What tech startups should know about seeking investment, with Kristina Milke

0:00I'm Ashley Madison from event chain for investmentpitch media and FinTech news network and today on blockchain interviews we have christina milky the president of Valhalla angels and the co-founder of Valhalla private capital christina thank you so much for taking the time to be on the show it's a pleasure to have you here today you're very welcome could you please start by giving a

0:21little bit of background on your experience with angel investing sure I started becoming an investor back in 2009 I was brought to a meeting on knowing what it was actually going to be about it was a formal angel group meeting and I was very fascinated by the whole a chain of events that happened that evening and I just knew after that particular meeting that I was going to

0:44eventually play some more in this space at some point in my career so a couple years after that I actually started working on the deal and take side with this angel her that's great and for those entrepreneurs and tech startups that are looking for investment could you give a definition of what does angel investing mean and why is it important for entrepreneurs to know

1:06about sure usually when a venture starts out they're looking for their first amount of capital to get the company going and that often comes either from themselves or their family and their friends maybe some government grants that they're available to them but after that the next round of capital typically that they raise would be from an angel investor and the difference between an

1:25angel investor and a venture capital group as an angel investor is often investing their own money and in an early-stage deal where the valuation is typically lower but the risk is very high and so the types of deals that they would get into and be often very personal to them and something that they would like to participate in or or have a you know belief in the progress or the

1:48industry that they're helping advance mm-hmm that's a great explanation Thank You Kristina and this depends on the investor but when you're looking at an investment what is the first question that you normally ask entrepreneurs and what should they expect I like to know if they've never been an entrepreneur before or if this is the first time at this game because experience can really

2:10help it's not the only factor and it doesn't conclude myself or my group looking at a particular deal but it is interesting to know if the founder and the owner team has any experience previously mm-hmm that's that's great to know and especially whether they succeeded or failed I'm sure they have probably learned a lot in their previous ventures and and can learn from that so that's

2:31obviously very important and how much of a factor is that in your decision to invest in in a entrepreneur it doesn't play a huge role but what it does tell me is yeah how they learned some of the lessons that they're likely going to have to continue to learn as they go down the path for their new venture but also their ability to identify or recognize when they have a skillset gap

2:57either with themselves or the team that they have and know when to bring on the right challenge at the right time mm-hmm that's great and what are the other top two or three questions that you really need to know before you take the next step for investing I want to know if they have product market fit and or customer validation and that kind of depends on the type of business some

3:21businesses need users before they can get customers so have they gone out got launched their Minimum Viable Product got user and/or customer feedback and then even better if they have started getting some paying customers so knowing that you have people that are willing to pay for your product becomes really helpful in de-risking the deal mm-hmm definitely and I could see how at an

3:44early stage if entrepreneurs have traction with their product right away obviously there's a lot less risk involved with incoming cash flows and there's more confidence for the angel investors to invest would you agree absolutely agree and it doesn't mean that they may not have to tweak their product or pivot in the future but knowing that they're on

4:03to the right path or at least as early as possible so they're not spinning their wheels and or wasting time and money mm-hmm that's great and I've noticed that with early-stage startups a lot of investors put a heavy weight on the founding entrepreneur and the and the core team and their execution rather than the pro or the product market fit how much

4:27weight do you and the group of valhalla put on the team themselves well that's a great point and we totally agree with what you just stated so when entrepreneurs come and want to do a formal pitch to our group it's amazing how many entrepreneurs come in and spend 80% of the time trying to pitch their product and I can tell you for sure that the advice that we give them is spend no

4:49more than twenty to thirty percent of your time on the product and the other 80% of your time we want to hear about the business model the team the competition that's out there at the deal the deal structure and what the forecasts financial forecast looks for the venture mm-hmm that's great and to fit that in a short pitch and be able to you know explain that in just a few

5:10minutes and the way that you presented as well obviously gives off a vibe from the founder in their confidence in the deal I would assume founders show up in there they want to do a pitch and it's more like a sales pitch to a customer and that's some of the feedback that we ultimately have to give is before you get in front of investors you have to tailor your pitch so then it's an actual

5:30investor pitch and the investors like I said only want to see a little bit about your product they really want to make sure that the team has the right skill set on it that the founders are coachable and are willing to take advice and they're not too in love with their product that if things don't aren't going the way they expected that they're not willing to make up a pivot if they

5:49need to and then they're gonna be able to execute on the plan to get to market as quickly as possible yeah I've really agree with you there Christina on the fact that to understand that they may need to pivot or maybe they were wrong and they can easily correct to move towards the right path without having that fear of being wrong in the first place and to be able to take advice and

6:10take critical advice and make that into an improvement in the company is shows a lot of grit for entrepreneurs so I really like what you said there great feedback is a gift and people don't see it as a gift that's great now this next question may vary depending on the type of business but for angel investment what would you say is the average cheque size as it is

6:36early stage and sure would probably differ between Canadian investments and American investments as well yeah definitely we'll differentiate between actually geographical area so you know I can't give you a number that's specific to the US but there's different parts of the US that will have higher check sizes as in Silicon Valley versus different parts of

6:58Canada even so if the market tends to be more frothy there could be multiple investors trying to get in the same deal and that may drive the price up and it may drive up the cheque size as well I would say in our group the average cheque going to an entrepreneur and it may be made up of multiple checks from multiple investors run somewhere around 150 to 170 thousand dollars and again

7:22that can be made up of multiple checks from multiple investors so angel investors typically write checks anywhere from 25 K to 100 K and then generally someone that writes checks for 100 K and worse is defined as a super angel well that's great to know and now specifically with valhalla angel group what kind of investments are you focusing on currently and are you

7:43limiting it to a geographic region as well so we get deal flow from all across North America we find that most of our investors like to actually meet the entrepreneur if they have the opportunity so typically they're Canadian companies that are coming to us that get through our screening process and we are focused in any kind of tech enabled business so we will stay away

8:06specifically though from retail real estate development in any kind of extraction business as in mining or only gas exploration hmm that's great and have you noticed a trend in increase in tech investments throughout 2018-2019 or any future trends towards tech I would say you know our group's been around since 2003 and so we've been in in this field for quite a long time now longer

8:33than a lot of other formal angel groups and I'd say that we're just seeing a lot of deal flow but we've never had a lack of investors in our group and and people interested in investing in this space so I'd say there's probably more and more entrepreneurs than there ever was or there seems to be a little bit more trend I think it has something to do

8:54with the average age of the entrepreneur as well and and the things that you know people wanting to have more control over their schedule and over their destiny and so we're seeing a lot of great deal glow coming from across the country and I think that trend will continue mm-hmm that's great insight now as an entrepreneur how easy is it to get in front of angel groups or the Valhalla

9:15group and and pitch their product well the first thing is we get a lot of deal flow so we've get anywhere from three to five hundred applications that come through our formal website every year in addition to the fact that all of the co-founders about Holly get multiple invites a day on LinkedIn to look at deals and so we will do a formal deal screening event once a month for

9:38companies that we feel may have a potential to raise money with our group and then once they go through the geo screening process they will get some feedback and if we feel that they're a good fit then they'll get an invitation to actually pitch in our group so if you think about it we see somewhere between three to five hundred deals a year that come to us and we may have 70 of them

9:57that will make it through screening and actually pitch in on year mm-hmm that's great and what would you say to the entrepreneurs that have pitched maybe at Valhalla and and had no traction or you know it just wasn't the right time for them and they didn't get any deal flow yeah so I would say that raising capital is a global game these days so there's a

10:21lot of capital in the world and you can reach out to investors all over the place and investors can find deals all over the place as well and so I would say that some of its timing but it's very competitive so you have to be you have to bring your a-game when you're pitching or when you're getting in front of investors if it's a one-on-one meeting and you're competing against

10:41every other deal that that investor is can see or has seen in the last 60 90 days and if you're pitching in our group you're going to be pitching with three other companies lined up next to you and so you're competing directly with those up three other companies as well so it's you have to be really good and you have to be able to answer all the questions

10:59that people may have for you exude some confidence but not be arrogant you know there's a lot of he wants us to doing a good pitch make sure you understand who your audience is and that you come with a refined and proper presentation great insight and if entrepreneurs are looking to reach out to Valhalla to get into in front of the group specifically what is the best way

11:21for them to reach out learn more information and get involved sure it's about hala angels calm and we have a section on our website for entrepreneurs and there's an application button that you can go through and start submitting your information to us awesome well thank you so much Christina for the time it's been a pleasure learning about Valhalla angels and it

11:42sounds like you guys have some great deal flow so all the best to your group moving forward and hopefully some of the entrepreneurs that are watching this will will reach out and test the group out to see if their product is right for your investment group and let's follow up in the near future to see how Valhalla is doing absolutely thanks for your time ash