 But a great occasion to be here, not only with two of the brightest people I know in the angel world, but also two people I really like. That feels really great. Today we're going to talk about the pre-seed and seed stage, the mysterious stage where nobody has a clue what they're doing, investors included. And since Jeremy, Sofia and I have done a lot of different investing in this stage, I hope that we're going to make complete clarity of that world. Hope you're ready for that. The first thing I would like to talk about are, like, which are the players? Like, now you're a founder, you're looking to raise your, whatever, 500 to, like, $1.5 million, and you go out there in landscape, and there's all these different players. Do you want to, like, who are the ones that you mostly want to co-invest with? And I think that look at yourself now as your angel and not as Atomico. I think it depends on the type of company. Normally, I try and understand what is the sort of common ground that we have. And if I find an entrepreneur that I really sync on the messaging, then I try and think of other investors that I know will get excited about the same thing. Because then we know it gets so much easier. But you prefer going with, like, other angels? Do you prefer going with, like, micro VCs or finding a VC earlier, an angel group? I think, actually, other angels when it's the angel stage. Yeah. I mean, I've done a few deals together with some of my former Spotify colleagues. That's always a good thing, because then it's people that you have worked with, that you know and that you trust. And normally we have very specific areas of expertise. So when my colleague who's been a former CTO at Spotify, I've had done a tech diligence, then for me that means something. Or when I co-invest with you in health startups that I know is one of your special areas, for me that means a lot when you rate them highly. What about you, Jeremy? I think at the earliest days, it's basically friends and family, as we talked about. There's always the option to bootstrap, which I think is probably something that should be done a lot more, potentially. And then there are your angels, and then now there are your pre-seed funds, and then there are your seed funds, and then I lose track now. I think at that point that's probably the universe that you're trying to look at. But we have, like, it feels like we live in an absolute excess capital world, which I think is very weird for a lot of founders hearing that. But I think that personally I really like micro funds, for example. I think that micro funds have a lot of value because there are, like, a 5 million, 10 million dollar fund, and they're going to be acting as an angel, but they're going to have the reputation problems of a VC, so they kind of have to mind that. Like, what do you think? Do you think micro visas are good or bad for the startup? Oh, I think it's really good. I think it brings a lot of value and some sort of depth to it. And I normally like to sort of work with people, and when you've done one deal and it works out, then normally it comes, sort of, follows on. What are many angel groups? Because, I mean, everybody in their kitchen sink are starting an angel group, suddenly. Yeah, I mean, the one thing I would say about angel groups is that they're groups. So, you know, unlike a micro VC, which typically will have one or two partners, or an angel, which is one person to make a decision, an angel group, the benefit is that it is a large group, so you may get the benefit of more heads around the table and more experience around the table. But it's also a group, so there's a potential for taking a bit longer or having a bit of uncertainty around the decision-making process and so on. And I guess the pen is, of course, if the angel group is run like a consensus-driven group where, when they all say yes, or if it's actually just a deal-sharing group. Yeah, I think what you want to avoid is the type of situation that can occur that if it's a group with lots of good names, and everybody thinks that someone else have done the DD and everybody's just tagging along, then that's kind of risky and I would say unprofessional. And I would say from the founder perspective, I mean, just like anywhere along the train is sort of do your due diligence, right? So, if you're gonna meet an angel, if you're gonna meet a VC, find out what they like to invest in, find out what the investment process is, find out what they've done before, talk to founders that they've invested in, and then also be very clear to sort of the investors. If you're talking to an angel group or VC, you should be very clear and demand from them what is the process, right? How long is this gonna take? How many meetings does it take? How do you make a decision? And what's the sort of next step? And I think it's up to the founders to sort of like push that forward because there's definitely a lot of angels out there who tend to sort of say, oh yeah, I'm kind of in or I'm really interested, but that doesn't necessarily mean that they've written a check yet or will write a check. And I think that that's the thing I think that more people should do is ask, I mean, all the way from angels all the way up to DCs, what is your process like and where are we in that process? Exactly. Because I think when you've done it multiple times, you know, like I can ask like the people I invested in and saying, oh, so have you been to the partner meeting? And they go, no, but the person that loves me and it's like, what's their title again? Associate. Okay, great they love you, but can you please get to the partner meeting because that could mean absolutely nothing. Yeah. So it's really tricky. We talked a bit yesterday about like, good angels, bad angels, good VCs, bad VCs. And I think that, I mean, we've all had different experience on that. Like, would you share like, what should people look out for? What's really bad signs on what's a bad VC and what's a bad angel and how bad can it go? Oh, a good one. I don't really have the answer, but I think you should always sort of assess people that you work with and only work with people that you trust and have a good idea. Sometimes that's hard because you don't get the time in. I mean, we talked about that example with a pretty nasty angel that we didn't appreciate, but how to avoid them, I don't know. No, exactly. It's hard. Yeah, I mean, I would say that like, just like everything else, they're bad angels, bad VCs, and they're great angels. Probably some of the easier ways to tell, obviously talk to other portfolio company founders. I think some of the things that are maybe less obvious are maybe people who don't really have an understanding of what angel investing is. Maybe they put a little bit more money than they expected to or would be expecting to. So that's something interesting to know. Typically when I'm investing in a round and there are lots of angels in it, it's very typical for the founder to tell me the guys who write the smallest checks are actually the guys who tick up a lot of their time because they're sort of nervous about it. They want more updates. They want to make sure it's okay. And without that sort of understanding that angel investing is very, very risky and you sort of have to let the founder do what he needs to do and go out his way. I would say it's also on the other side. I think sometimes when I co-invest with other people and they say, I could take 200K in this round and they're an angel. I just feel like you're not gonna run this company. This is not your next big project. It's like you're an angel. They're gonna do whatever they want for the money. And if they say 5K, I usually go, okay, you know that that means, but there's a sweet spot I find when people wanna do like 20 to 50K US or something when I can feel like, okay, you know what you're getting into. I think a normal question for me always to ask the angel is, how many other deals have you done like this last 12 months? And if they say none, I usually like ask myself if they know what they're doing. And I think more syrup should ask. Yeah. One reflection is also that if you're an angel behaving badly, I think at least in sort of the ecosystem and the Nordics where I operate, it's gonna come back to you because it's just your small community. So you need to have a good reputation. You need to be really sort of add value and be a sort of valuable person to work with. Otherwise, you won't get access to any more deals. So hopefully it's a sort of system that cleans out the bad seats. That's really, sorry. Yeah, I would say from the social proof perspective, I mean, or at least reputation perspective, you know, I feel like VCs are in a sort of range. I mean, some people might say all VCs are bad, but at least they're in sort of professional range. Hey, we work at VCs. Yeah, sorry guys. But you know, like, they can't be that bad. And at the same time, they also can't be like 100% aligned with founders because ultimately their main objective is a return for their investors themselves. Whereas an angel can sort of be all over the spectrum. They could be like the best angel ever, super selfless, spends all their time working with you. You know, it's super helpful. Or it could probably be your worst investor. And that's what I usually see because an angel can be 100% disaligned with you. If he decides that you've disrespected him or he doesn't like what you're doing anymore, he can do, and I've seen this, everything in his power to sort of destroy a company. And so it's just a much wider range of spectrum when it comes to an angels. Yeah, it feels like, I mean, VCs, like knowing from both our own experience and like, you know, seeing other VCs, like VCs are machines built to do returns. So it's like clear and clear. They're gonna be asking for certain things. And just to the day, a friend of mine, Ping Mian said that there's sort of, an angel was asking for if there was an exit above a certain number, he wanted a trip to Bahamas and a house and lots of stuff. And it's just like, that is clearly like unprofessional. But as you said, like, bad angels can be really bad. Yeah, but yeah. But I think that the best angels are, you know, probably the best investors you'll ever have, I would say, on the flip side of that. Because they can, you know, they can always be by your side, you know, even from a CEO relationship, right? They would, they'd be willing to coach you, they'd be willing to have your back, even if it maybe it's not even in the best interests of the company, but you know, they want to be in the best interests of the founders, they can do that, a VC can't. Yeah, I agree. It's like a true partnership. You want to stand by the entrepreneur and the goods and the bads. Yeah, and I think that more startups, more CEOs, more founders should, when they have a discussion, like when they meet one of you guys or me or anything, one thing one they should do is, like, before we sign a check, they should ask, could you do the intro for this person? Could you help me look at that? And if the angel goes, I don't really have the time, or comes back with a weird feedback, maybe that's a good sign. That's a sign, yeah. Or if they're sure, like, let's do this, and here's my feedback. I think that more people should just ask stuff from the angels before they sign the check. Well, one of my top portfolio companies always talks about how VCs promise him a lot of things, and then he would actually like to put that in the document. If you don't deliver all of these things, then let's claw back some equity. Exactly, make them work. That's nice. And then it's like, I mean, how does one, the other question is, so now that we have this landscape of all these, like myriad of people wanting to invest and everything, but then the question is, how do you get in contact? I was just actually standing in a coffee line over there, talking to another VC about a startup, and the person in front of the line turned around and said, I heard you're talking about digital startups, we're a digital startup. And he was like, I had to go up to her afterwards, like that was great, like well done. It was like slightly bad timing, but like great you did it. But how does one do that? How does one get in contact with you guys? Like how does one get to get a signed, signed convertible note from you? I think it's about being well researched, sort of understand, you know, if I'm passionate about a field and understanding that and send me stuff that feels relevant. And in that aspect, Twitter have actually been a sort of good source for me because if you look at what I'm posting on Twitter, you get a good idea of what I'm passionate about. And if you then DM me something around that, it's a good likelihood that I'll get excited. So that's one way. But I would say the best way is probably a warm intro from someone and preferably an entrepreneur that I already have worked with and trust or other investor friends. Yeah. Yeah, I would say it's pretty much the same thing. You know, either you've provided some sort of, you know, signal in some shape or form, whether it's, you know, something on Twitter having a good Twitter following or responding on Twitter and creating those relationships or you know, I think a warm intro is probably the most common way. Like I've taken some cold emails but you know, they tend to be very, very well written, very succinct and it's very clear that they've thought through this and there's a specific reason why they wanna reach me rather than sort of emailed 1,000 people or at least even if they did it 1,000 different times, that's still a good sign. Yeah. No, but I think you can send us those emails when you get a bulk email from somebody asking for money on the avenue. I think that actually, I think personally I really like when people like respond on Twitter and actually don't do DM because then they can't like just spam you. Like on DM they can just write 50 things and there's no accountability but if they do them public, they can't just like reply, reply, reply, reply. It's like we can have a conversation and then I can say here's my email address and then when they email me they can say we talked on Twitter, blah, blah, blah, blah and then of course like I'll have to do the meeting and they have a good chance. What's your way? I mean referrals is number one and it's horrible because it's also very non-inclusive. It means that like it's gonna be we talk to this other founder and that means this new company is kind of of course similar to age, gender, ethnicity, background, everything to the other founder of course. So it's tricky to find new deals. I can provide you with good deal flow through my angel network. Exactly, tell me about your angel network. This is great, she's doing a good plug here then. So with Atomico we started a new angel program just last week and I'm excited about it because I think we will actually get a broader sort of scope and a network. So what we're doing is that we're involving 12 angels, this cohort. They're given 100K per year to invest. They need to invest in a tech enabled company but they're allowed to make the decisions themselves. They don't need to go through us. So they make the decisions and we wire the money. We get new people in after a year and we have a good spread of really talented and amazing people that are kind of in the depths of the local ecosystems in our core geographies. And I'm excited about getting new people on board because that means that we would also generate a huge sort of alumni network between all of these people that are then sharing deals with each other and hopefully learning how to angel invest if you haven't done it before and feeling comfortable in the investing space. And I feel like I wanna sort of demystify investing a bit and make it more open and accessible. And hopefully we will get good people from it and maybe some will eventually be hired or work in VC or start new companies. But I think lots of good things can happen when you bring good people in together. Yeah, I think it's just amazing because most people are gonna start angel investing. They built their company, they've held this whole career and they're plugged in to another layer of the ecosystem suddenly. And then it becomes like a referral system. Yeah, so it's almost like we're activating a generation, a bit premature because it's just before they have their own liquidity event. But I think that's also when you have one of the best deals flows when you're sort of in the midst of it. Yeah, I actually have said yes to be an advisor to one of them because I'm an angel investor in one of them. And I actually think... Oh, that's so cool. But I think that's needed though because I think they're gonna run out to meet a company and I remember my first 10 angel investments probably that I had no idea what questions to ask and I think that what does good look like? Yeah. And I think it's good to be able to help these people or it's like, you know, how good is it? Or like, are they the best company in the whole of ESPO? Yeah. But that's what I love, that we can sort of share the know-how so that more people can do it. Yeah, I love this program. You should scale it up. I think there's so many people out there who, like in the industry who just, as you say, don't have the liquidity and would make great angels or great mentors for people and putting it out there. I think one of the most important things in sort of angel investing is to sort of have a large portfolio of investments as well. And I think an understanding of the risk involved. And so being able to enable people through a program like where at least you're covering a lot of the risk for them and they're sort of allowing them to sort of give back to the community. I think it's amazing. That's great. And about risk, actually, it's interesting to think about different angels with different risk profiles. Good and bad, I think that. I mean, I sometimes have a hard time with real estate investors who come in and ask for cash flow positive within 18 months or something. I'm kind of allergic to that. But on the other end, it's like, where should one put oneself? We had a bit of a conversation yesterday which was really interesting how the numbers differed that much. But where do you see your target's return investment is like when you're at a company? Because you have rather different profiles sometimes. Yeah, we have. I mean, from my end, it is the alternative for me is to put my money in the bank, which is a pretty boring and not so smart way to utilize my money. So for me, when I'm looking at a company, I don't have in mind a 10x return. I mean, obviously that's great if it happens, but it's not what I expect from them. And it also gives me access to people that I most of the time admire and I want to learn from and to a context. So for me, it's more than just financial return. But for me, I'm happy if it's like a 2x, 3x, 5x. That's good for me. Yeah, I mean, I'm a little bit different, actually. I actually don't like it when VCs tell me, oh, hey, we have a good deal for you. It doesn't work for us because it can only be a 5x, but 5x for you as an angel is great. And then I get sort of like, what are you talking about? I have the same return profile or return needs that you guys have from a diversification perspective. So in my opinion, even a company, like starting a company is so hard and it's so risky and even one that whether it's a restaurant or it's a tech startup, I feel that the chance of success is so low that when it happens, I'd like to be able to see it to be something very, very big. And so I'm looking for something with significantly higher returns in that possibility and as well as expecting a very high failure rate, unfortunately. But that also means that if the startup is in a fork of a road of taking extremely high risk and betting the farm versus like going the slightly lower risk and it's actually gonna be high probability that it's gonna work, would you advise them to go betting the farm? I think it's sort of a great question. I think it's sort of, it's up to the founder, right? So I think, you know, some founders would be happy to do that and some founders won't, you know? So I have a lot of founders who take smaller exits, you know, and some of them have become angel investors themselves now, which is great. But and I'm very happy when that happens. It's just, I guess, in the beginning, what is the sort of realm of possibility? You know, and so even for myself, like would you rather take the, if you're presented with a smaller exit or you're presented with a lower risk course, would I rather take, you know, more certainty of a smaller number than, you know, less certainty of a higher number? You know, I'm actually probably indifferent from a risk return perspective, so I really feel it's up to the founder. But then on day one, I feel like both come, like, you know, that company still has the same amount of risk, that makes sense, yeah. I think for me, it's like I tell people that I'm going to be the high-risk, ambitious, irritating guy that's always going to ask you to bet the farm, but I really tell them the same thing, that it's like, it's your choice. But I also invested in a company where I feel like the purpose is the biggest thing for me, and I think that if they're able to do that, I don't actually care if they're returns. Like, I think they should build a sustainable, economically sustainable company, not have to continuously fundraise. But I think at the same time, if it's a two-X return or a 50-X return, if they save the planet, it's fine. But of course, that's a rare case. Yeah. But about that, like, what kind of companies are you in love with? Like, if you look at your due diligence process, when somebody comes out and raises an angle round, like, I know there's no real due diligence process, you know? But at least I have a structure, and I think my structure is often, like, I have a list of stuff I hate, and if they tick any of those things, I don't want to do it. So they're like, oh, we arts us all the development, we have this great development office in Romania, which is not ours, or, yeah, we used to be four founders, but two left, but they still own the A star, as Locke is like, or whatever. And there's a list of those. And then when I checked off that list, that nothing goes bad, then my other list, which is completely emotional, which is like, do I like the person? Do we have the same values? Is the person super ambitious? Do they do something where if it actually, if the biggest competitor in the world copied what they do and this company goes bust, would I still be happy? Like, if they change the planet, and like, if they add optimization, I wouldn't cherish, right? But if they save the planet, I would. But like what, and then I introduce them to other angels. Just as you said about the CTO Spotify, I go like, okay, I like this. What do you think? What do you think? Well, that's how we know each other. But how do you guys do? I think for me, it's the same. I need to be passionate about it because as you said, there's so many companies out there to invest in that will probably be a good financial deal to make, but if I'm not into it for real, it's not gonna be fun for either me or the entrepreneur. And I also wanna work with companies where I feel like I can add real value. So I tend to be drawn to consumer brands and health tech and yeah, sort of areas where I'm passionate about and where I see that they're doing something that's good for the world in general. But I mean, does that also mean that, how much is it the passion of other people and how much a passionate for the cause? Is it both? I think it's super important that you are sort of connecting with the person because they are the one who's gonna make it or break it and be the person who will take this from an idea to hopefully a successful big company in the end. So it needs to be someone that you kind of feel like you understand and that you get to know and that you hopefully share the same values as because if you do, then it's gonna be much easier and way more fun. And when it comes to the question around the process, how do you understand that about a person? I think that's a bit of a tricky one. And at least both you and I do a lot of meetings over Google Hangouts or Skype. So how do you get that across in a video call? And I don't really know the answer, but I do have some sort of internal process where I shape my opinion about a cause and a person and their ability to do what they are saying they would do. One of the reasons I actually love doing stuff on Hangouts or Zoom is because my biggest weakness is I fall in love with people. If I meet people in person, I always think they're great. But if I meet them in Hangouts, I go like, that was a crappy person and it's much easier for me to not fall in love. So I talk to meet people. Yeah, it makes it a bit tougher for them because they need to get across even though there's a screen. But I'm gonna be that later anyway. So what about your jury? I mean, yeah, I think for me, I don't actually have a checklist or a process. I think to me the deal breaker is like, can I build a relationship with this person? It's over a long period of time. And that's probably the most important thing for me. And then once that sort of settled, then it really comes down to, can this sort of person get me excited about what they're doing? So for me, I'm a sucker for the sort of authentic narrative where they've looked at this problem, they really think about it, they talk to all their friends about it, they're kind of annoying to all their friends because they're talking about it all the time. And then you can sort of feel that energy and they sort of convince you that something that you thought was kind of thought that interesting or not that boring or kind of boring or you never even imagined before is possible. I think that's sort of the magic moment why I think probably all of us do this is great. I mean, I think that's what I always look for. Yeah, I agree on that. I think that it's like, I feel that one thing I kind of changed my mind about the last two years is that I actually almost avoid investing in people who don't have that manic conviction because I think they're not gonna be able to fundraise later. Like if they get me to invest because I like them. The problem is, as we talked about VC funds, VC funds don't like people. They look at returns. But if you're crazy passionate about whatever subject, maybe you're the one. So I agree. I think that previously I could have been more, I like the area. It's logical. But now I'm more like, you're not crazy enough. I'm sorry. You need to be kind of obsessed in solving the problem. Yeah. And I think more founders should actually think about what they're actually obsessed about. Yeah. And what problem they're solving. What is the actual value of what you're doing? And I mean, one company I invested in, they are really obsessed about the process of building companies. And I think that's fine. Cause they're so obsessed about it that that's fine. But I think I like, when you meet all of the founders, they're not obsessed about anything. They just like, I'm gonna do startup because most of my friends are doing startups. And that's probably the cool thing. And I wanna be on TechCrunch front page. That would be a problem for me. If you're just in it to be in a cool environment or wanna make a lot of money, then I don't think that that energy will make you last or give you that persistent and grit that you need in order to track through the journey of a startup. Yeah. And it is hell. It is. Yes. It's like a roller coaster and everyday is super stressful. And there's a lot of highs and there's a lot of lows. Yeah, exactly. Yeah. I think that I wanna give people, before I get to questions, I wanna get like, if you wanna advise people of how to actually get into the ecosystem if they don't know anybody. Like because we said Twitter, what are other ways that people can actually reach angels in general? Like how do they get in? I would say attend conferences like this. Network, every opportunity you can. Go to all of the meetups in your local community. Maybe start one of your own. Research and understand who is kinda, you know into what sector and try and be helpful and bring value. Be active on Twitter, social media, see what people are talking about and join the discussion. Yeah. But bring value. You cannot just be a bystander and wanna tag along. You need to sort of contribute. Yeah. Maybe do research, maybe do an internship. I know a lot of the US schools have this sort of VC clubs. Maybe that's a way to get into it. Maybe start one in the Nordic universities if they don't have it. Yeah. Which is not like a business plan competition, but actually something real. What about you? I mean, I would say that as by definition all sort of great angels or great investors are sort of very well networked because they sort of have to rely on that for their deal flow. And so I think that's the reason why everyone's so obsessed with sort of the requirement of all the warm intro. So if you can get sort of like one or two nodes in the network, it tends to sort of like just flow into itself. And then obviously there's, I think to this day and age is great. There's like, there are more ways where if you build a great product or you get a great following of some kind, there are multiple avenues in which you can sort of advertise that or you can be recognized like product hunts or so on. And I think today is a great time for that. So there's actually more avenues. I don't understand why people are not just, I was speaking at a university the other day and somebody said like, how does one become like a top VC in the X, Y or whatever? And I said like, because I got angry. So I said like what I would do, I would pick in each subject, like take something which is not mainstream yet in the investment world, eSports, mRNA, whatever. And then just blog about it, do a podcast about it, interview everybody, get into the end, just like be the manic, this is how we do this thing. And within two years, a VC will reach out and say, do you want to join us as an associate? Otherwise you sort of come here or something. And I promise you, if you're going to be the crazy eSports analytics blogger, I promise you that's going to be an avenue for work. And most people, and then the same guy raised his hand again and said, is there an easier way? I didn't answer that question. I have one great example in our community. There's a guy called Michael Josephs. He used to work for the city and driving the sort of startup initiatives. But he put together really interesting blog posts about the different sectors. So he kind of did research that I could use. And he also talked about sort of the startup phenomena, but put it into a context that was useful for others. I think that's a great way to, you know, make yourself valuable. And exactly, you don't have to even be niche in a subject. You can say take all the startups at Slush and categorize them in whatever, 58 different categories and structure. That would be great in infographic. People would be like, oh, that was a great one. They're just so many easy things, like quote unquote easy, still a lot of work. But yeah, one question from the audience before time is running out. What's your view on convertible notes, saves versus equity? I am a convertible note guy. I think that convertible notes, if an investor says they're joining the angel around them on equity, I think they're the wrong person. I don't have a problem with it either. I love notes. I love convertible notes. I love saves. For me, I like the sort of the lightest document possible at the earliest rounds, and just kind of like make things easier for everyone. And, you know, at the end of the day, the larger the document, the more complex it gets. And especially for an angel, if you're coming in, or even a seed round VC, and if you're trying to put in something too onerous, what people don't realize is that the next VC kind of wants that too, or wants something even better, and the next VC comes on. And by that time, by the time you go down the stack, you're basically holding common stock, I mean, effectively. So it doesn't really matter. I would say, you know, make it as easy as possible. And also the good thing about a convertible note is like, if I meet one of you guys, and I want, and like you fall in love with me, I fall in love with you, you sign the convertible note, and I can start working with you now. Yeah. Whereas if we are looking for herding the cats up to a big shareholder document, everything, that's gonna be like, yeah, not everybody's aligned, we don't have the full round yet, and you might be helping out, but you're not still in it maybe. So I think that's a good thing when doing almost up to, I don't know, 6,700K, I think US, you could totally go convertible notes. I mean, with one caveat, which I would say that it's important to realize that a convertible note or safe note is actually very investor unfriendly, right? So you're putting a lot of trust into the founder's hands, right? So the founder decides, oh, I raise a safe, but I'm gonna go raise even more, and more, more, more, and like sort of like, and yeah, you're sort of just really, not a lot that, at least in the standard safe that an investor can do. So I can understand why quite a lot of other investors are not happy with that, and it may not be the best thing for there, and it's like, for example, VC might not be able to do that because it's not the best thing from a control perspective for their LPs. But I mean, I think as angels, I think it's great. It's the chosen, yeah. Thank you very much for listening. Reach out to us on Twitter if you have other questions. Thank you very much, bye. Thank you guys.