Catherine Friend White & Ben Littauer, "Ask an Angel II"

AIB_046_Ask_an_Angel_Web_01.jpg

Angel investors Catherine Friend White and Ben Littauer answered questions about investing in startups in front of an audience at Babson College. Then the audience got to ask questions. The conversation ranged from the optimal portfolio size to the usefulness of the blockchain.

Click here to read the full episode transcript.

 

Here are some highlights:

  • Sal Introduces Live Event - Thanks Nina Block & Margaret Jones from Babson for Making it Possible
  • Sal Introduces Angel Catherine Friend White
  • Sal Introduces Angel Ben Littauer
  • How Catherine Became an Angel Investor
  • How Ben Became an Angel Investor
  • “…there are about 32 [angel groups] here in New England…”
  • “…I have so many soft values that I get from doing this [angel investing]…”
  • KnipBio & UltraCell
  • Cognition Therapeutics – Susan Catalano
  • “Having run my own company for 27 years, I have also my own list of what not to do…”
  •  “If you have 25 [investments], you can probably diversify away a fair amount of the risk.”
  • “One of the biggest mistakes that early investors make is, they have a good outcome on their first bet and then they think they can pick winners.”
  •  “…angel deals are chronically underfunded in the Boston area…”
  • “…when you're providing growth capital you need to keep providing more.”
  • NextShift Robotics
  • ICOs
  • “…I think that there is a lot of value in blockchain, but there's a lot of swamp around the blockchain ecosystem…
  • “The other thing to know about blockchain is that the NSA has cracked it.”
  • Potential of Using the Blockchain for Storing Medical Records
  • Maybe This Is a Situation Where an ICO Makes Sense
  • Coachability Is Crucial for Founders
  • "I am going to be the forever CEO."
  • “…come to us and ask for advice, you might get money.”
  • Golden Seeds Office Hours & The Capital Network, TCN, as Great Resources
  • Q&A: Joel Francois of Helius Power
  • Q&A: Ankit Soni of Cricket++
  • Q&A: Bob Goodof of Walnut Ventures
  • Q&A: Brett Wagner of Waec LLC

Transcript of Ask an Angel II

GUESTS: CATHERINE FRIEND WHITE & BEN LITTAUER

SAL DAHER: Welcome to Angel Invest Boston, conversations with Boston's most interesting angel investors and founders. I am Sal Daher, an angel investor curious to learn more about how to build successful new companies. The best way I can think of doing this is by talking to people who've done it, people such as my panel members today, angel investors Catherine Friend White and Ben Littauer. Welcome to you both. I'm so grateful you agreed to be on this panel.

CATHERINE WHITE: Good to be here.

BEN LITTAUER: Thanks Sal.

Sal Introduces Live Event - Thanks Nina Block & Margaret Jones from Babson for Making it Possible

SAL DAHER: Great. Great Ben. This is the second 'Ask an Angel Investor' panel. We're recording today on the beautiful campus of Babson College, a remarkable university dedicated entirely to entrepreneurship. This is the Alma Mater of Jamie Siminoff, founder of Ring, which was sold to Amazon for $1 billion recently.

SAL DAHER: Our audience today includes Babson students and other people from the Boston startup ecosystem. Welcome. Please remember if you are asking questions, the questions are going to be recorded and they'll be part of a podcast. Keep that in mind when you're asking a question. If you don't want your name mentioned don't mention your name and so forth.

SAL DAHER: We should also thank Nina Block and Margaret Jones of Babson College for their considerable efforts which made it possible for us to be here today.

Sal Introduces Angel Catherine Friend White

SAL DAHER: Catherine Friend White is an angel investor and entrepreneur. Her career in investment management spans three decades, most recently as Founder and President of FinArc LLC, www.finarc.com. Her investments include companies in marketing technology, big data and life sciences. Previously she was on the startup team for International Heritage where she managed a growth and income mutual fund. White is a Director of FinArc Investments Inc. and the Cutler Center for Investments and Finance. She was a Director of BostonFed Bancorp, BFD on the American Stock Exchange, Babson College and other institutions. Catherine Invests with Golden Seeds, and holds an MBA from the F.W. Olin Graduate School of Management at Babson College where we are today.

Sal Introduces Angel Ben Littauer

SAL DAHER: Ben Littauer is an angel investor with expertise in internet and communication technologies as well as Healthcare IT, currently an active member of Walnut Venture Associates where I'm also a member with over 40 investments in a wide variety of startups. He sits on the boards of several portfolio companies. Ben is a mentor for Mass Challenge, The Capital Network and is on the advisory board at TCN, The Capital Network. Mr. Littauer is a judge for Mass Challenge, CRDF Global and various academic competitions. Ben Littauer was Co-founder, President and CTO of Baranof Software, the leading vendor of service-level management software for messaging and internet applications. Baranof was sold to Tally Systems in 1997.

SAL DAHER: Catherine and Ben, please take turns telling us how you came to be angel investors. Catherine.

How Catherine Became an Angel Investor

CATHERINE WHITE: As I was looking to go through the process of selling the company I founded, two different people that know me from very different parts of my life, one of the guys who's actually on the board of FinArc, the company I founded said, "You know Catherine, you're a security analyst, you've been evaluating companies all these years, but you're also an entrepreneur. You founded this company, you've been a part of other startup teams. You bring a certain blend of experience together that would be really useful to being an angel investor because as an angel, not only are you an investor, but you're usually very involved in helping the startup company." I thought, "Well, actually, that sounds kind of interesting.'

CATHERINE WHITE: Then, somebody who knows me from a completely different part of my life said, "Catherine, I hope you're going to do like angel investing or something like that after you leave FinArc." I thought, "Wow, it's interesting that these people that see me very differently both had the same things." They both had mentioned Golden Seeds to me. I had heard of it a little bit but I didn't know that much. But, briefly we've got 300 members around the country. Every company we invest in has at least one C level woman. Not always the founder, although frequently a co-founder and not always the CEO, although frequently a CEO and certainly at the C level. That appealed to me too, as somebody who has struggled as a woman spending time, coming up through the investments business and then as an entrepreneur.

CATHERINE WHITE: As soon as I started to look into what I thought, this could be really great in terms of a new way to use my skills.

SAL DAHER: That's tremendous.

SAL DAHER: Ben, your story has been told before.

BEN LITTAUER: It has.

SAL DAHER: People who have done their homework in Angel Invest Boston will know the story a little bit but, please tell it again for benefit of our new audience.

How Ben Became an Angel Investor

BEN LITTAUER: The short version is after I sold my company, I discovered through two attempts that I didn't like to work for anybody else because they're all idiots of course.

SAL DAHER: Did you like working before you sold the company.

BEN LITTAUER: I loved working.

SAL DAHER: Okay.

BEN LITTAUER: I discovered that the only idiot I really wanted to work for was myself. I didn't have an idea at the time. I said, I really have to link up with some people who have good ideas that I can then jump in on. Someone mentioned angel investing as a good place to meet startups.

BEN LITTAUER: I joined initially, Boston Harbor Angels and then Walnut Ventures, I've been a member of three groups in town over the years. Now I'm only at Walnut. I actually did the dance with a couple of companies where I said, "You know maybe I should invest my time fully with these people." I said, "No, I'm having way too much fun angel investing. What I really love about is, I get to learn something new every day by talking to very smart people and listening to their ideas and asking stupid questions."

SAL DAHER: It's funny, I started angel investing because my brother-in-law introduced me to this woman who was his classmate at MIT who had a startup and so I invested and it was great results. That's how I got hooked but I had no idea that angel investors existed. I had no idea that they did this full time. I thought it was something, once in while they do this on the side.

SAL DAHER: Years later, like seven or eight years later, the same brother-in-law says to me, "You know there's a group called Walnut that you should ..." My eyes were open, I said, "Gosh, I can't believe it." People actually do this full time. That's when I started doing it. That's great.

“…there are about 32 [angel groups] here in New England…”

CATHERINE WHITE: Oh, I think Sal, you point out the different groups and there are about 32 here in New England and some of us are more specialized and some of us are more generalists but it's such an advantage to the entrepreneur to work with a group, because I know, with your group, with our group, an entrepreneur will come in and they'll say, "I have got domain expertise in engineering," for example, but I know I'm going to need to bring people around me that have marketing, that have strategy, that have a finance person obviously when we do out due diligence, we're going to ask more pointed questions having sat in the hot seat ourselves."

SAL DAHER: Absolutely. This is a little bit what, the next question I wanted to ask here, Ben, what do you like about angel investing?

BEN LITTAUER: Well, as I said, I like learning something new every day. I am still on the fence whether it's a financially responsible decision that I make.

SAL DAHER: A question I ask frequently. Yes.

“…I have so many soft values that I get from doing this [angel investing]…”

BEN LITTAUER: I did a bit of a portfolio review with one of my colleagues at lunch today and there are a couple of stars sitting in that portfolio that I'm very optimistic about, that we're both very optimistic about, but it's unclear to me whether overall, it's a great strategy. But, I have so many soft values that I get from doing this, such as learning something and giving back to the community. Every dollar that I put in is someone's salary down the road. We really are creating jobs, creating opportunities and that's a huge value to me. I totally enjoy it. That's the primary reason that I'm in this business is for the enjoyment. Keeps me off the street, keeps me out of my wife's hair.

SAL DAHER: You care to mention some of the companies that you have hopes for.

KnipBio & UltraCell

BEN LITTAUER: Well I'm very optimistic in two companies that I have no domain expertise. I'm a software guy and one of them is a company called KnipBio, it's a biotech firm. Basically, they are making a single-cell protein that eats methanol and grows into nice protein and that's going to be used as a fish feed. Growing very well. It's being well managed and if you watch this space, you'll see interesting news about them in the next couple of weeks.

SAL DAHER: Awesome, awesome.

BEN LITTAUER: The other one that's very interesting, I think a couple of our colleagues at Walnut also invested is a company called UltraCell Insulation [CleanFiber]. It is a very bland and boring company if you think about blown-in insulation. Man, is that a yawn? But, the entrepreneur is very exciting. What they're doing from an ecological point of view is tremendous but mostly it's that they're making a tremendous amount of progress and managing the growth of their company so carefully and so well that I think there's a lot of optimist around it.

BEN LITTAUER: I have also, a significant part of the portfolio in companies like ViralGains and Mavrck, which are pure software plays in ad-tech. Both of those are doing quite well but they don't have the same kind of multiples ahead of them. I fear that something like KnipBio. One thing that distinguishes those two classes of companies is patents.

BEN LITTAUER: Both Knip and UltraCell have significant patent portfolio that gives them a competitive advantage over anyone else in their field. Most software companies don't have that advantage and I think it is a detriment in terms of the outcomes.

SAL DAHER: I have all the software companies that you mentioned, don't KnipBio but I have a bunch of biotech companies such as SQZ and other companies like that, that have very strong patent protection. Things look very promising there.

BEN LITTAUER: Yes indeed.

SAL DAHER: There's another one Poly6.

BEN LITTAUER: Yeah.

SAL DAHER: Where, it has also some patent protection which is looking very promising. I like that. I like situations where there is that moat. Although, you can't ... like Pixability, I'm sure is doing to be doing very well, is tearing up track.

SAL DAHER: How about you Catherine. What're your proudest investments right now?

Cognition Therapeutics – Susan Catalano

CATHERINE WHITE: Right. I'll give you a ditto on ViralGains. I have high hopes for them. One of the companies that has been just a star at Golden Seeds is called Cognition Therapeutics. It's being led by this Chief Science Officer, Susan Catalano. They are working on Alzheimer's. In my layman's terms, what they've done is they've found a way to prevent some of the nasty oligomers from binding to parts of the brain in the cranial fluid and they just got FDA Fast Track and they've got a lot of non-dilutive financing along with other financing.

SAL DAHER: Love that. Love that. Non-dilutive financing.

CATHERINE WHITE: One of the things about Cognition, we've seen so many very disappointing results from some of the very large pharmaceuticals, the bio techs which are so important here to our ecosystem here in Boston. But Cognition just keeps going forward.

BEN LITTAUER: Awesome.

CATHERINE WHITE: With success after success. They're small but they are mighty and they have a fantastic team. They've brought in some very experienced CEOs that have brought companies like this to fruition, shall we say. I'm very excited about that.

CATHERINE WHITE: With my investing both with my company, before I became an angel and now, I always look for a company where there is that social aspect that social impact. Certainly Cognition, I think will fit both bills.

CATHERINE WHITE: I also look at it as something that, if they're not 100% effective, if they're not 100% successful, they're moving the science forward and they're adding to the body of knowledge.

SAL DAHER: If they fail, they'll pass the baton.

CATHERINE WHITE: I think that that is really crucial.

“Having run my own company for 27 years, I have also my own list of what not to do…”

CATHERINE WHITE: You talk about why become an angel? Well, part of it was, for me, I worked for a startup company and I had the advantage of learning from them, what to do but also what not to do. Having run my own company for 27 years, I have also my own list of what not to do and I'm happy to share those stories also. It's like, "Yeah, that wasn't the brightest move." Or, "It seemed like a good idea at the time." But then there are other things when you say, "Gee, I took a chance on this and I tested it and that worked out to be pretty good." Those are lessons that I think I can pass on to the next entrepreneur. I want them to make new and more interesting mistakes.

CATHERINE WHITE: Also, with fundraising, because I was president of a money management firm, part of my job was asking people to give me all of their money. When I'm helping our companies do a raise, I'm only asking people to give us a relatively small amount of their portfolio and so I'm very comfortable doing that, having that conversation. These wonderful companies that we see here at Golden Seeds, it's my passion and it's a very easy ask for me. That's another benefit.

CATHERINE WHITE: I think the other thing I'd say also, just being a sounding board, it can be awfully lonely when you're starting a company, even if you have a couple of employees.

SAL DAHER: Sometimes founders are isolated and it's hard to convince them they can reach out because they wall themselves out because they're so overwhelmed with things.

CATHERINE WHITE: Yeah, you don't even know that it's time to reach out, to be that person that they can call and say, "This is totally off the wall but, can you listen to this." If you can be the person that can be there for them. I think that, that's something. You were talking Ben about some of the softer aspects of it. I find that very rewarding.

SAL DAHER: You know the questions will get harder from here now.

CATHERINE WHITE: Oh, oh.

SAL DAHER: Until now relatively uncontroversial question. Now, I'd be interested to hear from each one of you, what you consider, just slightly controversial, the ideal number of startups in a portfolio.

CATHERINE WHITE: Okay, well, I'm going to jump in on that Ben since I was a portfolio manager.

SAL DAHER: You managed. Yes.

“If you have 25 [investments], you can probably diversify away a fair amount of the risk.”

CATHERINE WHITE: I've studied this question, with common stocks publicly owned companies, what we found doing that analysis was that if you had a mathematically optimal portfolio, 15 was the absolute minimum. But, there really is no portfolio like that. If you have 25, you can probably diversify away a fair amount of the risk.

CATHERINE WHITE: What I do is I look at my angel investings as part of my larger portfolio. In my larger portfolio I'm not having Alzheimer's startups, I'm not having, ViralGains. I look at them in terms of diversifying industry, diversifying within the specific sector and look at it holistically, but there'd be nothing wrong with having a couple of dozen small investments in companies.

CATHERINE WHITE: I don't have as many as Ben, I have seven individual cheques that I've written to individual companies as well as a couple of follow-on for those firms but I also have a fund with 25 companies in it.

SAL DAHER: I'm going to impersonate Ben. He says, "Start slowly as an angel." I know he gives that advice.

CATHERINE WHITE: That's a good idea. I've been doing this for five years but I've been investing for 40.

SAL DAHER: For 40 years, yeah.

CATHERINE WHITE: I had a little bit more self-confidence perhaps.

SAL DAHER: There's this thing that if you've only written seven cheques, don't feel bad about that because it's probably a good strategy.

CATHERINE WHITE: Yeah. I'd say, seven cheques, or seven companies, eleven cheques.

SAL DAHER: What are your thoughts on that?

“One of the biggest mistakes that early investors make is, they have a good outcome on their first bet and then they think they can pick winners.”

BEN LITTAUER: Like most of the colleagues of ours in angel groups, we do believe in portfolio play. We don't think we can pick winners. One of the biggest mistakes that early investors make is, they have a good outcome on their first bet and then they think they can pick winners.

SAL DAHER: Yeah.

BEN LITTAUER: That's a big detriment. It's a portfolio play. We do have some colleagues at Walnut for example who go in super deep on very few plays and it's unclear to me whether that's a good strategy or not.

SAL DAHER: It's worked out for Frank.

BEN LITTAUER: It's worked out for Frank.

SAL DAHER: Yeah. Frank Ferguson we're talking about. We discussed this and so forth and he it just worked for him.

BEN LITTAUER: He seems to be able to pick winners. But, I don't believe I can pick winners. I hope I can avoid some losers, but most of our colleagues who have been successful in angel investing will tell you that one or two of their investments out of sometimes hundreds are the ones that make the portfolio.

SAL DAHER: The whole portfolio, absolutely.

BEN LITTAUER: You have to bet on a lot of things. I bet small on a lot of companies and then I don't tend to do follow up but I do tend to follow up personally and shepherd the ones that I think and try to give as much assistance as I can to the ones that are really acing it.

SAL DAHER: Okay. We're going to get a little more controversial now. Follow-on investments. Any thoughts on that. Do you do follow-on investments.

CATHERINE WHITE: Yeah. Part of the curriculum we have at Golden Seeds, we have several different courses and they advise us that when you're going to do your investment in a company, think of that as maybe the first of three. If you love a company say, "Okay, this is my first one, but I should expect to do follow-on."

SAL DAHER: They're urging you to stage.

CATHERINE WHITE: Yes, to do stage. Every once in a while, I'll see a company and I'll think they can probably take, I don't know 400,000 say, and get enough revenues to run with it and not need more after that. It really depends on the entrepreneur. We have seen that occasionally but I don't think that, that's a typical bet that I would make. It's certainly nothing I would count on. I figure if I'm going to put down say 25,000, I'm ready to put down another 50, assuming things go reasonably well, right?

“…angel deals are chronically underfunded in the Boston area…”

BEN LITTAUER: I've made it a practice to be known as a, 'once and done', investor. That's been my style. I do that for a number of reasons. One is, many follow-on rounds in angel deals because angel deals are chronically underfunded in the Boston area, are really down rounds that are painted up a little nicer. It's easier to say no if you're already known as a 'once and done' investor.

BEN LITTAUER: Another reason is, if I reinvest, it maybe be a financially positive decision if it's not a painted down round, but I'm not in this primarily for financial gain. I'm in this because I'm enjoying it, I like to work with the new companies. The stage at which I provide the most value to most of these companies is at the seed stage. I invest very early, often before even Walnut will invest, I'll put a small cheque in. I'd much rather have the shiny new bauble than to work with the old, slightly tarnished one.

SAL DAHER: Too much is known already.

BEN LITTAUER: Too much is known already, indeed. I have made a few exceptions, if I'm on the board for example, I may make an exception because of the signaling and make a second investment. But, I think out of my portfolio, I've made three or four follow-on investments and I would say one of those has turned out very well.

SAL DAHER: I'm closer to you than to Catherine, than the Golden Seed approach.

BEN LITTAUER: Yeah.

SAL DAHER: The idea that you're sort of planning that you're going to be making further rounds.

BEN LITTAUER: I think that there's also a very different style even within the angel groups, which is a small slice of the investment community. Even within the angel groups, there are different stages that the angel groups invest in.

BEN LITTAUER: Groups like, Hub, Golden Seeds and Launchpad tend to be a little later on average in their investment than most of us at Walnut. We're very much a seed group.

CATHERINE WHITE: Our companies might be a little bit more proven [crosstalk 00:19:25].

SAL DAHER: They're more developed.

BEN LITTAUER: And, so, you're providing growth capital as opposed to proof of concept capital.

CATHERINE WHITE: Yeah, that's a good point.

“…when you're providing growth capital you need to keep providing more.”

BEN LITTAUER: I'm into that proof of concept stage of the company and so it makes sense for me to invest early and invest once and find another one that I can help prove concept whereas a Launchpad or Golden Seeds are providing growth capital typically in their deals and when you're providing growth capital you need to keep providing more. That's an attitude that differs from what you want to achieve in your angel investing.

CATHERINE WHITE: That's an important message, I think for the entrepreneurs because when they're looking at which angel groups to approach, and Ben will tell you this, sometimes people will come to me and I'll be like, "I think this is really interesting but I think that my colleagues might find it a little early but you might want to talk to Ben."

SAL DAHER: Exactly. Yeah, go see Ben.

CATHERINE WHITE: Go see Ben.

BEN LITTAUER: In fact, that very dynamic with KnipBio, five years ago, probably, one of the lead investors there, Jess McLear there, who's a very active investor in town, very well-known member at Launchpad, she was shepherding this deal through the system and said, "It's way too early for Launchpad. Ben will you take a look at it." We brought it, in fact, through Boston Harbor where I was a member at the time. Did a seed stage deal there because it wouldn't have flown at Launchpad. She as a Launchpad member knew this.

NextShift Robotics

BEN LITTAUER: It's really a very dynamic environment. We syndicate freely between the groups. One of my most recent investments was led by Golden Seeds and I'm very excited about it. That was actually a very early one for Golden Seeds.

CATHERINE WHITE: It was hybrid. Yeah.

BEN LITTAUER: It was a very early one for Golden Seeds. It was pretty well in my wheelhouse. I was very happy to join that deal.

SAL DAHER: Was that the robotics company?

CATHERINE WHITE: Yeah.

BEN LITTAUER: That was the robotics company called NextShift Robotics. It's really a software company that happens to have robots.

SAL DAHER: Yeah. I like the founder.

Now, there will be blood. Roll up my sleeves and put my arm into a bag of cats. I'm going to reach in there. Okay. Ben, please explain what ICOs are and tell us what you think of them.

ICOs

BEN LITTAUER: What are ICO? There're two flavors of ICOs. These are initial coin offerings. There is this new technology called, blockchain that Bitcoin is based on and Ethereum is based on. It's a cryptographic technique that is very confusing and indeed very confused.

BEN LITTAUER: ICOs are a way to issue some sort of cryptocurrency in order to fund your company. The two flavors of ICO, one of which is regulated by the SEC is, if there's no underlying value to the cryptocurrency that you're offering, then, it's a security. You're selling shares of the company, effectively into a blockchain. That is still probably regulated by the SEC.

SAL DAHER: And very rare. They don't happen very often.

BEN LITTAUER: Because of that, they're very rare.

SAL DAHER: Yeah.

BEN LITTAUER: Most of the others are, "Well, we're selling you a cryptocurrency that you can use to buy services from the company, or products from the company later." The hope is ...

SAL DAHER: Or exchange for another cryptocurrency.

“…I think that there is a lot of value in blockchain, but there's a lot of swamp around the blockchain ecosystem…”

BEN LITTAUER: Right. The hope is that the price you pay for the coins today will go up and that this Uber ride will be worth 10 times what you paid for it in two years. That's the hope. At the moment there is a tremendous amount of fraud going on in the ICO landscape. It's very hard for an average investor to evaluate what the underlying value of the product or service is. I'm staying away from them as an investor. I'm studying them and learning about them as much as I can because I think that there is a lot of value in blockchain, but there's a lot of swamp around the blockchain ecosystem and it's very easy to get mired at the moment. I've seen one company that I think has a legitimate reason to do an ICO eventually but not immediately.

SAL DAHER: Not immediately. Catherine do you have some thoughts on ICOs from your perspective as a longtime investor.

CATHERINE WHITE: I do. I do. You have to understand, I did come out of the public markets and was a bank director and worked for a mutual fund and then ran a SEC-registered investment advisor. I've spent a lot of time learning regulations. The first thing I thought about when I heard about initial coin offerings was, "Gee, if you were a criminal, that might be an interesting idea." Maybe it's the skeptical New Yorker in me. I don't know. But, yeah, I was like, "Selling heroin or something." That was my gut reaction.

CATHERINE WHITE: I did some research because any innovative way to raise money, well, you've got to look into that, right? Maybe it's the best thing since Kickstarter or something. The articles I ran across in the limited research I did, indicated that, that's what people did if they kind of failed at getting money from an angel or the venture capital community. I'm like, "Okay, that's kind of like two strikes and I'm moving on to the next idea." That's really where I left that.

CATHERINE WHITE: I do want to make one point though, because blockchain, even though that is the technology behind these, it's really, totally separate. We don't want to dis blockchain, in fact we've seen it used for some life sciences companies where they're doing patient records using blockchain.

SAL DAHER: Yes, yes, yes.

CATHERINE WHITE: We want to make sure we don't get those two too mired together.

BEN LITTAUER: Absolutely.

SAL DAHER: I have a conversation coming up later this month or beginning of next month with a company that Ben introduced me that's doing exactly that.

BEN LITTAUER: Yeah.

CATHERINE WHITE: We have a company that we're looking at, at Golden Seeds, depending on what the outcome is on some work we're doing, that I might be introducing to you all over Walnut. I'm not exactly sure what the status is right now but they're using blockchain in a completely different way. It's a technology company. It's fascinating.

SAL DAHER: I just want to make sure. Your skepticism of ICO does not imply skepticism of the usefulness of the blockchain.

BEN LITTAUER: There is definitely usefulness of blockchain and similar technologies. There are other technologies that are related but not strictly speaking blockchain.

SAL DAHER: Right.

BEN LITTAUER: Something good will come from that, I'm convinced. There's a lot of trouble even on blockchain.

SAL DAHER: Sure.

BEN LITTAUER: Recently they discovered that you can distribute child porn through the blockchain and all of a sudden anybody who's a miner has this on their computer. That's just the way blockchain works.

SAL DAHER: Yeah.

BEN LITTAUER: These sorts of crazy little gotchas are going to be there for the next few years at least and they're going to have to clean them up. I have no doubt that they will get cleaned up and there will be legitimate uses for this but there are definite dangers.

“The other thing to know about blockchain is that the NSA has cracked it.”

CATHERINE WHITE: The other thing to know about blockchain is that the NSA has cracked it. It's not quite as safe as some people might think. That's something else that people might want to salt away.

SAL DAHER: Maybe that's the solution for our public deficit. They're going to inflate Bitcoin.

BEN LITTAUER: There you go.

CATHERINE WHITE: I saw that it fell below 8000 yesterday.

BEN LITTAUER: Yes.

SAL DAHER: Maybe they're printing extra Bitcoin.

CATHERINE WHITE: Only because I heard on the radio. I am not an investor and I just am not following it but I heard that it was in the 7000 or something.

BEN LITTAUER: I do think that everybody including the Bitcoin investors realized that 17 or 18,000 was a bubble. I don't think anybody thought that that was a supported value. It was just a bubble and it happened and it's now deflating as it should.

CATHERINE WHITE: Remember somebody paid that for it.

BEN LITTAUER: Yes. Oh, absolutely. That's the mistake. Is that people who ... But, we see that in many markets including angel investing and we struggle as groups in Boston to keep the prices down on our deals and not follow the Left Coast where the prices of deals are very high, which makes it very hard to make money.

CATHERINE WHITE: Yeah.

SAL DAHER: Now, I had a question here Ben. Have you run across a business plan for which an ICO makes sense?

BEN LITTAUER: Yeah.

SAL DAHER: At the time I hadn't ...

Potential of Using the Blockchain for Storing Medical Records

BEN LITTAUER: The one that we were both planning to talk to later this month, is a potential one. Basically, it's a marketplace for health information, whether that's clinical studies from pharma, whether that's personal information of your health record anonymized, so that they can match and say, "Ben has this condition. Comes in and visits me. It turns out that Sal had the exact same condition and a similar genome." Sharing genomic data even and really getting down to the level of personalized medicine. This has an enormous potential value and the block chain and a cryptocurrency will presumably, they claim, allow, the exchange of monetary value for these micro transactions where I lend my medical record to Sal or vice versa and we get compensated for it.

SAL DAHER: Yes.

BEN LITTAUER: That's a big idea and a blockchain like technology enables it.

SAL DAHER: Blockchain like technology, no discussion, there's a use for it. But, the question was, what's the reason to issue a coin.

Maybe This Is a Situation Where an ICO Makes Sense

BEN LITTAUER: The theory there is that by issuing coins which are the mechanism for doing these exchanges on the blockchain, it's a crypto currency, the theory is that early investors can get their money out.

SAL DAHER: This is the reason that ... By accident, I was in Harvard Square at a Blue Bottle Coffee, and next to me were two young guys from Harvard. One of them had won a prize, at an MIT competition, blockchain competition for a young startup. What they're doing is they're basically creating Mechanical Turk on the blockchain. It's not going to be owned by anybody, it's going to be an opensource project and it's just going to operate on its own. The issuance of a coin is a way that the initial investors in that and the founder, who’re taking a significant amount of coin, has of having a stake in that of rewarding himself for starting that. That begins to make sense to me, but anyway.

BEN LITTAUER: I think we live in interesting times when it comes to blockchain and ICOs.

SAL DAHER: There's no doubt about that. There's no doubt.

SAL DAHER: One question that comes up a lot is, what do you look for in a startup? Catherine.

CATHERINE WHITE: Yeah, so the most important thing is, who is running the show. Who are the founders? About 70% of the founders that we've worked with at Golden Seeds they're a first-time entrepreneur. They're coming to us, they've got domain expertise. They really know their field but they haven't run their own company. You might find yourself as an entrepreneur in that situation and you might say, "Well, gosh, how am I going to get funding if I'm coming in and saying I worked for Megalith Corporation but I know a lot about this particular field and I've invented something or I've come up with this really interesting idea."

CATHERINE WHITE: What I advise people to do is to bring people around them whether it's a co-founder or advisory board, that bring the other skills in. If you're an engineer and you want to come in and say, "Okay, I have come up with something here, who can I get that, first of all is a name in my field but also people that will know marketing, that will know sales that will know finance, that will know what questions that I don't know enough to ask."

Coachability Is Crucial for Founders

CATHERINE WHITE: Which, leads me to another characteristic is “coachability”. We want somebody that says, "I might be really good at ..." In my case, I was a portfolio manager. That was my thing, that was what led me to that point in that stage of life to start my own company, but did I know about marketing? No. Up till then, the marketing department at the mutual fund company where I was a partner would come over with the proxy statement and the brochure from my mutual fund and say, "Is this what you do?" I'd read it through and say, "Yes, that's what I do." That was my marketing. I do have an MBA but I took one course because it was everything finance, right?

SAL DAHER: Yeah, yeah.

CATHERINE WHITE: I'd hope I’m not surprising anybody with that. I took statistics, I took other courses like that but marketing was not going to be something I thought I'd be doing a whole lot of work with. I knew ... That was my first hire, was a marketing major who'd gotten her MBA here at Babson and just to see that ability for someone to say, "This is something where, this is my special ability. These are things where I'm good enough for now." Things like administration or whatever that might be where you're good enough for now for that stage of the company.

CATHERINE WHITE: Then, there are things where you look at your own skills and you do your assessment and say, "There's a deficit here." Public speaking was probably my most serious deficit. I did four years of Toastmasters just to get to the point where I wasn't having a major out of body experience in front of people.

SAL DAHER: Toastmaster is an underappreciated resource. It's an underappreciated resource.

CATHERINE WHITE: It is. You have to do that self-assessment and be frank with yourself or find somebody who'll say, "You know what you really could work on is XYZ."

"I am going to be the forever CEO."

CATHERINE WHITE: The other thing we'd like to see with an entrepreneur is that a lot of founders will come in and they'll say, "I am going to be the forever CEO." We're saying, "Okay, why do you think that?" Sometimes they will be the forever CEO, but we're more impressed if somebody comes in and says, "I am here founding this company because I'm an engineer and I love to do engineering and I like to think of really interesting engineering solutions but I can be the CEO until we get to our Series A. How does that sound?"

CATHERINE WHITE: We're like, "That sounds like you've really thought about this. The Series A will be able to hire a CEO."

SAL DAHER: Sounds like a CEO with a head on straight.

CATHERINE WHITE: "Will free you up to go do what really turns you on in life and what's going to really make this company even more exciting for the employees, for the investors ..."

SAL DAHER: It plus, make the founder rich.

CATHERINE WHITE: "And, make you rich and make you happy." How about happy.

SAL DAHER: I'm not happy to do all this terrible CEO stuff.

What do you look for?

BEN LITTAUER: Well, I think that every investor will tell you that it's the team that is the number one driver.

SAL DAHER: Right.

BEN LITTAUER: To repeat some of what Catherine has said, coachability, very high. Deep understanding of the market.

SAL DAHER: Yes.

BEN LITTAUER: Very high. Self-awareness which is the sort of encapsulating the last thing you said, that's all critically important.

BEN LITTAUER: Another one that tripped up an entrepreneur I was working with recently is, I call it numeracy. You have to understand what the business drivers are of what you're building here. If you can't talk to me sensibly about cohort analysis if you're doing a B2C play, I'm just going to shut down.

SAL DAHER: Yeah.

BEN LITTAUER: That's on the entrepreneur's side. That is probably 60 to 70% of the decision making, in my mind. I sit with entrepreneurs for extended lengths of time. That's my diligence is to sit with them and ask stupid questions.

SAL DAHER: Time is the best due diligence.

BEN LITTAUER: See how they think about their business and how they've been modifying it. But, that aside, the rest of it is about having a great market that you can come into, that you can address, that you can actually get into is insufficient to be there and say, "Here's my product, come and get it." That's not going to work. You need to be able to address the market. To get into the market, your go-to-market strategy has to make sense.

BEN LITTAUER: I see so many top down analysis of, this is a huge market if we just capture half a percent.

SAL DAHER: Right, right.

BEN LITTAUER: We're going to be really rich. That's wonderful. It shows me that you've done the top-level thinking which is a great thing to do and a necessary thing to do, but I also need to see a step by step way of how you're going to get that half a percent.

SAL DAHER: The ground up. The ground up.

BEN LITTAUER: A ground up. I need to see both approaches. We need to see a huge market and a way to get to it and understanding that the business that we invest in, especially when I'm a seed stage investor, I know that the thing I invest in is not what they're doing, when they win. It's not what they're doing. Even a company like KnipBio, they thought they were a protein company. It turns out that they're a platform company for this bug and they have a bunch of different things they can build on this bug and they're building a nutrition platform.

SAL DAHER: Oh wow.

BEN LITTAUER: It's not pure protein.

SAL DAHER: Platform company with IP?

BEN LITTAUER: Yeah.

SAL DAHER: Sounds very promising.

BEN LITTAUER: We're hoping.

SAL DAHER: Coming up next, I will ask Catherine White and Ben Littauer two active angels, what advice they would give founders raising money.

SAL DAHER: First I wish to thank listener Fud515, for this review. "Sal is a smart guy sharing stories of incredible angel investors and operators. The level of experience around a mic means the podcast is pretty darn actionable for angels and VCs and helps shed light on Boston's vaunted startup ecosystem. Highly recommend it." Thanks, Fud515. I love these names.

SAL DAHER: The Angel Invest Boston Podcast has outstanding guests such as Catherine and Ben. It's professionally produced so you get a really great sound, has no commercials and comes to you free. The only thing we ask in turn is that you help get the word out. A convenient way to do that is to share the podcast on iTunes or on our website where you'll find a handy share button. Take a minute to review our podcast on iTunes.

SAL DAHER: I'm pointing at the audience here now. Sign up at angelinvestboston.com to be notified of new episodes and of upcoming in-person free events such as this panel at Babson.

SAL DAHER: Let's just, I'm going to ask this one question of Catherine and Ben and then we'll open up to some audience questions.

SAL DAHER: What advice to a startup trying to raise money Ben?

BEN LITTAUER: I think the one word would be network. You need to socialize your idea as much as possible, talk to everybody. In most fields, except where you have a patentable product that has not yet been patented, talking about it is the best thing you can do. Socialize the idea. Get people to feedback on whether that's a good idea, a bad idea, or it needs to be modified, here, there, everywhere. You need to talk to as many people.

“…come to us and ask for advice, you might get money.”

BEN LITTAUER: The aphorism is, come to us and ask for advice, you might get money. Ask for money, you'll get advice.

SAL DAHER: Exactly, exactly. Very true.

BEN LITTAUER: You need to come to us early and often and keep working on us. We're pretty public most of us. We do this podcast and I get leads all the time from it, and I relish those. I will read my email typically and I will respond to most of them unless they're abusive. That's very rare fortunately. I will say, "No, that's not my interest but maybe this other person is interested and we will talk about it."

BEN LITTAUER: If you want to get into an angel group to present, if you don't come in with an introduction, it's not going to work, it's not going to happen.

SAL DAHER: That's right. Much, much harder. 

BEN LITTAUER: I know Golden Seeds has a forum for bringing in people that aren't necessarily directly going to present, it's not a screening, it's an advisory committee. I'm out there advising all the time as I know you are Sal.

SAL DAHER: Sure.

BEN LITTAUER: We all do this.

SAL DAHER: Through that advising, you get to know the team and then you can introduce them.

BEN LITTAUER: Absolutely. That's the way to raise money.

SAL DAHER: Yeah.

CATHERINE WHITE: Ben is talking about Golden Seeds Office Hours which was developed here in Boston just about 10 years ago by some of my predecessors on the leadership team and people can go to the goldenseeds.com website and signup. We do it every month except August and we have a one-hour presentation on fundraising, of all kinds including non-dilutive angel investing in general as well as how we do it at Golden Seeds. Then, sit down with one or two of our members for half an hour and basically ask us anything. It could be somebody that says, "I have an idea, I think this is an interesting idea. What do you think about it?" All the way to somebody that has a fully developed pitch deck and they say, "I want to show you my pitch deck and get some feedback on it."

CATHERINE WHITE: We do see quite a spectrum of companies at our Office Hours. It's not part of our funding process but it's a fantastic way to have a formalized networking and some of those people will come to me and I'll say, "You might be more successful going to this other direction." Or, we'll have a meeting afterwards and I'll say, "We want to bring this person in. I think that they are a good fit with us." That is a very low-risk way for an entrepreneur to get feedback.

CATHERINE WHITE: Also, somebody just asked me recently, "Can I come back more than once?" We've had people come when they aren't that earlier stage and we'll say, "You know, if you did this and this and you got more traction, as we were talking about before where they've got the prototype done. Maybe they even have a little early revenue that we'd like to see. Come on back and talk to us then and show us the progress you've made. That is very valuable.

CATHERINE WHITE: The other thing and I think that this is something I find a little bit more with my fellow women entrepreneurs is to make sure that you ask for enough funding, that you're raising enough capital. Things can be more expensive than you expect, especially if you're going to have to do things like file patents.

SAL DAHER: Don't expect that you're going to be able to hire people to work as cheaply as you're willing to work in your own startup.

CATHERINE WHITE: That's right.

SAL DAHER: That's a common mistake people make.

CATHERINE WHITE: You and your best friend from school, you might be willing to work for $5 an hour but can't necessarily get other people at some point somebody is going to want a real salary and you might even need a lab space or office or anything like that. Be really careful when you're figuring out how much you need to raise, that you're raising enough because it takes such a long time and so much of your time as an entrepreneur to do that raise. You want to be working on your company, not spending time as wonderful as Ben and I are, and Sal, you don't want to spend all of your time with people like us.

BEN LITTAUER: No, no. But you will.

SAL DAHER: Yeah you will.

BEN LITTAUER: I'm afraid that fundraising especially in the angel community in Boston is a full-time job even after you've raised ...

CATHERINE WHITE: Full-contact activity.

BEN LITTAUER: It is, repeat…

SAL DAHER: Very demanding.

BEN LITTAUER: Network, repeat, and it is unfortunately a given. I do want to commend Golden Seeds for their Office Hours. It's a tremendous resource for entrepreneurs. There're are many other resources but the Golden Seeds one, I don't believe you even need to be qualified to Golden Seeds to come to Office Hours, is that correct?

SAL DAHER: Wow.

CATHERINE WHITE: We always look for a company that has at least one C level woman.

BEN LITTAUER: You do? Even in the open?

CATHERINE WHITE: We do.

SAL DAHER: Are there in your criteria. But in terms of how developed you are and so forth, there's no requirement.

CATHERINE WHITE: Yeah, that's not a part of the criteria because there are people there that are very early and certainly if people think they might be ready, that is certainly an opportunity as well.

SAL DAHER: Wow, Golden Seeds Office Hours, something I did not know about. That's a good nugget. People keep that in mind.

Golden Seeds Office Hours & The Capital Network, TCN, as Great Resources

SAL DAHER: The only thing I want to add Ben is the institution you're associated with, TCN.

BEN LITTAUER: Yeah, I was going to mention them.

SAL DAHER: The Capital Network, I'm moderating a panel on due diligence next week at TCN.

BEN LITTAUER: Yes.

SAL DAHER: While going over the slides, one of the things that make a big fuss about is, fundraising is a lonely activity, reach out for help. TCN is another good source.

BEN LITTAUER: TCN is The Capital Network. It is a non-profit that was organized by, I think 20 years ago, that provides educational resources around the fundraising process. If you want to know what a convertible note is, got to a TCN event. If you want to know how angels do diligence, go to Sal's event in a week.

SAL DAHER: Absolutely.

CATHERINE WHITE: How to negotiate a term sheet.

BEN LITTAUER: TCN does all of that and they do a fabulous job.

SAL DAHER: I couldn't recommend it enough.

SAL DAHER: Okay, at this point, who has a question. Please.

Q&A: Joel Francois of Helius Power

Joel Francois: Hi, my name is Joel Francois. I'm with Helius Power. I'm CEO Co-founder. I wanted to get some information in terms of what do you guys consider traction because you hear that a lot, sometimes the investors want to see traction.

SAL DAHER: Would you repeat the name of your company again please.

Joel Francois: It's Helius Power.

SAL DAHER: Helius Power.

Joel Francois: Yes.

SAL DAHER: And your name again is?

Joel Francois: Joel Francois.

SAL DAHER: Joel Francois of Helius Power. Catherine, what do you consider traction?

CATHERINE WHITE: Traction, that might be that you have a working prototype and maybe you've got some beta projects going on. You might have a couple of beta projects where these are people, they might even be paid betas. Not always. Not always. Sometimes we even see some early revenues. Because you're in the energy industry, you might even get some funding from government agencies. That's a great way to go if you can finagle some non-dilutive financing because obviously that's non-dilutive for you as well as future investors.

BEN LITTAUER: Yeah the question of what is traction will depend on what market you're in. Traction in an oncology drug is very different from traction that Viral Gains showed from day one of being able to sell advertising better than the next person.

SAL DAHER: Would you mind telling a little bit about your startup at the mic. Might as well give it a plug, right?

CATHERINE WHITE: While he's walking over I'm going to say, patents filed will be another example. You're not in this industry but just for general knowledge if somebody is in life sciences we like to see published paper in a recognized journal.

Joel Francois: Basically, what Helius Power does is we use interactive kiosk to pre-qualify and filter potential leads for retailers. We place interactive kiosks that are actually cellphone charging stations, and we have a platform that we use, survey questions to pre-qualify them. Once we have prospect in front of our kiosk, we then use direct marketing, using text message marketing to try to drive the foot traffic to a retailer's location.

SAL DAHER: Retailer location for what?

Joel Francois: It just depends on what the retailers is. The idea is to be able to get them qualified leads and qualified foot traffic.

SAL DAHER: Okay. Basically, it's a marketing tool and it sits in a high-traffic area and people interact with it.

Joel Francois: Exactly.

SAL DAHER: Any thoughts?

BEN LITTAUER: Well, I'm trying to understand who the customer is. Your customer presumably is the person who's buying the lead from you, not the consumer.

Joel Francois: Exactly.

BEN LITTAUER: The consumer is your product.

Joel Francois: Correct.

BEN LITTAUER: You're using your kiosk as a capture mechanism. What we'd want to see is that there are well, first thing we want to see you define your key metrics upfront so that we understand the way you think about your market. Then, we're going to start shooting holes in that. But, I'd want to see shooting from the hip here that you have probably a couple of retailers who says, "Yes, we're willing to pay you for those leads."

Joel Francois: We do.

BEN LITTAUER: Oh.

CATHERINE WHITE: And a working app?

Joel Francois: Yes. Yeah. Then you get leads.

BEN LITTAUER: Then, understanding the economics of your locations and what it takes to staff them to see whether that actually looks like a profitable and scalable opportunity.

Joel Francois: Sure.

BEN LITTAUER: Hope that helps.

Joel Francois: Yeah, thank you.

CATHERINE WHITE: Good luck.

Joel Francois: Thanks for the opportunity.

SAL DAHER: Good luck.

BEN LITTAUER: Come on down, come on down.

SAL DAHER: The gentleman in the back there is next.

Q&A: Ankit Soni of Cricket++

Ankit: Hi my name is Ankit. I'm the founder of Cricket++ and we are building the next generation of fantasy cricket. I have a question around ...

SAL DAHER: I'm sorry, next generation of?

Ankit: Fantasy cricket. Fantasy games.

SAL DAHER: Fantasy cricket?

Ankit: And analytics.

SAL DAHER: Mm-hmm (affirmative).

Ankit: My question is around Silicon Valley culture versus culture over here in New England, which I feel like it's a bit more conservative. What are your thoughts from a long-term point of view. I recently read that Dropbox was pitched over here in early YCombinator days and Boston investors had a week to decide but then nothing came out of it. Then they went to San Francisco. Is it, like from a long-term point ... Or, is it good for entrepreneurs where they can focus more on revenue and traction without much money? Is it good in that way? What are your thoughts?

SAL DAHER: Would you care to disclose where you think your customers are, are they here or in India and Pakistan or England or UK.

Ankit: South Asian and then Commonwealth countries, Australia, South Africa, England.

SAL DAHER: Not in the US.

Ankit: There are a lot of people over here in US as well but not the first go to market over here. Maybe that's second or third market.

CATHERINE WHITE: In other words, it's not important to your company where you're based.

Ankit: Yeah, it's a totally internet-based company.

SAL DAHER: Yeah.

Ankit: But, I do have some partners in India as well.

SAL DAHER: I could jump in here and do a plug for Boston, it's hard to be in the Bay Area. It's so expensive. Unless you've really proven that you have some serious funding, it's really tough, the costs are just pretty high. People are leaving the Bay Area. I would look at the possibility of incubating the company to the point where you're ready to get VC money but there's a lot more VC money there, no doubt. Think of growing it here and then when you begin to get some traction, then you can go out there if you really need serious money.

CATHERINE WHITE: Yeah. There are airplanes. You could ... I say that with a little smile but, I mean, I just saw General Catalyst just raised some enormous sum here in Boston. There's a fair amount of VC capital here too but I think the ecosystem here just has a special quality to it and it's nice to see you again, by the way, I don't think that there's any particular reason to go out to the Bay Area. I'm biased.

BEN LITTAUER: We've met many times and so you'll know my advice to some degree. I'm actually going to disagree with my colleagues here that ...

SAL DAHER: Oh, you know more about the company then.

BEN LITTAUER: Well, but it's not the company. The fact is that fantasy sports and daily fantasy sports grew up on the East Coast.

SAL DAHER: Right.

BEN LITTAUER: DraftKings and FanDuel and Draft are all East Coast companies. New York, Boston. It is actually a great place for your kind of company. The issue is, that we're also very parochial here. We want companies that we can touch and feel and often touch and feel the product. The fact that Sal asks even, so you're go-to-market is in India and in South Asia, is already an indication of the way we will receive the company. I think that is somewhat different in the Valley. Your valuation would also be higher in the valley typically, if they go in. I disagree also with the plane. Angel investors and VCs, share this on both coasts, we want our entrepreneurs next to us. We want them in your case in cricket bat distance. We want to be able to hit you upside the head when you do something wrong.

BEN LITTAUER: I think that if you do decide and do start getting, and this is where a plane does work, getting interest from angels in San Francisco you better be there. You better be prepared to be there and show them that commitment. I think that there is a difference between the coasts. If you can network into the same kind of groups that Draftkings and FanDuel were able to raise large amounts of money from, then you're perfectly happy here or in New York. If that becomes a difficult thing, you may need to look either to India, or Europe, or to the Left Coast here.

CATHERINE WHITE: I have a different perspective than these gentlemen in part because Golden Seeds has offices in New York, in San Francisco, in LA, in Houston, in Atlanta, in Dallas. We're going to be talking to five companies next week. Two or three of them are from totally, they're not even from New England. Maybe that's part of the reason I answered you the way I did.

BEN LITTAUER: Different groups have different philosophies as well. For example Walnut will only invest in companies that are headquartered essentially in New England. Golden Seeds, a national group. Launch Pad might go down to New York occasionally. Boston Harbor will invest in anything, anywhere, including in Canada. Your mileage will vary depending on the group you approach but what you need to do in all these cases is find the champion who's going to take you into that group and has vetted the atmosphere for you to say, this is going to be a likely success before you even present. That's what this networking that I was mentioning earlier is all about is, you need to find someone who's willing to make that commitment upfront.

BEN LITTAUER: Depending on the stage of that company, you may need to find someone who was an early employee at DraftKings and is now very happy and is willing to take a chance on doing the same thing in cricket and give you your seed funding. That will smooth the road for getting more general funding from a group like Walnut or Launchpad.

SAL DAHER: Excellent, excellent.

Ankit: Thank you thank you.

BEN LITTAUER: Thanks a lot.

CATHERINE WHITE: Good luck.

SAL DAHER: Thank you good luck all the best.

SAL DAHER: We're just going to have two more questions. Sir please approach the microphone.

Q&A: Bob Goodof of Walnut Ventures

Bob Goodoff: Bob Goodof, I have two quick questions.

SAL DAHER: Yes.

Bob Goodof: One, this could come from either entrepreneurs or angel investors, but how many of your Walnut colleagues or your entrepreneurs actually understand the terms of the notes that you're investing in?

BEN LITTAUER: I make it a point to make sure that they do understand. One of the things that I've learned having now done this 10 years, starting at exactly zero, was how much I didn't understand upfront and how important it was. I'm dealing with a company today. You are familiar with this company, that has a set of bad notes out there. They look very attractive to the investors and they may risk that company being able to get further funding.

BEN LITTAUER: When we look at funding and this is one of the things that TCN will hammer into you is, don't look at this round, look at the entire landscape and say, how much am I going to need in the follow on round, how many follow on rounds am I going to need because you can kill yourself by asking for the wrong thing now.

Bob Goodof: Where do we learn about this?

BEN LITTAUER: TCN.

CATHERINE WHITE: Yeah.

Bob Goodof: I'm sorry.

CATHERINE WHITE: On The Capital Network, yeah.

Bob Goodof: Okay.

CATHERINE WHITE: At Golden Seeds we have four different courses that we provide our members. It's a very basic Angel Investing 101, then we do Being Part of a Deal Team. Leading a Deal Team. And then, Board Work. That introduces people to how do you do valuation, how do you do term sheets.

CATHERINE WHITE: In terms of the entrepreneurs, not many of them have seen this before. As I mentioned earlier, 70% of them are first time founders. They and their attorneys walk through the terms. We walk through the terms with them and probably by the time they're done, they have spent entirely too much time going over the details but have a pretty good understanding.

Bob Goodof: Second question which is probably quicker is, we've had several, Walnut, we've had several meetings with Golden Seeds representatives at our event, which have been quite helpful to our understanding of the presentations. Unfortunately Walnut has maybe two or three women members. How would you suggest we recruit more women, more diversity?

CATHERINE WHITE: Well, I'll give you ... I heard a wonderful statistics. The class of 2019, is 54% female and 2021 is like 52%. We've got a pipeline of more women entrepreneurs coming along and certainly the Center for Women's Entrepreneurial Leadership, here at Babson is absolutely fabulous where they have a lab, an accelerator for women entrepreneurs. It's just been amazing to see what the women there have done.

CATHERINE WHITE: In terms of recruiting them, that is a great question. I think that ... We hold different events. We've got the Angel Capital Association coming up here in Boston next month. You might want to talk to some people there that are individual angels and see if any of them are very early stage, that would like to join a group. That might be one opportunity. You might want to talk to some of the people that are selling their companies. If you have some successful exits.

BEN LITTAUER: Oh, we wish.

CATHERINE WHITE: I mean the long list ...

SAL DAHER: There's always the hope…

CATHERINE WHITE: The long list of successful exits and they have couple of C level women that have enough money to come out of that, that they're like, they'd like to do that again.

CATHERINE WHITE: We were talking about our early angel investors. My first investment was actually a company where I was on the startup team and I got my money back. I thought, "What a dud." Then, other people I'm talking to just, "Oh no, that wasn't bad at all."

BEN LITTAUER: I want to say that I recognize the same problem seriously at Walnut and most of the other groups in town, many of the other groups in town suffer the same problem. One thing is, again, TCN is looking at providing angel education and the hope is that we can recruit some new angels and there are more women who are capable of being angels and just don't know what it's all about. That is what we need to be focusing on.

SAL DAHER: The last question please.

Brett Wagner: Hello, first off, thank you guys for being here. This was super helpful.

BEN LITTAUER: Thanks.

Q&A: Brett Wagner of Waec LLC

Brett Wagner: My name is Brett Wagner, I'm co-founder of Waec LLC. We develop autonomous ground drones to make deliveries and cut costs for restaurants and customers ordering food. I guess my question to you guys and you are here in person, as entrepreneurs when we're looking at angel investors and people to invest, what would you say are good qualities in people that you'd like to work with and maybe not so good qualities.

SAL DAHER: I'm going to ask you do me a favor.

Brett Wagner: Yeah.

SAL DAHER: Would you please state the name of your company again so I can just write it down to make sure.

Brett Wagner: It's Waec and it's spelled W-A-E-C.

SAL DAHER: Your name please.

Brett Wagner: Brett Wagner.

SAL DAHER: Brett Wagner. Okay. Please.

CATHERINE WHITE: One of the things we really would want to make sure is that you really understand the numbers. What are their finances? What's it going to cost? What's the competitive situation? Because there are a lot of food delivery services out there and it's going to be hard to distinguish yourself from the others. You want to make sure that you have very clear value proposition to say, this is why we're going to succeed. These are what our numbers are. That would be my advice.

SAL DAHER: Is this within the restaurant or outside?

Brett Wagner: Outside. On sidewalks.

SAL DAHER: On the sidewalks.

BEN LITTAUER: Beyond what Catherine has already said, I'd also want to know about the regulatory environment, flying drones in open air space is a tricky thing. If they're autonomous it's even more tricky. How are you going to deal with that. What are the hurdles you have in what geographies can you actually operate legally. All of those sorts of questions we'd want you to know that inside and out.

Brett Wagner: Thank you

SAL DAHER: Yeah. All the best with the project and thanks.

BEN LITTAUER: Thank you for the great questions.

SAL DAHER: Excellent questions.

SAL DAHER: Catherine Friend White and Ben Littauer, I thank you both effusively for participating and helping make this a great podcast. I'd like to invite our listeners who enjoyed this podcast to review it on iTunes. Once again Catherine thank you for being here.

CATHERINE WHITE: It was a lot of fun Sal. Thank you for inviting me.

SAL DAHER: Well, Ben, thanks.

BEN LITTAUER: It's great to be here, thank you.

SAL DAHER: Awesome, awesome. As I said, please leave a review. It really helps us get found.

SAL DAHER: This is Angel Invest Boston, conversations with Boston's most interesting angels and founders. I'm Sal Daher.

SAL DAHER: Yeah, thank you.

BEN LITTAUER: (applause).

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.