Fin tech founder and angel Aidan Yeaw discusses building and investing in companies such as NODE40 and Unruly Studios. Great chat with a Walnut colleague.
Highlights:
Sal Daher Introduces Aidan Yeaw
NODE40
NODE40 Founding Story
Unruly Studios
"... The other component to it is that they're programming, but they're doing physical movement, physical exercise, large motor, physical exercise, running around, jumping up and down, and so forth because kids are too sedentary..."
How Aidan Came to Angel Investing
"... There's an ecosystem of small-scale venture capitalists that are growing, but the opportunities are so numerous, and the venture capitalists are so few, that they're an excess of opportunities, and a lack of funding, a lack of capacity to address this..."
CoolSculpting
Aidan's Career Journey in Fintech
Advice to the Audience
ANGEL INVEST BOSTON IS SPONSORED BY:
Purdue University entrepreneurship
Peter Fasse, patent attorney at Fish & Richardson
Transcript of, “Angel & Founder”
Guest: Aidan Yeaw
Sal Daher: I'm really proud to say that the Angel Invest Boston podcast is sponsored by Purdue University Entrepreneurship and Peter Fasse, patent attorney at Fish & Richardson. Purdue is exceptional in its support of its faculty, faculty of its top five engineering school, in helping them get their technology from the lab out to the market, out to industry, out to the clinic.
Peter Fasse is also a great support to entrepreneurs. He is a patent attorney specializing in microfluidics and has been tremendously helpful in some of the startups which I'm involved, including a startup, came out of Purdue, Savran Technologies. I'm proud to have these two sponsors for my podcast.
Sal Daher Introduces Aidan Yeaw
Welcome to Angel Invest Boston, conversations with Boston's most interesting angels and founders. Today we have with us an angel, a colleague at Walnut Ventures, Aidan Yeaw. Welcome, Aidan.
Aidan Yeaw: Thank you, Sal. It's great to be here. It's an honor to be on your podcast, with other great people better than me like Jason Calacanis. It's an honor to be here.
Sal Daher: [laughs] Oh, no. For me, I'm really honored that you listen to the podcast. Every time I talk to someone who listens, I'm like, "Wow, this unbelievably accomplished person is listening to my podcast, I better pick up my game." I better listen to my daughter Grace Daher, who coaches me as a host, that she's always telling, "Oh, talk less, let your guest talk more, and so forth." Then I think, "Oh my gosh," and I've been a blabbermouth in front of people like that.
Anyway, it's always humbling. So glad to have you on. Aidan is a very, very thoughtful angel investor. I love his contributions of Walnut. Aidan comes from a background of product development. He's worked at large companies like Fidelity for many years, and smaller companies. His focus is FinTech and product. He has just a wealth of knowledge in that space. I think you epitomize sort of the angel that I'd like to attract to investing a little more in the life sciences, particularly in the wet lab aspects of life sciences because I think there's huge potential there.
Aidan Yeaw: I would acknowledge that that's probably one of my weaker points, Sal. It's one of the reasons why I love angel investing because I think it allows people like myself who aren't really in life sciences to get exposure and really understand and it's better to co-invest with people who really know the space better, and you really absorb things. I feel like when I started angel investing, I shied away from life sciences, but gradually thanks to angel groups and angel funds that I've been involved with for the last eight years, I've gotten a lot better. I know now if you asked me like when an FDA de novo thing is, I can tell you that, but when I first heard that eight years ago, I went running for the door, the exit door.
Sal Daher: What is that?
Aidan Yeaw: Yes, exactly.
Sal Daher: Let's get talking startups. What startups are foremost on your mind right now that you're excited about?
NODE40
Aidan Yeaw: What I love about angel investing and the startup community is there's so little you can predict, and it's so interesting where the journey leads you. I can't tell you how many companies have entered my ecosystem, whether hearing a pitch all the way to investing, it's really been thousands probably at this point.
Most recently, I actually invested in a company a couple of years ago, called NODE40. They are doing basically crypto tax and accounting situations. They're very much in the digital asset space. I had been doing some advising with this company and I kept in close touch as also a board observer, I'm still a board observer, but I joined the company recently as a COO. This is a first for me, where I actually joined a portfolio company-
Sal Daher: Oh, wow.
Aidan Yeaw: -because I'm so excited about what they're doing, and they also could use some help from someone with my background, having come from more traditional financial services and what have you. So I've been really helping them out, move along, and we're having great traction as a lot of people have known with the FTX meltdown and the ensuing chaos, it's really shone a bright light on compliance, which as people like you, Sal, know, in financial services a known thing, now the crypto space is coming into that.
It feels like a great time, and we have great traction selling into mostly big accounting firms. It's a really exciting time to be in the space, and the stories you hear about SPF, barely a day goes by where we're not interacting with people who are directly connected to these events. It's really a fascinating time to be in this industry despite the tumult, but I think there's an old Chinese proverb that says when there's chaos, there's opportunity. I think we're in that stage in the crypto space.
Sal Daher: I am a crypto skeptic, very much a crypto skeptic. I have yet to find a use case for crypto that is so compelling. To me, it seems like a very fancy technology looking for a really killer use case that hasn't found it yet. However, I've had Jeff Rosen of Broom Ventures on. He founded companies in the space. I think there is certainly plenty of money to be made in the picks and shovels aspect of that. However useless I think it is, it is a reality that attracts a lot of money, and a lot of people are involved with it, and it has its needs.
I recognize that there are some very interesting businesses to be created providing services, the area where it's most efficient. Would you explain to me exactly what NODE40 is offering and how it differentiates itself from the competition?
Aidan Yeaw: It's a crowded space, Sal. They're about anywhere from 12 to 20 different other entities doing this around the world that basically help people who have digital assets, mostly cryptocurrency, but also gets into NFTs and other DeFi types of situations. Most of the companies started with offering directly to retail users, directly to the consumer. NODE40 was no exception but realized over the last year or so they had developed a niche in really handling the harder use cases of really elevated crypto activity and digital asset activity, especially in the DeFi space.
That's decentralized finance. It's supposed basically using Ethereum-based protocols to do various things. That's where the company's found itself, and it has broken away from the pack in selling mostly to accounting firms and bigger enterprises versus selling it individually to individual users.
That's where-- and especially handling the harder use cases meaning if you're making a life trading in crypto, have a lot of activity, whether in individual, a fund, or a firm, that's where NODE40 has really found its niche, and there really isn't anyone else out there doing it quite that way. It is a crowded field. We just had our first bio in the space announced earlier this week. It's really starting to pick up an interest throughout the ecosystem.
Sal Daher: What caused you to instead of just being a kibitzer decide to get into the chess game?
Aidan Yeaw: Crypto scares me. [laughs] What I've always found fascinating is blockchain. I've been a member of a local-- a Boston group, an angel group that focuses on blockchain called Chain Reaction. That's how I initially came aware of NODE40 and led me on to write a series of checks as an angel investor including bringing to Walnut and other angel groups throughout the area.
I'd say the blockchain has always enticed me as a veteran in financial services. I'm waiting for my breakthrough of really applying blockchain to really hard infrastructure problems and financial services. For example, I worked extensively in the 401(k) world both at places like Fidelity and a startup I co-founded called SaveDay. I've yet to really find my epiphany of the aha moment of this is how blockchain can solve these things.
I continue on that pursuit. In the meantime, I feel like this is a great opportunity for me to really go deeper and better understand crypto and understand where it can do especially on the blockchain stuff. Like you, Sal, I'm still a skeptic. I don't hold any crypto as of today. I keep meaning to make a trade, but at this point, I don't even know which exchange I'd want to go with. Who's going to be here next week? I'm not so sure.
Sal Daher: One of the problems with the cryptocurrency, blockchain aside-- I have qualms about blockchain in general as well, some technical reasons, but also cryptocurrency. Part of the beauty of cryptocurrency is that you get rid of intermediaries. It's a trustless system. You don't have intermediaries that you're trusting, but then you go into an exchange, you have to trust exchange. You have to give up your keys and everything to the exchange, so it becomes a single ledger system.
That single ledger is the exchange. Your point of failure is the exchange if the exchange is not reliable. It defeats the purpose of this idea of a currency that you have direct ownership and there are no intermediaries between you and holding your currency. For me, it is impossible to own, okay? To own it in a way that realizes its full potential, its theoretical potential. That's the fundamental flaw of cryptocurrency. I'm not talking about the blockchain. It's just cryptocurrency as of itself.
Aidan Yeaw: Absolutely. The best example of that is, I think, the stablecoins. Stablecoins, I think, are meant to be what bitcoin and satoshi are meant to accomplish. Then there's been so much lack of faith and trust in stablecoins. I'm really pleased. I'm glad, right in our backyard, what I would view as the best stablecoin and the most legitimate one is offered by Circle with USDC. They seem to be doing most things right, and I'm glad they're here and establishing a better track record in the ecosystem. They've partnered up with firms like BlackRock and State Street to custodian things correctly. Tell me another one.
Sal Daher: Custody implies--once again, we're back to intermediaries. Not that BlackRock cannot be a trusted intermediary, but it's like we're back to intermediaries. It's like you have this thing that is supposed to disintermediate all those intermediaries, and it doesn't because it can't be owned-- operationally, it's extremely difficult for individuals to own it directly. That's one of the contradictions that I see in it. Then just the architecture, the computational costs of doing all the stuff compared to having a single ledger, there's just no comparison.
Aidan Yeaw: We'll get better. I think that's where bitcoin has created a major problem there, but there are lighter versions on the mining side. I think those days will get better. I still say what's magical about it is like when you make the payment. I'm sure for any of you who deals with international payments, and it could take--
Sal Daher: Absolutely.
Aidan Yeaw: When we fund angel investments, Sal, it's stunning how long the wires can take and how they get lost. It's really almost breathtaking for me when I see some crypto transactions ticker, and it's instantaneous.
Sal Daher: As a technology, I stand in awe that it really is a tremendously ingenious thing to transform a digital asset, which is by nature immediately reproducible, and to make it unique, that is a feat of almost magic. Theoretically, I find it really awe-inspiring. However practical application, I'm still skeptical. I remain open-minded. I was listening to a podcast with Mohamed El-Arian the other day, and he thinks that there is great potential for this in precisely that area of funds transfer, international funds transfer, which is a massively inefficient system, but I'm still a little skeptical. Anyway, tell me about the founders of NODE40.
Aidan Yeaw: They're really amazing founders, and that's one of the things that led me to invest in the company and actually join the team eventually, a couple of years later. The CEO's name is Perry Woodin. P-E-R-R-Y W-O-O-D-I-N. The CTO and more technical is Sean Ryan.
Sal Daher: S-E-A-N?
Aidan Yeaw: Yes.
Sal Daher: Excellent. What's the founding story? How did this company come about?
NODE40 Founding Story
Aidan Yeaw: Yes, it's really interesting. They were actually one of-- Perry and Sean, the first incarnation of NODE40 really was doing something else. They were actually one of the first staking companies in crypto. They were doing some work in that space, setting up other players, master nodes to do staking. They were getting paid in crypto, their business--
Sal Daher: Would you unpack that a little bit with staking? What does that mean?
Aidan Yeaw: It's essentially the idea of like, if you have a crypto asset, you can give it or loan it out to another entity and get some additional income from it. It's like lending an asset in the crypto world.
Sal Daher: A little bit like margin lending.
Aidan Yeaw: A little bit. Right. Fewer players, I guess. [chuckles]
Sal Daher: Not margin, but lending of an asset for trading, for shorting purposes, or whatever.
Aidan Yeaw: Yes, I'd say that's probably the most accurate description, Sal. Essentially they were very responsible and wanted to pay their taxes and do it correctly, and they realized during the course of that, they went to traditional accountants, traditional tax people, really were getting nowhere. The data that they had was really messy. They ended up building their own in-house solution just so they could pay their taxes appropriately and stay in the right side of the tax man.
They realized in the course of that project, they're like, "Wait a second. No one else is doing this. Maybe that should be our business." Several years ago, four years ago, they pivoted into the space they're now in, which is crypto taxation and accounting. I'd say that the thing is really interesting, and you can appreciate this, Sal, is the cost basis for crypto assets is really the wild west. As you may know that anytime you sell something, whether it's a gain or loss, you have to track that basis.
Sal Daher: Cost basis is basis for comparison. When you sell something, for figuring out how much money you made, what did it cost, that's the cost basis.
Aidan Yeaw: Exactly.
Sal Daher: You usually know what you sold it for, but the cost basis is sometimes hard to determine.
Aidan Yeaw: Exactly. It's hard enough in the traditional finance world, and I'd say the crypto space is still figuring that out. A lot of customers will often think that the exchange is doing it for you or it's accurate and--
Sal Daher: Keeping track of tax slots.
Aidan Yeaw: Exactly. You can get into a real raffle where you just assume a simple-- for example, a LIFO method, last in, first out, popular accounting method, but sometimes it doesn't apply, or sometimes applying that method can make the difference between having a gain or a loss. That's where having that variability makes a lot of sense. To be able to have a big look at the full life cycle of that digital asset to capture an accurate basis is really important for a lot of people.
We've literally had clients have million dollar tax bills that all of a sudden, applying a different method, turns it into a gain, reverses a bill. It's really kind of cool how that can work out. A good example of why I feel like I have to play here a role because I come from more of that traditional finance world, which solved for these problems 20 years ago. You remember the day trading craze in the late nineties, right? The same thing there, no one knew their cost basis, and now it's crypto's turn to figure these things out. It's in some ways history repeating itself, but not exactly unknown territory, especially when it comes to the taxability of this.
Sal Daher: Interesting. Very interesting. Is there another startup that you want to talk about?
Aidan Yeaw: Yes. When I got into angel investing, I thought I would do mostly FinTech deals, and quite frankly NODE40 was the first and only. I've looked at plenty, but the other one that-- the other theme I seemed to come up with, and it's a company you invested in too, is Unruly Studios.
Sal Daher: Yes, yes.
Unruly Studios
Aidan Yeaw: I'm a parent, I currently have three sons.
Sal Daher: Bryanne Leeming is the founder. She's been on the podcast a couple of times. Explain to the audience what Unruly Studios is providing.
Aidan Yeaw: Yes, sure. Thanks. Essentially, there is a unique play where they're providing in the category of STEM education, I forget what that acronym is. It's the--
Sal Daher: Science, Technology-
Aidan Yeaw: Engineering and Math. What they've done is they've developed a real cool hardware and software combination where kids, young children, I think it's in elementary to middle school, children can use a-- they can actually code what they call a Splat. It's a little pad that lights up and I think it has sound too.
"... The other component to it is that they're programming, but they're doing physical movement, physical exercise, large motor, physical exercise, running around, jumping up and down, and so forth because kids are too sedentary..."
Sal Daher: That they can stomp on. It's not something for them to sit-- The other component to it is that they're programming, but they're doing physical movement, physical exercise, large motor, physical exercise, running around, jumping up and down, and so forth because kids are too sedentary.
Aidan Yeaw: The kids can actually code what the Splat is doing. That's the hard work component. It could be like, "Oh, you got to go to Splat 1 and tap it and go to Splat 2 and stomp on it." There's all sorts of different permutations that the children are allowed to play with in the coding side or the software side, and then it manifests itself into the actual hardware. It's sold into schools, mostly schools, private and public. It's meant to bridge that gap of physical education, but also coding and engineering skills. It has that really interesting medium thereof not allowing the kids to be sedentary, and just pursue it.
Sal Daher: Also, the kids collaborating in what they're doing.
Aidan Yeaw: Good point. Yes.
Sal Daher: The idea is that they'd be doing this in teams. I remember Bryanne Leeming when she had a prototype of this thing that she and her husband had built with materials from Home Depot, lugging it around, and showing and so forth. At first, I said, "Oh, this is such a crowded space, education, games, it's so crowded, it's so difficult to get through," but she's so persistent.
I think one of the facts is that she was a college athlete, she's a very athletic person, and I think there's a lot to be said for athletic founders, just to have this grit and attitude of persistence and just economy of movement, and so forth. Her vision is very much what she had at the beginning. A device that creates interaction for kids that is physical because she's an athlete and she really values physical exercise.
We're talking at a time when the National Academy of Pediatricians has recommended that children who were obese be given GLP-1 agonists and have gastric bypass surgery. Obesity has gotten to that point among children. Something that helps develop their mind while they actually move is hugely valuable.
Aidan Yeaw: Just to be able to inspire the creativity in ideation side on the coding aspect of it, so the kids can always tweak what's being done and constantly evolve, and I think that's--
Sal Daher: Create their own games, yes, create their own rules. The name was Unruly because the kids make the rules for the game.
Aidan Yeaw: Exactly. That's what I find magical that you can really spark-- to me, depending on the child, that can really pave the way into how you can code things and have software do things. I think that's what I really appreciate the most, especially as I started to mention, I'm a parent of young boys ages 3 to 14, and to encourage them to pursue the ideation and they play video games, and they often say, "Well, what if the game could do that?" I'm like, "Well, go ahead and do that."
One of my sons has actually developed games in Roblox that are deviated from other games because he didn't like what they were doing and preferred or thought that they could be enhanced. I just think that's a great life journey to start on, to allow your ability to code and program things that just don't seem ideal or you think there's a better way.
Sal Daher: Well, in a way, what the Unruly Splat allows kids to do, to create their own rules for the game, it's an analog for starting up new companies.
Aidan Yeaw: Sure.
Sal Daher: They're finding new ways to address existing problems, which it didn't exist before. In a way, they're playing by different rules, by new rules. They have to create their own structure and then adjust to the realities that they're trying to address. I wouldn't be surprised if they actually lead kids to be entrepreneurial.
Aidan Yeaw: That's a good point. I never thought about that. I wonder if 10 years from now, we will sit around saying, "Oh, look at all these businesses Unruly incubated-"
Sal Daher: Loads of entrepreneurship popping up, and it all has to do with these Splats being there. I wouldn't be surprised. People who study development of children say that the ability to engage in unsupervised play, if they don't develop the ability to be asked to engage in games by the time they're four, then they never develop and they become disconnected. Play is serious business.
The playground is a place where really important things are happening for children. I mean, they're younger, they're before the age for Splats, but I think that there's a higher level of collaboration and so forth that's being developed for the kids in the Splat age. There's a huge potential there. Then she has the data from all these things. She has potential to tweak these devices to really make them even more effective.
Sorry, I was extremely skeptical about Unruly. I liked Bryanne and I thought that what she was doing was really impressive. Then I interviewed her, and after that, I wrote her a check. I wrote a small check, and then I invested several times because she's so good at executing.
Aidan Yeaw: She really is. I initially was introduced to her a couple of years ago, I think through you, and I too was skeptical. I was always impressed by her, but you know what? I didn't write my first check then. I think I snoozed a little bit and the round had closed, but I was on her investor distribution list, and I could see her progress and I could see, "Well, wow." She is, to your point, Sal, executing and communicating to her investors.
I'll tell you if there's one takeaway from my time with you, Sal, to relate to your audience, it's just like never underestimate the ability to communicate to investors and how important that is to investors, it's shocking-
Sal Daher: This is so important.
Aidan Yeaw: -how often overlooked or underappreciated or just forgotten that can be. Bryanne has been, I think, exceptional, one of the-- I would say, just one of the best examples I often cite. When another round opened up very recently, I think just last year, maybe in the last six months or so, I jumped on it. I said, "Look, I've been watching you for a couple of years now. I like your management style, I like how you're executing. I like how you own the mistakes." I'm like, "I'm on board."
One of the things I said I wanted to do with my investment, I invested a little bit more because I wanted to get Splats placed into a local school district here in my area in Newton. We haven't been able to execute that fully yet, but we're still hoping we can do that because I feel that strongly about what it can do, and I just want to help expand the beachhead for Bryanne, and on the team in Unruly, but just an impressive founder.
Sal Daher: I tried to get them in the local library where I live, and somehow it never happened. The people, I don't know, somehow they didn't see it, they had other stuff on their mind. It never happened, but I wouldn't be surprised if it's at the school. When I interviewed Bryanne, I was never in doubt about her drive, her grit, and so forth. It was just the space that I was doubtful about, and I thought, "Oh, jeez, she's so good at it, that she's going to overcome all these." The fact that it's a really difficult space to be in, and she's doing it. She's beating all the odds.
Aidan Yeaw: Yes, she really has. The one thing I remember most about her because there's an old saying, hardware is hard. There's a hardware component to this, it's important.
Sal Daher: Hardware is hard. Education is hard, and there are all these red flags that say, "Don't touch this stuff," because hardware means you have to have the hardware and the software. Stuff can get stuck in a container ship in the middle of the Pacific and all kinds of real-world things. It's so much easier to invest in software, but Bryanne broke through all those reservations.
Aidan Yeaw: She sure did and I remember early on to help solve for those manufacturing and logistics issues, she brought on someone who had done that for Hasbro early on. It was just so impressive, and she had the answers before I think she had the problems because I think, like you said, a lot of early-stage startups that are in the hardware space inevitably have some sort of issue where like, "Our Chinese-based supplier failed to deliver. We can't get them to compete, or the quality is poor, or we can't scale the logistics," and Bryanne, I think, handled it really well.
I think she had a few bumps, but she didn't have major bruises that I don't think a lot of other set of founders-- I give a lot of credit to her and her style and her proactivity.
Sal Daher: She calls to mind another very gritty founder, Susan Conover of Piction Health, which is a different type of space, and in certain ways, easier in a sense that she doesn't have a device that she's involved with, but she's in healthcare, and she's doing machine learning on images of skin conditions and creating a platform for that, but she has other problems, regulatory problems because they were in health care, and they've recently had a pivot so that the way that they're addressing patients and so forth has changed.
I've been meaning to have her on to explain that, but she's someone else who's-- tremendous grit, unusually mature for being so young. They've really looked around the corners for the headaches that are coming, and like Bryanne, they've been able to kind of dodge a lot of bullets. Not every single one of them, but they've dodged quite a few.
Aidan Yeaw: I don't know Susan. I don't know if your experience was that maybe you knew Susan before you invested in Bryanne, but I had I think a similar situation where the very first company I invested in eight years ago, also in the STEM space, incredibly dynamic female CEO and founder. This is a company that is now called KiwiCo. They do subscription boxes for children, mostly children, but they do for adults. You basically get them every month, an unassembled thing and you put it together, and it's great. My kids use them. It's great.
The founder of KiwiCo Sandra Oh Lin, she's there in the West Coast where I originally started angel investing and lived for 10 years, but Sandra is just a dynamic founder, really put together a great team. When I came across Bryanne, she reminded me so much of Sandra and the team at KiwiCo. It was so much easier for me to pull the trigger on writing a check because I saw so much similarity, and I think those two are just great examples of great female founders and just overall great managers that have really impressed me.
Sal Daher: It's funny, speaking of female founders, I see a lot more female founders now. This is my third decade, starting my fourth decade of angel investing. The first founder I invested in was a woman, Beth Marcus. In those days, there were very, very few women founders, but the thing is that those founders, they really stand out.
Aidan Yeaw: They sure do.
Sal Daher: Bettina Hein of Pixability, but now, there's a new generation of founders, who are just amazing. I mean, in the life science space, Laura Indolfi of PanTher Therapeutics, beating all the odds, and the number of female founders has grown a great deal in these last four decades. It's really striking. Aidan, let's talk about how you started angel investing.
How Aidan Came to Angel Investing
Aidan Yeaw: It's a little different than most, I think. Going back about eight or nine years ago, I was in living in Silicon Valley, Bay Area of California. I just left a company that had gone public and had a great IPO, and it was a great opportunity, but I realized I was living in the heart of a crazy ecosystem of startup life. I realized I'm so focused on my career that I really hadn't tapped into it. I made the full plunge and had left the financial services space and jumped feet first into a startup that was doing sharing economy type of basis. I quit. I was working for equity, the whole thing.
What I found as a lot of startups often do is that two of my co-founders got disinterested in the project, left. I decided to stick it out, and I started to try to raise money to keep things going. Realized I didn't really have great odds of salvaging this, certainly having two co-founders leave, not a great story. I know that better now than I did then, but I knew that's part of the startup founder journey to raise money. I said, "I'm going to do it. I'm going to try, and just learn, and maybe I'll fail here, but I'll find the lessons learned the next time around."
That's not exactly how it played out. What I learned in that process was that, as I was raising money, or trying to cork the venture capital and angel investors, I said, "Wait a second, I actually meet the definition of an angel investor. I'm an accredited angel investor." I said, "Well, wait a minute." I decided to stop what I was doing on this business and I said, "Let it just shut down. I'm going to actually join an angel group and really develop this. I think I will be a better startup founder and entrepreneur if I'm on the other side of this table, and really observe the best founders pitching and seeing how they raise money."
That's exactly what I got. At the time, I scouted up local angel groups in the Bay Area. I ended up joining a Keiretsu chapter, which is where they're based. For those of your audience who are not familiar with Keiretsu, they're a large global angel group, they have a franchise model, but they're headquartered in the Bay Area, they had three or four chapters in the Bay Area, and had hundreds of members.
When I found particularly attractive with that group is that there's just great brilliant people that were members, and that's what I really wanted to do. I wanted to associate with great angel investors who knew things and I could really learn from them. That's exactly what I got.
It seemed to me, one of the few predictions I think I got right, Sal, is that after coming to that point, I felt like my future self would live on this spectrum of being a founder and an investor, basically operator investor. I'm anywhere on that spectrum at any point in my life. As I mentioned earlier, I'm now in a point where I'm in a different situation with joining a portfolio company, but that's been my life, and shortly after starting angel investing, I did co-found a Fintech startup called SaveDay where we sold 401(k) retirement plans online to small businesses. It's a really exciting thing, I often think that creation is up there with my children, has been one of my great life achievements.
Sal Daher: Oh my God. [laughs]
Aidan Yeaw: I did that for four years, built the business to be able to prove product-market fit, had about 300 or so small business clients, and it was a really great opportunity. I left that startup the same day about four years in. It still goes on today, but without me. That's been my life since then. Then I made the decision to come back to the New England area about five years ago now. I'm originally from the New England area. I grew up in Rhode Island. It was coming back full circle. When I resettled back here, I was unfamiliar with the angel investing scene so I had to go through it again. I knew I wanted to keep doing it, and landed at Angel's Walnut chain reaction, and that's been my journey since.
Sal Daher: That's the thing about Boston. Compared to the Bay Area, it's a much smaller ecosystem, but there's massive amounts of variety here. There's a very cooperative, very rich, and there's a lot of knowledge in these groups. There's a reason why Y Combinator was started here. Facebook was founded in Harvard. There's a lot goes on here in the Boston area.
Aidan Yeaw: What I found most stunning, especially having started this and in the Bay Area is how accessible the venture capitalists here are in Boston and how they're really out there. I juxtapose that in the Bay Area where there'll be events, and they would usher the VCs on and off stage with security because there will be drones and people [crosstalk] Yes. It was almost like a feeding frenzy. There were some scenes where it got really ugly. I thought that was just the norm for most venture capitalists, and then when I came to Boston, I found ones that were open. They welcomed the opportunity to engage in discussions with founders and talk about fundraising. We were like, "Hey--"
Sal Daher: They're living among us.
Aidan Yeaw: They really are. They really are.
Sal Daher: Up in the clouds.
Aidan Yeaw: They're our neighbors. They don't want to have a segregated experience I find here in Boston, which I think is one of the biggest epiphanies I had in comparing the two different cultures of Bay Area and Boston area.
"... There's an ecosystem of small-scale venture capitalists that are growing, but the opportunities are so numerous, and the venture capitalists are so few, that they're an excess of opportunities, and a lack of funding, a lack of capacity to address this..."
Sal Daher: Well, that's why I've had so many VCs on the podcast, but the thing is that all they were talking about is on the software side. Angel Investing really grew up in the last 12 years in software. That's software eating the world as formulation of Marc Andreessen. On the life sciences, what's happening is that the most successful venture capitalists have gone in the direction of venture formation. They're creating their own moonshots, the drone shots, the smaller-scale startups, they don't have time for them.
There's an ecosystem of small-scale venture capitalists that are growing, but the opportunities are so numerous, and the venture capitalists are so few, that they're an excess of opportunities, and a lack of funding, a lack of capacity to address this. My mission really is to be an evangelist for life science investing, to talk to people who are investing in the software side of things, who grew up in the software side of things to consider taking a look at life sciences. Biotech is the big thing here in Boston.
Aidan Yeaw: For sure, getting stronger and stronger.
Sal Daher: Yes, the application of engineering to the life sciences is the particular specialty here in Boston. The Langer Lab, the idea material science for drug delivery, and some other ancillary spaces, those are the areas that are of particular interest. The possibilities are just numerous, huge, and there is a growing number of academics who are deciding to take the plunge and become founders. One of them, for example, we've mentioned already Laura Indolfi, she was a postdoc at MIT. She took technology from one of the labs associated with the Langer Lab into clinic.
She's taking that into the clinic. Talk about grit. She just doesn't give up. She's managed to raise the money to get her approach to treating solid tumors by encapsulating them with this drug-eluting material, and that puts the cancer drug directly on a solid tumor. Solid tumors are terrible to treat because they don't have a lot of blood vessels inside them. It's hard to get high levels of the drug into the tumors without toxicity to the patient. By encapsulating the tumor with this stuff, they get very high concentrations of the drug onto the tumor, and then outside that capsule, there's another layer that doesn't dissolve as fast as the inner layer. It keeps the drug on the tumor and prevents toxicity.
PanTher, I think, is extremely promising. They've also managed the raise on that little funding, significant on that little funding from the state of Texas. They're really off to the races. That for me exemplifies the promise of academics who are taking these really exceptional technologies to the market. In the case of PanTher, we're talking about tens of billions of dollars that they're needed, but in the case of, for example, a company like Savran we're talking under $5 million that got them to the point we're engaged in a strategic collaboration. I like this capital efficiency, highly motivated founders, numerous technologies, capital efficiency. That’s what excites me. Have you looked at that space at all?
Aidan Yeaw: Yes, I did. That’s where I find participating in funds, one investment that Hub Angels made a couple years ago in the space of Brixton Biosciences. It's a good example that connection to academia, right? Are you familiar with CoolSculpting?
Sal Daher: Yes.
Aidan Yeaw: The founder of that is MIT Rox Anderson or he's ties to MIT, I should say. I don’t think he operates out of Mass General.
Sal Daher: No. Explain for the audience.
CoolSculpting
Aidan Yeaw: Yes. What Brixton is endeavoring to do is taking some of the concepts out of CoolSculpting and instead of-- CoolSculpting I think is mostly for weight loss and whatnot, but there's a concept that was floated by the founder of CoolSculpting where they could use freeze nerve endings and that would reduce the reliance on pain medications especially opioids. I don’t know if it goes into the cancer treatments the way you're explaining about PanTher, but what I found fascinating it's just be able to leverage the academic world. This was thought up by a brilliant MD. His name's Rox Anderson. He's the inventor of CoolSculpting. Rox is a busy guy and he always has ideas, right?
He hands it off to a CEO and founder and to basically do it, execute on everything and that's what the story with Brixton is. I think we're very lucky here in the Boston area to have that type relation to the academic world feeding and seeding some great innovations and ideas. What I admire most about life sciences, Sal, I think life sciences figured this out earlier on, is that the big companies decided long time ago to scrap their R&D and to basically focus on M&A. Life sciences I think was the first industry to really make that a thing, so rather than inventing the next new treatment drug or whatever let a startup do it and once they show a sign of success where they get the FDA gauntlet, or show some initial attraction then get by it, right?
Sal Daher: Yes. The big players, the big incoming players are at a disadvantage coming up with new disruptive technologies. They've figured out no, that's not our core competency. Our core competency is the going through the regulatory track, taking a drug to scale in markets and reaching markets, and manufacturing its scale. Look at Pfizer, okay? The Pfizer-BioNTech. BioNTech could never have done the scale of what Pfizer did to produce the vaccine of that scale. They would have had a lot of scaling up to do. What they have? They have market knowledge. They have knowledge of the regulatory environment and they have the ability to scale because they have a lot of experience in scale.
They just go out and look at companies that are interesting that they have all these incubators, they have all these accelerators, they have all these places and they're not interested necessarily in making a return from that investment, but they're interested in acquiring the technology eventually when it's proven. I think it's very wise of them to do that. My life science company, I'm not particularly given this current state of public markets for earlier stage life science companies. I'm not looking for them to go to have IPOs. I'm looking for them to have strategic collaborations, many strategic collaborations if they are successful and can be very rewarding.
Aidan Yeaw: Right. I think that's a big part of the angel investing. It's like you don’t need-- As investors we need to have a view into where the liquidity then comes from because your money's tied up for a long time. We used to be the IPO. IPOs made a little resurgence a couple years ago and certainly the spec thing provided more liquidity options, but generally speaking it's going to be the acquisition.
Sal Daher: Specs. I've just a bad taste in my mouth from specs.
Aidan Yeaw: Oh, do you? [laughs]
Sal Daher: Yes, very bad. Anyway, Aidan, I was thinking perhaps what we could do here, I'll do a brief promo for the podcast and then we can get into a little bit of your life journey. If listeners are listening to this conversation with Aidan Yeaw, who is an angel investor and entrepreneur who has tremendous amounts of experience, a lot of wisdom, if you think this is valuable for other people, the best way you can get other people to see this is to go to wherever platform you're listening to this on and look for where you can leave a rating, five stars and you can do a written review.
Written reviews causes the algorithm to pay attention that someone has taken the trouble to actually write something. It doesn't have to be much. You don't have to write paragraphs. A couple of lines and a subject line really can cause an episode to be 2x or 3x or 10x sometimes, have the downloads during that initial crucial week. If you listen to a podcast that you really like, go immediately and do a review. In the Apple universe, usually, you're going to find a place to review it.
You have the whole list of episodes. If you scroll down, eventually you find a place that you can leave a review. You have to do a lot of scrolling through all the episodes so then eventually something shows up. I don't know why they put it there. Also, follow us so that we show up on your feed on a weekly basis and you don't miss out on great conversations like this one with Aidan Yeaw. Aidan, how did you get a start in what eventually became your career in product development and FinTech?
Aidan's Career Journey in FinTech
Aidan Yeaw: Great question. For the longest time even when I was-- I think the earliest possible time when I could start investing, I started investing in mutual funds when I was 18, 19 years old. Even before that, I had a father who was a real devotee to the Fidelity Funds, especially Magellan Fund. He let it be known he invested my college savings. I remember calling their voice response system to get balances and I really took an early liking.
Sal Daher: I love Fidelity's voice response. They recognize your voice. You don't have to go with all the rigmarole. The customer experience of Fidelity is excellent. It's just very impressive. Anyway, please continue.
Aidan Yeaw: Early on, I just felt like I was destined to work for Fidelity. Shortly after college, I worked at a different mutual fund entity called the Transfer Agent and they'd work on a lot of bank-owned mutual funds. Then, I jumped right over to Fidelity. I basically started on the phones talking to customers mostly on 401k plans. I accumulated a lot of interest there. It quickly turned into where I could, after spending a couple of years doing that-- Fidelity has a great entry-level and then progression of different opportunities. The biggest secret out there is Fidelity's really a technology. Most of it is a technology company.
Sal Daher: It is, yes.
Aidan Yeaw: I went down that route and started out as a business analyst and then project manager.
Sal Daher: Big cheer for Ned Johnson.
Aidan Yeaw: Yes. Rest in peace, Ned, a real pioneer.
Sal Daher: Rest in peace. It's just a New England success story. It's also a technology company as you say. People look at this colossus. 1970-something, Fidelity, it was nothing. It really grew in the 1980s and it became what it is. They are all these other players. Merrill Lynch and all these players have been around a long time, but Fidelity just came out of nowhere. I think part of it is because of technology, but also the Magellan Fund. Thanks to Peter Lynch.
Aidan Yeaw: Peter Lynch definitely set it on that trajectory. One of the biggest things that I was like privileged to be a part of this during that time, this is late '90s. It was essentially Fidelity's bet of getting into the 401k world. Everyone knows what a 401K is now, but Fidelity really entered the market viewing it as a distribution for their mutual funds. That's exactly what it panned out. I was at a time, it was really exciting. All the big corporate names were just all of our clients, whether it was Bank of America, Ford, IBM, you name it. They were all blue chip clients and they were all coming aboard Fidelity around the time I was there. I had nothing to do with it according to that business, but I was-
Sal Daher: No, but you were in a knowledge-rich environment. You were in a place where things are happening.
Aidan Yeaw: Very much, yes. There was great momentum. There was big bets on our ability to scale, our ability to service customers. It was a big bet on technology. Fidelity, and this is the vision of Ned Johnson and now Abigail Johnson, his daughter, who runs Fidelity now is to use proprietary technology to develop those things. I was lucky enough to be part of the teams that developed a lot of the proprietary technology on their 401K business. That launched me into a product management role at Fidelity. After spending about 10 years at Fidelity, the last four, which was in the product management role, I made the life decision after getting married, decided to move to the other coast. My wife's a college professor so she secured a tenure track appointment at a school in the Bay Area. That's what led us to going to the Bay Area.
Sal Daher: Love took you out there?
Aidan Yeaw: It was--
Sal Daher: That's how I ended up in Argentina-
Aidan Yeaw: [laughs]
Sal Daher: -because I was in the Bay Area and I ended up in Argentina because that's where my then fiancée, my now wife was.
Aidan Yeaw: Well, my wife's originally from the Boston area as well. That's where I met her. For any of those who love academics and know the tenure track faculty, it's very different from the corporate world.
Sal Daher: Oh, yes.
Aidan Yeaw: It's, basically, an annual job cycle. Sometimes colleges and universities are hiring, sometimes they are not. At the time, her options were the Bay Area, I think, Pittsburgh, and someplace in Michigan.
Sal Daher: What field is she in, what discipline?
Aidan Yeaw: She's a developmental psychologist. You mentioned as we were talking about [crosstalk]-
Sal Daher: [crosstalk] psychologist. Oh, talk about the children. [laughs]
Aidan Yeaw: [laughs] Our children are her test subjects.
Sal Daher: My wife is in the-- also studied in that area at Tufts. She just knows so much about kids. It's amazing.
Aidan Yeaw: Yes, it's amazing. What it means when you're-- I'm sure you can relate, Sal, when you're married to someone like that, right, means when you're a parent, you have very little say because whatever my instincts are apparent, my wife counteracts with a paper she had written on the topic that was published. [laughs]
Sal Daher: In the normal relationship the guy is out of his depth, okay?
Aidan Yeaw: Yes, very much.
Sal Daher: When you have someone who's a specialist in the field, you really have to shut up and take orders.
Aidan Yeaw: You really do. You are out-manned and you just need to go to the back of the room or else-- [laughs]
Sal Daher: The thing is that my wife, she knows what's going on with them. I'm like, "Oh." Of course now she's a grandmother so she's had two layers of experience plus the academic training and the experience in the classroom and all this stuff. It's just amazing.
Aidan Yeaw: I kid because I did the traditional business track in college and my MBA and I think one of the biggest things I feel I missed was studying psychology and better understanding because there's so much about-- especially, in financial services about understanding the psychology of humans, about how to help them and how they understand things. I mean, there's a whole field to that now. I'm sure you're familiar with it too, where there's financial economics or rather behavioral economics. It was a good shortcut rather than to make up for another college experience, just marry a college psychologist. [laughs]
Sal Daher: [laughs] Instead of major or minoring in something you just marry the knowledge.
Aidan Yeaw: You marry the knowledge itself.
Sal Daher: You just married me for my brain.
Aidan Yeaw: [laughs] I could be accused of that.
Sal Daher: I think that accusation has never been uttered [laughs]-
Aidan Yeaw: [laughs]
Sal Daher: The way around, many times.
Aidan Yeaw: [crosstalk] That was very important to me. I have some really interesting conversations with my wife about behavior and the neurology of the brain and how humans are wired.
Sal Daher: It is a source of wonder. You went back to the west coast, you relocated back there because of your wife's position?
Aidan Yeaw: Yes, I relocated there. I took a job at a company called Financial Engines, which at the time they were doing, essentially, a robo. They were really the first robo-advisor. It was founded by a Nobel Prize winning economist William Sharpe, for those in finance the Sharpe ratio-
Sal Daher: The Sharpe ratio and so on. He was a giant in the field.
Aidan Yeaw: He was a Stanford professor.
Sal Daher: William Sharpe and then Gene Fama are two of the biggest names.
Aidan Yeaw: Yes. Bill Sharpe was one of the co-founders of Financial Engines. It was a great time. The company had had several pivots they started out in the AOL era but found a way of figuring a way to manage money within 401K plans. I have to say 10 years working at Fidelity. The Fidelity didn't really fear of any competitors with the exception of Financial Engines on that little niche. It was really intoxicating to join something that did rattle Fidelity's cage. To join it I was one of the first-- I was probably employee 150.
It was really early. It was still small then. I had a six-year run there, including their IPO. That really gave me a better understanding of product management, especially FinTech, that there were other people like me and there was a whole community of product managers in Silicon Valley, and also the virgin FinTech scene was really starting to rise to prominence. It was a great time, and that's where I really delved into. I realized that these are my people and there are more like me.
I'd say the product piece is interesting in investor scape because I think I'm a huge beneficiary of that background, because as I look at investing now, one of the first things I do is I want to understand the product, I want to see it, feel it, touch it, I want to understand the usability. You'd be surprised how oftentimes we see as investors, Sal, and I see pitches all the time, which is the presentation. Sometimes things are said or illustrated, and that they sometimes fall apart upon a product demo or just understanding a product. You're like, "Oh, it's not built yet."
Sometimes it's okay to have the idea, but I can't tell you how many times I've let that true north of my product background guide my investment discipline, and I've decided to pursue investing in areas or back off, based upon what I view as a product evaluation, on a given startup or pitch.
Sal Daher: Tremendous. That's a great insight. Having a product perspective on the pitch decks, and to judge the maturity of the product where they are. The process that they have for product development is very often overlooked with angels.
Aidan Yeaw: To me, it's usability. A lot of times it comes down to because I think you make a lot of assumptions about how your customers are going to use it, find it, and at the end of the day, you really need something that- especially if you're selling to a consumer, but also the enterprises, then you want to make sure that the friction points are minimal, that it makes sense, the flow's right, it's not cludgy. I'd say that's one of the best things I've developed. I'm not sure how well it's appreciated. I'm sure you've seen it too, Sal, like there'll be a lot of groups that will have their due diligence checklist. Very rarely do you see a product evaluation. I'm like, "That should be the first thing you do."
Sal Daher: Yes. You know, anybody in FinTech, they want to discover the difference between user experience. They should go to your community bank and open an account there and try to do business there for three months, and at the same time open an account at Fidelity and try to do business at Fidelity for three months, and spot the difference. The community bank is going to have all the goodwill in the world, but the systems they're riding on are just clunky, and the user experience is disastrous compared to Fidelity's, which is completely seamless. They pay minute attention to the user experience. That's why they're like the death star. [laughs] It's very hard to compete with them. Aiden, as we think about wrapping up this podcast, is there any parting thoughts that you'd like to leave our audience of founders, angel investors, and people who are interested in startups?
Advice to the Audience
Aidan Yeaw: For the founders in your audience, I think one of the biggest things that I often try to say is, a lot of times when you're pitching to investors, whether it's like angels, like Sal and myself or VCs, a lot of times, we're looking at you as a person and trying to value your capability as a leader, and also the capabilities of your founding team because quite frankly, my experience has been the most reasons for failure for startup have to do with some founder issue or founder dynamic. So a lot of times we're looking at you--
Sal Daher: Frequently, the founders just give up.
Aidan Yeaw: Exactly. They're not going to stick it out, and so, a lot of times that's how we're sizing you up. The more you can prove that you're passionate, that you're staying with it, makes it easier for an investor to write a check. I think it's out there. Other people say this, but it's real, and that's what I love about angel investing, versus traditional investing. It's very qualitative. There aren't a bunch of charts, styles of CFA. This isn't us looking at a bunch of charts and turning your projections through a Monte Carlos simulation. It's us using our guts to size you up as a founder. That's what I view as 80% of how we make an investment, so know that.
Sal Daher: A judgment about the founders?
Aidan Yeaw: Yes, and the founding team. Are they the right--
Sal Daher: Their dynamic is on.
Aidan Yeaw: Right, and so, I'd say that's, for those of you, the founders, and for those of you who are maybe angel investors or want to be angel investors what was the key epiphany for me was realizing I can use my retirement assets to angel invest. I've been on a mini mission for the last few years and I know, Sal, you already understand this. I won't mention any particular vendors today.
Sal Daher: I'm suffering with my current vendor [laughs]
Aidan Yeaw: Maybe that's not a good example. As I mentioned earlier in the podcast when I realized I met the definition of accredited investor is because I had so much retirement assets in 401(k)s and IRAs where viola, there I am, I meet the definition. I think there are a lot of people out there who meet the definition of accredited investor and can actually use their IRAs and 401(k)s in angel investing and they just don't know.
Sal Daher: The caveat that I inject here is, having invested in so startups and maybe 50 of them are still extent and so on. Most of them via my IRA, I can say, I spend tremendous amounts of my time with the corporate actions. Right now I have to sign, get something signed, I have to go to my custodian, and send something signed asking them to sign. This is a lot of handling.
Then there's the annual evaluation of the asset. Since they're private assets they have to be evaluated every year. You got to be chasing the company to provide evaluation once a year. It can be very time-consuming. I would say weigh that against the interest of having-- You need diversification. At least 20 different startups because that's the nature of the space. At the same time, keep in mind the burdens that any one of these startups you're going to have interactions, two or three interactions with them a year on average.
Aidan Yeaw: At least, I think that's a good reason. What was important for me about the other thing about the diversification, I think especially when you're going to use your retirement assets to do angel investing, you have to understand the duration of those. Because when you're write an angel check, assuming you get a return, your return may not come for 5, 10 years.
Sal Daher: Yes, long holds. Not precisely duration that these assets do have high duration in a sense that their value varies a great deal. This is CFA talk.
Aidan Yeaw: I should have not abused that term. [chuckles]
Sal Daher: In interest rates, yes. They do have duration, but the biggest problem is the holding periods. The investment periods that you have to hold them for a long time. You have to keep in mind they're not liquid and you have very long holds and the chances of a complete loss if you invest in one or two or three of them are pretty significant. The statistic that I hear frequently from the Angel Capital Association is that two-thirds of angel investments do not return the original capital investments.
Aidan Yeaw: Yes, I believe it.
Sal Daher: If that's a single one, but when you get them into a pool then you begin to realize return. You need to balance between having at least 20 and then not having so many that your entire life is taken up with valuations and things.
Aidan Yeaw: Yes. That's where I didn't really get too deep about how I used two different angel funds throughout my angel career. That's helped me get to quicker diversification. There were times in my life where I can't spend as much time in angel investing because I'm on the operating side and the funds can balance that out. Those are actually better to have in the IRA vehicles when it comes to the paperwork evaluations because they're usually more professional managing directors dealing with that stuff. That's worked out well for me. I shouldn't use the term duration. It's really the maturity of the investment.
Sal Daher: Well, it's more the whole period.
Aidan Yeaw: Yes, it's the whole period.
Sal Daher: It doesn't technically have a maturity like a bond. It's the holding period of the investment that how long you have to hold that illiquid investment.
[music]
I want to express to you my great gratitude for making time to be on the podcast, also for your very very helpful and insightful contributions at Walnut.
Aidan Yeaw: My pleasure.
Sal Daher: I really enjoy having you as a colleague at Walnut. It's always great. I'm looking forward to the upcoming meeting now, so thanks, thanks once again.
Aidan Yeaw: Thanks for having me on, Sal. It's an honor to be invited. As a follower of the podcast, I'm flattered. Thank you for inviting me on. I hope your audience gets a little something out of their investment of time.
Sal Daher: It's amazing. Somewhere a young person is being inspired in a different direction by this conversation. I'm entirely confident in saying that. Tremendous! Aidan Yeaw, product person in the FinTech space, Angel investor, I thank you. This is Angel Invest Boston, I'm Sal Daher. Thanks for listening.
I'm glad you were able to join us. Our engineer is Raul Rosa. Our theme was composed by John McKusick. Our graphic design is by Katharine Woodman Maynard. Our host is coached by Grace Daher.