Thomas Korte is one of the founders at one of the consistently top-ranked startup accelerators. They’re always up there with names like 500 Startups, Y Combinator, and TechStars. To date Angel Pad companies have raised around $1.4 billion, with Thomas’ own company having raised close to $80 million itself.
In this episode you will learn:
- Patterns of teams with higher chances of success
- Founder vesting and cliffs
- What angel investors and early stage VCs are looking for
- The value that startup accelerators bring
- How the application process works at accelerators
- Fundraising strategies and tips
For a winning deck, take a look at the pitch deck template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash. Moreover, I also provided a commentary on a pitch deck from an Uber competitor that has raised over $400 million (see it here).
Remember to unlock for free the pitch deck template that is being used by founders around the world to raise millions below.
ACCESS THE PITCH DECK TEMPLATE
About Thomas Korte:
Thomas Korte is an angel investor and advisor to early-stage internet startups and the founded AngelPad, a startup incubator in San Francisco.
Prior, Thomas Korte worked at Google for 7 years. His roles there included International Product Marketing Manager, European Search Agency Business Lead and most recently Google Evangelist. He is the co-author of several patents related to improving efficiencies in search advertising and local search results.
AngelPad is a mentorship program to help technology startups build better products, attract seed funding and grow more successful businesses. We provide an extensive mentorship program to carefully selected startups during the course of 10 weeks. Companies typically receive $20,000 in exchange for a small amount of common shares.
A strong emphasis is also put on helping founders to prepare for demo day, which allows companies to present their idea/vision/product to several hundred investors.
Connect with Thomas Korte:
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FULL TRANSCRIPTION OF THE INTERVIEW:
Alejandro: Alrightee. Hello, everyone, and welcome to the DealMakers Show. So today, I’m actually very excited about this interview because we’ll be covering the two aspects of the equation here at the same time – the investor’s side and then also the entrepreneurial side of things. So without further ado here, Thomas Korte, welcome here to the DealMakers Show.
Thomas Korte: Thank you. I’m excited to be with you on the show.
Alejandro: It’s really amazing what you have done with Angel Pod but I guess before we dive right in to it, why don’t we do a little bit of walk through memory lane here and let’s go back to when you were working at Google because I believe you started there when they were like around a hundred people compared to the 25,000 plus employees after you left which was like around 8 years. What were some of the biggest learnings during these eight years, Thomas?
Thomas Korte: Yes, so let me go back. So I joined Google in 2001, very early about a hundred people as you said. In their product management team, there were about seven people and my role there was to really figure out everything that went in to [Europe 01:05] so let’s start it with you know a lot of the revenue products. Adwords was just about to launch, Adsense later, maps and all these things. And you know when you work for Google that early on, it really wasn’t the household name in most places. In the US, yes, but around the world, it certainly wasn’t. And you know one of the biggest learnings I think through those eight years especially in the early years was you know how quickly technology can disrupt existing industries. It was just flabbergasting when you saw you know how quickly you know search expanded really around the world. To give you an example, when I first went to Germany for Google on my first trip, it was about 25% of the market share was Google. By the time I was there, the second trip which was about six months later, it was already half the web searches in Germany that were on Google and the same thing was replicated you know throughout. When you look at adwords, it totally disrupted an entire advertising industry just really within a few years. Or look back at Gmail, you know, Google Mail you know completely disrupted the existing players, Hotmail and Yahoo Mail, just in a few years. And of course, the same happened with Maps. No one was buying GPS units anymore because everything is on your phone a few years later that happened. So you know when I look at those early years at Google, it really helped me understand how quickly technology if done right can disrupt existing industries and really almost take down major players that we never thought we could disrupt.
Alejandro: That’s amazing. And then finally you get started with the entrepreneurial journey. Obviously it’s not like in the you know that way that we would see it like with ramen noodles for a couple of weeks like more like say running an accelerator. So how this Angel Pod idea come about?
Thomas Korte: Yes, Angel Pod, I launched Angel Pod in 2010. It was a couple of years after I left Google. While I was at Google still, I started to do a lot of angel investments and mostly in founders of companies that left Google as product, mostly product manager that were at Google and then left to start their own company. And one really exciting way to find new companies at the time was obviously your own network which was inside of Google in Silicon Valley but the second one really was emerging as you know with accelerators. At the time, there really was only Y Combinator and Tech Stars and I would join those Demo Days and really early on there were maybe 30, 50, 100 people at these Demo Days. And you would meet founders and you know speak to them and figure out if you like them, make investment, classic angel investments. And eventually I realized that I really enjoy more working with founders than just writing a check, figuring out at the earliest stages of a company, what is there to be done. And when you’re an angel investor back then but also still today, you know with all the best intentions of working with the company, the reality is that you know once the company raises money and if you’re not with them next to them everyday, they’re busy, they’re running their company, they’re figuring things out, then you as an angel investor, you might meet them every week, every two weeks, every month, but really the only thing you do is catch up and kind of try to understand the journey they’ve just gone through, and that really started to wear on me and the idea of working with them side by side really emerged, and that’s what became Angel Pod is work with founders at the very earliest stages in the company, usually when it’s just the founders and no one else. You know give them enough money so they’re okay for you know six months, 12 months and really work with them on a daily basis to figure out what is the big business that we can, that they can build behind it. And that’s what Angel Pod is. So you know I’m a little bit kind of a small proxy founder in many of these companies because I’m so early with them. I’m alongside them and really helped them with the journey and learn from them in the journey.
Alejandro: Got it. You know it’s remarkable that you got started in 2010 because I remember at least when I first started my previous business in 2010 here in New York City at least, there was like not that many startups. Now they are like popping everywhere but it’s just unbelievable how the ecosystem has you know shifted a little bit in the Bay Area obviously. It was kicking in the high gear but in New York it was starting. So I guess kind of like talking about the structure of Angel Pod and the early days, who are the cofounders and how did you guys meet?
Thomas Korte: So Angel Pod really has two cofounders. It’s Corinne and myself. We are fulltime all the way. The interesting fact as you know Corinne and I are married so it’s an unusual cofounding team which I guess now has become more common Silicon Valley but certainly at the time it was very unusual to have a husband-wife cofounding team.
Alejandro: Got it. Got it. And you know what I actually love that, Thomas. I don’t think I mentioned this. My previous business, I launched that with my wife so it’s a recipe that I don’t recommend doing at home but when it works, it’s actually magical.
Thomas Korte: It does. It does. I agree with you. You know the things that you think about differently when you’re a couple and start a business together. Sometimes people will ask me like what does it take and we get a lot of applications, not a lot, but some applications from husband and wife teams and they say, “Look, we’re husband and wife. We admire what you do.” But I think there’s really more to it to make it work and I’m sure you’ve experienced the same thing where love is not enough. You know the reality is we know our partners well in our personal life but we don’t know them necessarily in our work life. So what was really, really helpful for Corinne and me, we’ve actually worked together along before we were a couple and really knew each other in a professional setting way before we knew each other in a personal setting. And you know if you work with your significant other, I think it’s really important, one, that you know them or get to know them on a professional level, not just personal level really well, and then that you have to just kind of have radical honesty. It’s difficult to be honest with a cofounder. It’s even more honest with your spouse or your boyfriend/girlfriend cofounder because it intertwine so much with your personal life. I think another part is really important is trying to figure out how you’re complimentary and you’re really one plus one equals three, as much as that sounds a cliché and I think that’s true for any cofounder and it’s certainly more important even as a couple cofounder. And you know it works beautifully because you have complete trust in the other person. You live together. You work together. You figure out how to separate your personal and business life and spend every dinner conversation talking about the business but if it works, it works really well and I consider myself very fortunate to spend that much time with Corinne both in work and personal life and make Angel Pod work.
Alejandro: That’s so fantastic. That’s fantastic. You know the other thing that I wanted to talk to you about because one of the things that I was just like remembering was that when I was building the business with Tanya, and we were going through the multiple rounds of financing, you know, like I remember the investors being worried, “oh my god, if I invest this and that.” We actually had a memorandum of understanding of what would happen if we were to split and what would happen with the business but that kind of like leads me to the next question here that I had for you, Thomas, because typically it’s like very easy to understand how the financing would work for or at least that’s the normal thing that we hear in the entrepreneurial ecosystem on how it would work, how the financing would be structured, but for example like for something like Angel Pod, how the fund raising work and what is the structure like?
Thomas Korte: Can I switch back to you for a second what you just said because, Alejandro, it’s super interesting waht you just said.
Alejandro: Go for it.
Thomas Korte: That your investors asked you about having something in writing basically what happens if you split up and when you think that through like that’s really what any founder should do with their cofounder and I think it’s important, and it’s great that you did that but it really is something that every founder should think through, not just at the point of fundraising but all the way. We see a lot of founders or founding teams that come in and already have one founder departed. Early in the career, sorry rather early in the start of a company, it is so easy to add a cofounder. You need a coder. You need a growth hacker. Like you need somebody, it’s like wow let’s add them to the team. That’s exactly what we need right now. And you know the cofounder title but also the equity that’s involved in cofounders is so significant that unless that person is there for a long time, it becomes really problematic. So people really should think about vesting schedules, how long you want vest founders, at what point you actually start earning the equity and I think for founders that is double important, not just in the context of a couple starting a company together but really with any cofounder. I don’t think people think enough about this early on and it really hurts companies in the long run when you have a founder that has left after 18 months and might have 5% or 7% or 10% of the company with them, or worse significantly more than that. But sorry, I just wanted to add that. But let me answer your other questions.
Alejandro: No and I agree, Thomas, and before we go in to answering the other question, you know, something just came to mind that I wanted to ask you. With all these different founders that you see in these different companies, is there like an average type of like equity split that you see on these businesses between the cofounders?
Thomas Korte: We see everything. We see minority cofounders with a couple of percent. We see teams that have three cofounders and that have each 33% at the beginning. I think there’s not really a one size fits all formula. I think you have to look at the individual circumstances now. From my perspective, if someone is a minority cofounder, if someone is 5 or 7% cofounder, my next question is why. Do you value this person this much less? Is this person not as invested? And often you have you know these circumstances where you know someone might still be at a job and so there’s one founder who’s full time and one founder that’s at a job because you know for healthcare, for money, whatever it is. And that person has significantly less equity than the other. I’m not sure that’s the right way to look at it because you’re looking at five, seven, 10-year horizon to build a company and so if someone joins three months after the other person, I’m not sure it really is a good reason to have these significant equity differences. I think from what we see, it’s very standard to have a four-year vesting schedule with a one year cliff. Personally, if I would start a company today I would ask my cofounders to have a six-year vesting schedule as founders and at least a two-year cliff. So when you look at the cliff, the cliff is basically the commitment to the company which says if I leave before that point, you know I walk away with nothing or we have to negotiate what I walk away with but legally I’m entitle to nothing which is a hard concept for founders to say yeah, you know what if. But in reality, when you look at the person across from you, and you say, “Well, are you committed for two years? We’re going to do this, right. We’re going to quit our jobs. We’re going to raise money, maybe put our own money in to this. We ask our friends and family put money on this. How committed are you to that?” And I think having a certain commitment goes really long way especially the first two years go by in a snap. You know you blink twice, you don’t sleep and two years is over. So I think as cofounders the concept of longer resting periods and especially longer cliffs is something I think about. I would do that today. I would ask any founders of the company I would start to do at least a two year cliff and possibly a six year resting schedule, maybe five years, but I think four years is too short when you start out company on day one.
Alejandro: And I love the fact that you say the two year cliff because in so many instances I remember especially when we were building up CoFounders Lab, we matched so so many teams, in many instances you would see the founders just give away a bunch of equity, just without any type of vesting and then that founder leaves and then they have like this free rider on the cap table where this our completely disappointed and turned off because they’re giving investing money to someone that is not sweating or putting the work.
Thomas Korte: Absolutely. Absolutely. And I think you know with CoFounder Labs I’m sure you saw that all the time where people come together for a common reason but then starting a company is hard and building a company, hiring people, fundraising and especially when the going gets tough, you know, when you don’t raise the round you thought you would and you can’t pay yourself as much as you thought you could. You know people drop off and it’s not they lose interest and they leave, you know. It might be personal reasons. It might be that they need a certain amount of money just to live everyday. It might be that the stress is too much when those things happen or it might be that someone just doesn’t work out as a cofounder. But whatever reasons, there’s no blame to be assigned. And I think you know having a vesting schedule in place and having discussed that beforehand and also the cliff, you know even if you have a longer cliff and let’s say a person has to leave for personal reasons, you as a cofounder you have the flexibility to discuss what that person really should have. So to give you an example, if someone has to leave a startup because they need to have really good health insurance, we actually had this happen, he needs a really good health insurance because he has a medical problem with his wife and he actually had to go back to the prior job that he had and the company was very happy to take him back on. You know, that’s the situation that like no one can foresee and it’s not an ugly breakup as we think of it most times. This is just like you know this is life you know. Some people can’t do it for whatever reason it is. And those founders agreed to having him a small portion of the company that was more than he was entitled to because it before his vesting, sorry, before his cliff, and he still stays engaged to this day with the company as an advisor and I think the second he can you know leave with the other company has proper health insurance, he’s going to be back on as a key employee. So I think it’s something to think through. Too few founders think through at day one.
Alejandro: Got it. Got it. So I guess for now switching gears a little bit here…
Thomas Korte: Yeah, sorry.
Alejandro: … and talking about the – no, no worries. I think this is fantastic for the people that are going to be listening so I guess switching gears here and talking about the financing of Angel Pod. How much, and I don’t know if this is public, but if it is how much capital has been raised for Angel Pod so far?
Thomas Korte: So we raised since inception probably about $70 maybe $80 million. I don’t know the exact number. And you know what’s interesting is the evolution of how this actually was raised because when we first started Angel Pod in 2010, it was really a vehicle just from Corinne and I where we invested our own money and that really went through the first several cohorts where we were angel investors and that’s how we did it with the difference that we have in office and we have people with us and we worked with them really closely. Around 2013, we raised our first fund. That fund with the relatively small fund, at the time of $7 million, well today a very small fund. At the time, it was probably a case size fund.
Thomas Korte: And that one was raised from are still high net worth individuals and very small fund to funds. And then our last and most current fund which we raised this year is a $50 million fund and that is purely institutional investors so this is fund to funds institutions with you know the smallest investment today is about $10 million in to the fund.
Alejandro: Got it. Got it. Okay. Fantastic. So do you also would consider like family offices and stuff like that would also invest in something like this or not?
Thomas Korte: Yeah, absolutely. I think you know what’s important is to understand the asset class of accelerators which is different from even micro VCs and certainly from venture capital. You know I think accelerators or certainly Angel Pod can be bucketed in to the pre-seed seed of venture capital. And we actually structured it and see ourselves exactly like a venture capital fund but for any investor that invests in a pre-seed fund, there’s a couple of things to consider. One, the exit horizon is very long. You know, we invest, when there’s a founder or a couple of founders and a prototype. So for this company to mature, to raise more rounds of funding and eventually to exit, it is a long horizon so I think that’s the most important thing to understand as an investor in pre-seed and even seed investments. The second one I think is to understand that the failure rate is fairly high and it is by design. You know in pre-seed you want to make a relatively large number of bets and then follow on selectively in companies. So it’s really it’s a Darwinian process where at that stage it’s incredibly hard to see what the future winners are because there’s nothing to go with. There’s no data. There’s really nothing you can make an evaluation on apart from do you think the founders are capable. Is it an interesting industry? And is the approach they’re taking somewhat unique? Is the business interesting? So the failure rate is higher early on but then the multiples get you know very interesting as soon as you hit the B round of funding. And I think for family offices, for anyone that makes these investments, it’s important to understand that dynamic that is specific to pre-seed.
Alejandro: Got it. Got it. You were mentioning that you guys got started in 2010 and since then it seems like everyone and their mother has been launching an accelerator program. Now the good news I guess for you guys is that you have always been ranked right at the top with other programs like Y Combinator. What makes Angel Pod different?
Thomas Korte: You’re right. I would have never guessed that there’s hundreds or even thousands of accelerators when we started. Now it’s really become a thing and in many ways it’s good. Accelerators have different reasons to exist. Some of them are for regional development. Some of them specific to a vertical or backed by a specific corporation that wants to induce innovation. Angel Pod has always been a very horizontal tech accelerator so very classic. We’re interested in any company that uses technology to solve a problem at mass scale. So it doesn’t matter if you are thinking about technology to make I don’t know make legal practices more efficient or marketplaces to sell cars more efficiently, or you know API products to build cloud software more efficiently. As long as it’s technology based and it can scale very, very quickly when successful of course and become very, very large, that’s kind of like the company we’re looking for. You know what has always been different about Angel Pod from let’s say you know the classic early accelerators, Y Combinator, Tech Stars, Five 500 Startups, is that we’ve always focused in a very small cohort. We’ve interviewed a lot of people. We have a lot of applications but we always just pick a very small number, usually around 15 companies per cohort. And the reason for that is going back to the very early at the start of our conversation, we want to work with these companies. We actually want to be with them and have an impact, Corinne and I working with them. And I think some of the success have show that works. We worked with them very closely. We are in the office with them. Unlike really any accelerator, Angel Pod doesn’t have mentors coming in that speaks to these companies. It’s really just Corinne and myself and the founders of these companies that are there trying to figure everything out. And when I say everything, I mean everything. This is from what is the most interesting business that they could build in the context of what they want to do. What is the revenue model at scale? How do they acquire the first customers? How do they—anything. How do they hire their first engineers? Really anything that a business needs. And because we are so small and so focused on a small set of companies at the time, we can really have an impact working with them and customizing whatever this one company needs. What you won’t see at Angel Pod, one you won’t see mentors coming in and out giving kind of canned advice or conflicting advice at worst. You won’t see us in a classroom setting where people take notes and learn something. That’s not the place for Angel Pod. We work on the specific company and often times the companies are the stage where there are specific things to be figured out. It’s not just, “Oh, I have an idea. Now let’s start.” They are slightly more in to the company building and we have specific things we need to focus on. I can focus on them.
Alejandro: Got it. I mean I will say very impressed because I saw that for example Harvard Business School I think that the acceptance rate is like 12% and that compared to the acceptance rate of Angel Pod being 1%. I was like very impressed. Is that right?
Thomas Korte: Yes, we have, you know, we get a lot of applications about 4,000 applications per cohort plus minus. We end up interviewing probably around 200. We interview everybody that we think is interesting and it fits kind of in to what we like doing. We end up it’s usually around 200, 250, 300 interviews that we do and we accept somewhere around 15, sometimes 12, sometimes 18 companies in every cohort. So yes, the acceptance rate is well below 1% at Angel Pod.
Alejandro: And you have the program in the Bay Area and then you have it in New York City so what is the difference that you see in the companies that join one or the other location?
Thomas Korte: So there’s really no difference at all actually. We have people come to that location for Angel Pod so we end up having probably about 30% to 40% international founders coming to Angel Pod. Before New York, there’s people from the Bay Area that come out. You know it’s a very focused two and a half, three months program. People fly back and forth. Actually if you’d ask me where is the best place to have an accelerator the way Angel Pod runs, I would say look the best place would be like on a remote island where there’s really high speed internet connection because what we do is so unique. We’re there with the founders. We don’t rely on people coming in and for the most part we have a closed door policy like there’s no one comes in to our office, well certainly no employees from the company if they have any already. No mentors, no meetings, no advisors. And so we really could be anywhere and I think that’s reflected in the companies when they come to us. They are from anywhere and they can be anywhere for that short period. It’s very intense short period, almost bootcamp like experience where all that matters is your company, the relationship you’re building with Corinne and myself and the relationship you’re building with the other founders and the cohort which over time is probably disproportionately affecting your company. I always say being a founder is really lonely. You’re at a certain stage. I mean just because someone has started a company two years ago doesn’t mean you have the same problems, the same source going through. If you’re a founder and you have people that are exactly at the same stage that you’re at, just about to fundraise, after that just about to hire first set of employees, a few years after that, the struggles of hiring your first VPs, figuring out revenue, and the people that you know so intimately that you spend three months with in the same place, become a really, really important support system. Most of the founders tell us years later that some of their closest friends are the people that they went to Angel Pod with and that’s fantastic for the network because whatever we do to foster the network at the end it’s the relationship between people that make the network worth and the value that they create between themselves without us sending emails, without us setting up events and all of that. And those relationships are just really, really strong and that’s pretty one of the hidden benefits of Angel Pod that I didn’t foresee happening when we first launched it, just the strength of the network between the founders without us even being involved.
Alejandro: And is there like anything that you do there to like do you have like a platform or how do you make that network be a little bit tighter?
Thomas Korte: So what we do we have mailing list and things like that. We have happy hours so people get to know each other. But I think the most efficient way to do that is really for me to be switchboard a little bit. Through the fundraising process, it’s really important as current Angel Pod founders so the current cohorts, a fundraising, they are reaching out to the founders that have fundraised one cycle before, that are two cycles before that, they have a database and see who has raised money from whom, who’s spoken to whom. And the founders from previous cohorts are really active in making introductions to investors. Now one I think that’s counterintuitive in that process is that it would be very easy for us to make introductions, right. We know all these investors extremely well. We know what they’re doing, what they’re like and we do make a good number of introductions but in a way as Angel Pod we love our companies equally, and I think the smart investors know that. The investors know that you know I will introduce a company and I will find the best things about this company for each investor. I think what’s different if introductions come from previous Angel Pod founder, so people that have gone through a cohort, before the current cohort, is that the founders they have to meet those founders. The current founders have to meet the former founders. They have to convince them that this is a cool business that they’re building. They have to give them the page because that’s the way to do it so it’s both practice but kind of you know getting buy in from other founders. And then if those founders are comfortable, they’re like, “Hey, there’s these two or five investors I think you should talk to and I can make introductions to,” or they’re honest and say, “I think those are great investors for you but I can’t make the introduction because I don’t have a super strong relationship with them.” And so this process of learning how to fundraise even with existing, sorry, with founders of previous cohorts is super valuable exercise that is much, much more beneficial to the companies than us just making introductions to every investor on the planet which we probably can, not on the planet but in Silicon Valley.
Alejandro: Absolutely. I think that the social proof what we’re talking about early stage investing is critical because trust is everything.
Thomas Korte: Absolutely. Absolutely. I mean that’s well said. You know as a founder and when you look at what we do at Angel Pod, a very, very important part is the fundraising and the fundraising process. Our companies, we get them into a point where what they have—when they apply, you know we try to find the best founders, best founding teams with the most interesting businesses in really large industries. Then we have the luxury of three months with them to actually hone in on all of that, right. Is there a better way to do this? Is there a slight more narrow vertical that might be more interesting to start with, all these things that are specific to a company. But then the second part, once they’re ready to fundraise which usually happens within six, eight weeks, understanding the fundraising process and really going through a fairly methodical approach of how to fundraise and preparing them for this fundraise. The fundraising starts many, many weeks before you have your first meeting and as a founder, you don’t fundraise everyday. Most likely this is the first time you do it and even if it’s the fifth time you do it, you’re not a super pro at it because that’s only five times you do it. You become really good at hiring. You become really good at code review, whatever it is. But fundraising is always something hard for almost any founder. And so having us by their side helping them go through what this process is you know makes them I think disproportionately more likely to actually raise rounds. Many founders I see this a lot from founders like from all over the world to Silicon Valley for two weeks trying to fundraise and many of them don’t succeed and it’s not because they’re not good founders. It’s not because they have not good businesses. For the most part, they have more revenue than their Silicon Valley counterparts for sure because that’s what most parts of the world value most. What they’re failing at is understanding the fundraising process and this social proof and this trust building that you just alluded to. You know, who are the people that can introduce me, why can they introduce me to? When you talk about networking, you can land on Silicon Valley for two weeks, hope to network, get around together, get back out and build your business somewhere or even relocate your business in Silicon Valley, it’s really a process that takes much much longer than that. And networking as in ‘I give and hopefully I get,’ not just ‘I ask for stuff’ which is not networking, is really, really important that it takes time.
Alejandro: Of course. And how much capital have the companies in your ecosystem of Angel Pod have raised so far?
Thomas Korte: So it’s a bit of an arbitrary number. So hold on to your seats, it’s $1.4 billion.
Thomas: Which of course you know is there’s a small number of companies that have raised a lot of money and then there’s a good number of companies that have raised a significant rounds and of course there’s a fair fair amount of failure in there. What’s interesting about the portfolio of Angel Pod company which is about 140 companies by now through 12 cohorts is that you know in every cohort, there is one or two companies that now have raised very significant funding and are worth well over $100 million, some over $500 and even some unicorn valued over $1 billion. What’s interesting is that it’s not one layer out of a whole portfolio. It’s 10% of our portfolio, almost 10%, 9.4% or so, is valued over $100 million today.
Alejandro: Got it. So I guess from these companies that you know have raised this money and perhaps some of them have done the full cycle of getting it all the way to the I would say to third base or to home, what is so far the amount of exits that you guys have seen already?
Thomas Korte: So we’ve had, I don’t know the exact number but I think it’s probably around 15 exits or so. Several of them are kind of accu hires meaning the team was acquired for you know a significant amount of money for most people but in Silicon Valley term, it’s not that much money, so sub $10 million. And then we have some really interesting exits that are significantly above that. Actually two of them we can’t say how much they were but they were significantly above that for all trails and [34:22]. And then our largest exit today which came really early in Angel Pod in 2013 was MoPub which was sold to Twitter just days before the IPO and that end up being an exit that was valued roughly at $750 million by the time Twitter went public and the lock up period had expired.
Alejandro: Wow. Wow. Because when you guys get involved like what’s typically like for example what ticket sizes do you guys put in and how does that structure work?
Thomas Korte: Yes, so we invest on day one as companies are accepted to Angel Pod about $120,000. We get about 7% in common shares for that investment. And then we make follow in investments as companies mature so if companies out of Angel Pod do well, we programmatically invest in them. We now invest up to about $2 million per company.
Alejandro: Got it. And it must be like unbelievable the data that you guys now have and some of the patterns that you’ve seen from all these different founders that you have worked with. So I guess like to dive a little bit deeper in to that, what are those patterns that you have been able to recognize on founders that go out and end up being wildly successful?
Thomas Korte: I wish I have a golden formula. I think it’s humbling every time as an investor to see when you are wrong both when you decline companies and they end up being successful companies or when you see companies that you think are super successful and you love the founder and you love the businesses and for some reason they don’t work out. Of course when companies that you have questions about and worry for a long time, all of a sudden become these big successes. I think holistically there’s a couple of things I think that matter and I’ve spoken about that sometimes in the context of international founder. So we have a disproportional success with international founders. People that come to the US to start their company or have recently come to the US certainly not even first generation, they actually are the immigrants, the people that were educated somewhere else and come to the US to start their company. And I think they have some traits which are applicable to anyone. It doesn’t have to be an immigrant, a recent immigrant at all. I think that’s kind of the grit like the willingness to succeed, the willingness to pack your bags and go somewhere either physically or just saying I’m going to do this. This is an unlikely journey and this is not a premade path that many have walked. The chance of failure is high but I’m going to learn something from it. So to collect this immigrant spirit, I want to say, is something that we really see standing out even for the founders that are not immigrant that end up being successful. They have that spirit of immigrants. The other thing that we really is people that are adaptable, people that see what’s working, what doesn’t work. They’re opinionated but they use data and smarts to make decisions and are willing to deviate from what they thought was right, and kind of find that path. If a startup founder, you make 20, 50, 100 decisions everyday or week and it’s not about making the right decision at every turn. It is making more right decisions than wrong decisions and keep honing in to the direction there is. You know there is a million ways to build a billion dollar company as long as you keep moving forward on the right path and you find like the best way to move forward, you’re more likely to succeed. And the last thing I want to say is you know many of them just want to be successful. They have to prove something to themselves. They have to prove something to the people around them. They have gone through hardship and they want to prove people wrong. And I think that goes the way in the grit and kind of like making it happen. Entrepreneurship is uncomfortable. Entrepreneurship is hard. The chance of failure are very high and the people that just stick with it and have the grit we tend to see being more successful.
Alejandro: Got it. And I think that you’re in a very privileged position because you get to see now all these different founders, all these different sectors, all these connections that you have to some of the world’s top investors, so I guess after like being like so in the ecosystem as you are, Thomas, what are the sectors that you think have the most amount of potential growth for the next couple of years?
Thomas Korte: I think anything. It would be too easy to say AI or this or that specific thing that’s on vogue right now. But we are in such a transformational period right now that unlike we’ve ever seen I think in the history of mankind and as much as this sounds like a cliché, everything is going to be disrupted. It doesn’t matter which industry, which company, someone is going to do it differently and it’s going to make it more efficient and will build a multi billion dollar company behind it. So when you ask me what am I most excited about, you know when we get applications of an industry or of a product that I have never thought about, I’m like, “Oh wow, I didn’t think of that as a multibillion dollar company, sorry, multi million dollar industry or multi billion industry rather,” and see something unique where a team had like a smart approach to doing that and disrupting that industry and it literally can be anything from you know transportation which we’ve seen a tremendous amount of disruption just in the past two years from Uber to Hyperlube to now the scooters, mass transportation, all of those things, all the way to any service business there is. It doesn’t matter if you’re a plumber, if you’re a lawyer or if you’re an accountant. There’s going to be massive disruption. So we see the most fun part about Angel Pod is kind of seeing all the applications coming in and seeing things differently, hey I haven’t thought about that much. Like wow, this is interesting and kind of getting deeper in to it. On the flipside, the worst part about Angel Pod is declining so many people with very little information. Actually what’s the hardest part is when people then reach out and say, “Can you tell me why you declined us?” And just the pure volume of declines that we have, we unfortunately can’t answer that. Also, it will be very presumptuous of us to really make a full judgment on a company on why somebody is. It’s just for the most part we decline people because they don’t fit in to what we do or what we think is interesting or somehow a gut feeling about it. But sorry, that’s just a quick, best part of Angel Pod you never know what the next big business is when you open your inbox and you look at applications. Worst part saying no to so many people and often times because we are one of the first investors that they have an interaction with, it might hurt disproportionately hard to have and hear a no from us. And we hope and in the application letter, we actually tell people like don’t take that as a judgment. We didn’t spend that much time on the application or any application. It’s just not right for us.
Alejandro: Got it. Got it. Makes sense. I mean out of 4,000 applications that you guys receive, if you had to sit down with everyone, oh my god, that will be a little tough. But anyhow, I completely get it. Thomas, for the people that are listening, what is the best way for them to reach out and say hi.
Thomas Korte: Oh okay. So there’s a couple of ways. One as you just said, it’s hard for us to do one on ones because we have such enormous amount of inbound. And what I do is I go to conferences all the time. I speak. I’m at TechCruch Disrupt. I just came back from [Websun 42:39] in Lisbon early this week. When I’m there, approach me and say hello. Find me. I love to speak to people. That’s why I’m there to spend time with people that I would otherwise not meet. I think if you’re a founder and you’re thinking about a company, if you have a prototype, if you have something, if you’re committed to your company, certainly a way to engage with us is through applying at Angel Pod which is angelpod.org. If you are an investor, same thing on the website. It’s really easy. There’s a form for investors. We try to systematize and put everything in systems. Also how we engage with people at scale so the best way is take a look at the website. It tells you where to find everything and then if you do see me in person, stop me and say hello.
Alejandro: Fantastic. Well, Thomas, thank you so so much for being part of the show today.
Thomas Korte: Thank you very much. I really enjoyed it.