In the final episode of the podcast I, Sal Daher, review important lessons I learned in seven years of interviews and decades of investing. In my voice and in the voice of my guests, I recapitulate the discoveries most salient to me and invite listeners to find their own nuggets in the sound archive which will remain available on Apple Podcasts and other platforms. AngelInvestBoston.com will have 250 episode pages with sound, notes, and in most cases, annotated transcripts.
I’ll be publishing new content at Substack.com focused on keeping fit as we age. You can find me there under Sal Daher or under Aging Fit. Startups will show up occasionally. Here’s a link to the Substack:
Thanks for listening.
Highlights:
Lesson 1: Company-Specific Risk – The Bad & The Good – Why It Matters in Startup Investing
Lesson 2A: “You know nothing, Jon Snow” – The Need for Tight Risk Control
Lesson 2B: “You Know Nothing, Jon Snow” – Whence a Real 400X Return
Lesson 3A: What to Look for in a Startup? What to Look for in a Founding Team?
Lesson 3B: The Most Significant Results from Ed Roberts’ Research
Lesson 4A: It’s Important Not to Keep Your Idea Secret but to Talk to Many People About It
Lesson 4B: The Google Problem – Why Founders Should Be Open About their Ideas
Lesson 3B Recapitulated: Robust Finding: Larger Teams Do Better; Startups Tend to Have Teams that Are Too Small
Lesson 5A: Focus, Focus, Focus
Lesson 5B: Focus, Focus, Focus
Lesson 6: Take the Money & Run
Lesson 7: It’s a Long Way from the Lab to the Clinic
Why I Am Ending the Podcast – Archive Available – See You at Substack.com
ANGEL INVEST BOSTON IS SPONSORED BY:
Transcript of “Lessons Learned”
Guest: Sal Daher
SAL DAHER: Hey, this is Sal Daher. I'm delighted you found the Angel Invest Boston podcast in which I interview people who know a lot about building technology startups. I now have a Substack about losing and keeping off 100 pounds of body weight in my 60s. It's called Aging Fit and my goal is to build a community of people interested in keeping fit as they age. Look for Sal Daher on substack.com. Daher, by the way, is spelled Delta, Alpha, Hotel, Echo, Romeo. Enjoy the podcast.
Hi this is Sal Daher, an angel investor in Boston who is curious to learn better ways to build startups. I’ve been an angel investor since the early 1990s. My angel investing really picked up in 2013. By now, I have invested in more that seventy startups and am on the board of one, a life science startup. Also, for seven years I have interviewed angel investors, founders, academics, venture capitalists, lawyers and other professionals on this podcast with the purpose of learning from their experiences. In this episode I try to bring together some of the more salient lessons I have learned from the interviews and from my angel investing. You will hear these lessons in my own voice and in the voices of several of my guests.
Prior to becoming an angel, I worked for decades trading and investing in the distressed debt of emerging market countries. Those happened to be great decades in which to be doing that and it allowed me to benefit both as a trader and as an investor. Since most of my investable capital was in IRAs (Individual Retirement Accounts) I ended up investing mostly via the IRAs. I have done another podcast titled “Startups in the IRA?” which goes into the pros and cons (mostly cons) of using IRAs for startup investing. Just google “Sal Daher and startups in the IRA” if you want to find the episode page. [Startups in the IRA? - Read & listen]
Lesson 1: Company-Specific Risk – The Bad & The Good – Why It Matters in Startup Investing
SAL DAHER: In stock markets, traders and investors are leery of company-specific risk (AKA idiosyncratic risk). You need to have a very good reason to be exposed to an individual stock beyond its participation in the broad indices.
You see, the probability of positive company-specific surprises is usually much lower than that of negative surprises. When good things happen to companies they usually happen over months and years allowing the market time to incorporate these positive developments into the price of the stock. However, events such as accidents, lawsuits, and expropriations can cause sudden loss in the value of the stock. Thus, idiosyncratic risk is seriously tilted to the downside.
Private assets, such as startups, however, are more likely to experience upside surprise than traded assets, since the value of their shares are not exposed to price discovery by an active market. A startup can be killing it and few people beyond the investors may be aware of that success. It’s not to say that startups are not risky, they are very risky, it’s just to observe that they offer a different risk profile which can be an excellent complement to an investor’s traded portfolio. However, in order to benefit from this feature of startup investing one needs to put in a lot of effort and to exercise a lot of discipline.
Lesson 2A: “You know nothing, Jon Snow” – The Need for Tight Risk Control
SAL DAHER: Startups are as ineffable and as alluring as Ygritte of Game of Thrones fame. We need to be very humble about what we think we know of a startup’s prospects and we have to resist the temptation to be carried away by the romance of investing in startups.
I have learned I cannot pick winners. There were some companies I felt had such a compelling team and product that they were slam dunks. I invested more in them and put them in my Roth IRA account (post-tax money). Almost every single one of them failed! My successes came completely from left field and mostly ended up in my pre-tax IRA, aargh.
This emphasized to me that I cannot pick winners. The best I can do is to eliminate losers and hope for the best. Speaking of the best, he best way to eliminate losers is to work with more experienced angels and to invest slowly and small at first. Veteran founder, angel and advisor Ben Littauer says:
“BEN LITTAUER: I've been doing this as I said since 2008, I started off knowing nothing about investment, that's why I joined Boston Harbor Angels and then Walnut because there's no better way to learn the ropes than to work with people who've been doing this for a long time.
I did this full time so I'm pretty committed to it, I jumped right in, and I'm certainly perfectly happy to have lost some money early on through some rookie mistakes. One of the mistakes that most angels do is they spend too much too early and discover that that won't let them build a big portfolio, so I've been steadily decreasing the amounts of my investment. Still hoping to find that 100X return in one of them that will cover the portfolio.”
Interview with Ben Littauer - Read & Listen
Lesson 2B: “You Know Nothing, Jon Snow” – Whence a Real 400X Return
SAL DAHER: Speaking of Ben Littauer’s hoped-for 100X, here’s the story of a real investment that paid off 400X and significantly affected the return of the entire portfolio over decades of investing.
Howard Stevenson was a pioneer of the study of entrepreneurship at the Harvard Business School. Professor Stevenson’s gloried career blended doing business and studying business. He consulted to businesses, he helped found one of the top hedge funds, The Baupost Group, he did research on entrepreneurship and he was a very astute angel investor. Here’s Howard Stevenson talking about his best angel investment.
“HOWARD STEVENSON: The best investment I ever made was in a company that had a really stupid business plan. But the people were fantastic.
SAL DAHER: Yes.
HOWARD STEVENSON: They were in an industry that I thought was very interesting. I thought that what they were doing in that industry made no sense. Over a couple of years, they morphed, and that's probably returned 400 to 1.
SAL DAHER: Oh, the 400 to 1 return that everybody's looking for, to pay for the rest of the portfolio.
HOWARD STEVENSON: Yes. But ...
SAL DAHER: Which company was that?
HOWARD STEVENSON: It's a company called Asurion.
SAL DAHER: Asurion.
HOWARD STEVENSON: And, they are very quiet, I'm still invested.
SAL DAHER: Yes.
HOWARD STEVENSON: They're doing very well. One of my friends, who's a noted venture capitalist, turned them down because the business plan was too stupid. That's been one of the worst decisions he ever made. Whereas, one of the other venture capitalists that put a little money in, it's the best decision he's made in his life.
SAL DAHER: I know, those kinds of investments are few and far between, and when you turn one of those down, it's hard to live it down.
HOWARD STEVENSON: You have to live life forward; you can't live with regrets.”
SAL DAHER: Later on in the conversation, Howard Stevenson related how significant his investment in Asurion was to the performance of his entire portfolio. By the way, the stupid business of Asurion is that of insuring cell phones and other high value devices. Being an academic, Professor Stevenson kept close track of the return on his angel investing portfolio. He talked about his investing in the 25 years since he sold down his position in Baupost, he used to own a share in the company that managed the hedge fund, for personal reasons. Here’s a short clip of Howard Stevenson describing how important Asurion was to his portfolio.
“HOWARD STEVENSON: Now you ask how we've done. We've been doing it for about 25 years, since I sold down some of my position at Baupost, and left active management. I was the president for the first eight years. We probably return 17% or 18%. Probably 12% without the real big winner.”
SAL DAHER: The real big winner is the stupid business of insuring my iPhone against the risk I drop it on the hard tile floor of the bathroom. - “You know nothing, Jon Snow”. Go figure.
You can find the full interview with Howard Stevenson by searching “Howard Stevenson and Angel Invest Boston”.
Interview with Professor Howard Stevenson - Read & Listen
Lesson 3A: What to Look for in a Startup? What to Look for in a Founding Team?
SAL DAHER: My first podcast was an interview with renowned founder and investor Michael Mark, the person most responsible for getting me into angel investing. I’m grateful to Michael for all his patient mentoring and I’ve learned tons from him. He has compelling answers to these questions.
Here’s a clip from that interview.
“SAL DAHER: With all this experience Michael, what do you look for in a startup?
MKICHAEL MARK: Well, I look for an interesting market. People have to be operating in a market where it's possible to build a significant size company and I look for a great team. To me, the founders are more important than any other aspect. I mean I've invested in companies that had marvelous sounding business plans and it didn't work out because it wasn't a first-class team, they didn't execute well. I've invested in multiple companies that didn't have that great a business plan but had unbelievable managers and became successful. An airtight business plan is not on my list. I'd go further and say there are almost no successful companies I've invested in where the money that was made was made on the business plan that was shown to me on day one.
SAL DAHER: When they show you a business plan, you expect to make money from something else they're going to come up with, so you’d better have a team that can come up with something that really can work.
MICHAEL MARK: Absolutely.
SAL DAHER: Not the thing that's in front of you.
MICHAEL MARK: Absolutely.
SAL DAHER: Awesome. What is it that you look for in a founding team?
MICHAEL MARK: They have to be intelligent.
SAL DAHER: Mm-hmm (affirmative)
MICHAEL MARK: Because nobody's going to set out a set of rules for them and you follow these rules. They're going to have to take a tremendous amount of information in and figure out what the rules are. They have to be passionate. They have to be tenacious. I mean there are hundreds of times an entrepreneur's going to say, "Yeah, what a horrible day. I've got too many doors slammed on me." There are too many chances, opportunities you have to quit. You can't be somebody who quits.
SAL DAHER: Right.
MICHAEL MARK: I can point to all of the successful entrepreneurs I've invested in and none of them quit under circumstances that would have made almost any normal person want to quit. They need to be open because they should be dialoguing with their directors or with their investors and using the accumulated knowledge that those people have gotten over the years. That dialog won't work unless they're open and they talk about their problems as well as their successes. I have to like them; I have to like them. I'm going to be spending a lot of time over the next five or six years with this person and if I don't like them today, I'm going to like them less tomorrow.”
SAL DAHER: Listeners who are curious to listen to the whole interview can just search for “Michael Mark and Angel Invest Boston”. You’ll find the episode page. There’s only one place you’re going to find a podcast with Michael.
Interview with Michael Mark - Listen & Read
Michael Mark’s answer about the founding team brings us to what is the most highly supported result from the study of entrepreneurship: more founders, better.
Lesson 3B: The Most Significant Results from Ed Roberts’ Research
SAL DAHER: Here is Professor Ed Roberts of MIT’s Sloan School on this topic:
“SAL DAHER: Now, Professor Ed Roberts, what do you consider to be the most important result from your scholarship of entrepreneurship? What's the result that you're most ... that you think is the most significant?
ED ROBERTS: Well, most significant, in this case, I will interpret as being what is that that I really tried most hard to communicate to my students. I run the entrepreneurship and innovation track in the MBA program, so it's the largest track in the school, and it consists of people who think that they're dedicated to starting companies. What I most want them to understand is that if they grew up believing with this American myth of Horatio Alger, which is that individuals are heroes, and individual heroes accomplish everything, they have a lot to learn relative to starting companies. Our data are very clear. The failure rate of those who start companies alone is the highest by far among all of the companies we study. It is not the individual alone that matters, it is the individual as part of a team, along with other individuals who bring, hopefully, complimentary skills, attitudes, and the like, while bringing, again, hopefully, comparable values together. Our data say, as you go from one founder to two, you significantly improve the likelihood that you will succeed rather than fail.
As you go from two to three, it improves again. As you go from three to four, it improves again. Now, at those levels, one to two, to three, to four, my statement is a statistically significant statement. The data are clear and well-defined. If you go to five, the trend is still the same, more likelihood of success but now, unfortunately, there's not enough five founder companies in our sample for me to say it's a statistically significant finding. I believe it, but I can't prove it to my level of satisfaction.
Do I really believe more is always the merrier? No, I do not. I believe that if you get beyond something like four or five, you're going from team to chaos. It's going to be a very difficult thing to manage a very large group of individuals.
Now, why a team? First is just the addition of the assets of those people. More skills, more money, more experience, more capabilities. Second, is the increased likelihood of complementarity. What I know is different from what you know, and adding you and I together is not just one and one, it is something that may have some meaningful significance.
Three, by bringing multiple people together, I'm bringing multiple sources of interpersonal strength and comfort together. It's a terribly difficult thing to start and build a company. You try to do it alone, where is your back up for you? Never mind for the company. Who are you going to weep on when you're in pain and suffering? It's great if you have a supportive spouse or partner, that's wonderful, but it would also be nice if you had a supportive partner, who was a partner in the business, where you could sit and talk together, coach each other, help each other, comfort each other and the like.
The more is merrier at least up to a small number, of people who could, together, be a much stronger group of people providing reinforcement to each other. The data are clear. Now, two different additions. Number one, the team is more successful if the team is co-mingling people with the technical background and people with the management background. That combination of skills turns out to be statistically significant.
SAL DAHER: It makes a lot of sense, yeah.
ED ROBERTS: Now, one final thing. If of the management background someone has background in sales or marketing, it's still better. At each of those points, I can say, "Okay, more people up to a given level is better. More people who come from different sets of skills base, technical, and management, is better. More people that include some degree of experience in sales and marketing is better. Every one of those three dimensions of teaming is statistically meaningful and I think critical in the founding and building of a company.
SAL DAHER: If I can paraphrase, Dr. Roberts' prescription for a successful start-up team, at least three or four people from different disciplines with different backgrounds and knowledge. People with different personalities that are complimentary, somehow, and ... ?
ED ROBERTS: Well, personality differences then have to really be managed.
Sal Daher: Right, right.
ED ROBERTS: You got to believe in the same kinds of things because if your values are in conflict with each other, you are going to encounter situations where the value conflict can't be resolved readily.
SAL DAHER: People can't get along because of it.
ED ROBERTS: Because they really believe in different things and they don't share the same goals.
SAL DAHER: If I can try restating it, so a team, one lonely, two better, three even better, four tremendous. Then, a mix of backgrounds. Technical founders, people with sales background, people with marketing background, and so forth, and shared values?
ED ROBERTS: Right. Now, I challenge your use of the word prescription, because if a doctor gives me a prescription, I believe it's going to cure my problem. I would say, "Okay, that's a prescription that is going to help, but not cure."
SAL DAHER: Cure, so this is a recipe for a very successful dish?
Lesson 4A: It’s Important Not to Keep Your Idea Secret but to Talk to Many People About It
ED ROBERTS: It's a piece of a recipe, because then, you're going to do everything else right. Then, you need to have a good idea. By the way, we encourage our students to believe that ideas are dime a dozen. We try to get our students to be open with each other about the ideas that many of them believe need to be hidden in secrecy. By the way, coming from different countries, they especially have a secrecy notion about ideas as something that is terribly important to protect.
SAL DAHER: Has to be preserved. Has to be preserved, and you don't agree with that? You think-
ED ROBERTS: It's wrong.
SAL DAHER: You should talk about it.
ED ROBERTS: It's not agreeing with it, it's wrong.
SAL DAHER: It's wrong.
ED ROBERTS: It's incorrect.
SAL DAHER: You have data to show that?
ED ROBERTS: We got infinite, experiential data, the experience is that in the classroom, where I've got 120 students in my class, when we do cold calling, and they've got one minute to throw out an idea, the outcome is, that they get all kinds of feedback from their classmates. Somebody else bumps into the corridor and says, "I had a similar idea to you. We ought to sit down and chat about that." Or, somebody says, "The thing you said, I know a guy who's working on a company in that area." Or, somebody says, "I tried to do the same thing you're talking about, and really, it's a problem, because here's what I ran into." Suddenly, it turns out that that sharing community is much more powerful than the single secrecy community. They begin to realize, when we put them to exercises of generating ideas, which we do, we put them through brainstorming exercises, we put them through simple exercise.
Eric von Hippel, my esteemed colleague shows very large fractions of start-ups come from user innovation, namely, you yourself owned the problem. Therefore, you started a company to solve a problem you owned.”
SAL DAHER: You can listen to or read the complete interview with Professor Ed Roberts here:
Interview with Professor Ed Roberts - Listen & Read
Lesson 4B: The Google Problem – Why Founders Should Be Open About their Ideas
SAL DAHER: This brief video with the founders of video marketing platform Wistia makes the same point Ed Roberts made but they flesh it out with how they approach the maturation of an idea at their company. Brendan Schwartz and Chris Savage pack a lot of wisdom, and they are really compelling, in these two minutes.
Video with Chris Savage & Brendan Schwartz of Wistia
“SAL DAHER: The question is really about the Google problem. Founders are always afraid somebody is going to steal their idea so they hunker down and don’t talk about it. What do you guys think about that?
CHRIS SAVAGE: We made the mistake of not sharing our ideas openly or being worried sometimes that we just need to get something to be perfect before it goes on to the world. But, that’s always the wrong thing to do.
BRENDAN SCHWARTZ: [laughing] Your ideas are not that good. You should be so lucky that Google is copying you.
SAL DAHER: [laughing] Yes!
CHRIS SAVAGE: Mostly you need to be embarrassed by what you’re putting out. You need to put out something that you know is missing stuff. You know there are other things you want to do. You’re afraid people are going to ask you those questions. Or ask for things you want to make that you don’t have in there. But if that core thing isn’t really valuable enough then there’s no point in doing any of it anyway. You’ve got to learn as fast as you can. There’s no other way to do it than to put those unfinished things out there.
BRENDAN SCHWARTZ: You can learn a lot by talking to people about your idea before you have even made anything. I think. And getting that feedback, which is why it’s insane to me that people...when you’re precious about the idea instead of actually talking to people, and you can build an audience, and you can learn how people react to it before doing anything
And guess what, once you build that thing, you’re going to need people to use it. So, if you’re talking to people, and you’ve got them excited...
SAL DAHER: [laughing] You’re ahead of the curve.
BRENDAN SCHWARTZ: [smiling] Yeah!
SAL DAHER: ...you’re protective of your idea. You’re afraid to expose it. And, maybe secondarily you’re afraid...maybe it’s even an excuse. Google is going to copy it. And you should resist both of those things and you should be embarrassed. You should call it the Savage Test... if you’re not embarrassed, you’re not doing it right. [all laugh]”
Chris Savage & Brendan Schwartz on the Google problem
SAL DAHER: I interviewed Chuck Eesley who teaches entrepreneurship at Stanford and did his PhD with Ed Roberts at MIT Sloan. Chuck confirmed the finding about team size in this brief passage of our interview
“SAL DAHER: Good. Earlier on, you talked about the work that you're doing on teams.
CHUCK EESLEY: Mm-hmm (affirmative).
SAL DAHER: I know that Ed Roberts, during his interview, one of the many things that he pointed out was that more founders increases the chances of success. The more founders there are, up to four, statistically significant data, that likelihood of success increases if you have additional founders with complementary skills. You're bringing in people with complementary skills. Like they said, they have an engineering team, and they bring in somebody with marketing expertise as a founder. And so would you kind of talk a little bit about your work that you've done on founding teams?
Lesson 3B Recapitulated: Robust Finding: Larger Teams Do Better; Startups Tend to Have Teams that Are Too Small
CHUCK EESLEY: Well, just one important note on the founding team size. This is one of the most robust effects, and one of the stronger effects, actually, is that larger teams tend to do better, and in general, people tend to have slightly too small of a team.
SAL DAHER: Yes.
CHUCK EESLEY: So, we found that not only among MIT alumni, we replicate that same finding among Stanford alumni, and even the international data sets that I've collected, in China of the Tsinghua University alumni, almost any entrepreneurship database out there, you see the same effect, that larger teams tend to do better. So, then the question becomes, what other characteristics of the team are important?”
SAL DAHER: A conversation that added nuance to these findings ensued. You can find the complete interview here. It’s really worth listening. Chuck Eesley is a really compelling speaker. Very different from Ed Roberts in style and so forth. His last name is spelled E-E-S-L-E-Y. Chuck Eesley, look under Angel Invest Boston. The guy is very interesting.
Interview with Professor Chuck Eesley - Listen & Read
Lesson 5A: Focus, Focus, Focus
SAL DAHER: Another lesson that I picked up is the need for focus in startups. Founders frequently try to do too much and many have legitimate reasons for that, but they need to realize that radical focus is essential. Here are two passages that make the point.
First, we hear from Jean Hammond, founder, angel and co-founder of the leading edtech accelerator LearnLaunch.
“SAL DAHER: Well, this is beautifully said and I think very insightful. Is there some bit of advice that you find yourself giving to people all the time, that you wish you could put just a little blue card and you hand out to founders?
JEAN HAMMOND: Well, focus, focus, focus. If you're trying to do too many things, none of them will get done. In fact, my lead investor in Quarry said that to me. I said, “And, the third thing we're going to do ...” He said, “What? I've been around startups a long time, Jean, and I know there's the first thing and I know there's the second thing, but I'm not sure that I've ever heard of a third thing.” I was like-
SAL DAHER: No matter what it is, there's no third thing.”
SAL DAHER: Jean Hammond’s full interview is available and well worth the listen. She is very wise and engaging. You can search for Jean Hammond and Angel Invest Boston”
Jean Hammond’s full interview can be found here:
Interview with jean Hammond - Listen & Read
Lesson 5B: Focus, Focus, Focus
SAL DAHER: Here are Michael Mark’s thoughts on how hard it is to focus:
“MICHAEL MARK: If you're interested in knowing what we did ...
SAL DAHER: Yeah, very interested.
MICHAEL MARK: We actually had two businesses, which I would tell any startup today, don't do two businesses.
SAL DAHER: I've heard you tell of them, yeah.”
“SAL DAHER: Awesome. I'd like to come back to these narratives of startups which are really interesting, but I want to go back a little bit to what you said about not trying to run two businesses because I've heard you many times ask questions in this direction when we're doing diligence in startups and saying, "Which business are you guys in? Are you in this business or that business." Can you expand a little bit on this, on this importance of focus on that? I mean how did you feel when you were juggling two businesses?
MICHAEL MARK: Well, we like all the other startups that I run into, we had rationales for why we had to do two businesses. In our case it was we had to build the clinical laboratory systems around the IBM 1130 because IBM was going to sell it for us but the IBM 1130 was the wrong computer to use. It didn't have the resources we needed so we had to add equipment to the IBM 1130 at the same time we were automating clinical laboratories. We had a rationale. The problem is that it's very hard to be successful in a company and it's doubly hard to be successful at two companies. When you have two companies that are interdependent on one another, they both have to be successful for you to be successful. You're truly asking for trouble, so find a way at the very beginning to avoid that situation.”
SAL DAHER: Here's the full interview again:
Interview with Michael Mark - Listen & Read
Lesson 6: Take the Money & Run
SAL DAHER: In 2015 I led the angel round into SQZ Biotech (pronounced “squeeze”) an MIT spinoff co-founded by the remarkably talented Armon Sharei, PhD. Armon not only could do the science and engineering he was also able to explain it to lay people intelligibly. In addition, he was an affable person... is a really affable person. I invested $50,000 in SQZ, which is twice what I normally invest.
Part of the appeal of SQZ, in addition to the stellar founder, is that there was demand from scientists across the country curious to try SQZ’s technology for re-engineering cells in a new way. There was the promise of being able to get new types of “cargo” into the cells and the possibility of doing it at scale. SQZ set up a program to sell kits with their devices to labs.
Armon had brought in a classmate and friend, Agustín Lopez Marquez as president of the company. Agustín had worked in industry and had experience in commercialization so he led the sales effort. Within months Agustín and Armon realized that selling SQZ’s tech as a research tool was not a viable business. The cost of customer acquisition was high because it took a lot of effort to onboard the SQZ technology at a new lab. On the other hand, the lifetime value of each sale was too small to compensate for the high cost of acquisition.
It became obvious that a pivot was needed. Agustín left for another life science company and Armon stayed to pursue the next step at SQZ. He went through MassChallenge, the startup accelerator. There he connected with an experienced life science executive who helped develop a new business model for SQZ. The new direction was to seek collaboration with strategic partners interested in SQZ’s technology. In this new incarnation SQZ was able to raise venture money and eventually signed a significant collaboration with a major pharmaceutical company. This collaboration, and others, allowed the company to develop its technology and eventually to go public via an IPO in October of 2020.
My $50,000 investment was worth more than $500,000, eventually. I thought about selling down my position but never got around to doing it. Unfortunately, the stock market turned against biotech companies in SQZ’s stage of development and my stake became worthless.
I now realize that I had beaten big odds in having an angel investment go public. I should have taken the money and run.
By the way, I still think very highly of Armon Sharei and Agustín Lopez Marquez. They are both involved in founding new companies. Were I doing angel investing right now, I’m on the sidelines for personal reasons, I would be looking closely at their startups based on their demonstrated abilities and my experience with them.
If you google Armon and Angel Invest Boston you will find my interview with Armon Sharei. If you google Agustin and Angel Invest Boston, you’ll get my interview with Agustin Lopez Marquez about his startup.
Interview with Armon Sharei, PhD - Read & Listen
Interview with Agustin Lopez Marquez - Read & Listen
Lesson 7: It’s a Long Way from the Lab to the Clinic
SAL DAHER: Life scientists work in the frontiers of knowledge, on the other hand, medical interventions have to clear high bars for safety and usefulness. This makes the distance from discovery to cure unimaginably great. For a scientific discovery to be used in medicine it has to travel a very long distance.
First the discovery has to be confirmed in multiple studies, then safety has to be determined by testing in animals and humans, then there are dosage studies, then tests for efficacy ie does it work, then there is an application for regulatory approval by the FDA, then there are production facilities to be set up, concurrently reimbursement from payers such as Medicare and health insurance plans have to be approved. With so many potential points of failure, it’s a wonder new treatments come to market at all.
In his interview on Angel Invest Boston, respected life science investor Jeff Arnold provides us an understanding of one of the causes of this distance. As he explains technologies that work in the lab do not necessarily translate to the real world. Jeff Arnold observes that incentives differ greatly from business to the academy. In business, the goal is to fail fast so that you can find the ultimate solution. In academia, the goal is to discover new things, thus reliability of the technology is not such a big issue.
This is very true and very important.
So, whenever you’re investing in a scientific technology you have to keep in the back of your mind that scientists really have a hard time understanding something that can translate into the real world. They often under-estimate the hurdles in their way and you have to spend a lot of time on this aspect of it.
Interview with Jeff Arnold - Read & Listen
SAL DAHER: I hope these lessons have been useful to you.
Why I Am Ending the Podcast – Archive Available – See You at Substack.com
At this point I would like to let everyone know that I am ending the podcast with this episode.
One of the reasons I started the podcast in early 2017 was to become better known among investors as I sought to raise a fund. I have now suspended the effort to raise a fund so it does not make sense to continue the podcast beyond the seventh year.
The decision to suspend the raise came from a question posed to me by my friend and mentor Michael Mark. He asked how I would handle the life science assets, which tend to have long holds, likely to still be in the fund in ten years. My breezy response at the moment was that I would hire capable managers who would take over the running of the fund, eventually. However, when I thought more about it, I realized that I would not be able to step aside leaving others to take care of my investment decisions. The prospect of still having such responsibilities ten years from now was not inviting. That’s when I decided to call it quits on the fund.
As I explain in my “Startups in the IRA?” podcast, I am suspending investing from the IRAs, where I have most of my investable funds. The limited funds I have outside the IRA will be dedicated to a personal project. When that project is finished, I may start investing as an angel again with such funds outside the IRA as become available.
Outreach via the podcast was successful in that it connected me with many great people who have backed some of my startups. The listeners to this podcast are impressive group. Every time I meet one of them in person, I think to myself “wow, this accomplished person spends her or his time listening to my meanderings” and it prompts me to up my game. It is also rewarding to know that several startups have been inspired in part by this podcast. I have found the experience gratifying. Unfortunately, podcasts with good sound and graphics are expensive to produce and take a lot of time.
In the new year I’ll be publishing a newsletter over on Substack.com. Startups will make occasional appearances but the focus will be on staying fit as we age. If you are interested, look for Sal Daher or Aging Fit at Substack.com.
Sal Daher's Substack: Aging Fit
While no new episodes will be launched, all seven seasons of the podcast are available on Apple Podcasts and other places, and will remain available. On AngelInvestBoston.com you can find episode pages for 250 episodes, most of which have complete annotated transcripts. I hope you will dig into the archives for lessons that might be helpful to you. On the episodes page it is possible to search by topics. If you are looking for a particular interview it is better for you to google the name of the guest together with Angel Invest Boston.
This is Angel Invest Boston. Thanks for listening. I’m Sal Daher.