Tech founder David Kessler discusses his journey as an angel investor in companies such as CleanFiber, Wasabi, and Hilltop Bio.
Highlights:
Sal Daher Introduces David Kessler
"... This is like a very counterintuitive investment for angel investors, but it was angel-funded..."
The Importance of Updates
What Hilltop Bio Does
"... This is why I want to create infrastructure to help the angels support these academic founders with connections..."
Wasabi
"... helping founders hone their messaging, hone their presentation..."
"... Basically, the question is, what other ways of looking at the world are there and are you flexible enough to say that there are other ideas out there, and you may wind up pivoting into one of those..."
How David Kessler Got into Angel Investing
"... Start slow, start small, and don't invest alone..."
Advice to the Audience
ANGEL INVEST BOSTON IS SPONSORED BY:
Transcript of, “#1 Peeve with Founders”
Guest: David Kessler
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 for 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 to some of the startups which I'm involved including a startup which came out of Purdue, Savran Technologies. I'm proud to have these two sponsors for my podcast.
Sal Daher Introduces David Kessler
Welcome to Angel Invest Boston conversations with Boston's most interesting angels and founders. I'm Sal Daher, an angel who is really curious to find out how to best build technology companies. Today, I'm really, really excited to have on the podcast an angel investor who is one of the nicest people and also a really very insightful person, very big on helping startups with their messaging. Welcome, David Kessler.
David Kessler: Hi, Sal. Thanks for having me.
Sal Daher: Now, sometimes you may think that we have Darth Vader on the line speaking here, but it's not. He's as a very kind person, not at all Darth Vader-like, David is just a very wonderful person. Nice husband, and father, and grandfather, much adored by his family and his friends. Don't mistake him for Darth Vader, despite the device that he has in his throat.
David Kessler: I had a mild touch of stage 3 thyroid cancer, and it left my vocal cords not working quite right. One of the things I learned is that vocal cords are involved in breathing, so I live with a tube in my neck for now. The twin valves that I have when it opens up makes me sound like I'm breathing like Darth Vader.
Sal Daher: Darth Kessler, David is a dear colleague of Walnut Ventures. I've always wanted to get David on, he had to struggle with the cancer, and before that he was very busy before he retired. Now, let's start out talking about some of the startups that you're excited about. You mentioned to me about CleanFiber, you're involved in CleanFiber. Tell us what CleanFiber does and why you find it so appealing.
David Kessler: One of the nice things about CleanFiber is that it's a really boring business, they make insulation.
Sal Daher: [laughs] Yes, it is.
David Kessler: It's a high R-factor or high insulation factor, and it's also quite fire retardant. It's an interesting technology. The CEO was great. He communicates with his investor base. He doesn't make wild commitments. When he says he's going to do something, he does it. If something doesn't quite make it, he doesn't sugarcoat it. You know where you are, where they're going, and they're doing well. They are now making money, and they're starting to build additional factories. They're in their ramp-up phase. It's a nice company. It's doing a nice job.
Sal Daher: The fiber they're using is-
David Kessler: Corrugated cardboard.
"... This is like a very counterintuitive investment for angel investors, but it was angel-funded..."
Sal Daher: -cardboard, yes. Basically, they're recycling cardboard, fiber from cardboard, into insulating material, which is just counterintuitively fire retardant. It has all kinds of very neat synergies. As you say, the CEO has been very, very capable in building up this business, setting up factories, getting production, getting it adopted. This is like a very counterintuitive investment for angel investors, but it was angel-funded.
David Kessler: Yes. Another thing about it that is helping with adoption of the product is that it is an easy-dropping replacement for the existing cellulose insulation that installers already use. What they wind up doing is it cuts the cleanup time at the end of the day. It seems to be a win for the installers and the homeowners on pretty much every basis.
Sal Daher: That is a big win. That's a big win.
David Kessler: Jon Strimling is a great CEO.
Sal Daher: Oh, he is. Yes.
David Kessler: As I said, he says what he's going to do and he does it.
Sal Daher: [laughs] That is tremendous. You also highlighted the fact that he reports regularly and keeps people appraised. This is something that founders, believe me, you need to-- I have some founders that are really, really outstanding. Great founders are doing great, and they get caught up with trying to report perfectly, very long -- These reports don't have to be long. You should not spend more than 30 minutes, let's say, at least a quarter reporting. All I would say is the first 5 minutes of the 30 minutes, read the previous report from the previous quarter. Then in the back of your mind, think what's happened since then. That's another seven minutes. We're 12 minutes into it.
Then just write up something in 10 minutes. We're at 22 minutes now. In 10 minutes, write up something that says, this is what's happened since last time. We have so much cash in the bank, which means so many months of runway. Then after you've written, there is your 22 minutes, spend 5 minutes reading it over for typos and so forth. Then send it out. Don't send more than 30 minutes a quarter on it. If you can report every two months, every month, even better if there's a lot of stuff happening, but at least a quarter.
You occupy mind share of the backers that you have, the people who wrote you checks. These are important people for you to [chuckles] stay in touch with, because more than half the time people come back for more money. Come on.
The Importance of Updates
David Kessler: There was a company that I was in at one point that would send out communications, but only when they wanted to raise money, and they would have a meeting and give everybody sandwiches and do a report. At one point, I talked to the CEO about it. I said, "It'd be nice to hear from you when you're not raising money, just how are things going?" He asked me if I wanted to sell out of the company because he had someone else would be interested in the shares. I said, "Okay." I actually sold my shares.
Sal Daher: Awesome. I would say founders would think like that. It gets old when your kid doesn't call you in college and then you get a phone call, "I need money." That gets old. Now, imagine a founder who's not your kid, that gets old even faster. Don't do that. The thing is just look at a positive point of view. There's just this no-side downside to it. David, it is really incredibly important for founders to just take a moment and reflect what they've done in the last three months.
They're so busy doing stuff. I don't blame them but just take 30 minutes. I want it to be a light-burden thing. I don't want it to be super perfect. It's a 30-minute task every three months, you can do it.
David Kessler: Actually, there are a couple of companies I'm in that I don't even know if they're still there. I thought about sending them an email that says-
Sal Daher: "Hello, are you still there?"
David Kessler: -"Please fill out this one multiple-choice question. Things are absolutely fabulous, things couldn't be better. We're doing ok." Or, "Oh my God, why did I ever think I could do this?" That's the answer. Just send me that one thing.
Sal Daher: David, that's a brilliant suggestion. When the startup doesn't report regularly, you send a checklist with multiple-choice responses for them to check off. Doing great. Doing okay. Run away, ran out. Need money now, [laughs] or three months run away, nine months run away, 18 months run away, blah. Let's do a shout-out for founders who report really well. Shout out to Susan Conover. The thing I love about Susan's-- Are you invested in Piction Health?
David Kessler: No, I'm not in that one.
Sal Daher: Oh, I love Susan's updates. They always start with, "What do we do again?" [laughs] Angels frequently forget what the startups. If you're invested in 50 startups sometimes you go, "What does the startup do again?" She puts in, "What do we do again?" Using image recognition to enhance care in dermatology. All fine, it's very well. The accomplishments they've had. She explains where they are in terms of funding. She has a asks she asks people then she does shoutouts to people. Shoutout to at so and so, for doing this for me, so on, so on. She's just an awesome founder. Okay. She's pulled rabbits out of hats more times than I can imagine. She and her co-founder Pranav Kuber, awesome. That's an example.
David Kessler: Amanda Drobnis from Hilltop Bio is good.
Sal Daher: She is so good. Amanda Drobnis is just so-- Oh, Hilltop. Let's talk about that.
David Kessler: Okay.
Sal Daher: Explain what the startup does.
What Hilltop Bio Does
David Kessler: They're into veterinary health and I think primarily in breathing issues, like COPD in horses. Breathing issues are near and dear to my heart at the moment.
[laughter]
David Kessler: They are in the phase where they are starting to ramp up more sales, and that's nice to see. They made the transition from having an idea to having a product that they're marketing at this point.
Sal Daher: They have real revenues. Revenue growth and so forth. Yes, she started out with this idea of using biological material from the placenta of horses. They would extract certain factors from that, and it's been used for-- since the early 1900s, they've used that biological material that's in the placenta and the afterbirth, they've used it for repairing joint damage in horses-
David Kessler: Yes.
Sal Daher: -and other animals.
David Kessler: Oh, it wasn't just breathing, it was joints. Yes, I was not in on the earliest rounds at Hilltop, I just came in in the middle of 2021.
Sal Daher: Yes. The way that they got started is that her dad patented a process to take the afterbirth from animals, -- the afterbirth of any animal, including humans -- and to create a shelf-stable compound with these biologics that preserve the function but is shelf stable. It greatly simplified because veterinarians do this still. They take biological material from afterbirth and they inject it into joints to help horses but it's a messy process. It has to be cleaned, and it's much easier to have something off the shelf that they can just inject. This is really her first product, it's what put her on the map. I saw early on at one of the accelerators here in Boston, at some network. Ah, my memory.
David Kessler: Oh, the Capital Network?
Sal Daher: Oh, the Capital Network. Duh. Yes, there you go, David.
David Kessler: Yes. I'm even on the advisory board.
Sal Daher: Awesome. Okay, the Capital Network. I haven't had time. I wish I had time to to hang out with those guys more. I haven't, but I was in an event there and I met her and she was just beginning to pitch and I was like, "Wow." She's a very dedicated equestrian and she's been in the veterinary space. I think her dad's a veterinary and has been in the space and she just loves horses and she loves helping horses. She bumped into this thing and she's so determined. Equestrians tend to be people who have their act together. They have to understand leadership because you're leading this large animal to do really difficult things. Tremendous founder reports very nicely. She's in our gold star list, [laughs] of founders.
David Kessler: There's another great CEO. The company failed, but it was Avaxia Biologics and they had some technology to deliver drugs to hard-to-reach places to treat gut-based diseases, irritable bowel, ulcerative colitis, things like that. They used bovine colostrum to enroll the drug that was being delivered. They got to the point of doing first-stage human trials, and they found that they were delivering significant amounts of the drug to where they wanted it without dosing the entire system of the body.
They got to the point where they were going to need a lot of money. They started looking around and the pharmaceutical companies said, "Gee, we don't see ourselves running herds of cows to get this colostrum, but if you could do it with just chemicals, that would be great." They wound up looking at it, and I guess they decided that it was just going to be too hard to go and reproduce everything they had done. They closed the doors but the founder was a great CEO.
Sal Daher: What happens in biotech and the life sciences in general, is that you can have a great CEO not succeed because of technologies in there, or it turns out to be too complex to develop with the resources available. That is a really important thing to be able to gauge is just how expensive is this project going to be? How low hanging is the fruit really? This is one of the things I've learned from having invested now in more than 70 startups and focusing on life science companies, part of my screen David, is very much, how much is it going to cost if things work out? If things work out, how much is it going to cost to get this to the point where a strategic player will take an interest?
I'm not shooting for IPOs, I'm shooting for collaboration with strategic players who can then take that to the next level. It has to be the point where it's de-risked enough. Because strategic players, they frequently have the problem of if a program fails because of the science, they're not good at separating that from failure because of the capacity of the person leading the program. You become associated with, "Oh, there is this failed program." It failed because of the size, not because the person leading the program did everything right. In the startup world, it is perfectly okay for a founder to have a failure, and they go on to raise money, and then they succeed in the next round.
In large companies, there is still not that culture yet and so you have to de-risk it to the point where it becomes really clear that the technology is developed to the point that it's not going to be a flop because of the science, because of the technology and it looks like it could work in a clinic. The thing is that a lot of academic founders don't know the difference between something working in the lab and something actually working in the street or the clinic.
David Kessler: Yes.
Sal Daher: That's a huge gap there, shout out to Jeff Arnold.
David Kessler: One of my favorite guys in this area.
Sal Daher: Isn't he? He's a great guy, very popular podcast, people keep downloading my interview with Jeff Arnold a lot, because he is really very knowledgeable about how to avoid landmines in investing in biotech. He said that one of the things that people don't understand is that this is massive, massive world to be traveled between something working in a lab, perfect conditions, and they're trying to discover something at the edge of knowledge to something working all the time and at scale, can the process scale? Can we make all the consumables, can you produce everything.
There's a lot of learning to be done and I love this area, because it's just so fertile. There's so much to be done and with a little bit of common sense help, these academic founders who know a lot about this particular topic can be really tremendous.
David Kessler: There was a company that I took a pass on in their first round, it was called First Life Biosciences, and they make a diagnostic for rapid diagnosis and figuring out what will be a viable treatment for things like malaria or MRSA. They had a urinary tract infections, and Jeff was very high on them early on.
Sal Daher: Oh, Jeff Arnold? Okay.
David Kessler: Yes. I looked at the founder and Jeff is more knowledgeable than I am, hands down, no question. I looked at the founder, and I said, this guy is very smart, but I don't think he knows how to run a business. I took a pass and I didn't think that-- Well, he came from a big company and academic background, and I just didn't think he'd know how to manage a startup. I took a pass on that round, Jeff subsequently got involved in it, and they made a couple of other key hires of people who actually seemed like they knew how to run a business. They opened up another round and I got in on that one.
That's a company that does report. They have grown. The CEO then has kicked himself into a more appropriate position. There are people who know how to run a business who are seeming to be running that business now, and they're moving to commercialization. They're doing well and I have hopes for them.
"... This is why I want to create infrastructure to help the angels support these academic founders with connections..."
Sal Daher: That's great to hear. On this topic, the great strength of academic founders is that they know the science and they know how to get stuff done in the lab. That's what they do. They spend decades doing that. In these early-stage biotech companies, a lot of it is exactly that. It's working out the processes in the lab, recruiting the right people to do the scientific stuff in the lab. You run the process over and over and over and over, so it becomes repeatable and becomes more efficient. That's stuff that's very much in the wheelhouse of academic founders.
Sometimes you get some really very high-functioning ones that go beyond that, like Cagri Savran, the founder of Savran Technologies, who's really very capable guy. He's learned quite a bit about being involved in a business.
Then eventually, when that initial stage has proved out, it's possible to bring in someone who is more management minded. That frequently can be very productive. The reality is that most early-stage biotechs, and there's just an explosion of interesting ideas, the CEO is going to be the academic founder. Angels need to figure out a way. This is why I want to create infrastructure to help the angels support these academic founders with connections. They don't need full-time people. I see LabShares Newton, Jeff Behrens' venture, it connects them with part-time CFOs. It has a shared lab space. It connects them with other founders who are going through the same thing.
An environment like that is very, very constructive. This is what they need in the early stage. Once they have something that gets the interest of a strategic player, it's another game. Then they can think about hiring somebody who's more familiar with a tempo of large companies, who's going to spend time doing a lot of stuff that connect founders may not really be interested in doing. There's a handoff that's eventually possible, but initially, they're all going to be founder-led, these companies.
Part of my screen is really looking at the academic founder and seeing, is this somebody who's got, as they say in the Brazilian soccer culture, jogo de cintura, waist play. Can he turn his waist, dribble the ball in a clever way to get stuff done, or are they just like one-trick ponies? Which a lot of academics are, and they're very specialized in what they do. Some of the are very high-functioning people like Cagri. David, let's do a quick promo for the podcast, and then I want to get into a little bit of your career and how you became an angel investor.
David Kessler: Absolutely.
Sal Daher: I want to ask my listeners who are enjoying this delightful conversation with my good Walnut friend, David Kessler. You can get more people to listen to this by first, subscribing to this podcast, okay, so that Angel Invest Boston shows up in your feed every week. Also, then take time to review us. If you review us on Apple Podcasts, it's really powerful, we've got 180 reviews. David, this is so funny, every time you get one review, bingo, I got a whole bunch of people looking at all the different podcasts, including the podcast of that week, which is the one that's most highly rated.
The most recent ones are most highly rated, it says to the algorithm, "Here's something that people care about," and it gets featured, so leave us a review and check out angelinvestboston.com, our website, where you have 200 plus back episodes with full transcript. Almost every single one of them with a blurb, some videos, lots and lots of graphic assets. Anyway, I thank the audience for that help. David, let's talk about this other startup that you're invested in, that reports regularly.
Wasabi
David Kessler: Right. It was one of the last investments I made before I left Boston Harbor. It was a new company at the time.
Sal Daher: Boston Harbor is another angel group?
David Kessler: Yes. Sorry, and it's called Wasabi. The CEO is David Friend, who started Carbonite and half a dozen other companies. In fact, I think all but one of which had successful exits, and Wasabi is a unicorn.
Sal Daher: Oh, wow.
David Kessler: Yes. I'm hoping that that one will make my portfolio neutral. Anything else is gravy.
[laughter]
Sal Daher: What does Wasabi do?
David Kessler: Cloud storage.
Sal Daher: Oh, cloud storage, okay. What's the particular take on cloud storage? What separates them from the competition?
David Kessler: They are AWS compatible and they're much cheaper and much faster than AWS, and their pricing model gives you assurance of exactly what you're going to pay.
Sal Daher: Okay.
David Kessler: Whereas with AWS, they charge, I forget what they call it, but essentially anytime you look at your data, they charge an egress fee. A user doesn't know what their bill is going to be because they don't know how many times they're going to access their data. With Wasabi, you pay just exactly what it is based on the amount of storage you occupy and your bill is assured. The transfer rates are higher than Amazon's and it's cheaper.
Sal Daher: Awesome. I can't argue with cheaper and more predictable billing and faster access.
David Kessler: They now have data centers all over the world and they're growing quite nicely. Dave Friend is very nice about reporting when anything happens.
Sal Daher: That is awesome. David, that touches on something else that I know you're really big on, which is helping founders hone their messaging, hone their presentation. Do you want to talk about that a little bit?
"... helping founders hone their messaging, hone their presentation..."
David Kessler: Sure. Before my cancer, I used to be out in the angel community more. I would talk to groups sometimes about how to structure a pitch. Among the angel groups in the Boston area, a lot of them follow this format that the entrepreneur will have 10 or 15 minutes to pitch the company and then answer a bunch of questions. The question is, with this amount of time, what are your goals and how are you going to make the best use of that time? The things that I would talk to them about is what should go into the pitch. You don't want to tell them about your entire business because if you can do that in 15 minutes, then it's not a big enough business for investment.
Sal Daher: [laughs] By definition, yes.
David Kessler: Right. You have to pick what you're going to do. Then you go back to what is your goal. If you're pitching to a room of people, your goal is not really to get them to write you checks. Your goal is to get them interested enough that they're going to be excited to take you into the next stage, which is going to be a deep dive or diligence. "I want to learn more about your business. I think what you're doing is really interesting and now I want to know more."
Sal Daher: It's like to get your foot in the door, so to speak.
David Kessler: At that next stage, then you can proceed to tell them all kinds of things. Again, at this previous stage, the question is, what do you do in your 10 minutes?
Sal Daher: Basically, the point of the pitch is to get to go onto the next stage. It's like a resume, everything about you, but just enough to pique the interest of the listeners to go onto the deep dive, where then you will tell--
David Kessler: Then you have people who are preselected as being interested in what you have to say. In the first room, there are going to be some number of people who aren't. The question is then how do you allocate your time, especially for technical founders. Being a former technical person, I know the issue, you want to tell everybody everything about this great thing you're doing.
Sal Daher: Yes
David Kessler: The answer is don't.
Sal Daher: No.
David Kessler: If you've got a 10-minute presentation, don't talk about the technology for more than 3 minutes. Four minutes absolute tops because what you have to tell the room about is how this is going to be a business and how it's going to reach a point where it's a self-sustaining business and does something worthwhile in the world.
Sal Daher: I think you need to make clear to people that you have a chance to beat the odds. What is it in your business plan that gives you a chance to beat the odds because the odds are stacked against you?
David Kessler: Absolutely.
Sal Daher: You got to get that across. Joe Caruso, I've had him on the podcast. We call him the Father Confessor because he looks like a Catholic priest.
David Kessler: I know Joe. He's a nice guy.
Sal Daher: Monsignor Caruso, I've had him on the podcast. He makes a big focus on framing what you do, making sure that the audience understands what your business is about because he says very often the most common, and you and I have heard this many times, the discussion after the five minutes you have after the pitch.
David Kessler: Sure.
Sal Daher: Then it's like, oh, this is what they do. Oh, no. This is what they do. That's a no. It should be very clear what it is that you're proposing to do. You should be very succinct and very direct, but also be very clear. [laughs] It shouldn't be a topic of discussion. The discussion should be, does this guy know what he's doing? Is this a real business? That's the discussion you want to have. It's not like they're in this business. No, they're in that business.
David Kessler: Right, absolutely. Another thing they have to worry about, you want to know that they're looking at the competitive landscape. One of the common slides that we see in pitches is the grid, and you list all the companies and you look at all the features.
Sal Daher: The competitive matrix.
David Kessler: Yes, and you are the only company that's doing everything right.
Sal Daher: You are so good.
"... Basically, the question is, what other ways of looking at the world are there and are you flexible enough to say that there are other ideas out there, and you may wind up pivoting into one of those..."
David Kessler: If I'm ever reviewing one of these pitches, I like to say, "When you have that chart up, there's going to be some jerk in the room, and it's going to be me, who says, given that companies don't deliberately set out to build bad products, how are these guys seeing the world differently than you? What might you be missing that they're seeing? If one of them was doing this chart, what features would be there on the vertical column on the left that they would have you missing?"
Basically, the question is, what other ways of looking at the world are there and are you flexible enough to say that there are other ideas out there, and you may wind up pivoting into one of those.
Sal Daher: Oh, yes. That point's a very interesting direction. I was listening to my first podcast interview with Michael Mark.
David Kessler: Goes back aways.
Sal Daher: It goes back, it's seven seasons. We're in the seventh season. This is six and something years ago. It was beginning of 2017. Can you imagine?
David Kessler: Congratulations.
Sal Daher: With Michael Mark, and it stents up so beautifully. We talked about pivots, and we talked about how it's so really hard to have a founder who is absolutely determined, would walk through walls to get stuff done. At the same time, has enough openness to consider that maybe this thing doesn't work, maybe they need to go in a slightly different direction, because he said, of all the startups has invested, maybe one of them didn't pivot out of hundreds, and that was Progress Software.
He discusses that on the podcast, but everything else, every time you pivot. You need to figure out if you're capable of pivots. I agree entirely, David. I agree entirely. David, I wanted to also get back to how you got into angel investing. What was your on-ramps? I know you blamed Ben Littauer, but [laughs] there's a lot of stuff to blame of Ben Littauer but anyway, tell me that story.
How David Kessler Got Into Angel Investing
David Kessler: Well, Ben was somebody I knew because our daughters, who are now adults, were in fifth grade together. I knew him just socially. At one point, Ben called me. This is in, it must have been about 2012, I think. He said he was doing some due diligence on a company, and he thought I might know the founder of the company, which I did. We talked a little bit, and he asked me what I was doing those days, because we hadn't talked in years. I told him not that much. I was basically retired. I wasn't working. He said, "Well, have you ever thought about angel investing?"
I said, "Well, gee, doesn't that require vast buckets of money?" He said, "Well, not really vast. If you take $100,000 and put it in 10 companies, that's a portfolio."
Sal Daher: Yes. I would say $100,000 put into 20 companies, you have a better chance. There's a lot of diversification that happens between 10 and 20, or 200,000 and 20 companies. People have a misconception that you got to have Zuckerberg kind of money, but it's not. A lot of it is a little bit of money, and a lot of sweat equity. A lot of connecting people, a lot of offering a shoulder to cry on, a little bit of adult supervision sometimes, helping them in really mundane-- The founders are really good at stuff that's at charting the unknown waters, but we oldsters we, the gray hair brigade know where the shoals are.
We know how to come to the harbor, how to go out to a harbor, but when they're in high seas that's where the founders are going to discover stuff. We can help them not trip on their shoelaces, so to speak, and to make life easier for them and to connect them to provide some funding. Angel investing is a hugely rewarding activity. Sometimes you make money, and sometimes you luck into a company that pays for the whole thing and more if you're lucky. It's just darn fun.
David Kessler: It's fun. It's interesting. It's a great learning experience, but it's another thing that I've found that I have to tell entrepreneurs when they're looking to raise money. Most of the people out there, many of the people, I don't know about most, when they consider the competitive chart on their pitch deck, another area of competition that most of them don't consider is the checkbook of the people they're trying to get to write checks, and most of these checkbooks are finite. My deal with my wife was-
Sal Daher: Talk to your wife first, first stop.
David Kessler: -it would be no more than 5% of our portfolio. As I tell people, well, it's probably around 7% now.
Sal Daher: Yes. That's the thing. These people, the founders there are very few unlikeable founders. Most of the founders very likable. It's hard to say no to them. [laughs] Risk control is really important in angel investing.
David Kessler: Then you want to put money into the next new shiny thing that comes along and that requires a conversation with the spouse that never goes well.
Sal Daher: Never goes well, never goes well. I'm in a stage, I'm not writing checks right now because I'm raising a fund. For me, it takes a lot of work because I invest from my IRA, and so there's a lot of paperwork investing from the IRA. My bandwidth right now is taken up. I have money in the IRA to invest, but I don't have the time and I'm focusing on the fund. Going forward, I think I'm going to probably just write one large check from the IRA into the fund and then invest just through the fund.
David Kessler: That becomes much easier to do, I imagine.
Sal Daher: Yes. I think that's much easier. If I'm not investing money from the IRA, I'm investing money that-- The startup is competing with the kitchen renovation or something. [laughs] No chance.
David Kessler: Absolutely.
Sal Daher: Great. It was a call from Ben Littauer doing some due diligence on a startup and you got talking and he got you into--
David Kessler: Into angel investing. He was a member of three groups at the time. I visited Walnut and I visited Launchpad and I visited Boston Harbor. In the end, I joined Boston Harbor at that time and I was there for about seven years. I learned a lot and met a lot of interesting people also. It was a great experience. The biggest mistake I made, I think, was getting more or less fully invested way too soon.
"... Start slow, start small, and don't invest alone..."
Sal Daher: Start slow, start small, and don't invest alone. That's Ben Littauer. That's one of my early episodes. You can listen to that and it still stands up.
David Kessler: I've been doing this for about a little over 10 years now. After the initial burst of enthusiasm, I slowed down a great deal because of the 5% limit. At this point, I've been in 20 companies. About half of them are life science and half are mostly tech, but where do you put CleanFiber? Not exactly a tech company.
Sal Daher: No, no.
David Kessler: I still have 13 of them that are in flight. I've had a number of them flame out. Let’s see. Then there's Siamab.
Sal Daher: Oh, wow. Yes, that's right. That was a nice exit with Jeff Behrens.
David Kessler: It was but we still don't know how big it's going to be because some of it is contingent on how well it works. Then there was Respiratory Motion, which was sold to a Swedish life sciences company. I'm still waiting for those shares to be deposited in my account.
Sal Daher: The mechanics of those things.
David Kessler: I don't think it's going to be profitable, but it'll be something back.
Sal Daher: That frequently happens. That happens like that.
David Kessler: Back in the early 1980s, I was one of eight founders of a venture-backed company. Actually, that was the best investment I ever had. When I left there--
Sal Daher: What did the company do, David? What was it called?
David Kessler: It was called Easel. It was an early touchscreen company. After about 10 years, they got sold. I think it was to a company that IBM ultimately bought. The amount of shares that I had vested up to that point was about $7 worth. My $7 in stock turned into a brand-new Dodge Caravan. [laughter] On a percentage basis, the best investment I ever had.
Sal Daher: The best investment.
David Kessler: Not life-changing.
Sal Daher: You kick yourself. Oh God, I should have had $7,000, 1,000 Dodge caravans instead of just one1.
David Kessler: I would have if I could have but I was invested for more than that.
Sal Daher: Yes, too bad. David, as we think about wrapping up our conversation here, are there any thoughts that you'd like to leave our audience of angel investors, potential angel investors, founders that you think could be valuable for them? Take a moment and think about it.
Advice to the Audience
David Kessler: You're going to get asked lots of questions. Some of them might even be worth listening to. You'll get asked questions, what's your exit going to be like and what's your revenue going to be after five years? The thing that people are listening for is not the answer to your question, but how you approach the answer. Whatever you say, we're not going to believe you.
Sal Daher: That's five-year projections.
David Kessler: Yes, it's not going to be right. We want to know what you're thinking about the business. Remember that what you're building is a business and angels are in it for a lot of different reasons. Not all of them are making money. They want to see change in the world. They want to see improvements in the world. They like what you're doing. They think it's wonderful. You've got a sympathetic audience. Be honest, be positive, and learn things.
[music]
Sal Daher: That is a tremendous way to leave things off. I want to express my gratitude to David J. Kessler.
David Kessler: Thank you much.
Sal Daher: Co-founder and angel investor and technologist. Thanks for being on the Angel Invest Boston podcast.
David Kessler: Thanks for having me, Sal.
Sal Daher: 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.