Super Angel #219 Charlie Delingpole, ComplyAdvantage

0:02This is a dream? No, it's not a dream I'm an angel. Why would God send me an angel? Because God knows that everyone needs a little coaching now and then. I'm loving angels. I saw an angel. All angels say for a long day. Please say it's me an angel. The smile on her face. Be in it together. But don't love me, Johnny. Thanks, let's buy an angel. Girl, girl. Hi, and welcome to the Super Angel Podcast. The go-to podcast for angels backing the next generation of European unicorn founders. If you love our show, do drop us a review, share it with your friends and join our community at eu.bc. Today, we're happy to welcome you to Charlie, founder of Comply Advantage, an AI-driven financial crime risk and detection technology powered by Comply Data.

0:55They have raised$100 million from Index Ventures, Boulderton Capital, OTPP and Goldman Sachs, with global hubs in London, New York and Singapore. If you're an angel listening in and wanting to get closer to the European angel scene, do not hesitate to reach out to us. We'd love to connect and see how we can play together.

1:22Welcome to the Super Angel Podcast. I am so excited to have you with us here, Charlie. It's amazing to be amongst Joe Rogan's old fintech, the kind of$50 million superhero podcasters who are now all things. Yeah, so it's a huge honor and a privilege to be here. How can I beat that? Thanks for joining the pod, Charlie. Thrilled to have you come on the show and share your perspectives as you're truly one of the OGs when it comes to founders turned angels in Europe. So let's get started. I mean, we'd love for you to share with us your story. and what got you into angel investing in the first place?

1:57I've done now like 150 able investments and I've kind of started three companies and to a large extent, they're kind of one and the same like skillsets and network of people and ideas. Historically, what I've done is companies all very much linked to Comply Advantage or Market Invoice, all the companies that I've started. So they've all been around the business. I think in terms of my advantage, then work with like 1 ,500 different fintech companies, identity companies, SaaS platforms, banking platforms around the whole world. So I started that company back in 2014. So in doing that, you're going to travel all over the world.

2:44You meet tons of companies, tons of partners, tons of suppliers. therefore people who you've met or you know can ask you to invest ask you to help out so i guess that's typically how i got started and what i've done and it's been quite synergistic to the extent that lots of companies that we might work with the kind of ceo or the person i'm talking to ask me to do it right so or you get someone like anthony who has fantastic companies and is like, Charlie, this is a guaranteed deck of corn and you can put your grandchildren's school fees in this company and that would be sorted. So yeah, I did gun.

3:25Obviously everything that Anthony has ever promised me is materialized times 10. So yeah, it wasn't just Anthony and it got me started, right? That's amazing. And so besides the ones I recommended to you and your kids might come down for when they don't have their pensions, do you want to share a few of the memorable deals or any of the ones that are notable you want to share with the audience? Yeah, so the first two that I did died immediately. We're going to have friends from university or friends from work, and they're like, hey, you started a company, do you want to invest in mine? So the first two I did died immediately.

4:00The third one, super early, was Kodak back in 2016, and they used to work with me at Market Invoice. And that was a piece of infrastructure that we ourselves needed in terms of we were lending money to other companies and therefore having the accounts in real time was a piece of functionality that existed in many of the companies, wasn't done particularly well. And therefore, I put money in back in 2016. They raised$100 million or so from Jason Morgan under a year ago, a$800 million valuation. So I think that single deal was done at like a million pounds premium money valuation, SCIS. and so um with the tax rebates that's now worth like three and a half million pounds right so i've invested two million pounds um it says that other companies that are interesting i guess taxed out for it with you that you're kind of two jobs ago companies like coyo has done quite well in lending space or seon was an interesting company in like the fraud space what about one you might have missed right so like i think with all the synergies and complied advantage there's not too many that you do but are there any that looking back you think you know you would have loved to have done i think one of the ones that i would love to have done at the time was this company graphie i think jared leto the hollywood actor um invested in that round I think it was run by a guy who I think had like a kind of, anything was like Bogdan or something.

5:38And we had lots of developers in Romania also called Bogdan. I think I called the wrong Bogdan. And therefore, I didn't manage to get into the deal because I called the wrong person on WhatsApp. And therefore, I didn't. But yeah, I think and then kind of Code 2 kind of came in at like five times the price within a month. And it all became suddenly super, super hot. But I think it's gone very well since then, basically. But like, yeah, at the time, it would have been quite exciting. Yeah, those are the shallow portfolio ones. I didn't normally put in huge tickets in there, but I didn't normally not get into ones that I think are interesting, basically.

6:12And I tend to do like reasonably high volume companies, right? So, yeah. And I will dig in right into strategy right after this, which will be very interesting to share on kind of your approach. But just before that, and you did mention about how, you know, a lot of angel investing came organically from, you know, professional circles from your companies. But like looking back, what would you say angel investing has given you both personally and professionally, if you had to summarize? I think I've made some good kind of like professional contacts through it. As in, I think there's a very good group of people in London who kind of just always do is like full time angel investing.

6:51and it's very much like a team sport as in no one ever does this on their own as in they don't kind of put in the entire round on their own and kind of take the entire round. Normally, like in doing it, you have to talk to many people who are experts in that particular space who want to kind of co-invest with you. And so, yeah, I guess that kind of collaborative element means that if you do this, then ipso facto, you have kind of like 30 people with whom you'll have to talk the entire time. So whose opinions you value, whose perspectives and methods you can learn from. So I think it's like people who tend to be involved in this stuff.

7:32It's an opportunity to deepen and enhance those areas of collaboration. I think it isn't, in that respect, pointless socializing, right? It isn't just kind of meeting up for a coffee without an agenda, right? Which I find kind of often quite frustrating because it's like a huge waste of time. It's kind of you're meeting up with a specific agenda to discuss, like points to analyze. You have to have an opinion. You have to act or not act. You have to contribute something. So I think if you have spare time and you want to get involved in something and you want to learn and be involved in the space, then it's a much more engaging way of doing things.

8:08And then just going to pointlessly meeting up for coffee. I'd love to dive deeper on that because some angels, of course, join formalized groups where there's a lead or there's even a secretary or something like that to do that kind of thing. And then there are others where it's more informal, but still, as you say, it's a committed relationship that's in there. You're meeting with an agenda and you're meeting to actually go through the investment proposition. I'd love to dive into that and ask you, how do you think about that activation of your network and formal versus informal and all that?

8:41it's much better where you have zero technical obligation to anything, right? As in, I don't think you want to sign up for anything where you kind of have to do anything, right? I think it's only kind of if at the time you feel like doing it and you're going to be excited to buy it. And a lot of angel investing is bad in the extent that you're kind of buying yourself a job, right? You're kind of giving up money, which you might get back in 10 years' time. You're giving your time away for free. And the more money you invest, the less liquid you are, the more you have locked up and the more time you have to give up doing like whatsapp calls or introductions so in many respects it makes zero sense right and therefore then tying yourself further to be obligated into it is like even worse so there are so many drawbacks that i think um if you could have constrained yourself by having like formal structures then it becomes even worse and yeah i think so the beauty probability is that if you want to you can quit anytime and there's like zero ongoing obligations i guess the hack is create center of gravity by your own companies from before right and then things come to you as well because a lot of people band together for sources of deal flow as well um and it's kind of a way to try to do things in a more structured way but uh i totally agree with you with what you just said yeah i mean i think a lot of people like will send me stuff to my space right and therefore if it's like lending or if it's like compliance or AML, then I'll get set the same deck like 10 times.

10:08Therefore, like it's a respect you can't, like you can be rude and say, listen, I don't care, go away. Or like, so in terms of like banning together to like source deal, like it's also avoiding it if you can, because I think everyone has that, right? If someone starts a company in a space, then any company that ever is traded will subsequently will also be sent to them as well, which is quite dull. I just want to touch on that point again, Because you said that the part with meeting with an agenda and going through the details and all that, when activating your network, how do you think about that?

10:40If it's not in a formalized network, how do you think about activating your network? Is that around the other investors that are coming into the deal? Or is it with someone like Anthony? Or how do you do that? Typically, let's say you have someone who you know, and they're trying to start a company. There isn't around, but you think they're exceptionally talented. then they'll need customers, suppliers, team members, and investors. So in terms of building your own confidence in the company and the person, you can make introductions to other people with whom they could have a working relationship or could form a 10-person group to actually get a round done.

11:19But you need to have enough excitement and momentum in making these introductions to have them form a sufficiently large group to get a round done. And their perspective, as in, they might understand from their experience the kind of banking as a service market, or they might understand how SOP2 or ISO 27 as a more compliance works and which is the process they've used. Or they might have a CRO or a CTO candidate I think in lockdown also, a lot of people did deals in Colombia or Indonesia. You have no clue about those markets, like if a person's a fraudster or if they're good. Whereas I think if they're in London or somewhere, you can get their deal on that person and who they work with and just really understand the better dynamics of the business or the proposition.

12:15Everybody gets hundreds of messages from GLG where you get paid to do a one-hour call on a particular market, right? Well, I think this is doing that for free, right? Like building confidence and momentum in the market, the people, like everything needs to build a company. That kind of happens naturally and mimics the kind of de-intelligence fundraising mechanisms that will be done at a much larger scale in private equity or more formalized data rounds of venture capital. And obviously, there was between investing in angel rounds versus like a BCT fund or an EIS fund or like a, you know, is that you can actually help build the company.

12:54You can make introductions. You can help hire the team. You can make a difference. Whereas if you're only passive, then why not invest in a fund itself where they're going to do all that work anyway? I love that. What I do love about all of what you just said is instead of proactively being intentional about activating your network for the sake of, let's say, sourcing or giving back to someone that sourced back to you. It's much more around the specific company from what I understand. And how can I actually make introductions that are going to be to people you know and you respect that's going to be both helpful to the founder, helpful to that person, and also helpful to your due diligence as well, right?

13:35And so it's quite organic and it's quite value-add. I love that. Just wanted to summarize some of that. Like people sent sending messages saying, hey, I got laid off by a VC fund and I want to get this single deal done. can you help me like well there's something really in it for you if you aren't necessarily going to invest or can you help me like you know give me like a one hour view on this in time like frankly that's like work right and so why should i whereas at least like if you're doing annual investment you kind of get compensated like at no point have i ever taken money for or D.D. or taking a paid director role, right?

14:15Because why would you sell the time for money and buy yourself work, right? It's just like, I think life's too short. Whereas if you're investing money, at least there's some sort of element of charity and risk-reward, right? You aren't necessarily putting yourself to a kind of cash-for-labor type scenario. Oh, no. It's not about the thesis.

14:42Let me just hear from you. Your investment thesis, could you give me your overall take on it, both in terms of what you're looking for, but also the size portfolio you already have and are looking to build and how you're thinking around different geos, different verticals and all that? So historically, it was like this company is like a client of ours or a supplier of ours or they're a partner of ours and what the person used to work at a company for me or something. So it was from people I knew really well, right, or companies I knew really well, with whom I wanted to learn more, or things I had conviction, right?

15:16So that's what I've done historically, right? As in the stuff that I knew already, and I was going to, or something that Anthony said was like, this company's amazing, you've got to do it, right? Or perhaps someone saying, but someone that you could have admired is saying something, you've done like 20 deals together already. And if you have coffee, you have a 21st deal to discuss, right? So that was the drive of what I've done historically. each investment thesis is going to be distinct unless it's part of like a macro trend right that's the rationale how do you think about i guess number of as well so like volume strategy versus more concentrated among other things um i've changed my mind quite a lot as in i think um i used to believe that it was like a kind of volume game and therefore you know having 10 grand in a deal is worth it if that could be huge.

16:08Whereas I think what you've seen recently is valuations have become increasingly disconnected from reality and it's impossible to make any money and therefore it doesn't make sense to commit to volume because they're all going to be terrible deals. So I think people have become far more valuation sensitive recently in terms of people having, I have to own X percent of this company to make it worth our while. I think going forward, I want to do less deals, but kind of probably spend more time and more money on those deals, right? So I think it becomes too unmanageable because you kind of have to reply to the companies.

16:47And I think it's basically plight in this means that if you are an investor, you kind of have to engage, right? You kind of just like, going forward, I prefer to do like fewer, better deals that I've kind of really believe in rather than kind of... So I have enough training data from the past deals to kind of hopefully see which features are meaningful, right? As in, is the profile, the founder important? And is the market important? What are the weightings? So it's hopefully from the past, like since 2016, sorry, since 2008, I can see which of those deals are kind of working out well, which are interesting, which are bad, what to look for.

17:26So I have enough information from my direct experience to learn and now hopefully they're going to apply those learnings in a more meaningful way. Follow up on that, quick one. If you had to choose between the two, would you choose founders or markets? The obvious answer is like founder, right? At the early stage and at the later stage, markets because the founder will be fungible at later stage whereas early stage they're not, right? So I mean, that's the classical answer. But then, you know, when you kind of pre-see Kokoa stage, then I think understanding if the founders really thought about the deal and if it was simply I hate my job and I could have got a new idea about a product but they could have really thought about it they really understand it and they could have really thought about it where they really understand the strategy and the depth of understanding and I think from my vantage I had a very deep thesis on many things that I'd really thought about and spent months researching Whereas I think marketing invoice is a faster thing.

18:31I've been looking for a while for a business and I jumped into it. I think in terms of recognizing those two profiles of the founder and someone who's come from a whole company, like a cover-up unicorn, a CD good playbook, but how much do they really understand the business, the market? You could help them with some things like product marketing, positioning, or your own playbook and everything you but she'd known at the time. but then how much time they have to invest in their thesis and the business and how thoughtful are they? Are they one of 20 companies? I think just evaluating the quality of their idea you can do in a very straightforward way.

19:11I'm curious, Charlie, because before you just said you'd gone from a more volume-based approach to now wanting to be more concentrated. Could you put some numbers to that? Because it has different meanings to different people, right? So what are you kind of looking at now, if we say on a per year basis, as an example? So I've done 149 investments since 2015. The average size was like£12 ,000 2021,£18 ,000 in 2020. Also, I think I want to do less internationally and do more in the UK. I think UK you have EIS, SEIS, right? That's hugely attractive, right? If I write an SEI sticker, I get income tax rebate, I get 10 % capital gains relief.

19:55If I get 6 % of the money back immediately, EIS, I get 30 % income tax back, I get 20 % capital gains to borrow. It doesn't cash flow. It means I can do double the numbers of deals if I do it in the UK. But also, I can reference all the team involved. I can know the markets. I can meet with coffee. I don't have to do it on Zoom. So I think you'll have a much better understanding of the business and the market. And you can do double the number of deals because you get the tax rebates, right? And also, you can get other investors involved and know the whole cap table, right? If you have an issue, it isn't just you emailing on your own, right?

20:35It's like, okay, good point, Barry. The investors will get wiped out under this clause. We should push back, right? So, yeah, for many reasons, it makes sense to do less deals in Botswana and Colombia this year than doing it like lots of high volume deals elsewhere. So that's the international part. And then also clearly a volume strategy that you've run before. When you now stay concentrated, what are you then looking at? I'm asking this specifically because I think both Anthony and I try and say when we talk to the average angel, you should probably do more deals than you are. But that does not mean that many angels are only doing maybe two or three deals per year.

21:14And that's not what I'm thinking that you're talking about when you're saying concentrated. So if I want to get like, so you're allowed to do, it's going up, you can do 200 grand of SEIS a year, right? And you can do maybe like 350 grand, 100 grand of EIS, right? And that means that you have coverage for like a tax bill of, say, 300 grand of income tax, right? Which also means you get the capital gains relief as well. So if we're doing one or two deals a month of$15 ,000,$30 ,000, that's probably a decent amount. And now I have a question that I have to ask because I can see, at least that's what it seems on my screen, that you are a quite data-driven guy.

21:56Meaning that when we just asked you these questions, it seemed like you were looking at an Excel sheet or something like that. I would love to hear your take on that and how you use that in your investing. Yeah, I mean, I do my tax return. So tax return is due today, right? I did it on my own this year. I didn't use the accountant, right? And I spent a lot of time doing that tax return, right? Because I paid a huge amount of tax, right? Both the past two years, right? So yeah, I think I have to because I have to have the numbers. I have to have the forms. um also i think you want to understand if you are being intelligent with your time and your money right i think if you want to be a millionaire start off as a wealthy person and do angel investing right you know you can kind of lose a lot of money and then so i put in over two million pounds so far and i've only had two exits right i had companies do do secondary and not get given the secondary allocation right so it's kind of um even though i asked for it right so So, yeah, I think it's a lot of money to invest.

23:04And sure, it's fun. And it's like you can be intellectually promiscuous and you can see lots of ideas. But I think you have to ask yourself if it makes sense, right, at every time. I think a lot of angel investors, they come, they do a few deals, and they think, actually, this is horrific. I've lost all my money. I'm going to leave, right? So I think having stamina and staying in power means that you have to be objective and rational and ultimately make money off this, right? Because I don't think anyone's going to stay if they're doing it for a very expensive hobby. I think I'm not personally into fast cars or boats or anything, but I'm sure there are more exciting ways to spend money than building companies and giving it time to do what other people get paid for, right?

23:48I don't get paid for this stuff. I paid to do it, right? Am I hearing right? And maybe I'm here making conclusions by myself, but like making the investment decision itself has elements of emotional and EQ and conceptual, but actually taking a step back, strategizing, looking at portfolio allocation of time, strategy is a much more quantitative exercise and needs a much more rational thinking. Is that kind of what you're saying as well? I used to write like long, formal investment committee memos to myself, right? To kind of like make sure I was being systematic and thoughtful and rational, right?

24:21I think you can't do that at scale. I think I want to get back towards being much more like imposing professional standards upon yourself, right? Rather than also helping yourself to develop much more like systematic, thoughtful ways of doing things that avoid biases and you're doing a good job, right? Rather than just like wasting money on trash, right? So, yeah, I think giving people money and encouraging them to pursue projects when those projects are terrible and don't make any sense is a curse on them. And it's much more generous to them to say, actually, we're making a big mistake. This is a terrible business.

24:59So I think you have to be aware of the consequences. And also, for your own credibility, if you deal with those terrible deals, everyone will know after that that you have no standards and you do terrible work. So being taken seriously and only sending people good stuff and having high standards is important because they're looking for you as a professional to separate signal from noise. So I think it's not enough just to indiscriminately pile into every single deal. So now I have one question before we go into the core learning segment. And that's just because you said the word loyalty money just before.

25:36And I really like that. And then you said you had some founders that have done secondaries even though you'd asked for it, and then they hadn't really told you about it or invited you in at least. I'm curious to hear, because I had this conversation with my co-founder today, about how do you make sure that you build those relationships that ensure that you actually do have loyalty money in the firms? Often they want the people who are annoying out, right? The best way to get secondary is to be really awful and constantly harass them, right? Because then they want to get off the cat table. And those are the ones that got out early, right?

26:10So I think be a massive douche and send them offensive messages, and then you'll get secondary. I actually thought the other way around, so meaning being allowed to purchase. But then that's pretty much the opposite, right? One hopes at some point you can recycle the money in this portfolio. Rod Hamid constantly put in new money, right? I've had two full exits, right? But they aren't enough to sustain it, right? So, yeah. You're learning more about them agents, right?

26:44so on that note and i know we touched upon some already but if you had to share three core learnings charlie from your time angel investing what would those be firstly that you never stop learning right and i think understanding yourself and understanding like different markets like everything's constantly changing a lesson learned one time like five years later could be utterly wrong right so i think it's one of the most challenging things you can do because it constantly changes, constantly evolves. And there's always different perspectives, each which are equally valid, right? So yeah, I think firstly, it's impossible to know everything and you always have to keep on learning.

27:24I think secondly, you never have enough time to do as much as you want to do in terms of understanding the markets or the people. And therefore, I think you have to be collaborative and work with others on this. Thirdly, I think I'm probably guilty of this because of like you're always biased or kind of colored in your own perspectives on areas closest to you. And therefore, it's debatable to be rational and objective. I think that can be quite costly, right? So yeah, I think where possible, you want to avoid bias or irrationality in your own decision making. Can I touch a bit on the third point?

28:01and I know you mentioned some of it before. Maybe some of it comes from being systematic or surrounding yourself with people that are knowledgeable of the space or you're becoming and being an insider to the market. Isn't it a fine balance? Like on the one hand, you don't want unconscious bias. On the other hand, like a lot of early stage investing is subjective or is opinionated. I do think there's elements of systems thinking and it can be grounded and get me systematic, but I don't know do you have any tips or any anything you want to share on your ways of thinking about how to make an objective decision let's say in some sense or how you think about it and biases and there's obviously a tension between having enough time to build like a great thesis and real understanding versus knowing you don't know and uh this round's closing tomorrow and hopefully this year we have more times that like think around things and um things don't close immediately and therefore you can you aren't just like I think Try21 a lot of it was like this round's closing today you have a half hour phone call with a bounder and therefore you can decide immediately or not right so yeah I think that there may be ways to think about it and all of them have some ability I'd love to ask you about the part where it's impossible to know everything you must just keep learning and I'm tying it back to your journey from being very volume-oriented to more concentrated.