EUVC #220 Jed Ng, Angel School

0:00Hello, everybody, and welcome to the European VC podcast. I am David and as usual joined by my co-host Andreas. Today we're welcoming Jed on the UBC pod. Jed is a self-taught angel with one exit and has backed two startups from CTU. He started his own syndicate back in 2020 and is now backed by a thousand plus investors. He's also the founder of angelschool.vc, which is a venture education program that helps angel investors build their own syndicates in under eight weeks. As an operator, Jed built the world's largest API marketplace with RapidAPI, which, by the way, is an A16Z-backed company. If you're listening in and love our show, do drop us a review, follow the pod, and subscribe at u.vc.

0:57We can serve as a model for other regions of the world. The nature of a problem requires a European response. Europe is a story of new beginnings. Let's start acting. This show is not investment advice and the hosts of this episode may be invested in the funds and companies featured. So, yeah, we are super excited to have you with us today. As most of our audience probably have gathered already, we are pretty big fans of the syndicate model in VC. And we've said many times that we don't necessarily think that syndicates are the lesser brother of funds. But not all understand why we would say this, as many see it only as a springboard to raising a fund in the future.

1:51And we've had many conversations with you, Jed, about exactly the pros and cons of running syndicates. So we thought, why don't we get Jed on the pod to talk about this and have a really deep conversation about syndicates, how your model is put up or put together and how our model is put together and how they're different and why we think that there's power here. But Jed, tell us first about you so our audience get to understand exactly where you're coming from. I appreciate you having me, guys. Truly, I feel like I'm in the company of kindred spirits here. You've already explained what I do pretty well, but I will add a few things.

2:30Besides what I've done as a self-taught angel, I'm also an extremely low volume investor. So besides having two unicorn hits, I don't invest in a whole lot of companies. on angelschool.vc, the venture education program. What I see us doing is inventing a whole new category in venture education. The thinking is really simple, guys. If there's venture education to help people be angel investors, and there are programs that help people create VC, why is there nothing in the middle space around syndicate building? So that's exactly our mission. And finally, on the syndicate itself that I operate, yes, we have a thousand LPs.

3:12The way we think about it is that we are really pushing the art and science of what it means to be building and operating a syndicate, really squeezing maximum performance out of this and pushing the boundaries for scale. So a few data points on why I believe that even though we're at a thousand LPs, we are not at the limit yet. today our LP acquisition is completely inbound. I do not spend time looking for LLPs. It's entirely based on our network introducing new people to us. We close capital, zero touch. I don't spend, when I have a live deal, I'm not talking to hundreds of people trying to educate them on the deal.

3:56We have a very defined process to educate, create awareness, and to help investors make decisions. In my entire tech stack, I spend the princely sum of$60 a month. It doesn't get leaner than that. I got to love that final statement myself. But Jed, you know, I'm bumming a bit the planned agenda here for the conversation, but I think it's really interesting because there's many different ways to run syndicates and there's many different models out there, right? And I think I would venture say that you would agree with me that there's no necessarily right or wrong model. It's very much about what the lead or the team wants to get out of it and build towards.

4:42And the feeling that most of us will get from listening into you is that despite being quite lean, you run quite a, let me call it, professionalized model in the sense that you're actually pouring in time as an example to dig the deals, right? So you're not necessarily spending time talking with every individual potential investor to get them excited about the deal. But you're investing time and making sure that you do a thorough DD enough based on your own criteria to be convinced about that investment. And then I guess you have some kind of standardized information that you're sharing with investors.

5:16It would be really cool, which is, by the way, very much different from what Andreas and myself do, because we do that on behind the scenes, but then it's much more about, you know, we want to, we want to deploy capital into this, into this opportunity. Whoever wants to join, join, happy to jump in a call, not one by one-on-ones, but we do like group calls and that's it. So even like, we're not spending a lot of time kind of, you know, convincing each individual investor, but we're not really putting out kind of a detailed memo of each, each investment opportunity. And happy to talk about the why is there, But I'd love to ask you, could you expand a bit on how you run your syndicate in terms of what different processes you have in-house that you're working on and that the investors then leverage to make their decision in terms of investments?

6:06Sure. I think for us, ultimately, the North Star that we're trying to attract towards is how do you maximize capital deployment and maximize the hit rate on the company, right? both the probability of success and the returns. Those are basically the levers that you have to play with. So it either becomes large volume of deals. So you have more hits on the board and spread your bets a little bit more and to attack the problem that way, or you go a little bit more concentrated on the deal flow and do fewer deals, but high quality diligence to get, I guess, move the needle on the probability of success.

6:48If you think about a syndicate model, there are a few interesting constraints. One is the throughput of deal flow on a syndicate in a given time period, let's say a year. How many deals can you really do? Ultimately, I think it's philosophical. There is no right and wrong answer. I do believe that if the deal flow volume is too high, it basically, it creates a bunch of compromises. One is there is this conflict of choice. You have too many things going on and an investor might go, okay, I don't have time now, but there's going to be another deal in two weeks. So I'm just going to punt on it. So the engagement could suffer that way.

7:34The other part of it is the idea of trust. I believe in what we do. Ultimately, why do people part capital with you? It's because they trust Andreas and David, right? You're building relationships and a network, not a mailing list. Building a mailing list is easy. So in my view, I think doing too many deals also has a potential downside of stretching the fabric of that trust, right? Because people can go like, well, how serious are these guys, right? If there's a new deal every two weeks, right? And so I guess on a philosophical level, with children. Fewer deals, deeper diligence, and then also bigger checks into these companies.

8:16When you say fewer deals, could you share a number there? Because I think it's worthwhile just to make sure that everyone is caught up there. I think a normal run rate for us would be six or eight deals a year. Now, what's interesting for us is that when we started, we focused on US deal flow, we were always very US-centric. That was a deliberate choice because I had a global network. And in my view, I could build a global network of LPs and have a reasonable chance that they would look at US deal flow and funnel capital. It tends to work less well outside of that. You tend to see more of regional angels, regional deals.

8:57They stay at the regional country level. Now we basically got a base around the world. And so the other way to scale on the deal flow is that, yes, I might do six or eight US deals a year, but we can also segment a network and say like, look, I'm going to do Europe, right? And there's another six or eight deals potentially of throughput and the same for Asia. And you can scale up that way. There's another thing around or about us, which is quite similar in the sense that we are both creators. We create our podcast on our newsletter. You've created Angel School, which is, of course, content heavy.

9:38So I'd love to, if you tell us a bit about the content that you're doing there and so on, and also how you see those two things connect, because I think that that's, at least what I hear from many that they find interesting about our model, which is that, well, we're first and foremost creators, and then we're doing our angel investing on the side. And how does those two fit and how much of it is commercial and how much of it is passion? So I'd love to hear those questions answered by you. This is a great question, right? So if you step back, it looks like Jed does a couple of things. One, he runs a syndicate.

10:16And the second, he has the venture education business. These two things exist by design, right? They're designed to feed off each other. So I'll talk about how that is. Starting with the venture education program, what our mandate is at Angel School is to help angels build, grow, operate their own syndicate so that they can lever up on capital. I think that brings a whole bunch of advantages, which we're familiar with. That's a separate question, separate topic of conversation. In my view, if you're an angel, you've written a few checks, you really love doing this. It's not for everyone because it is a bunch of work.

10:59If you really love doing this, it makes sense to me that you want to build and run your own syndicate and write bigger checks because the risk reward compared to you investing entirely off your own balance sheet, incomparable. The last deal I closed last month, we wrote our first seven-figure check. We also led around in this company and had a VC fund follow us. We're kind of like flipping the script because of the scale. And you think about the numbers there, right? The value of that upside, it's tremendous. But anyway, Angel School is about helping angels building growth syndicates. We do a lot of content, right?

11:40It's an eight-week program. We've done seven runs of it. And I am planning the eighth run for September. we've taught, I think, 50 to 70 angels at this stage. We've kept the cords deliberately small to make sure that we can prove the model and prove the content and the delivery plan. And we've taught angels around the world from US, Europe, Asia, all over the place. And out of all these angels, we've had, I want to say, five new syndicates created out of this. In a previous cord, we actually had a couple of angels who were preparing for this, And they actually ran their first fundraise during the eight-week program.

12:23And so that gives me a lot of pride and joy, right? They were able to help these angels kind of get to that stage. Five syndicates, that means it doesn't mean five investments that are led by this VC and they set up the syndicate on Boban or Bunch or wherever they use. That's not what it means. It means that they set up an actual syndicate with an actual community around them that is building towards being a size of its own. Am I right in saying that? It's not a syndicated investment, but it's a syndicate. That's correct. Exactly right. And I think that to our audience, of course, the distinction I made there was between having done a syndicated investment and let that versus having actually set up what probably in Europe oftentimes is referred to more, at least in the old card, more as a club or as a community of angel investors.

13:21I'm always looking at the angel ecosystem and thinking there's many different models of approaching this, right? Because you've got the syndicate leads on the one hand, and then in Europe, the bands are very strong. The business angel networks are very strong, which are membership-driven organizations that have members that choose to lead deals themselves. Then sometimes they have a secretariat where there is a couple of people employed, making sure that the wheels keep turning and everyone is, you know, that there's events to attend and there's deals flowing to the organization, that type of thing.

13:59And then the deals happen between the angels. And it's actually interesting because a typical issue in most of these networks is getting more lead angels because you get to a point where you're a bit overtaxed on your angel investing. And then the last thing you're looking for is to have eight meaningful friends around you that are expecting something from you because now you're leading this. Now you have to do all the diligence. You have to be the one representing the whole syndicate, all those things. So it's actually interesting connection to what you're doing with Angel School. That is one of the issues that I'm seeing in many of these networks here.

14:44And then I was about to say, and then we have the other category, which is deal lead, deal led syndicates or words. David and Andreas running a syndicate of people that are co-investing with David and Andreas time and time again, right? and then you have someone in the middle that are doing a bit of a hybrid. So I think that it's very interesting to see that I love your perspective on what you're seeing across the world because definitely, I don't think Europe necessarily has the right model. And I think that we're much more membership heavy compared to the US as an example where you have many syndicates that are run by a deal lead.

15:23And I have spoken with a lot of different angel networks, right? Angel groups. Angel groups that don't perform. What is the common trait? I'm not saying they all don't perform, but when they don't, the common problem that you have is this. You've got this community of angels, right? They're united by some common theme, right? They were all worked at the same company. They were zoo glivers, whatever. And so that becomes your potential base of capital. You have a group of leadership that organizes, sources deal flow and brings it together and organizes these pitch nights. And you have these things that happen once a month, once a quarter.

16:09How often do deals actually get done? The ones that don't crack the code, they just end up running a bunch of pitch nights. And so what have you really achieved with all of that? To organize these regular events and not do deals. And one perspective, you can make the argument you're ending up just wasting founders' time because they don't walk out of there with capital. They don't pitch for fun. They're actually trying to raise fundraising. raising. I'm a big believer in the idea of self-interest. It's just universal truth. What we do is hard. And if somebody is doing the heavy lift of getting these things organized, should they have an incentive?

16:52If you ask me, it would be yes, 100 % all the time. This organizing team that does this, should they be incentivized with carried interest? Should these deals that they do charge carry? I'd say yes. There's nothing so free in this world. right? You're paying for it somewhere, you know, and it either comes out of somebody's time and it's not sustainable or you make it worth their wallet and, you know, hopefully they do it well. Yeah. There's something to that. And I think that we always have to tread lightly here, right? But I think that you often see these networks struggling with exactly that they see good deals happening outside of their network that they never saw.

17:36And it is very difficult in a very competitive industry like ours to be running something without very strong upside economics for the people running it. And if there's anything that we're seeing, it's that VCs compete very aggressively for talent. And if you want to be more than a launch pad for talent in an angel network, with your secretariat, then I think that you would probably do very well in making sure that you have something similar to a carry dynamic. I would agree on that perspective. Jed, I want to go back to something you said, which I think is quite interesting. Coming back to this concept of running a lean syndicate model.

18:20And we've definitely gone back and slurred on that one ourselves, actually. I think we're lucky to have a lot of friends around us that help us out as well, but it quickly becomes very easy to spend money. If you take the easy way out of thinking about that, now I need a CRM. Okay, let's buy a CRM. Now I need a data room provider. Okay, let's buy a data room provider. Now I need running a community so people should be able to view stuff in some kind of login-enabled thing. So let's build that out or buy that out. And then suddenly we're very far off from your, I think it was$60 a month. We're very far off that number, right?

18:58So I'd love to ask you to share a bit how you thought about building the backbone, the infrastructure of your own syndicate and any kind of core, not necessarily lessons, but like core principles that you have. So I guess like first principles, right? We're basically trying to like, again, maximize the economic value that's generated out of the syndicate. You need to balance that out with the cash flow, some fees to sustain this. When we think about constructing the syndicate, what are your levers here? Again, one is scale. Scale of LP, scale of network, basically gives you... There's this economies of scale.

19:43For example, on, let's say, a half a million or a million dollar fundraise, your SPV costs goes down to sub 2%. On something like that, maybe the deal itself could swallow 3 % of management fee and it doesn't seem absorbent to LPs. It's something like that. I do think about the syndicate and again, just going back to the core idea of driving, squeezing maximum performance out of this, like really operating like a bootstrap startup, right? Like assuming you have no funding, you operate with what you got. Like, what does that look like? And so like performance for me goes just beyond the tech, right?

20:24It's actually also like very metrics driven and operationalizing certain like processes, even things that are unintuitive, right? So let's talk about some of these things. In terms of technology, what do you need to run your syndicate? you need i agree you need a data room you need an email address those things uh don't have to be very expensive you need a crm that doesn't need to be very expensive as well you need to make crucial choices around your distribution mechanism is it a newsletter uh is it a notion page or is it some platform like all of these things have have implications on you know your cost structure and also the user experience.

21:09For distribution, I tend to prefer to use email marketing and automation because everybody's got an email. You can reach somebody where they are, not go there and tell them, go here. That extra step in the friction, I think, does affect conversion. So that's one of the crucial design choices. And these choices also help us keep the cost structure is super lean. I don't have a fancy CRM. It's super basic. We have a really cheap email automation system. We use Google Drive for our data rooms. All you need really is access control. It's not the prettiest thing, but it works. Then the other part of the equation is, okay, how do you actually maximize the performance beyond the technology?

21:57So let's talk about a few examples. You put out a deal to your network, however you choose to do it. Stage one is letting them know this company exists, so awareness. Then you want to take them towards the education phase. Why is this company interesting as an investor? And then you go to a commitment. Those are the phases. Let's take that very first piece. Like engagement, I think is an area that everyone or by and large, a lot of syndicates or other investors struggle with. You're like, I found this company. I think it's great. I said a bunch of stuff. I shared it with my LPs and then nothing happens.

22:36It's a really interesting topic for me, right? Because if you think about your own experience, probably receiving deal flow from other investors or having other founders reach out to you and they'll ask you, they'll communicate about this company or opportunity in their own way. there's a giant spectrum on this, right? Some are a complete dumpster fire. Some are like super polished. Like surely among this, you can distill best practice, right? And if you can, like, why wouldn't you distill that? So a really simple thing that we did was, hey, you know what? I noticed that if you look at how founders communicate with investors versus investor to investor, there tends to be a lot more structure, a lot more commonality in how investors speak to each other.

23:25I'm not saying founders are bad or whatever. I'm just saying that's the pattern I see. The built-up knowledge in how investors communicate with each other is really simple. There is this lingua franca. There is a language that we speak. There are things that we look for. So we basically went down that path and looked at a whole bunch, dozens or hundreds of investor to investor communications and said, these are the things that are common. So ergo, this is what people expect to see. So what is a simple framework that we can use in order to communicate what a company does in the most understandable, the most impactful and succinct manner possible?

24:07So those things are not really tech related. We're just codifying knowledge and experience and observable data points. And then we're just turning that into a framework, right? And that in conjunction with the tech, which is also very lean because it helps us automate stuff. You know, I think that's the recipe for success. I'd love to ask you a question on that automation point because it's something that, you know, you've got deal-by-deal LPs. Fund Manager has, you know, fund vintage LPs. I would be curious to hear how you think about all those automations. And because on the one hand, we know as syndicate leads that it's necessary.

24:56I know that as a creator as well, that it's necessary that I beef my own ability up by doing both automations and getting Gen AI to help me. But at the same point, there's also, it's a very fine line that you don't want to cross because then you end up being disingenuine. So Jed, I'd love to hear how you're thinking about that and where you've thought, we shouldn't do this. I can feel that this feels wrong or you have gone the other way and done something that that has then turned out to be the absolute right decision to make? This is a great question, right? Again, it's not completely a technology discussion, right?

25:38And it's also about positioning and tone. You know, as a general principle, when we put out deals and share that with investors, we never sell or oversell the deal, right? That's a big, big trust breaker, right? So it's a big red line that we never want to cross. And so there are techniques that you can do to mitigate that. You can focus on database arguments. You make an argument statement, here's a data point to back it up, right? So it's not me making a blind assertion that this is great because, right? We steer away from also very emotive or strong emotive descriptors. This is not going to be the best startup in the world.

26:24It's going to, yeah. Here's our independent view of it. And to present it as factually as possible and then to back up those arguments with data. That's the best way to stay neutral. If you can't make an assertion without a data point, then it's just conjecture. And then on the technology and automation piece, our approach is that, look, I've got a deal. And the only people getting deals are, number one, you've opted into it. Second, we've had a conversation and we've actually spoken. If that hasn't happened, you're not seeing my deal flow because I need to know who's on the other end of it. And I want you to make sure that you trust me.

27:04So we have that as a first principle. The people that receive the deal flow, we tell them about it. We give them a nudge a couple of weeks later. Because sometimes people get busy, they missed it, they dropped it, whatever, all kinds of reasons. But if they don't opt in, they no longer hear about it. I just assume that you're not interested. The tricky thing is we can describe this conceptually, but then you also need the right technology to determine who's actually engaged on a deal. And for us, again, our tech stack with email automation is great because in the copy about a company, I'll embed a link.

27:41Well, here's the pitch deck and here's the data room. And when somebody clicks that, it's an indicator of engagement. And then we can say, fine, this is the people to nurture and tell them about the deal and to see if they're interested. Because if they haven't even opened the email, they haven't clicked on anything after getting a couple of reminders, it's just not the right time for them. It's not the right deal. Whatever the reasons are, they've basically opted out by inaction. So we sort of guide people through that funnel that way. Those are the principles and then some very lightweight technology to back it up.

28:19Another point to the tech stack, probably you do six to eight deals per year. You've got a thousand LPs across different investments. Some of them are in some deals, some are in others. How do you manage the reporting to everyone so they only get what's relevant to them? Yeah, again, right, with the right email automation, you can also do segmenting. So whoever committed to a deal, they are grouped as investors in company A. Again, automation is a way to help send out investor updates to the right group. I'll do you one better, guys. I'll send you my CRM setup guide after this. We'll put it in the show notes.