Sal Daher, "Every Startup Is a Folly," Ep. 25


Sal Daher got a person who knows him really well, his brother-in-law Martin Aboitiz, to interview him in this 25th episode of the Angel Invest Boston podcast. The result is a wide-ranging and light-hearted conversation that tells a lot about how Sal sees the world of startups.

Click here to read the full episode transcript

[BTW, during the podcast Sal refers to the physicist Stephen Hawking as Christopher Hawking. This lapse was occasioned by Sal having spent time with Christopher Lydon just days prior to recording. Sal's sure neither gentleman takes umbrage from the confusion.]

Quotes from the podcast:

“Every startup investment is folly, but not every folly should be a startup investment…”
"How can I eliminate the real follies?"
“Banks are dominated by all these rules, and they're extremely risk averse. It's sort of like belt and suspenders, and yet, periodically, their pants fall down.”
“Someone who's selling is steeling herself for failure in every phone call…”

The list of topics includes:

  • Sal Daher Bio
  • Switch from Engineering to International Finance
  • How Sal Started Investing
  • How Being a Banker and an Engineer Helped Develop Sal’s Investing Philosophy
  • ”When I look at markets, I understand that markets are not knowable, and so I don't look to guess where markets are going. I don't look to think that I know more than anybody else, or that I know more than the market.”
  • “Banks are dominated by all these rules, and they're extremely risk averse. It's sort of like belt and suspenders, and yet, periodically, their pants fall down.”
  • “I've developed kind of an approach of skepticism, you know Popperian skepticism of how much I can know.”
  • Sal Has Andrew Carnegie as a Model – Keep a Lot of Cash to be Able to Buy Bargains
  • “I can tell you right now, anything we're buying, we're buying it very expensively.”
  • Sal Thanks Listener GranTia for Leaving a Review
  • How Sal Decides on Which Startup to Invest
  • “Every startup investment is folly, but not every folly should be a startup investment…”
  • "How can I eliminate the real follies?"
  • “What I have to do is I have to play a defensive game, I have to avoid investing in losers.”
  • “Martin, I discovered a really amazing thing, being really smart and really knowledgeable has zero correlation with the ability to sell, zero, okay?”
  • “Someone who's selling is steeling herself for failure in every phone call…”
  • Regrets?
  • Anti-portfolio
  • Sal’s Favorite Pivots – Pixability & SQZ Biotech – Personal Pivots
  • “I'm a big fan of pivots, because a pivot is an expression of belief in the ability of human beings to fall down and get up again.”
  • Networking in Boston vs. the Bay Area
  • “There's no other place like it [Boston], and there's an unbelievable variety of things that go on. It is a little bit insular, it is hard to network here, but I can tell you that the angel investing environment, there's no angel investing environment that's as collaborative as the one here.”
  • “Now, venture capitalists aren't interested in follies, they're interested in sure bets.”
  • “How many companies can an angel investor successfully track and manage in his portfolio?”
  • People from Whom Sal Learns the Most

Transcript of Sal Daher, "Every Startup Is a Folly," Ep. 25

Guest: Financier, Angel & Podcaster Sal Daher, CFA – “Every Startup Is a Folly”


MARTIN ABOITIZ: Welcome to Angel Invest Boston, conversations with Boston's most interesting angel investors and founders. I am Martin Aboitiz, engineer, founder, and angel investor. Sal Daher is my brother-in-law, and he has asked me to interview him for this 25th episode of the Angel Invest Boston podcast. Listeners curious to know more about me, Martin Aboitiz, can refer to episode 24 and the relevant episode page on

SAL DAHER: Martin, I'm really grateful that you've been a good sport and you're putting up with this, so thanks a lot.

Sal Daher Bio

MARTIN ABOITIZ: Thanks, this is interesting to be in this seat now. So, I'll start with an introduction of Saleh. Sal's family emigrated to Boston area when he was a boy. He attended Belmont High School, and then studied engineering at MIT and Stanford. A career of international finance followed. In early 1999, he made his first startup investment, it was a company named Exos, to which I connected him. It had a successful outcome to Sal, and he went onto invest in a handful of startups over the next two decades. Since retiring from international finance, Sal has become focused on investing in early-stage companies through the Walnut Venture Associates, an angel group that concentrates on tech companies located in and around Boston.

He now invests in eight to 12 startups a year. On January 11th, 2017, Sal launched Angel Invest Boston podcast as a vehicle for him to learn more about how successful startups are built, and to bring that knowledge to the widest possible audience.


Switch from Engineering to International Finance

How did you get into international finance, how was that switch from engineering to finance, how did that come about?

SAL DAHER: Well, love is the short answer. I studied at MIT and at Stanford in engineering, and as you know, I was engaged to your sister when I was wrapping up at Stanford. I was in Palo Alto, she was going to be down in Buenos Aires, and I was scratching my head to figure out how I could be in Buenos Aires and to marry her. The only place I could think of, I was talking to engineering companies, and they had jobs in northern California for me, they didn't have jobs in Argentina, or Sarawak in Indonesia. I went to Citibank, that supposedly had branches in 120 countries, and they were glad to put me through their lending officer program, and promised that I would get a position in Argentina, which I did.

I went to Argentina just in time for, Argentina in those days, was during the Plata Dulce years, when they were just borrowing, enormous amounts of money and living it up. As I got there, just the year after that, the whole thing just blew up. Then they had the Falklands War with Britain, and it was just a disaster. So, I went into banking just so I could be in Argentina, because that's where my fiancée at the time was, but by accident, I got an unbelievable training in pathological economics of Argentina, and learned a lot about markets under conditions of stress. That's got me on the path on dealing with emerging markets.


How Sal Started Investing

MARTIN ABOITIZ: Interesting, I didn't know some of this. How did you discover your calling as an angel investor then?

SAL DAHER: Well, so I came back, you know worked in Argentina, I had gone through the training program for lending officers in the bank. Citibank is a place that spends a lot of money training people, and the people they have, everybody wants to hire them away because they are well-trained and they know what they're doing. After some time at Citibank, I managed to get my resident visa in the US when I was working for Citibank in New York. I am very grateful to Citibank for that, but then I was free to go and do what I wanted to do, which was to come back to the Boston area, where I had grown up. I went to work for the Bank of Boston, involved with buying and selling assets of the bank, similar to what I was doing in Citibank, except that in Boston, it was this whole idea of buying and selling internal assets of the bank.

Then the bank decided it wasn't going to pursue that business anymore, and I was all of the sudden out of my ear. I lost the job that I had at Bank of Boston, and I was kind of stumbling around. I ran into an old friend from Citibank, Jim Hammond, and Jim is an old Yankee and said, "Sal, you've got to meet my friend, Bobby Smith," tremendous guy, Jim. He put me onto Bob Smith, of Turan Corporation, who had founded Turan Corporation maybe a decade before. What Bob was doing at Turan was very similar to what I was doing at Citibank, because I went in as a lending officer, but as all this crisis ensued, I ended up being somebody who bought and sold distressed debt of these countries.

Bob had sort of been a little bit of a competitor to Citibank in different countries. I joined up with Bob Smith back in 1988, and we spent several decades doing this. My introduction to investing came by the accident of putting money to work as a trader, and observing what could happen if luck struck, and that thing became worth a whole lot of money. It was a little accident that I had that, from Citibank, that had brought a little retirement account, sort of like a proto-IRA. I had a little bit of money that I could invest, and so that allowed me to build capital, that's how I got the daring to be someone who invested.


How Being a Banker and an Engineer Helped Develop Sal’s Investing Philosophy

MARTIN ABOITIZ: You have worn several different hats now. We're talking about your investment hat, but then you are an engineer and you are a banker. How do you think? Do you think like an engineer, do you think like a banker?

SAL DAHER: My thinking about investing is informed by a graduate course that I took at Stanford on decision science, from professor Ron Howard. The midterm for that test was a multiple-choice test, and it looked very simple. What you had to do, is you had to assign probability that a particular choice of the multiple choices was the right one. If you thought that the answer was B, you could put 100% chance, you have 100% certainty, you have certainty that B is the correct answer, except that if B was the wrong answer, you could lose an enormous, if you put 100%, you lost a lot. If you put 50%, you lost a lot, if you put 25%, you lost nothing, so that if you just put, you know like four responses, you put 25%, 25%, 25%, meant that you get zero for the question, and then you got zero for the exam if you answered it all like that.

As it turned out, that test, the median score was -23, so if you had answered, "I know nothing," you got a zero, and you were well above the median. Why was that median score below zero? Because people didn't understand their state of knowledge. They thought, in one question, it didn't take many questions, just in one question, they thought they knew a heck of a lot more than they actually did, and they made a mistake on that question and they lost huge points, they could never make up for that.


”When I look at markets, I understand that markets are not knowable, and so I don't look to guess where markets are going. I don't look to think that I know more than anybody else, or that I know more than the market.”

When I look at markets, I understand that markets are not knowable, and so I don't look to guess where markets are going. I don't look to think that I know more than anybody else, or that I know more than the market. I look for indications, for trends that suggest that perhaps there is an imperfection here that I can take advantage. Then I take advantage of that, in an experimental basis, the idea of empirical falsification and so forth, experimenting really. I have an experimental attitude, so it's more like a scientific attitude. See, engineers, talk about engineers, engineering models work really well. Not so well, for example, in water resources, maybe you have more problems with that, you know it's hard to predict when you have rainfall and so forth, but if you're talking about a structure and the load at which a structure will fail, and so these models have all been worked out.


“Banks are dominated by all these rules, and they're extremely risk averse. It's sort of like belt and suspenders, and yet, periodically, their pants fall down.”

Engineers have great confidence in what they know. Bankers, on the other hand, have to be extremely risk averse, because their businesses are highly cyclical, and they're dealing with human psychology and markets and so forth, there are trends and there are all kinds of crazy things that can happen in banking, and banking is highly cyclical. Banks are dominated by all these rules, and they're extremely risk averse. It's sort of like belt and suspenders, and yet periodically, their pants fall down. I observed this world of banking, which is, you know they have all these amazing levels of rules and risk control and so forth, and yet they fail. I looked at engineering, and I said, "Engineering, perhaps has too high expectation of the level of knowledge you can achieve of markets."


“I've developed kind of an approach of skepticism, you know Popperian skepticism of how much I can know.”

I've developed kind of an approach of skepticism, you know Popperian skepticism of how much I can know. I'm always asking myself, "What's my state of knowledge here?" Given that, I go back to that test that professor Ron Howard gave, and I say, "Hey, I'm not going to put all my eggs in one basket. I'm not going to say I know 100% for sure that this is the right answer, because it could blow me up." That's my attitude towards investing, and that's how I interpolate between banking and the engineering mindset.

MARTIN ABOITIZ: In my question, I should add the scientific mindset, no? As far as the engineering.

SAL DAHER: Yeah, it's a little bit, well you know every startup is a science experiment, really.

MARTIN ABOITIZ: You've already started mentioning this, so my next question is, when you're forecasting a company in a political and in an economic environment, how does the political and economic environment influence your investing.

SAL DAHER: Different scales, different dimensions, you have to look at it in different dimensions. For example, in a country like the United States, you still have, although it gets eroded all the time little by little, you still have property rights, if you own something, it's not going to be expropriated from you immediately. The conditions for investing are that you have to have certainty in terms of property rights, and you have to have some semblance of knowledge about what your discount rate for future cash flows. I mean, that model is one that, sort of like on the engineering side, it's kind of trying to apply, the idea of discounted cash flow is trying to apply engineering to investing, and it is one that is very dangerous, but it is one that also it's a discipline that you have to impose on yourself and ask yourself, "Something is going to pay off in the future if interest rates are very low, if there are no alternatives for investing, that means that things in the future look much more attractive than things today."


Sal Has Andrew Carnegie as a Model – Keep a Lot of Cash to be Able to Buy Bargains

What I ask myself is, in a world of absurdly low interest rates, why am I investing so avidly? I need to be more cautious, because if interest rates ever go up, kind of like the tide going out, you discover who's been swimming without their trunks on. I think that you have to look at economic conditions. The example I really like is Andrew Carnegie. Andrew Carnegie built the steel business, but he had this idea, he didn't build steel mills, he kept a nice cash supply on the side, and he bought steel mills that were too well-built. He was a consolidator of other people's steel facilities. I have this attitude of wanting to buy stuff on the cheap, and so I look at economic trends and so forth, and I ask myself, "Am I buying it expensively?"


“I can tell you right now, anything we're buying, we're buying it very expensively.”

I can tell you right now, anything we're buying, we're buying it very expensively. All the experience that I've had with seeing Argentina and Brazil and all these other countries, Nigeria and Russia and all the economic debacles, the summation of that, to me, is be cautious, keep some money handy, keep some cash on the side. When you really see an opportunity that comes along, and don't invest too quickly, just control your investments. That's how you deal with all this uncertainty and all these crazy environments.

MARTIN ABOITIZ: We'll follow up on that on this question, and see what you look at when you look at a startup, but before we get to that question, I know you want to tell us about some of your listeners.


Sal Thanks Listener GranTia for Leaving a Review

SAL DAHER: I want to thank some of the listeners who have been kind enough to write reviews. iTunes has an algorithm that takes into account how many reviews someone has, in terms of suggesting a particular podcast to people, and so it's important for us to have more reviews. So, whenever anybody does a review, I'm very happy to read it on. I wish to thank listener Grand Tia for this review: "I've been listening to these, and they're awesome. I'm not trained in finance, but the info is amazingly accessible, please keep them coming." Thanks, GranTia, for doing your bit and leaving a review. The Angel Invest Boston podcast has outstanding guests, such as my guest host today, Martin Aboitiz, is professionally produced, and so you get really great sound, has no commercials, and comes to you free.

The only thing we ask in return is that you help get the word out. Please, tell a potential angel or founder about us, take a minute to review our podcast on iTunes, sign up at to be notified of new episodes, and of upcoming, in-person free events.


How Sal Decides on Which Startup to Invest

MARTIN ABOITIZ: Sal, how do you pick a startup? Are you looking at what is the best opportunity, are you looking at which opportunities are the worst ones and to throw them out?


“Every startup investment is folly, but not every folly should be a startup investment…”

SAL DAHER: What do I look for in a startup? Samuel Taylor Coleridge said something to the effect that, it was much cleverer than this, but the epigram was basically that every poet is a fool, but not every fool is a poet. Every startup investment is folly, but not every folly should be a startup investment, okay? When I say it's folly, it's because it's likely that it will not succeed. Any particular startup investment is likely not to succeed. Why? Because it's a science experiment, it's something new that's being tried out, and therefore the same way that you're talking about a founder steeling him or herself to the possibility of failure, as an investor, I have to think already that this is going to be money lost.


"How can I eliminate the real follies?"

Then I say to myself, "How can I eliminate the real follies?", and so that I can find something that's a really brilliant thing, so it's a gorgeous poem, and not just the babbling of a fool. The way that I do that is first, and this is what's so fun for me for investing in early stage, you know the later you get in the stage of investing in a startup, it's more and more about cashflow. That's more like what bankers do, you know the bankers look at cash flows, they do minute market analysis, competitive analysis as things stand and so forth. Well, at this early stage, it's really you're looking at people's characters, first number one absolute requirement, complete integrity.

It has to be a person who's honest, honest with others, and honest with herself, that's really important. That character and the ability to look at herself in a mirror and say, "You know, you were going to do this, but you're not doing it, you're doing that, you need to have a change of plans," and so forth, that honesty is extremely important. Honestly with others, hugely important, and smarts, and technical knowledge, the understanding of the space, understanding of the field, understanding of the technology that's required, the ability to do things. Ed Roberts put it really well, you know he always said that you have a single founder, a certain chance of succeeding, you get a second co-founder, chances of the company succeeding goes up, a third founder, up to four, the chances of success go up and up and up.

If that original founder can tell a compelling story to bring other people into her particular folly, into her reality distortion zone, it tells me that that is somebody that can get it to work. Really I focus on the team, intelligence, integrity, and flexibility, and then the other screen that I apply is, is this a business that's worth taking a risk on? I'm not interested in a business that's going to be a very, very nice little niche that's not going to be consequential, I want to make money. I want this investment to be something that, if it works, it's consequential, it really moves the scale. Team, and then a screen on the space.


“What I have to do is I have to play a defensive game, I have to avoid investing in losers.”

I know that you're always asking this, about do I look for winners or do I avoid losers, it's definitely the latter. It goes back to the Popperian approach to this. A priori, maybe I know a little bit, I don't know a lot, I cannot presume that I know in advance, especially at this really early stage what company is going to be a winner. What I have to do is I have to play a defensive game, I have to avoid investing in losers. Meaning, I have to really buckle down on knowing the founding team. Is this a founding team that's going to fall apart because they don't get along? You can tell the chemistry is not good, you know you sit down with them and they're looking at each other resentfully and so forth, this thing's not going to work.


“Martin, I discovered a really amazing thing, being really smart and really knowledgeable has zero correlation with the ability to sell, zero, okay?”

Can these people sell? They're all really brilliant, but there isn't one of them who can sell. Martin, I discovered a really amazing thing, being really smart and really knowledgeable has zero correlation with the ability to sell, zero, okay? This is where Christopher {Stephen] Hawking, for all his brilliance, can learn from Willy Loman, who was a mediocre salesman in The Death of a Salesman. Even being a mediocre salesman, Willy Loman is miles ahead of Christopher [Stephen] Hawking, because selling is not an intellectual pursuit, selling is an emotional pursuit. You talked about the steeling yourself for failure of startup in your previous podcast, well I think that was really a very, very important takeaway.


“Someone who's selling is steeling herself for failure in every phone call…”

Someone who's selling is steeling herself for failure in every phone call, they have to have a way of dealing with that. There are ways of dealing with it, you have to have a system and so forth. I eliminate the people who can't sell, you know the people who can't get along, the people who are not going to raise money. If they can't sell, they can't raise money. Those are the things that I try to weed out. Then whether or not it's the next Google, the next Airbnb, the next Dropbox, you cannot tell ahead of time. I try to have a fair number of companies in my portfolio, and I try to eliminate the ones that are obvious losers, and I try to be open to the ones that could be winners. That's my rationale for not trying to pick winners, but to just eliminate obvious losers.

MARTIN ABOITIZ: Interesting. In hindsight, playing Monday morning quarterback, what are the bad investments that you made, and why should you have seen them coming, or not?



SAL DAHER: I can think of one, for example, that was an investment, it was someone whose character turned out not to be what we all thought it was. That was very disappointing, this guy had managed to create such an aura of, you know he was such a rock star that I didn't do enough due diligence in that particular instance, because I sort of took character references and so forth, so this was a miss. I managed to do business internationally for three decades without investing in someone who was ... You know, banking, this is one of the things about banking that's really important, you know character, character, character, the three Cs of banking. This guy flew under the radar, and started lying. He was not necessarily a fraud, but wasn't telling the truth about what was happening in the company, and this was very disappointing.

To this day, if you call him up and ask him what's happening in the company, he will lie to your face, and we know that it's not true. Those things can happen, that's why one out of 47 investments, that's happened. I will not make that mistake again, because I'm sure that guy, if I talked to one of his high school buddies and so forth, "Oh, he's such a BS artist," would have told me right away. Maybe I should have, I dropped my guard on that, I should have done... Otherwise, I've invested in companies that are, you know people that are spectacularly hard-working, really smart, have done their very best in almost every single case, and some of them have failed.

I don't fault them for it, and I don't think that it was wrong. I probably would have invested in them again, and I will invest with them again, you know even though their company went under. Most of those people, I should say five of those six, I will write a check to them again, because they are really outstanding entrepreneurs who just, you know it didn't work out this time.



MARTIN ABOITIZ: There's the other side of the coin, investments that you regret not making.

SAL DAHER: I know this is one of your favorite questions. When we did this forum at Babson College, Martin was one of the people who emailed the question, "What investments do you regret not making?" Martin, my business partner for many years, Robert P. Smith, Bob Smith, is a delightful person, a genius at making money, but he had one terrible flaw, which is whenever he lost a deal, he'd never forget it. He was going over that deal in his mind, "Why did we, how did I lose that deal, why did I make that bad investment, or why I wasn't able to make that investment, why did I pass on it?" That sort of Monday morning quarterbacking, a certain amount of it that's helpful, to point out where you went wrong with your process, that's understandable, but I don't think it's productive to be thinking, "Oh gees, I wish that I had written that big check for LinkedIn, or wish I had written a big check for," you know whatever, it's not productive.

Examine your investment process and see if there was a mistake. There is one startup that I regretted not investing in, because of failure to follow up. I can blame myself, and that's something I need to correct. I need to get back to the entrepreneur and tell them, "Look, I don't have the bandwidth right now to pursue this," otherwise, I can't think of anything that I really regret not investing in. I don't like thinking in that way.


Sal’s Favorite Pivots – Pixability & SQZ Biotech – Personal Pivots

MARTIN ABOITIZ: We've been talking about pivots, which is always an underlying theme in your podcast. Tell us some of your favorite pivot stories, and perhaps you can tell me your individual pivots.


“I'm a big fan of pivots, because a pivot is an expression of belief in the ability of human beings to fall down and get up again.”

SAL DAHER: I'm a big fan of pivots, because a pivot is an expression of belief in the ability of human beings to fall down and get up again. I have faith in humanity, and I have faith in the ability of humanity to start again, to reinvent itself. For me, you know personally I studied engineering, but I didn't go into engineering, because personal reasons, I wanted to be in Argentina, and so I went into banking. Then when I was in banking, I went from being someone that was doing the lending to large, multi-national corporations, to being someone who was involved in distressed debt held by banks, and buying and selling of that, so that was a pivot.

Then I did a pivot when I was canned at Bank of Boston, and I had to go out to a small company. I had been working in this large corporate environment, all of the sudden, I was in a little tiny company, you know five people, and that was a big pivot, you know to accept the idea of I wasn't part of this huge organization. I was part of a small organization that had to do a lot of stuff on its own, so that was a big pivot. Decades later, when our business at Turan sort of dried up, I kind of had to invent myself. I had heart surgery, in 2010, and then I was thinking, "What am I going to do next?" I was lucky that I had capital to invest, and I had a great family and I had a lot of friends.

To 2010 to 2013, I was sort of wondering what to do next, and you connected me to Walnut. You said “Saleh, have you thought about joining an angel group?” "You remember that guy, Michael Mark I told you about, he meets with these other guys?" I tell you, that for me was, I had no idea that people actually invested that way, took angel investing so seriously, angel investing is something that you do together with other people. That was, in all these pivots, and I've suspected I'll probably have some more pivots. I got involved to pay the bills, you know because interest rates are so low, I got involved in owning real estate with a partner of someone who I'd known for many years.

He and I went out together and bought some residential buildings for rent, and we operate that as a business. I sort of reinvented myself as someone in real estate in 2010, 2011, through connections. This is something that young people have to keep in mind, networking is a way to discover opportunities that you have to keep working on all the time, you don't stop networking, you're always networking. Networking is part of working, it's part of business, you know it's not just networking, it's working. That's how you do business, is through networking, and because of this, I connected with all these things, and I continue to do that.

Podcasting is also a vehicle that helps me to know people better and to understand. You have to keep exploring new ideas and so forth. Now, as to pivots, you know the two iconic pivot stories that I have in mind are of course the pivots of Pixability, of Bettina Hein, who really is a paragon of pivots. I mean, she is someone who combines all the qualities that you want in a founder, tremendously bright, very hard-working, very honest, very direct and blunt, huge energy, and just the right balance between unbelievable determination, but also ability to listen to reality, to look at reality and see if things are working and things are not working.

She's not someone who lies to herself, she's a woman who is capable of telling you the truth and telling herself the truth. You know, telling yourself the truth sometimes is harder than telling the truth to other people. The pivots that she made, from starting out providing services for people who have a bunch of pictures, you know that’s a consumer business, and discovering perhaps that wasn't the business for her, and that maybe they were going to do videos for businesses, and they discovered that really wasn't scalable, that really well-produced videos already existed in businesses. Then she went home to her experience that she had in her previous startup, and she had this amazing epiphany that the video business is very interesting, but I've been looking at the wrong end of it.

The really important part is how do we help the brands figure out how to show these really excellent videos to the right audience, audiences that actually want to watch it, and to improve the quality of the experience of the viewer, so they're not watching garbage all the time, that it's not interesting to them? You know, you're an 18-year-old, and you're being told about denture adhesives and so forth, I mean this is preposterous. She has a platform that now is extremely successful, they received an award for being the fastest growing company in Massachusetts, and because of this quality to reinvent herself. I mean, she is a person who epitomizes this ability.

Another example that I find really praiseworthy is of the guys at SQZ Biotech. Armon Sharei is a brain of the first order, he is a scientist highly regarded in his field. He comes out of the Langer Lab at MIT and so forth, and this is a guy who would, you know if he stayed in it, he would have a Nobel Prize winner and so forth, but he wants to be an entrepreneur. He's combining being an entrepreneur and being a scientist, and building SQZ Biotech. They started that company out with the supposition that they were going to be building a tool that would help other researchers develop new research. They had this really special technology of how to get things into cells in a way that's very effective, and then the cells become transformed and have new functions, really a very promising thing.

They thought, "Well, you know all these labs are calling us and wanting to use our technology, so we can build a tool business right now, really low to the ground," so they thought that that was their base camp approach, was selling tools. Then they had this summit, which was having this technology used by the major pharmaceutical companies all around the world to develop new drugs and new treatments for people and so forth, because this is a really incredibly effective way of transforming cells. Cell transformation is something, you know the technology is pretty primitive. They use electric shock on the cells, they use these lipofectamine, the incredibly noxious chemicals on the outer layer of the cells, they get stuff in and so on.

SQZ has a really very gentle, effective way that is extremely promising, for transforming cells, and so they were barking up the wrong tree with this. What they thought was a base camp, and then summit, it wasn't a base camp. It turned out that that was some kind of a precipice that they were approaching, because the tool business is really difficult, and particularly if you are a company that the technology was new, it hadn't been completely hashed out, so it cost them a lot to get a lab up and running with the new technology. They had to have a PhD scientist explaining to the other researcher how to use the technology, and then the lab would use it for three months, and then they run out of funding on that particular project.

The churn was incredibly high, it was an uneconomic product, so this tools business was completely uneconomical. There was a very well-informed analyst who looked at this at the time and passed on the deal, who was just, "Oh no, no these guys shouldn't be wasting time with their tool business, they should go and do research." Well, Armand Sharei was wise enough to take the advice of the people he was working with, and to see that things weren't working, of his board, you know he has a functioning board, he has other people he had reached out to. They completely pivoted the company, they got additional funding and they're now doing what they should have been doing from the beginning, which is to take this technology and to do strategic partnerships with big pharma in particular areas, you know they inked a $500 million contract with Roche on cancer research, which all the information I have, it's private and I can't really talk much about it, but everything looks promising.

They are working on other similar strategic partnerships. He had the guts to admit that their initial strategy was wrong, and to do this. This is for someone who was used to getting approval all the time, this is a guy whose papers get published and lots of people cite them and so on, it's really hard. I admire that, so those are the two pivots that stick in mind.

MARTIN ABOITIZ: In all these conversations, we're always finding that networking is the key, and it's the key to pivots also. Almost in every pivot, there's somebody that you talked to that gave you a different point of view.

SAL DAHER: Absolutely.


Networking in Boston vs. the Bay Area

MARTIN ABOITIZ: I find that the networking opportunities, the networking process that happens in Boston is very different than the networking process that happens in California. In the east coast, you don't feel like talking shop is appropriate in this environment or that environment, you know and whereas in California, every conversation is available, it's possible, every opportunity. I'm curious, first of all, on how you see networking. What drives the networking engine, and how you take advantage of it?

SAL DAHER: Basically, human beings learn from each other. They learn from doing things, but they also learn a lot from each other. Networking is really about learning from each other, networking is connecting with other people, and the product of that is that both people understand better what one can do for the other. I mean, the ultimate networking thing in my life that I remember really very, very clearly, there was this relationship manager for a large multi-national who sat in New York, and he had a very pronounced Dutch accent. The other lending officers in Argentina, my colleagues in Argentina, thought he was a moron because he talked with a very strong Dutch accent like this, and they had terrible Argentine accents with their English, but they thought that this guy was an idiot.

He wasn't, he was really a very nice guy, very, very good relationship manager for these large, enormous multi-nationals, and I struck up a friendship with him, because I was the guy that would take his phone call and would try to help him out with problems he had in Argentina with the subsidiary of the companies that he worked with in New York and Argentina. That was business for me, and I didn't regard him as an idiot. I thought he was rightly, you shouldn't regard anybody as an idiot, you can learn from almost anyone, you should be much more open to learning from people.

Literally, I ran into this guy taking an elevator at the head office in New York, and I told him, "You know, I'm kind of coming to the end of my rope in Argentina, I really need to figure out a way to come to the States because there are health reasons and so forth, and I want to be here in the states, and not in Buenos Aires, but I don't have a residency, what do I do?" He tells me, "Saleh, if you're working for Citibank overseas, they can easily get you," what was in those days an L-1 visa, "For you to work in head office, so look for a job in head office. In two years, you do your job well, they'll get you your permanent residency in the US, it's an easy step."

This guy opened this enormous door for me, solved with 15 seconds, it solved an enormous problem in my life. That kind of said, "Number one, don't be an a-hole, and number two, listen to people, and you can learn the most amazing things." This was reinforced by my partner for many years, Bob Smith, and the fact that I connected with him through Jim Hammond, you know I struck a friendship with Jim Hammond and so forth. That aspect of networking is hugely, it's just you cannot overvalue networking. Beth Marcus talks about this very importantly, about how the importance of networking in pivots, in the interview that I did, it's episode four. She talked very eloquently that, when you're struggling with your startup, you've got to talk to everyone, and this is what she did with Bob Metcalfe.

 He came up with an idea that wasn't the pivot, but eventually got her to the pivot, with the connection with Pierluigi Zappacosta.

Now, Boston versus California in networking? Look, Boston is not a company town for startups, San Francisco is. San Francisco was a tiny little town, okay? I mean, before World War two, San Francisco was not much, and then it grew after that and so forth, and it was basically a boom town that grew from the gold rush and so forth, and then it wasn't that consequential. Because of the accident of Stanford University being nearby and so forth, and Berkeley and so forth, they started going places.

 It really is a company town, in that sense. Now, Boston has a whole lot more academic resources than the Bay Area does, and yet it's not a company town. I mean, there is no place in the rest of the world that has the concentration of academics that Boston has, there is no other place, I mean it's unbelievable. You get on the Red Line, and you go from Harvard, past MIT, past MGH, and you end up at JFK, you know UMass, Boston out there. You take the Green Line, and you go past BC, you go past the Longwood Medical Area with all the research facilities and all these schools, and then in the suburb, Brandeis, and you've got Northeastern, you've got BU, MIT, Harvard and so forth. There's no place in the world like this, and yet Boston is not a company town.

You don't go around and you hear people talking about test tubes all the time, or doing some latest genomic test or whatever, it's not a company town, so that has a benefit. San Francisco, it's a little bit of a hothouse, and so it's a monoculture, whereas Boston is not. Boston has the universities, it has all these research facilities, but it's a big independent city on its own, it has an unbelievably deep history, a lot's happened here.

It's a funny coincidence, I worked for 24 years in what's called the Landmark Building, United Shoe Machinery. My dad, when he was at Harvard, he was in the Gordon McKay Center for Applied Science, I think it's called. Nice thing, you know who is Gordon McKay?

Well, Gordon McKay was a guy that, circa the Civil War, bought a patent on a machine for sewing soles onto boots, and he made a fortune in the Civil War, and this grew into the United Shoe Machinery company, and that built this gorgeous building where I had my offices with my partner for many decades. The other day, I was visiting this incubator out in Beverly, Massachusetts, which is located in Cummings Park, used to be United Shoe Machinery's, one of their factories, it's this enormous thing. The Boston area has an unbelievable history of entrepreneurship, and it has lots of different industries. My answer to you, Martin, is this is not a company town. This really is the Athens of America, the Athens of the world, in a sense.


“There's no other place like it [Boston], and there's an unbelievable variety of things that go on. It is a little bit insular, it is hard to network here, but I can tell you that the angel investing environment, there's no angel investing environment that's as collaborative as the one here.”

There's no other place like it, and there's an unbelievable variety of things that go on. It is a little bit insular, it is hard to network here, but I can tell you that the angel investing environment, there's no angel investing environment that's as collaborative as the one here.

MARTIN ABOITIZ: As an entrepreneur, you always appreciate the involvement of investors, when there is an opportunity for investors to help you as an entrepreneur. Here's a specific question that I find, that you are an angel investor, and then there is the VCs, the venture capitalists. Venture capitalists, as we have discussed a little bit, have a different view of how they look at a company, and there is a chasm in between the angel round and the VC round where many companies fail. It's probably the single failure point, is when you're talking about summit strategy and base camp strategy, most people die on Everest on the ice fall that's just after base camp, not on the summit.

Two-part question, this one question is, how does an angel investor help your companies that you invest in? In particular, how can you help in bridging this chasm, getting the company from the angel round and handed off to the VCs, which are a completely different animal?

SAL DAHER: Okay look, angel investors invest when there is no business yet. The job of an angel investor is to enable creativity in these founders, creativity informed by reality. An angel doesn't try to control the startup. Typically, angels invest such modest amounts that they could not possibly control the startup. However, angels are there to ask questions, and the wise founders pay attention. They don't have to take suggestions, but they should at least take the questions seriously. If they don't take a suggestion, they have to explain why. They should, because that helps them become better founders, because really, the job of an angel investor, or of having at least one board member in an early-stage company that is actually very involved in the company, someone who might spend 10 to 20 hours a month on the startup, a startup that has that is miles ahead, because that person is going to be asking questions.

Professor Ed Roberts talks about this, you know it's getting the entrepreneur to look a little bit further ahead, and not just be looking right in front of their feet, because they're always putting out fires. I mean, at the startup, they're putting out fires. At the same time, they shouldn't be telling the founders what to do, because we don't know, it's a science experiment. Remember, this is a folly, we're trying to make it a wise folly, but this is a folly, so you have to allow the actors in the folly to commit their folly. You can ask questions, you can say, "Do you really want to throw yourself off the roof?", but in the end, you have to give them the freedom to do this.


“Now, venture capitalists aren't interested in follies, they're interested in sure bets.”

When they've committed these acts of folly, and it's resulted in something, they've discovered a business through all this experimentation, then they're ready to go to venture capitalists. Now, venture capitalists aren't interested in follies, they're interested in sure bets. They're very conservative. Angels take a lot more risks, angels make more investments, angels write much smaller checks, and they have a much different attitude towards control of the company. When they go to a VC, a VC really needs to have something that's ready to take off like crazy, it's already growing, and the VC just wants to basically pour fuel on the fire that's already roaring, and really get that thing to take off, and then three years later, make a 10X, 15X return on that thing, and they're done.

“…VC money is not for everybody; angel money is not for everybody. Some people manage to bootstrap their company, even without any angel money.”

This is what VCs want. Well, when they do that, VCs want a lot of control over the company and so forth, the company has to be ready to accept that. It has to be the kind of company that needs that kind of money. How do you navigate that? Well, the first thing you have to ask yourself, I mean, VC money is not for everybody; angel money is not for everybody. Some people manage to bootstrap their company, even without any angel money. If you have a product, if you really have product/market fit, you know getting product-market fit is something that you know you've gotten it because it's so obvious, you know it's like blood spurting out of a main artery, you hit a gusher.

Then you have product-market fit, and then you're saying, "Oh man, I need a lot more capital, this thing could grow 10 times faster if I had more money." Then you're going to make a really compelling case to a VC, and if you find the right VC, you really have to screen them to make sure that you get people who really understand your business and can work together with the way you work, then it makes sense. But on the other hand, if you have a moderately growing business where you've learned something about the market, but you haven't achieved perfect product/market fit, you can be, you know cash-full posit, it can be profitable, and you still don't have a VC-fundable company.

Fine, don't pretend that it is, because otherwise, that will lead to tears. My answer to that is, you know not every company is VC-fundable, and sometimes VCs are crazy enough to fund companies that are not VC-fundable, because it's fashionable, in a fashionable space and so forth. Sometimes companies that deserve VC funding don't get it, but by and large, be realistic.

MARTIN ABOITIZ: In order to work with companies, you need to be involved enough, you said 20 hours. I wish-

SAL DAHER: 10 to 20 hours.

MARTIN ABOITIZ: I wish any of my investors would do that over there.

SAL DAHER: No, I'm not talking about investors, I'm talking about one board member.

MARTIN ABOITIZ: Board member, yeah.

SAL DAHER: At least one board member, I would like that person to spend at least 10 hours a month, maybe 20.

MARTIN ABOITIZ: Many startups at the angel level don't have the luxury of having anybody of high level that can dedicate 10, 20 hours to them.

SAL DAHER: No, that's the sad reality, right, but if you can, you know at least one person. It doesn't have to be someone who's a huge expert in this. I mean, I come from the finance industry, so I don't have a lot of operating experience with startups, but still, I don't spend 10 hours with any one of them, but I spend probably at least 20 hours a month with all the different startups that I work with, supporting them, connecting them with people, helping them network, being a valuable part of their network. Not telling them what to do, or even asking particularly penetrating questions, but just sort of they call me up and say, "Geez, you know we're having trouble connecting with this person or that person, can you help?", glad to do it.


“How many companies can an angel investor successfully track and manage in his portfolio?”

MARTIN ABOITIZ: How many companies can an angel investor successfully track and manage in his portfolio?

SAL DAHER: I believe that, even up to 100 companies, you can be useful. You're not going to be on 100 boards, but you will be able, during the year, you will have two or three interactions with each company, and can be fruitful, providing perspective and so forth. I'm invested in, as I said, about 47 startups, 41 are extant. Yeah, I'm comfortable with the amount of time that I have to spend with them, I wish I had more of course, but I wouldn't be averse to having more startups in my portfolio. I think that it's necessary for risk control, but the thing is, that you have to really have a good due diligence to put those on. This is where working with people, putting together a team for each due diligence, that makes sense, people who know what they're doing.

If I don't have that, you know I don't invest, because I haven't been able to get a critical mass of people to look at it. It's limited by that, it's limited by how much due diligence you can do, and not by how much work you can do subsequently. That takes a lot more work, to get on the board, to get a company on your portfolio, than it does to maintain it going forward.

MARTIN ABOITIZ: Well, we're coming up now to the close of our ... But just one last question. Of people that you respect, and thought leaders, entrepreneurs that you respect and that we might know, I mean not the smaller, but the people that are, the larger names that our audience might know, who are some of your favorites?


People from Whom Sal Learns the Most

SAL DAHER: Well, you know it's funny, I was just looking at a post on LinkedIn from someone I respect a lot. She liked this post, and it was someone saying, "Claiming that you're a thought leader implies that other people don't think," so I don't like to think of thought leaders, I think that's kind of a goofy thing. Look, human beings exchange information with each other all the time. I value hugely the mentorship that I've received from Michael Mark, deeply experienced guy and unbelievably generous in helping other angels and helping startups get what they need to succeed, he's a tremendous guy. Kathryn Roy is the person who liked that thing on LinkedIn about thought leaders, she is a person who, every time I talk to her, I learn something.

Patrick Rivelli, these are all people I've interviewed, and this is the benefit of what I do here, is that I learn so much from the people that I interview.

Patrick Rivelli is the person I've learned the most about investing in biotech startups, a guy who founded two biotech startups and exited them in 11 years. That's really fast work for biotech, because biotech is a very problematic field, but he has an extremely pragmatic approach. He has a crucial calculus that you have to perform to figure out whether it makes sense to invest in a biotech startup or not. Michael Mark, Kathryn Roy, Patrick Rivelli, Ed Belove, Jay Batson, you know these are all my colleagues, Frank Ferguson has built an amazing company.

I mean, there's so many of these people that I work with. What I see in angel investing is hugely talented people willing to be very generous with their time, and to help other angels and founders get off the ground.

Now, when we talk about celebrities, my favorite people, you know this is kind of like a trinity, Steve Jobs. There's also a little ethic pride here, you know he's from Syria, Arabic background, his birth father was from Syria. Elon Musk, who is just, I couldn't invest the way that he does, being so committed to things, my disposition is very different from his, but I respect him tremendously, and the achievements he's made are just unbelievable. I also like his story, the fact that his family are immigrants, you know they went from South Africa, to Canada, to the United States, and my family emigrated from Lebanon to Brazil, and Brazil to here.

I think that there's a lot that you can learn from that experience that makes you a really good entrepreneur. Peter Thiel, who I think has something, a little bit of emigration in his background as well, and he is a really original thinker. Every interview I can that I can catch Peter Thiel talking, you know like Kathryn Roy, I learn every time I listen to Peter Thiel talking. That's my celebrity triad.

MARTIN ABOITIZ: Right. Well, thanks Saleh, I really enjoyed being able to sit now in this chair interviewing you.

SAL DAHER: Getting payback!

MARTIN ABOITIZ: It's a great time. I would like to invite listeners that enjoyed this podcast to review it at iTunes, drop Sal a line with any critiques or suggestions at, conversations with Boston's most intriguing angels and founders. I am Martin Aboitiz, thank you for listening.

SAL DAHER: 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.