Angel Invest Boston is sponsored by Peter Fasse, top life science patent attorney.
Bill Arnold of Purdue University’s innovation center asked me to put together a panel discussion about what makes Boston’s startup ecosystem so strong and how these lessons might translate to other places. Naturally I invited my angel investing buddy Ben Littauer to participate and we had a productive chat which gives founders, and prospective angels, a valuable glimpse into how angel investing works.
Transcript of, “What Angels Do”
GUESTS:bill arnold, ben littauer, and sal daher
Sal Daher: Hi. This is Sal Daher. I didn't know this and you may not know this, but Purdue University is number three in startup creation in the United States according to IPWatchdog. The number three behind Columbia University at number two and MIT is number one. I was invited by the folks out of Purdue to put together a panel to talk about how to support early-stage startups. I invited my friend and angel investing buddy Ben Littauer who's vastly experienced in building companies to participate in this panel. This episode today is an interview. Bill Arnold of Purdue Foundry Grounds interviewing Ben and me on that very, very fascinating topic. I learned a lot of stuff from hearing Ben talk and Bill. I think you'll have fun with this really sterling episode. Thank you, Bill Arnold. Thank you to all the people at Purdue Foundry.
Bill Arnold: Good morning. Welcome to Foundry Grounds remote every Friday right here at facebook.com/PurdueFoundry. If it's your first time here, welcome. We're really glad that you're here. I don't know why it took you a year to find us but here we are. Over the last couple of weeks, we've had a couple of shows where we've talked about angel investing. We've looked at it from a couple of different perspectives. Today, we have visitors from afar. From the far east, you might say. I wouldn't say that but from the east coast of the United States. These are folks who are involved in early-stage investing in large part in life sciences, the kinds of things which we happen to have a lot of floating around the Purdue eco system for a university that doesn't have a med school, we got a lot going on.
Two topics for today, right? The angel investing thing early stage especially in life sciences. Sometimes those two things don't go that well together. The ecosystem, what are we missing. What have they got in Boston that we don't have besides seafood? [unintelligible 00:01:58] Anyway, I digress. My guests are Sal and Ben. I'm going to let them introduce themselves. We're going to go to Sal first. Sal, tell us about you.
Sal: Hey. Bill, thanks for having me on. I have my friend Ben Littauer on. I'm an angel investor. I live in Cambridge, Massachusetts. I've invested in about 60 startups to date. All the value of my portfolio is in the life science companies. I'm really now only writing checks in the life sciences with particular emphasis on biotech companies, platform companies modeled after a Purdue company that I invested early on. I put together their first raise here, Savran Technologies. This is what led to connecting with Purdue. I like Purdue. Before, I had a very gaseous connection with Purdue. This is how that Cambridge-West Lafayette-Indiana connection was created. I also have a podcast called Angel Invest Boston. We do a lot of what you're doing here, which is talk to angels, talk to founders mostly in Boston. I've talked to some founders there at Purdue. This is what I do.
Bill: Welcome to the show. I will just plug Sal's podcast. Our Chief Entrepreneurial Officer Wade Lange was on the show with Sal a couple of months ago, maybe two months ago. If you look the podcast up, Angel Invest Boston, then you can look that up and hear what Wade has to say about what's going here.
Sal: If you don't get enough Ben Littauer in this podcast, you can also listen to several episodes of Ben Littauer on my podcast.
Bill: Super.
Sal: It's why I invited Ben. He's one of the wisest people that I know.
Bill: Great. Hey Ben, welcome to the show.
Ben Littauer: Thank you very much, Bill. Way too much Ben Littauer, definitely on the podcast. I'm actually a software guy by history. I came to Boston to be a lawyer. I'm only half a lawyer so they wouldn't give me the degree.
Bill: I thought that I actually saw that on your Facebook page. No degree from Harvard Law. [laughs]
Ben: No degree from Harvard. I backed into entrepreneurship when I got fired from the first software startup that I worked for after 6 months. It was a friendly firing but that didn't mean that I had a job. I happened to have an idea and a partner available so I started a company. This was in the early '90s. Sold it in the late '90s, not for internet multiples, unfortunately. Then I dabbled around for a while. In 2008 I had actually moved back to my hometown in upstate New York, Ithaca, New York where Cornell is. Some similarities to the Purdue environment, not 100%. When I moved back to Boston in 2008, I was looking for interesting things to do with startups.
Someone said, "You know, angel investing is interesting." I joined several groups. Boston Harbor Angels, and Walnut Ventures, and Launchpad. I've invested in over 40 companies over the time period, mentored a lot discovering what I like and don't like in investing. I'm an early-stage investor. Often the first professional money, and I should say not including friends and family. That's the stage where my superpower comes in, I ask stupid questions. At that stage, it's actually valuable, later on it just gets to be a pain in the butt. That's what I've been doing. As an angel, I don't have to have a thesis. Sal has focused on life sciences. I have some very nice life sciences companies in my portfolio, including one that's continuing to generate some returns for me, which is very nice, having exited.
I'm now, gotten my investment back and then some and it's not done giving, I hope. I don't focus specifically on life sciences, although I'm about to make another life sciences investment this month, I expect.
Bill: Ben, we have a lot in common. I also ask stupid questions. The thesis of Foundry Grounds Remote is Bill's going to learn something during every episode. It's really the whole reason I do it. Which brings me to my thing. You rattled off several Angel groups that you're part of. I don't know anything about Angel groups in Boston, I just don't. What are the differences between those groups that you're a part of, is it just that it happened up to be this group of people, that group of people or is it this thesis, that thesis, different model, that model? What's the difference?
Ben: Well, initially, I joined Boston Harbor Angels, because they had the most open environment with a ton of guests hosted at Babson University, but Babson College at the time, everybody's upgrading. It was a very open forum and Boston Harbor Angels has the distinction in Boston of being open to investing in anything anywhere. I joined Walnut next, where that's the only one that I'm still a member. Walnut is a bunch of old software people at the time now many younger, about half of our membership is less than three years with the group with a much more diverse background than initially when I joined.
It was a bunch of people that I knew and I was attending a lot of their meetings because there was overlap, and so I joined, great crew. I really enjoyed the unstructured nature of Walnut's meetings. Walnut also has the distinction of investing earliest of the various groups in town. There are some that invest equally early, but a group like Launchpad that I also joined, they merged two groups together became 150 members, which is the largest group in Boston. Because of that, there was a push from the membership to look at larger deals, which tend to be later stage deals. My interest is in earlier stage. That was an impedance mismatch, you engineers understand that term. I said, "I don't need to be spending the dues and the time to attend all these meetings," so I dropped out of Launchpad first.
Boston Harbor changed a little of their direction so I dropped out there too. All I'm doing now is Walnut, and some on my own. I'm doing some investigations of some different models of investing.
Bill: Cool. Hey, how about you, Sal? Are you involved in multiple groups or have you been over the course of time? Tell us a little bit about that.
Sal: Yes, it's funny. I spent most of my working career investing in distressed debt of emerging market countries. I never had the background that Ben had with starting a company and so forth. I discovered mispriced bonds, that's what I did for a living. Along the way, I've made a handful of Angel investments back in the 90s'. A couple of which panned out surprising number of which panned out. That's the first one, the very nicely.
Then circa 2010, I basically retired. I had bought some income property, and I had some capital to invest. That's when I started investing full time. I joined Walnut. Funny thing, I didn't know at the time that Angel groups existed 11 years ago, I'd been an angel investor for 10 years. One of my, that's my brother-in-law said, "Hey, one of the guys who invested in that early company we invested in, you know that guy, Michael Mark, he belongs to this. A bunch of guys." Ben's laughing because Michael is a very prominent member of Walnut.
Bill: Also I just listened to your episode with him.
Sal: Yes, he's a terrific guy.
Bill: It's really good. It's fun.
Sal: Yes, you're not going to see any other recording of Michael Mark, because he's very shy about interviews. It was a personal favor to me that he came on the podcast, he was the first guest that I had. Anyway, because Michael and Ben are my mentors, people who, I listen to a lot and I ping them and I ask them questions, and I said, "Jeez, this is tremendous, I could go--" Because I have all these questions about Angel Investing and I joined this group where all these people have a lot more experience than I do, they've actually started companies, and I said, "Oh, gosh." You know what else? Their sharing of labor. When we're doing due diligence in a company, you can pick people's brains, you can find anybody know anything about this thing or that thing. It's just wonderful connections I can think of Savran.
I mean, Savran has been helped by a question I asked Ben, we have a board member of Savran, thanks to the introduction by Ben. This is what Angels do. My eyes were opened in 2010, and that's when I joined Walnut. I also went up to Maine. Portland, Maine has a very active Angel investing community that is kind of tied to Boston but Maine has a lot of pride. Recently, I interviewed one of their guys and I made two investments up there and both of them were excellent, I can tell you that.
My Maine Angel experience, although brief, I was only a member for a year, was really great. I got to experience two different groups. I respect a lot of people at LaunchPad. That's the beauty of Angels. Angels are not jealous of each other. They're not like, "Oh, there's another group there." No, no. It's like more hands to help. I mean, there's so much stuff to be done, and the more Angel groups the better, collaboration, different types, and so forth. It's so much fun. It's like being a kid in a candy store in one of these Angel meetings.
Ben: A couple of comments [crosstalk]
Bill: No, no, no. All I was going to say, I was actually going to refer back to what you said earlier about sort of the self-limiting nature based on the deal size and what you're interested in and how that creates these cells. Right? Then you don't want to necessarily have a big group. You want to have separate little groups who are doing, are they-- [crosstalk] Go ahead, Ben.
Sal: Different sizes--
Ben: The ecosystem thing is very important here. At Walnut, we have probably 10% of our members are also LaunchPad members because they have interests both in early-stage and later-stage. It's also an on-ramp for our companies that we write a convertible note for that they can go on and get a price around out of LaunchPad a year later. There's a lot of collaboration, and when you talk about Maine Angels out of Portland or River Valley Angels in Springfield, Massachusetts, that's the West Coast for us [crosstalk] [laughter]
Sal: Or we go down south to Providence. [crosstalk]
Ben: Yes, there are Cherrystone Angels in Providence, or there's a group out of Angel Investor firm out of Connecticut.
Bill: Believe it or not, Queen City Angels operates out of Ohio, which is, I don't know. The far western shore from you guys.
Ben: A long way way.
[laughter]
What we have is a regional group that is under the umbrella of the Angel Capital Association, ACA, that gets together and syndicates deals. If LaunchPad is leading a deal, they'll bring it to a syndication meeting every quarter or so and say, "Hey, anybody else wants to sign up, here we go." That brings a lot more capital and intellectual capital to the table for these things, and we actually, for a long time, have had a thing called Angel Treaty where we agree not to sue each other on our diligence. So, most of the angel groups in Greater New England area are signed up on this angeltreaty.org and Walnut included, of course, where we can syndicate deals freely, so while each group may have its own focus, many of the individual members and most groups operate as individual investors in each deal as opposed to a fund.
We do have some funds, but on the whole, we invest as individuals, so a Walnut deal, well, we have a very low limit. If two people invest in a deal that presented to us, it's a Walnut. If LaunchPad is leading a deal, collecting additional investors is a great thing for the company.
Bill: I did a show a couple of weeks ago and one of the things I asked people to comment on was, there's so much asymmetric information. Right? You guys know so much about how the game works and entrepreneurs know so little, which is why I do this. Right? I hope they come here and they hear you people talk and they learn things about how the world works, but they don't have a clue. So, I ask, how many people think that an Angel-- If you're looking for an Angel Investor, you need to find somebody who is going to write you a $250,000 check. A bunch of people raise their hands, right? That's what I think an Angel is, right?
But on that show that day, for instance, we had, that was the day we had Ben Pigeon from Vision Tech Angels here in Indiana, and they're writing $10,000 checks. People were like, "Wait, what?" There's a whole group of them in one place and it's a target-rich environment and they're each writing smaller checks so they're spreading the risks and-- It's just, people didn't understand that that was even a thing, so to hear you guys talk about all the different groups in your market is refreshing.
Sal: I'm only 10 years ahead of the entrepreneur that you’re mentioning here. Because 10 years ago, I didn't know angel groups existed till my brother-in-law told me about it. I want to just make a distinction here which I think is important. What Angels do is Angels are providing their entrepreneurs with knowledge of the pretty mundane stuff. Sometimes they might be specialists in a particular field but they're just basically trying to help them blocking and tackling and so forth. The entrepreneurs are discovering the particular new information which does not exist anywhere and because of their experimentation, they are discovering these new directions.
The role of the Angel is what Ben does so well, which is ask questions and also to provide resources, but not to tell the founders what to do because the founders have to discover for themselves. There's a fine balance of founders. They have to be willing to listen but at the same time, they have to go where Star Trek, no human has gone before. This is the mission of the Starship Enterprise. What you're doing is you're going to uncharted space. We can help you with the charted stuff and you go for the uncharted. What do you think, Ben?
Ben: Well, there was an old ad and I'm going to show my age. A guy named Syms used to have a company called Syms that sold clothing.
Sal: [laughs] The Sym's Warehouse. The Sym's were lost.
Bill: It's this place, right?
Ben: Exactly.
Sal: Yes.
Ben: He said an educated consumer is our best customer. In Angel Investor point of view, that's true for us too. We don't want to interfere with your big idea, but we do want you to be educated on what does it mean to get an investment and what are the right forms of investment, what's going to match your trajectory best. We have in Boston, again, one of the things that makes us a strong ecosystem is a ton of accelerators and a ton of educational opportunities ranging from, of course, the million universities that we have here. Also, we have a group called, The Capital Network, thecapitalnetwork.org for those who care, which educates entrepreneurs on the funding process.
It's much better for me to have a lecture where I explain convertible debt to 20 or 40 entrepreneurs at once than to do it one-on-one. I find that a tremendous resource because I don't have to explain all this stuff every time and it's all the same for every entrepreneur.
Sal: It's pretty mundane stuff.
Ben: It's very mundane.
Sal: Very mundane stuff but it's really important stuff that you can really fall down if you trip on it.
Ben: Right. Anybody watching this today, you have an advantage. We're in COVID times, that means that all of TCN's material is now virtual. You can go and listen to it yourself and learn.
Sal: Thecapitalnetwork.org.
Ben: Yes.
Bill: We'll make sure to promote that because that's the truth. Right? Here's the thing I find and I think-- So a guy that I work with named John Hanak, he's the other Managing Director at the Foundry. He runs our venture side. I deal mostly with entrepreneurs coming in, he deals with helping them get funding. Anyway, he loves to tell this story about how he had a guy stop him one day and he was just frantic, "I have to find John. I have to find John." He finds John, he says, "John, I need you to explain X to me." It was something to do with financials. John said, "I did a half-day seminar on that yesterday." The guy said, "I didn't need to know yesterday, but I need to know now."
I find that a lot. I suppose it's not just entrepreneurs but that's who I mostly deal with. For so much of life, there is not something that I want to learn just to learn it. I want to learn it in the context of I now need to know it. It becomes important, right? That's why you end up having those individual conversations with people about this is how convertible notes work, this is what a valuation cap is. All those things that there have been books written about, there's a ton of websites but people, they're not going to just consume it for general purposes to maintain a set of resources, to be able to say, "Yes, just go here, and tomorrow come back and talk to me about your question."
Sal: The Capital Network is an excellent place for that.
Bill: That's right.
Ben: Yes, and we have a ton of other resources that I'm sure we can point you to. That said, the conversation that gets started when someone approaches me and says, "Ben tell me about caps on convertible notes," allows me to start seeing how the entrepreneur thinks. Sal mentioned diligence before. We have to dig deep into these companies, but when there's an idea on a napkin, it's not been very in-depth. What we need to understand is how does the entrepreneur think? Trying to teach them something as simple as convertible notes is actually a great metric for understanding how do you process information? That's going to be the key to our investment. Sal will tell you time and again, we invest in teams and that's an ongoing theme throughout the podcast is that we need a good idea. There's no question. That to get in the door, but after that, its execution and that's about the team.
Bill: Sal, when you talked about the Star Trek thing, you're the Scotty. You're like, "This is how the ship runs and the ship's engineer. How the ship goes where it's going?
Sal: The entrepreneur is Captain Kirk?
Bill: Right? That's what I'm saying.
Sal: I'm Scotty. The Angel is like Scotty. He tries to help keep the ship running and overacts frequently. Angels are known for overacting. Sorry, Patrick Doohan.
Bill: Come on captain. When you're talking to entrepreneurs, when folks come to you, Ben, you said idea is get in the door, and then I want to dig into the team. That's really a key thing. Flip that around for me and tell me as an entrepreneur and people mostly who are watching this show, as an entrepreneur, what should I be looking for in the angels that I'm talking to? If you're going to muck about in my business, what matters the most to me? Theoretically, I don't want just everybody's money. Money's all green. I want something else maybe. Sal's nodding so we'll let him go first.
Sal: Let me tell you, when you're raising, the temptation is like to get your lead investor is really hard. Once you get a lead investor, then things go. Angels come in different stripes and there are some Angels who can be extremely helpful. If you land somebody like Ben, somebody like Michael Mark, somebody like Joe Caruso as an investor in your company, you're headed towards having a leading investor that other people will listen to and somebody who has experience in helping companies. There are all stripes of Angels. Some of them are much greeter and have a lot less time, a lot less experience, a lot less understanding of how it is to be an angel. It takes all kinds of angels to fund a company, not just the super-experienced people. They bring other people along and they can help in different ways.
I've brought some people to Walnut and I'm just astonished at these people who are very inexperienced in Angel Investing and how much energy they put in, and how much they help Walnut. Don't you agree, Ben? Some of the new members we've had?
Ben: Absolutely. Our new members are carrying a tremendous amount of weight.
Sal: Amazing energy.
Ben: Not only that, they have fatter wallets.
Sal: They have fatter wallets because they haven't been investing for so long. That's what happens is they run out of money.
Bill: They have yet to have failed investments as well.
Sal: Exactly. In the life sciences failure takes a lot longer. I would say when you're approaching an investor, you should always do your homework. Don't cold-call people. Find out about the Angel, understand what that Angel invests in, what that Angel specializes in, and then see if it's a fit for you. People like Joe Caruso, or Michael Mark, or Ben Littauer, or some other Angels that I can mention, a huge number of people chasing them all the time. I don't now how Ben even gets out of his house.
Ben: A dog. Nowadays he's sitting at home.
Sal: He's got founders waiting in front of his house waiting to talk to him. He can't get out. I think salesmanship requires a lot of doing homework, learning who the angels are, what they've invested in. It's not as easy as it is with VCs finding out what their portfolios are, but you can find that out. Then just see who can be the lead investor in your race. Then after you have that lead investor that can help you with the terms, that can bring people in, you're going to see that that fundraise goes like that. Until you get your lead investor, it's always desperate.
Ben: It really is a human connection you have to establish, you need to know something about me. You need to make a connection so that I'm interested in talking to you. I'm one of the easiest guys to get to read your pitch deck. I learned something from everyone and though you were saying how you like these sessions because you learned something. I learn something from every entrepreneur I talk to, even if it's only that I never want to talk to them again. But I do learn something new every day, but on my LinkedIn. I say, "If I haven't met you, give me a good reason to talk to you. If I have met you, remind me where, because I meet a lot of people," the number of connection requests I get that ignore that simple piece of advice is just astonishing. Why should I talk to you if you can't even read the damn instructions.
Sal: They don't even read the LinkedIn profile.
Ben: It really is about making a human connection. "Ben, I see you invested in an XYZ company. I have a company that's in an adjacent place. I'd really value your advice." Something that's simple is probably going to get a positive response. Whereas please connect with me. I'd like to add you to my network is not.
Sal: Yes. Message to founders. Angels are not VCs. It may come to a point where you're applying to VCs and VCs need to invest in you because they have a mandate or you're the flavor of the month and all that stuff. Angels don't need to invest in you. They invest in you if they like you, it's a very personal decision. It's like befriending someone and you don't befriend somebody by cold calling that person, you don't befriend somebody by just talking to them without even knowing who they are.
Bill: You just don't pick random numbers out of the phone book. If you're watching this then you know what a phone book is. You don't do that.
Sal: Try to find… LinkedIn is a really valuable resource. Try to find people you have in common who might make an introduction. That will also say this person is somebody who's reliable and somebody because you will be able to judge my friend Çağrı Savran at the Purdue founders and Savran Technologies, he was the first people to be all the time from Purdue. He's somebody that I listen to because this is a very smart guy. He was very committed. Use that warm approach, cold calling doesn't work for raising money.
Ben: That's absolutely right. We used to have on our Walnut Ventures website, we used to have an email address you could send your business plan to. We have a very informal process. It turned out that no one had looked at that mailbox for two years. We finally took it off the website because it isn't a good way to come in, a statistic that Christopher Mirabile who runs co-leads Launchpad. We were on a panel. It must have been five or six years ago. Maybe the statistics have changed, but he said that they had not presented to the whole group any application that had come in cold without a referral. None of those have ever gotten funding. It's a networking play. We have a very informal process at Walnut, but you know someone who knows somebody and that's how you get in.
We're always looking for deals. We're looking for interesting stuff, for good deals, for good entrepreneurs. I've been doing this long enough now 13 years. No it isn't. No, I guess it's yes, 13 years, jeez. A long time that I'm getting CEOs that I saw in 2009 are coming back up three companies later and coming to Walnut again and saying, "Hey, remember me?" I say, "Well, my email does, but I don't." But to get back to the question about ecosystem, that's all about the ecosystem. In Boston, we network all the time.
My CEOs are always out there in my portfolio or people I know they're always out there networking because they never know when they're going to need to hire someone. They never know when their VCs are going to fire them. They never know when COVID is going to come along and close their doors. They need to always be networking. It becomes a cloud of connections when you have a vibrant ecosystem and that's what really makes Boston work.
Bill: There is so much in that, including the propensity of technical entrepreneurs to put their heads down and focus on if I could just add another feature or if I could just prove this one more thing I could spend that hour better in the lab than I could spend it at a reception or whatever, or spend it communicating with my board member about who that person might connect me to, that could help within X, Y, and Z, whatever. I find that a lot. We have people come to us and they say, "Can you help me find so-and-so?" We're like, well, maybe we can and what are you doing about it besides just asking us, are you asking somebody else to help as well? Just as a practical consideration, for those of you who are watching, if you are trying to find people via LinkedIn, that you should talk to just make sure that you have a premium account and put plus Purdue at the end of whatever you're searching for and you will find people who are connected to Purdue University. You will not find Sal that way, but you will find Çağrı Savran, and you will see that Sal and Çağrı have a connection, which will lead you to somebody like Sal.
Now you've got a connection to Purdue, which is Çağrı, who is a professor in mechanical engineering, as well as being the CEO of a startup and as well as being an expert in residence at the Foundry, working with biomedical devices, and you can say, Hey Çağrı, can you introduce me to Sal? Because that's a lot better than, "Oh, Hey Sal, I saw you on the Foundry's show will you talk to me?" Even that's better than, "I didn't read your LinkedIn profile, but will you talk to me anyway." There are steps of positivity here and the most positive will cost you whatever. It's $90 a year or something to have LinkedIn premium. It is well worth it just for those kinds of little search tricks that you can use.
Sal: I think while we're on this topic, Bill, it makes sense to emphasize. I see with scientific founders, when they're raising money, they're used to being one of the top authorities in their field. Their papers are cited a lot. They get a lot of approbation from their peers. When they go out to raise money, it is a very different environment. It's harsh. Rejections are rife. You do not get the approbation of potential investor, you have these people who have only maybe 80% of your IQ or 70% of your IQ asking you questions you can't answer, insulting your science and so forth.
I would highly advise scientific founders to understand that fundraising is sales and they need to have a sales process. They need to have a sales funnel. They need to have almost like a tick sheet, a list of things or procedures that they follow irrespective of the pain of rejection, which will invariably come. They have to steel themselves to that pain. They need to have a sales process. They should study up how salespeople sell things, they have lists, they're going to contact people on that list, they're going to follow up with them and so forth.
That's the only way that you can relieve that pain of rejection, which scientific founders find so hard to deal with because they're always the top student. They're always stuck on growth and all of a sudden, all these Angels asking stupid questions, saying, "No." It's hard to bear, but the trick is you might speak to 150 Angels before you find your lead investor and you might end up with 12 Angels and that lead investor in your cap table and that's your cap table. All the other conversations you had are steps on the way there and if you don't go through all that figure out a way to withstand that pain, that emotional suffering, that emotional weight, emotional burden, you're not going to have a successful raise.
The process you really, really have to be methodical in your fundraising. Take notes, have some kind of a CRM that you use, there are free CRMs out there and then schedule further follow-ups with people. Even if somebody says no today, it doesn't mean no forever. It means no today. Right now in the middle of COVID I don’t have a lot of money. My buildings are hurting, I'm not writing a lot of checks right now. I wrote quite a few checks last year, but I've run out of money right now, but I might be writing later this year, who knows things turn around.
Ben: In the meantime, you're still connecting people.
Sal: You're still connecting people. If they come to me, I connect with them. I invite them on the podcast if they sound interesting. Keep the connections going. Oh, going back to the star Trek analogy, the entrepreneur has to be Captain Kirk, but also he has to be Lieutenant Uhura.
Bill: Communication.
Sal: Maintaining communication with your investors is so important. I recommend, I don't know if you agree with this, Ben, I recommend monthly for early-stage companies, monthly communications. Tell them where you are, make sure your reports this month ties into last month. Last month you said you're going to do this. Did you do it? Did you not make sure you tell them your investors, how much money you have left. How much when you're burning every month, but basically a runway. Keep them apprised. There's going to be bad news. We're going to have to raise more money. If bad news is better told a little bit at a time don't surprise people. They'll talk to them for six months and says we need money. Don't ever do that. I highly advise founders always to be informing their investors the same way they have to maintain a conversation with their clients, with the customers.
Ben: I agree fully, but I much prefer working with entrepreneurs who are communicative. I mentor a lot of pre-funding companies. I get updates from them regularly, monthly or quarterly. I usually skim them, but it's always a good thing to keep those connections warm. Even before you get the investment or after you've gotten a few investors on one side they'll still be sending it. Then they'll say, "Now you're right to go to Walnut. Or maybe you're beyond Walnut. Let me tell you, call some of the friends over at Launchpad to see if they're willing to take a look." It really is critical to keep those communications open. I wish I could say that there's a super strong correlation between the communicators and the winners in my portfolio. Sadly, one of my best outcomes was from a least communicative CEO, but maybe he's an outlier.
Bill: Yes. Hey, I saw interesting little tidbit the other day. It said it was a discussion. It was actually a series of tweets, but it started with the notion that the person who was writing said, "I could always tell how a company is actually doing by how long the status update is, the longer the update, the worst shape we're in." I just wondered if you guys had any thought about that or any correlation like Mike if you're killing it right, it only takes one line to say that. Sales are up 250% and blah, blah, blah. Whereas if you have to explain why you're missing all your projections, that takes a lot more time.
Ben: I wouldn't buy that one. I do hope the two of my biggest stars write very long reports are going to be winners. One of my favorite ones gives me, well, here's what we're doing. By the way, if this doesn't work really well, here's plan B and we also have a plan C and here's what that looks like. I find that very-
Sal: Comforting.
Ben: -comforting is the right word. It's comforting to see, because I want to know that thinking about what if things go wrong that tends to lead to a long update rather than a short update. I agree fully with Sal, that I want to hear the bad news soon. I also want to hear asks, do you know anybody who knows this? Do you know someone at that company that would be a help to us because chances are, we know someone who knows somebody at that company.
Bill: All right. I find that this has been a fantastic conversation, but I'm afraid we're reaching the time where we're going to have to wrap it up. Maybe we can do this again sometime because I've learned a lot that I didn't expect to learn. Which is my absolute favorite kind of show. It's one thing to learn something you thought you would learn. Right. But it's another thing to learn like that [unintelligible 00:38:43] is not in a place where anybody would stumble upon.
[laughter]
Anyway, whenever I have people on the show, one of the things that I'm aware of is that sometimes they have a preconceived notion of a thing that they want to communicate during the course of the show and I never stumbled down the right path for them to say whatever it was or something has come up in the course of the show that they think, "Oh, I'd like to ask a follow up about that either to my co-guest or to me, anybody, whatever." Or do you have a summary statement that you'd like to make? You don't have to declare which one of these options you're taking. It's just, you both get an opportunity to have a little something to say here at the end, I'll start with Ben and then we'll go to Sal.
Ben: I'm an engineer by training and learned how to do the business thing late in life. We've talked about networking and the connected nature of what Angel investing is all about. Repeatedly during this conversation, engineers have a particular bent, which is they like to do this and do that it results in this following outcome. Then you do this again and that again, and it's the same outcome. That's not the way networking works. It doesn't come naturally to many engineers. I know I had to learn it by doing it a lot. You talk to Sal, you talk to Ben, you talk to Joe Caruso and you talk to Bill Arnold and nothing has happened, then two weeks later, something pops out of the sky and you say, "Hey, that's really cool." You don't know whether it was talking to Bill or Joe or Sal that worked but something happened. That is so nonreproducible that it frustrates the heck out of every engineer but it's the way networking works. You have to leave the door open to kismet.
Sal: Serendipity, I agree entirely.
Bill: Sal, what you got for us? [crosstalk]
Sal: Right now, because of my sharpening focus on biotech investing, what I want to communicate is that both for Purdue and also for the ecosystem here at Boston, we are just beginning, we are the start of an enormous wave of really interesting biotech companies that will be doing stuff that's hugely consequential. Some of them will not require a lot of capital but they will certainly require some capital and they will require a lot of help.
The professionals-- One of the scarcest things here in Boston is experienced biotech executives and experienced Life Science Angels. Believe it or not, not a lot of life science Angels in Boston. There's some at MIT Angels which is a university angel group that's sponsored by MIT here, Harvard Business School has an angel group as well but compared to software, there are a lot of software angels around Boston, a lot of software angels in Silicon Valley. I think a lot of those people are going to have to retool, to re-skill to become Life Science Angels.
Ben has to a certain extent as I have because there's going to be a lot, the vineyards are going to be weighed down with a lot of grapes and a lot of workers are needed at the vineyard. People are going to have to re-skill because it's going to be the kind of explosion that begun-- Marc Andreessen in 2011 talked about software eating the world and now Andreessen Horowitz talks about bio eating the world. It's about to start, there's a lot of stuff that's achievable. It's not just the mRNA miracle that we've seen with the vaccine and all that but just a whole bunch of other technologies that are coming to fruition. It's going to entail people who never dreamed about investing in the life sciences. Start with the company that's accessible to you, see what it is that you can help.
It's immensely rewarding, the rewards are not going to be like all of a sudden you have a great networking company or a great social network or something like that, it's going to be like all of a sudden you're going to cure this, you're going to cure that. It's going to explode. There are a lot of reasons why the economics are going to be very attractive. Watch out for that. One of the things that helped me open my eyes, one of the people that Ben invested in, Jeff Behrens, I invite you to listen to my interview with Jeff Behrens. He's on a board and Jeff has pointed out to these scrappy biotechs that only get 3% of the funding, the big-name biotechs get 97%.
These scrappies, their numbers are going to explode, how do we fund them? How do we support them? That's the big question, the bone that I'm gnawing on right now.
Bil: All right. That sounds like actually a follow-up show that we could do on-
Sal: Sure.
Ben: Bring Jeff in, he's great.
Sal: Yes, bring Jeff. Let's get Jeff in.
Bill: All right, we'll figure out a way to do that. It's been really great for me to have both of you on the show. I appreciate you taking the time out, helping us out here at Purdue. You're both, from our perspective, friends of the university these days and we appreciate that. Thanks.
Ben: Thank you. Just remember that in the era of COVID, we're all just a Zoom away. Those connections are as tight as can be, please reach out.
Bill: If I had one last word it would be network, that is the theme of this show. We didn't know that was going to be the theme but it is networking, network, network, network.
Sal: I agree.
Bill: That's the whole thing. All right. Hey, for those of you who are watching, I hope that the commentary was robust on the Facebook comments. I will be there Friday morning typing away and chatting with you if you're there. Come see us next week, we'll be here once again facebook.com/purduefoundry. Have a great weekend.
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Sal: 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.
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