only invest in few companies, because they could all fail. So, you must invest in enough companies to minimize the risk of all of them failing.
The importance of due diligence and that you should try to become aware of your biases are other things I learned as investor. A bias could lead you to convince yourself why to invest in a certain company overlooking arguments not to invest. To overcome biases, I always look at a company asking myself: “Why shouldn’t I invest in this company?”
I also built a habit of writing down my thoughts on every company no matter whether I decide to invest or not – an investment memo. In a few years’ time, I hope I will be able to see which companies became successful and which ones not. I then will be comparing this with my notes to draw conclusions and learn from that. I think just seeing a lot of companies and then following whether they become successful or not is a great way of learning about patterns, and I hope this will eventually help me become a more successful investor.
Q: You brought up the term investment thesis. What is your investment thesis?
A: I would say that I am still developing my investment thesis. At this point, I like to invest in companies that take advantage of an emerging trend. The company must also do something in an area that I understand. Therefore, most of my investments are in technology companies, because that is my area of expertise. Another thing I pay attention to a lot is the team. I must feel like this is the right team to invest in to solve a certain problem.
Q: You said you like to invest in areas you understand. What do you think about the trade-off between investing in your areas of expertise and diversifying your portfolio as much as possible?
A: I think that portfolio diversification is more important, but I do try to find a middle ground. I enjoy educating myself about different areas, so I have relatively broad knowledge. As a result of that there are enough areas that I feel comfortable investing in from a knowledge-perspective, that I am still able to create a diverse portfolio while limiting myself to those areas.
Q: How closely do you work with startups that you invest in?
A: This depends. Companies I invested in through SAC, I don’t really interact with at all. It’s the fund manager who does that. Companies I invest in individually through Keiretsu, I can be more involved with. I am in touch with both the founders I invested in directly. One of the companies I support through my expertise a lot, while the other company is more interested in my network. Either way, I try to be a resource for them and support them, however, I think at this point I can contribute most if a company needs my expertise simply because I am new to angel investing and my network is still relatively small.
Q: How difficult is it as an angel investor to see many startups fail early while waiting for the 10x-return investment? How do you convince yourself to keep putting more money into more companies in the face of failures?
A: You must have the right mindset. This is why many people who legally are accredited investors practically are not suited to be angel investors. They cannot deal with the risk involved in angel investing.
Personally, I view angel investing as a way to diversify my overall investment portfolio. Angel investing is the portion I put into high risk, high reward opportunities. This portion should not be too big. I should be okay with losing all that money. In fact, my mindset when writing a check is that the money is gone. At the same time, by building my portfolio I decrease the chance of loosing all my money put into angel investing opportunities. Chances are that if I invest in enough companies, eventually I will be cashing out on at least one investment that makes up for the many failed investments. This is why successful angel investors have been investors for a long time. It simply takes time to build a portfolio, so you need to be committed to that. In the end, I trust the portfolio theory, and the companies that are still running give me hope.
What also helps me is thinking of angel investing as an investment in my education. I have learned so much through being part of this community. Doing angel investing is almost like getting an MBA. You do a lot of case studies, look at different companies, listen to their pitches, talk to CEO’s and learn how they run their company, think about different business models and different markets and you analyze financials.
What I also like about angel investing is that you can do this no matter the age. By learning how to do angel investing today, I can be a full-time investor after I retire from Microsoft. So, angel investing to me is an alternative after-retirement occupation to teaching or writing a book, which are things many other people consider doing after they retire.
Q: What are some of the challenges you faced as an investor?
A: I think the biggest challenge for me is time, especially with balancing angel investing with my day job at Microsoft. Another challenge is deal-flow. I am trying to figure out whether I should limit myself to local companies or not.
Q: When you face challenges, what are some resources that you seek advice from?
A: I use books and podcasts to build my knowledge. Podcasts allow me to listen and learn from the top-experts. Other than “This week in startup,” I listen to “a16z” by Marc Andreessen and Ben Horowitz, and I listen to “Masters of Scale” by Reid Hoffman.
To get advice on a specific issue, I reach out to communities like SAC or Keiretsu. John Sechrest is someone who has answers to everything related to angel investing, so I often reach out to him. I also ask questions at workshops on things I need advice on.
Q: What advice would you give someone new to angel investment?
A: Only do this if you are willing to commit long-term. If that is the case, I would refer him/her to the Seattle Angel Conference as a starting point, and to David Rose’s book “Angel Investing.” I find this book to be an easy read and easy to understand.
Here are some things I learned from this interview:
In the interview Edward mentioned some resources and organizations, find out more about them here:
“Angel” by Jason Calacanis:
“This Week In Startup” by Jason Calacanis: https://thisweekinstartups.com/
“Angel Investing” by David S. Rose:
Seattle Angel Conference: https://www.seattleangelconference.com/
“a16c” by Marc Andreessen and Ben Horowitz: https://a16z.com/podcasts/
“Masters of Scale” by Reid Hoffman: https://mastersofscale.com/
John Sechrest: https://www.linkedin.com/in/johnsechrest/
About Seattle Angel:
A strong ecosystem creates an environment that allows startups to thrive. Seattle Angel’s goal is to strengthen Seattle’s startup ecosystem by increasing the access to funding for entrepreneurs to push their ideas further.
About the author: Sven Goepfrich
Sven Goepfrich is currently finishing his MBA in Syracuse. His studies focus on technology, innovation and entrepreneurship. At his school, he is working for the department of finance. Sven was actively interning with the Seattle Angel Conference in summer 2019. He is currently looking for full-time career opportunities in this field.
Meet Curie, Grist Analytics, Hal9, Instinct, Pure Blue Tech, and Skip Technologies, SAC21 Finalists!
If your startup is raising an early seed round this spring, the Seattle Angel Conference is a perfect springboard to meet investors and fine-tune your message. And offers a chance to win $200k investment!
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