Super Angel #258: Angel Investing with Harsh Sinha, CTO of Wise and angel in more than 50 startups and multiple VC funds.

0:00In a world where podcasts outnumber humans, we try at EUVC to be mildly more interesting. Tune in at eu.vc to watch this episode instead of just listening. Eu.vc, where the extraordinary is just another Monday. Welcome everyone to the Super Angel podcast. We're delighted to have you here today and we're even more delighted to have Harsh Sinad joining us. Welcome to the podcast, Harsh. Thank you so much for having me. Is this 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.

0:44All angels say. Angel. Please say it's me, an angel. The smile on her face. We're here to get back to the dog. Angel. Thanks, let's find an angel, girl. Girl.

1:00This show is not investment advice, and the hosts of this episode may be invested in the funds and companies featured. Yeah, thanks for joining us, Harsh. I mean, eBay, PayPal, what experience is there? Excited to have you on and to share more. Do you want to start by sharing a bit more about your journey and what got you into angel investing in the first place? Yeah, so just going back, I've been a builder all my life, recruiting products and different experiences for customers. So I started off as an intern in the 2004 timeframe after the dot-com birth in the Bay Area at eBay and then quickly moved to full-time.

1:36And then through my journey, spent about 10 years building products at eBay and PayPal. And that was across a wide spectrum of things and problems that we saw for customers. So I started off as core engineering, looking at how we scale applications and distributed systems. So working more as a performance engineer. At those times, it was pretty cool that if you said you were a performance engineer at a web company, there were not a lot of teams like this on the planet at that time. I think there were like eBay and PayPal, Amazon had one, Yahoo, Hotmail, which was, you know, MSN and Microsoft. And then there were a few others.

2:20Generally, if you looked at web scale and web scale, and Google, of course, had one, but like web scale was still coming up to, you know, like number of computes and number of transactions per second was still much lower than we are today. But in the earlier days, there were very few companies which had separate teams looking at performance in scale on the internet the way we were. So it was pretty fun times, small team, but that helped me understand what it means to build an amazing performance product across the world. And then I moved that into actually building experiences. So I spent time building parts of eBay Motors, which I'm a car enthusiast.

3:02So a lot of things that were close to my heart. Most people don't know this, but I think at that time, we had some numbers that 2.5 billion of GMV of eBay, it was a$5 billion business. 2.5 billion GMV was from parts and accessories. And then half of it was from selling vehicles or getting leads to dealers. And we sold a part. So if you had a hobby car and you're looking for a part in a 1965 Chevy, where would you go? You would usually go to your local salvage yard, which would be good luck finding that specific part, or you'd go to one of the biggest marketplaces where eBay had this. So there's a pretty big product and fast-forward product.

3:47So that was fun to build. It has a lot of intricate complexities on how do you build search on this. And then we went on to build other products, including acquiring a company where we tried our hand at doing a local delivery product, eBay now, and then ended up spending time from there to building the PayPal, creating the PayPal product with the PayPal mobile app. And then finally, around 2014, Krista and Tal, with the founders of Wise, or TransferWise at that time, found me and we started talking about me potentially moving from not-so-sunny San Francisco to not-so-sunny London for a while to try and scale what now has become a pretty global company, where we help people manage their finances and spend and receive funds across the world.

4:35One thing I realized, I did a segue in the middle and did an MBA at Berkeley. I was trying to think maybe I should do a career switch, like I had my middle-life crisis a bit early. Tried to think whether I should be a consultant, whether I should be an investment banker. in my Berkeley journey, did an actual role in consulting for about a summer. I actually went to Israel and worked there with the government on a project. Then very quickly realized consulting is not my cup of tea. I like things implemented and seen to the end of the line and actually see how users can sit. In investment banking, the more I learned about it, it was not my cup of tea.

5:14I realized I was right where I started, which was I like being a builder. Through that journey, and my 20 years, over the last 20 years, I've met a lot of builders. One of the things that I really enjoy is the passion that people who are solving the problem bring to the table and how they get obsessed with solving that problem in the world. So my angel investing foray was basically from that. I have a notebook that I still keep. I have ideas that one day I would want to solve. And I met other people with these notebooks. And some of them were actually, I was jealous of because they were actually working on items on the notebook where my notebook is still on my desk.

5:55So that passion drove me to start working with some of them and understanding why are they focusing the next 10 years of their life on this problem. And from there on, other ways I can help them. And that passion will actually get me excited about what they're building and also got me to learn a lot about those specific problems very quickly. So that's how I basically we started working with, you know, early stage company. And that still is the number one reason why I do this is just to meet people working on different problems, different industries, and just very smart people trying to solve the problem in a different way.

6:30Oh, what a story and what an angle. I mean, I'm going to go slightly off script and then come back just by saying that I think you bring a very unique angle to it, right? I mean, having been, you know, a very technical background and having scaled technical teams, you know, would love to hear a bit more. Like, how do you think about assessing those founders and companies with that technical angle in mind? It's interesting how things have changed, actually. If you asked me even 10 years ago or eight years ago, would I ever take a team without a technical founder seriously, the company, I would say they're smoking something.

7:15I think now actually, given the tools and some of the things that exist now around no code, no code stuff, and that you can actually get some of the stuff up and running. if you have a particular other skill that you bring to the table and you can get it to an MVP where you can actually start showing some traction. So 10 years ago, without any technical founder, I would say good luck. You should go find a technical founder. I think you still have a very big edge if you have a technical founder, but you could get some traction. I'll give you an example. I mean, I've invested in a company which is, their core thesis is around analyzing real estate contracts.

7:56You know, the founders are amazing because I think one of them has an economics degree and the other one is a lawyer. And actually that probably applies more to the business than just bringing the tech in. So I invested in them early on because they're very passionate about the idea. They were able to explain to me how broken the commercial underwriting system is for buying buildings and what are the gotchas there and how they could actually build a much better setup but then a lot of this was driven off training of giving a product to paralegals and these like lawyers of these companies who do this underwriting and learning from their work how to build a smarter system and this is before like chat gpt and stuff and they got quite a bit of traction before covid hit of course and impacted their business because commercial real estate and now they're on the other side where they're like you know using a lot more ai and lms to even analyze these documents but this is a classic example of not they're technical but they're in their own space but they're not like you're pure technical co-founders but then they were able to hire actually one of the people they hired i did their final run interview for them for that cto hire and just turned out to somebody that i'd interviewed before too so so there are places is what I've seen now that even if you don't have a pure technical team from a I can write code perspective you can take a challenge in the forward harsh it's like we it's like we set this up but we really didn't because we're also co-investors at Seacamp in orbital witness and I know Ed and Will super well so they completely agree they're just they're founders who can articulate the problem so so clearly I also came from a legal background prior to Seacamp so I remember when I met them I was like this is a problem that needs to be solved and and those guys seemed an ideal fit to do it and and also agree with the the technical talent they've built around it's it's put the company to a great spot so it's great that you've been able to guide them in in that way as well oh no it's not about the thesis

10:01kind of changing into or like going even further into the investment pieces and strategy and how how you think through your angel investing. One bit which I'd love to get you to kind of expand on is a little bit about where you are with your angel investing now. Obviously, when you maybe started making the first investments, was it earlier in your career or was it at a certain point? Almost like maybe even what the trigger was for you to think, what wanted you to go into that? And then also how far through you are in terms of like ticking off those things in the book you described of the ideas.

10:36we'd love to spend a little bit of time on that one yeah so actually just going back a little bit i think a lot of people start off this way in angel um at least most of the people i know they start off by just helping a few mates right and uh you know helping other builders build stuff they get excited about the idea they're working on they get obsessed along with them they're doing these weekend calls and suddenly you're like oh you're raising money of course it's gonna be great So you give them some money and get on with it. So I did that around 2012, 13. To be noted, all of them have gone bust.

11:09They were horrible ideas. Or not horrible ideas, but like, I guess we're good execution. There's so much to building a company than just ideas. So I realized, you know, I do this retro every year, and the end of the year and how the year went. And one of the things that started popping up was like, oh, these are like interesting small, small checks and what happened to these companies and how the fund is doing. And basically my retro was like, I was doing more charity than really angel investing. So I had to take a very, very objective approach to like remove myself from this bias. I said, okay, this is kind of weird because now I'm, and also it might impact on my friendships, right?

11:51So what I should do is be more objective. So how can I be more objective is by being blind a little bit. I have no association with these folks. And I'm going to look at every deal that it comes through on the face value, given a deck, given presentations. But then how do you get this deal flow? So I actually just found AngelList and I started joining some syndicates, pitched myself into a few syndicates, started getting some deals for that way. And, you know, like I ended up investing in a furniture company. It's called Burrow. I'm not on their cap table. I'm just through an STV in there. they've done CVC now, it's fine, going slowly, but it's fine.

12:30They're doing fine for the furniture industry. But I learned a lot about the furniture industry. Every time I'm in shortage, I'm walking by Loaf. I'm like, hmm, how is this just in my burrow? And trying to look at the product. What those deals taught me was actually very quickly helped me learn a lot about what do founders share? What do investors ask? And some SPVs are better. They were actually coaching us in the earlier days through this process of, you know, like I didn't know that you should be asking for prorata. What the hell is prorata? You know, I mean, obviously as a small person, you cannot, you know, as a big vehicle, you can.

13:06But what does it even mean? Why do you want that? What does it mean from a dilution perspective? So it actually taught me a lot by just dipping my feet a little bit and getting these things going. And then through that, I got some confidence on the thesis that I was running, which my thesis is not like I should do one industry, I should do one type of company. I just kind of go pretty broad and look at what's interesting that's happening. And then from there on, I went to, that helped me basically start doing direct deals. So by that time, you know, I think I did my first big direct deal in 2018 when my son was just born.

13:45So in fact, I just don't think Carter, the founder knows this, but I took calls in the middle of the night because he was in early morning because he was in Estonia, I think. And he thought I was waking up early for his calls to take the call with him. But I was up because my son was crying and I had to be sitting in the middle of the night too. So I took those calls too. But that's my journey basically. So failing with a few friends who had great ideas and I was too emotionally invested on to going completely the opposite side where I started to be too objective. And then now I've found a middle ground where most of my deals are.

14:19There's some connection to the people. usually a people connection somehow uh it's how i got uh the bill on my on my inbox in my inbox no super interesting to see that kind of evolution and and as you think through other because you mentioned there obviously about like indexing on on the people but are there sectors that you'll kind of lean into more because of your experience and obviously having worked at at ebay and such senior roles and then now of Zeep with the CTO at Wise or are there is it kind of that you actually stay away from some of those sectors because we know yeah angel investors who have that deep domain expertise can kind of go almost one of both ways yeah so I am pretty broad I do think that it's selection bias is generally in their deal flow even what deals show up on your on in your inbox so it's i was just looking through the list that i maintain of all companies i've invested in before this call and i can see like there's definitely earlier days i had a much bigger bias even i think there was a bias in what was showing up to me was more payments companies so i can see a team there's payments or something to do with finances that is uh smb subscription products that i'm seeing and then there's other things like you know real estate i've got things around trucking in India, enabling to improve the efficiency and tracking of trucks.

15:44Like it's a very big industry in India, but like it's such an antiquated technology and trucking system that we're using. So like how do you improve efficiency for truck owners, which is a very kind of out there problem and a different problem. So I think earlier on, yes, there was a bias for payments and marketplaces. Now I think we're pretty diverse at all. Just jumping in with one more question, which is usually a conundrum we see as angel investors, right? Which is capacity and time. Portfolio theory tells you diversify. The more you institutionalize and you get to know about Parada, you get to know also about the statistics of it.

16:21So how do you think about that trade-off between portfolio diversification versus having capacity to support those founders? Yeah, it's a tough one. I struggle with this a lot. So I fall in love with ideas. I fall in love with people and that's what I want to invest in. And then very quickly I have to be conscious, can I spend time with them? And that bar has gone higher and higher because now as I've got more people and more people in the list who I've already invested in, I'm getting paid. So maybe my bar should have been higher in the early days. And I think you should have a higher bar in the early days because you just get kind of like very quickly caught up into, like I want to be part of these amazing ideas and amazing problems that people are solving.

17:02One trick that I have learned, and I think I was telling you, Anthony, was I've been able to luckily work with some more established VC firms, big firms, early stage firms in Europe, in the US, where I've become part of their expert network too. So what they'll do is they'll kind of send me some deals load to more from an intro from a perspective of, hey, we think Harsh might be helpful for you at this stage of the company you should talk to. And they know that I will look at all deals, not just payments. But that's helped me kind of have a little bit of a filter and allows me to spend my time more wisely versus just spending a lot of times with a broad spectrum of people.

17:48I'm sure I'm missing some folks that I would like to spend time with, but I just have to, building wives is more than a full-time job. So I'm still doing this on the side. So I have to kind of prioritize that. It's so fascinating, your story, Harsh, and some of the companies you've worked at, and particularly now with such a key leadership role at Wise, it's almost like scale. You've seen such scale in the companies you've been part of and now Wise is pushing through so much money on a monthly basis. When you look now at these super early stage opportunities, how do you assess whether those kind of founders and those companies can go on that journey?

18:26How do you see, because you've actually seen scale. You know, it's so rare to like have someone, even on this podcast, and we're really privileged to speak to some amazing angel investors, but to really see like scale in a technology company like you have. And when you sit down with these founders, I'd love to see if there's any insights you can give to maybe me and Anthony or anyone listening about how you'd assess whether they can go on that journey. I think that's a tough one. I think generally I'm not assessing whether you will be able to scale the level where WISE is reached or PayPal reached or eBay reached.

18:57it's kind of when you look at early stage you have to look at the personality and the person like so i like to ask the question like okay why would you spend the next decade of your life building this and working on this problem and that's very interesting how founders answer that right you know some founders are i think it's a good business problem i think nobody's attacked this space okay you can be very smart but i think generally that answer the fire in the belly goes out quickly. I think people who had a personal journey with the problem, they usually tend to have a bigger fire in the belly to solve the problem.

19:39Again, this is very cliche and very high level. But I think it does come true and ring true so far. I also look at what have they done before. Do they have scar tissue? It's like what I would say. Scar tissue comes by doing. So I'm not saying there aren't amazing young founders coming out from college and building amazing companies. But if you look at a success rate, a lot of people who have been able to do sustained performance and sustained scaling, they've done something which has been previously hard too. And I think that helps, again, build that. It's either something in firing your belly because of the reason why you're chasing the problem, or you've got some scale because you've done something hard before.

20:25right but i think those things are the things you look for afterwards scalers can be hired it's not the hardest problem if you are in the lucky position that you have a great business people will be like bending backwards to come help you build any problem is like how do you pick the right scalers to help you build right let's go a bit more and talk a bit you know about your core learnings from angel investing got here learning more about them angels

20:55so you know if you had to share three core learnings and maybe you've already touched on some already what would those be number one early stage it's all about the team and the way i look at it still is does the team have a hustler and a hacker so usually i think two people teams are great because everybody knows like any relationship you'll have your good and bad days and these things are hard so you want somebody beside you building with you so for a tech company if it's a tech solution or anything to do with like scaling and large numbers and it's powered by tech you need to have a hustler as in somebody who can paint the vision maybe sales maybe marketing something that they can really get out there and get their early customers and be passionate about being in front of people and selling even if it's a consumer business how do you get those first 10 20 100 100 000 customers and then the hackers obviously needed to just build the product right so that's one thing i look at but it's all about the team and then you check the thing i check for is do they have the ability to work through first principles so there's a lot of like copycat ideas especially back in the day in europe i think europe's not better but back in the day there's a lot of copycat ideas of, I'm Uber for blah, and actually, I'm just Uber for Europe.

22:10And some of these companies have done well, but generally, I think you have to work through first principles of why this problem in this market, why is this the right time, and they articulate that. And then the final bit on this one is, still the first one, by the way, is why will they spend the next decade of their lives doing this, right? So that's the team, right? So a hustler and a hacker can take on first principles, and will they spend the next 10 years building this? Second insight for me was be careful of your own bias. I think you referred this. I was getting a lot of payments companies in the beginning.

22:46It's kind of funny, like founders I think need to be naive and bold. Sometimes the biggest problem solvers are not from their own industry. So they're kind of naive to let go, we can do this differently. But as an angel, you seek out for your expertise a lot of times. But you should also try to be a little naive. And I'll give you an example on this one. So I probably missed out the biggest return on an angel investment a few years ago, where I met this founder working on improving check payments and enabling businesses to get paid by checks and moving them online in the US. Amazing founder, amazing story, amazing hustle.

23:28But I was so obsessed with ACH chargebacks. If you've ever worked in the US payment system, ACH chargebacks is a big problem, right? And my entire journey of the last 20 years of building eBay, PayPal, and wise, I was like, what about ACH chargebacks? Have you thought about this? And I just wrote him off thinking he has not thought about this. This is going to be a car crash. It's$4 billion valuation today. I would have been in the earlier ones. So that tells you, you should be thinking about the industry, but you have to be a little naive because you have to believe in the person going back to the first stage, follow up with the team, think about first principles, and don't try to apply all your learnings on them because then you're becoming the industry player, right?

24:12And then the third one is, I actually think this is a very bad business to be in if you're just doing it for returns. I think angel investors actually predict for returns overall, Like you can get massive returns, but I think if you look at everybody who says they're an angel investor in the world, given the deal flow that you can get and how you get access to it, and there's so much competition, and now big firms, VC firms also going like super early. I think it's actually, if you just dare to maximize your returns, you're probably going to be unhappy. I think what you need to have is another reason why you should be in this business.

24:45I mean, for me, it's the first principles that I had, which was I love meeting people who are passionate about an idea, learn about the industry why is this idea worthwhile solving and along the way if i can help them that's great and then if i make some returns that's good but i would you know if i looked at my spreadsheet there's a clear chance that a lot of these will go to zero in fact some of them have started going to zero now right so i just had one company that you know they got acquired but it was basically a talent acquisition and i got to return back after the whole deal 42 cents on my entire investment, which came back to my bank account.

25:21So very on the open up. Would I invest in the founder again? Yes. But the outcomes are not as great all the time because we only talk about success stories, right? So you have to be in it, I think, for more than just returns because you're taking very early bets. And some of them, the bets I've taken, they'll be fine. They'll pay the entire portfolio. out. But it's just, you can't be in this, I think, for just chasing for returns. That's my piece, you should be doing it for something else too, along with the returns. Even beyond that, right? If you're there only for the returns, I'm taking it back to kind of us, right?

25:57Seed investors or angel investors in different micro funds, right? There's so many ways to make scaled returns that are much more efficient, right? I think most kind of seed investors are slightly rational and doing it about the passion of the craft first. Of course, if you're doing it professionally, hopefully at the top 1%, you'll do extremely well, right? That's industry we're in, but definitely can identify with that. And I could actually very much identify with a second because I'm increasingly doing more and more fintech, which is what I've done. And I always obsess about making sure I'm proven constantly wrong and I'm first principles thinker and doing it at pre-CT.

26:35It's all about meeting the next great person that's going to prove me 100 % wrong. On the first bit, the one thing that I've increasingly been spending time on with either senior operators about to start a new business or founders about to do their next thing, especially on the former category, right? On the one hand, it's obvious the reason why you should have a co-founder for many reasons. On the other hand, sometimes it's quite hard. And also, you know, brute forcing such a partnership can be tough. And a lot of the failure in the early days comes from founder fights. I mean, what are your views on that?

27:14If, you know, you have a solo founder in front of you versus, you know, brute forcing such relationships, or is it not just a trade-off at all? Like anything in life, you can't have an absolute rule, right? So you will have exceptions. And yes, I have seen my fair share of founder fights, like way too many. I still think that this is composition that kind of comes naturally because building a company is very, very hard. So you want, even in the sounder fights, actually, when things come to the end or liquid the hilt, there still is a lot of respect in that relationship because they've gone through some other journey together.

27:51So even though they might have fallen out, there will be a mutual respect. And you see them invest in each other's companies over time because there's a lot of professionalism there. But yeah, I agree. If that is an amazing idea and an amazing founder with enough fire in this or her belly to go at it, then I would still fund and I would still work with them. But it's definitely a reason for me to look at going deeper as to if this is such a great idea, how come there's not another person in the world who we can convince to join? Because if you can't, then how do you convince the next 100 ,000 people as customers to join you if it's a business or consumer?