The Diligent Observer Podcast

Episode 50: "Crush the Cost of Diligence" | Serial Entrepreneur Wade Myers on Systematic Founder Scoring, 30 Years of Investment Lessons, and The Future of Angel Investing

• Season 1 • Episode 50

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Today's episode explores three ideas that caught my attention:   

  1. Binary scoring reduce bias - Wade's yes/no questions (vs typical “tell me a story” questions) help address the "I like every founder" problem.  
  2. Transaction fees align incentives - Wade's preference for paying only when deals close checks out with many other conversations I’ve had in recent years. Perhaps the next evolution for angel investing in community? 
  3. Scarcity really does drive urgency - Wade's amazing “fax machine story” illustrates how scarcity and momentum create investor FOMO.  

I explore these ideas and more with Wade Myers, Co-founder and General Partner at Eagle Venture Fund. Wade Myers brings a unique combination of military leadership, strategy consulting expertise, and 30 years of angel investing experience to early-stage capital allocation. As a former U.S. Army Airborne Ranger and Boston Consulting Group veteran with a Harvard MBA, he has invested in 150+ ventures while building systematic processes that filter through 20,000 annual pitches. Currently serving as chairman of a venture studio and partner in multiple investment funds, Wade has pioneered data-driven approaches to founder assessment that challenge the traditionally informal nature of the angel ecosystem. 

During our conversation, Wade shares: 

  • Binary yes/no assessment questions that capture founder culture fit, perseverance, and business acumen without lengthy application essays. 
  • Why 90% of angel network inefficiency stems from poor founder-investor matching and how marketplace mechanics can solve this problem. 
  • The allocation strategy conversation every new angel needs - from calculating liquid net worth ratios to identifying where you can add immediate value beyond capital. 

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All opinions are personal and may not reflect the views of The Diligent Observer. Not investment advice.

Andrew Kazlow: [00:00:00] All right, we are recording. Double checking sound. Still looking good. Feeling good? All right, Wade, thank you for being with me today.

Wade Myers: Absolutely great to be here.

Andrew Kazlow: So to start out my classic first question, Wade, what are you excited about right now?

Wade Myers: Well, uh, we're we're, I've, I've always been trying to refine how, how I think about investing. and how I perform diligence and how to crush the cost of diligence, right? Because the. challenge of early stage investing is you want to do enough diligence, but you usually, your check size is so small that there's kind of an, an issue with, you know, how do you, how do you not spend or overspend on diligence, time and effort. So there, there's kind of a, I, I'm always excited about trying to improve that process, but the most exciting investments right now. Are, or certainly ai. I mean, it's, uh, there's a lot of [00:01:00] exciting stuff going on with AI and um, that's a, that's a real, a fun area and I've got a number of AI investments I'm super excited about.

Andrew Kazlow: So I'd love to come back to, to both of those. Uh, first double click for me. When you say crushing the cost of early stage diligence, that's something that I've. spent a lot of brain cycles. Thinking about what are some of the, uh, strategies or, or methods that you have been leaning into recently that you feel like are are effective?

Wade Myers: Yes. Well, and I've been investing for 30 years as, as an angel, and then put together a venture fund eight years ago and continue to invest as an angel, as well as, um, with the fund just depend on the fit, right? So, so for a lot of years and a lot of mistakes and I'm always thinking back about those mistakes and what went wrong and kind of doing those retrospectives, right? When I, when I, and when I do, whenever I do that, I, I codify all these learnings and then I've been building that into an app [00:02:00] and really want to get this to where. you know, the thing is I get so many, like most investors, I get so many pitches per month. I think between, uh, me personally, my partners and our venture fund website, we get a 20,000 pitches a year, and the, what's difficult is usually taking a time to sort through that. And I don't want to have a whole analyst pool. Just because someone sends you a pitch deck doesn't mean, you know, we, we have to review it. So, um, I've put in place a whole bunch of gates to, uh, quickly, but respectfully, uh, you know, help a founder understand. And the first thing is like the. the. uh, startup investor fit analysis because in most cases it's just not a fit at all.

So I only invest in software. So whether it's B2B software as a service, or mobile apps, or ai, I only invest in software. So if I get a, you know, medical products [00:03:00] or you know, something commercial real estate. Now I do invest in commercial real estate, but that's, that's a different deal. I'm, I'm, you know, here I'm talking about angel investing and, and venture investing in, in early stage startups.

Right? So, um, in most cases the pitch decks are just coming in either some, you know, robotic AI-driven automated spamming, and so I'm trying to quickly filter those out. So we've, we've built a, you know, software app that basically walks a founder through a series of questions. And because every investor.

Whether you're an angel investor or an institutional seed capital investor, every investor tends to have a strategy. These are the kind of businesses I like to invest in. This is the kind of geography, the check size, the stage, et cetera, right? And so those are really easy questions to put right up front. So if someone, you know, comes to me, wants to submit I, I want them to use a submission link which walks through that. So first they ask questions, and after each one of those, if it's [00:04:00] obviously not a fit. Then it just, they could just get an automatic, respectful email saying, I'm sorry, this isn't a fit and that way.

'cause in many cases, as an entrepreneur, I've raised a lot of venture rounds and in the early days as a venture-backed entrepreneur, it always frustrated me when I couldn't get a 

no So when I, so I was pitching an angel, it's. Sort of like, Hey, I just, I, I just, you know, a clear no is better, and so I always strive to give someone a clear no, but it's easy.

So I go through the, you know, the fit with my investment strategy. If it's not a fit, it's not a fit. And that, that weeds out, frankly, over 90% cause I'm very specific to what I'm looking for. So that's, that's pretty cool. Right? So that saves me a lot of cycles and saves the, the necessity for an analyst effort.

So a lot of angels are doing all this themselves, or if they're you're an angel network, you have maybe some volunteers or students or others that you pay on the staff, and right? so I'm trying to automate all that away. But then when, let's say they, they hit all [00:05:00] those. Those gates and they, they're a pass and, uh, they pass through the gate and, you know, it's a, it's a go.

Right? Then I actually want them to continue to fill in information because here's what I don't wanna do, and then what I've kind of learned that I don't like, um, I don't want to try to read somebody's long form bio. To try to pull out of that and tease out of that. Are they a good leader? Have they had leadership experience?

Are they a subject matter expert in this industry? How long have they been wrestling with this problem? If I just look at someone's LinkedIn profile or read a long form bio, it's kind of hard to pull that out, right? So I've designed a whole bunch of questions that are all, yes, no, almost all of 'em are yes, no.

So really easy to answer and it's a binary answer. Either you have done this or you haven't. Right? And in that way, then I create a score, [00:06:00] right? And, and now I use the score to rank the opportunities so it's way more efficient. So, I'll give you an example. So when I look back of, you know, a few years ago when I was kind of, you know, putting all the software together to make this process more efficient, I said, okay, what I wanna learn from all my failures, so I've invested in 140, maybe give or take, uh, founders, right? And so I go, okay, which ones failed? And what were the common reasons? Because I think sometimes that's easier to discern from that than it is the successes, right? And in. most cases, the failure was. where I invested in someone that had zero leadership experience, absolutely none or very little, right? And so it suddenly, it's really obvious if someone has never been a leader if they've never been that person, that the buck stops with them and it doesn't matter.

Some, some were had been a [00:07:00] nonprofit leader. Uh, and that was, that was, that was better than not, but, those that had never led something before and a military commander's fine. So have you commanded, you know, in the military, have you led a company, led a nonprofit, have you led something P&L responsibility, right? Ultimate authority. And so that one thing. Was one of the very most important, how I describe it, is this I would never send someone into battle to lead an infantry company in battle if they had no leadership experience. In fact, I don't want 'em to send 'em in into battle that they haven't been to bootcamp even.

Right? But let alone lead, because a startup is high stress, low

resourse 

It's like a battle. It's like a battle. And so I'm looking back and I'm going, how would I have expected someone that didn't know how to lead? To suddenly become a great leader in this high stress, low resource environment of a startup.

Right? It, it seems obvious in retrospect, you know? So [00:08:00] then, so I've got a series of questions that just try to ascertain their level of leadership experience. Um, and the same with subject matter expertise. I'm trying to figure out, okay, how long have you been wrestling with this problem you're trying to solve with your startup? Are you a deep expert, right? One. Another one's just like industry or marketplace expertise. Have you been participating in this, in this industry or marketplace for years? Do you know everybody? Right? Like, um, I built a FinTech, uh, for an investment banking platform as one of my startups like six, six years ago. And. I had been a FINRA broker dealer, investment banker. I, I knew how the process worked. I knew kind of everything about it. Obviously, I was the subject matter expertise, right? But also because I'd worked with a lot of big banks and knew, knew the banking world. I had a lot of contacts. And so you, you marry those two things together. And I wasn't asking a single [00:09:00] investor, gee, do you know who I should call? Or do you have any ideas or can you help me validate my idea? I didn't need validation. I was a subject matter expert. I knew the market needed what I was, you know, wanting to build 'cause I wanted it. And, you know, and, and I knew who to. Contact and that was, um, it was, and that was, it turned out, you know, so it was a real blessing, you know, um, you know, glory to God, right? Sometimes we just get a blessing. But that company was built up and sold in 16 months from closing the seed round, 19 months from launching. It was just a real spot on hit, and it was a huge return for investors. But that's just an example of my investors also. didn't have any resistance in investing because of the combination of, I had a lot of leadership experience, I had a lot of subject matter expertise and I knew a lot of players in the industry at, at very high levels with large banks. [00:10:00] And uh, we ended up selling that to JP Morgan. And working with a Glo, you know, global head of digital strategy, global head of investment banking, et cetera. So let's, I just use that as an example. Not that I'm a, you know, a fantastic entrepreneur or anything, but that's an example of what I look for. What I've learned to look for is those kinds of things. And so now that really helps me refine. You know A A founder's pitch, if you will, is I only want to really dig deep on those that are gonna score high with, uh, leadership experience score high with subject matter expertise. But also there's tons of these categories. One is, uh, business model expertise, right? Like if someone comes to me and says, I want to build a business to business software app, but they don't know anything about business to business, you know, software as a service. Business model. They've never, they've, they've came outta manufacturing and they're trying to build a B2B SaaS app for manufacturing, right? They know [00:11:00] manufacturing, but they don't know software. So that's an example of a, that's a bit of a miss, right? They don't understand the business model. So there's all kinds of categories like that, that I'm trying to assess and score. that make sense?

Andrew Kazlow: So it sounds like you've really, I mean it's, it's it's a fascinating explanation because it sounds like you've really just taken stock of, okay, the last a hundred plus investments that we've made, some have been successful, some have not, and you've pulled out these two or three core themes and then built a screening process that essentially filters for and surfaces the opportunities that most, most directly correlate with that.

Set of key themes. Why do you think more investors don't do this? Is it lack of experience, lack of reps? Um, lack of, uh. Because as you're explaining, this is very systematic, seems very, you know, cut and dry. Okay, this is a strong fit. [00:12:00] Let's have a, have a call, or, you know, it, it just seems very simple and obvious.

Uh, anything that's simple and obvious if I've learned anything is that it, uh, was not simple and obvious to arrive at those conclusions. So, uh, yeah, just curious, ideate for me, why, why do more investors not have such a systematic approach, especially at the Angel stage?

Wade Myers: You know, I, I don't know. I mean, and why did it take me so long to develop this, right? Because it's only a couple years old. And what I would say is that there's a lot of categories I've, I kind of dove deep on just two or three, right? Uh, so there's, you know, the, like, so I score everything from the market opportunity, the, um, the, you know, the product or service distinctiveness and maturity. Uh, founder culture fit. This is one that's really fun. So think about this, right? so historically, here's what angels do. know, angel. We like to get involved. We like to get to know the founder. We like to hear the pitch. [00:13:00] You know, we kind of want to help. You know what I mean? So there's a desire for most angels. To want to meet face to face, to want to hear the pitch and, and, and see if there's a connection. But when you're getting so many pitch decks, that's what forced me. And because I'm, I'm, you know, I've done a lot of business process redesign. Over the years, right? Like when I was at Boston Consulting Group doing strategy consulting, I did a lot business process design was a lot of, a lot of the input into, into a great strategy, right?

That was gonna be uniquely better. You typically had to completely redesign a process, completely rethink it, right? And so I just had a lot of that training and discipline. And so I'm naturally trying to bring that to whatever I do. but but there is this friction because angels love that personal connection.

Kind of want to be, you know, be on, I'll be on the board, I'll help you. Right. There's, But that feeds a lot of the desire, what an angel wants to achieve from an angel investment. Uhm [00:14:00] but in my case, I was getting so many pitch decks and I also had a venture fund, right? So it's kinda like, okay, let me. Let me throw up some gates here. But, but one of the things that I was looking for when I'm being pitched by a founder, and I think I have the same problem a lot of angels do. I tend to like every founder I meet, you know what I mean? I tend to like, oh yeah, yeah, great idea. You know, and it's, you kind of want to

cheer them 

on. You wanna lean into it, you know?

And so I would find myself that if I didn't have. A way to quantify and score. I would tend to like every

deal 

and then later regret going, oh man, why did I rush into that? You know, I shouldn't have done that. Uh, so I kind of forced this quantification and, and so forth into these objective buckets and scores.

But one, another one that I really like the score is the founder culture fit. So I've talked about founder context fit right in terms of the context. Have you ever worked in a startup before? Have you been a leader before? You know, what about the business [00:15:00] model? You know, the, the founder idea fit? Are you a subject matter expert?

on This problem, you know, um, do, do you understand the target customer? How well do you really understand the persona of the target customer, like the investment banking one for middle market investment banking deals? Right? Did I understand the mentality of a middle market business owner and what they went through when they sold their company? As I was building a platform, absolutely. I've owned a whole bunch of businesses. I've acquired a whole bunch of lower middle market and middle market businesses, right? So that's another one is how well do you really understand this customer that you're trying to sell to? Not just the industry, not just the market, uh, but, but there's this whole founder culture fit Andrew, which is really fun. And, uh, what we came up here with here is a whole bunch of yes no questions that would assess, kind of your mindset. So, for example, I'm gonna guess that back in your childhood or in high school, tell me some of the entrepreneurial experiences that you [00:16:00] had.

Andrew Kazlow: You asking me this question or, uh, oh yeah. I mean, selling, uh, candy to your, your kid, you know, schoolmates, right? That's like the starting point.

Wade Myers: Yeah. So there's a whole bunch of questions like that, which is, you know, you sold door to door, uh, you had a paper route, you know, anything that said, okay, you were always, you always had a side hustle, right? And so it's not just what you did as a kid, but we have a whole bunch of questions about experiences like that, right?

You know, kind of through, uh, childhood, young adulthood, et cetera. So, even now. Yeah. If, uh, I'm always impressed when someone comes to me and they have a, like a side hustle. Oh, I got this one E-commerce side. I threw up a landing page. I did this, I did that. You know what I mean? It's like, oh, wow. Yeah. That's, that's pretty cool.

Or I put myself through college doing this. And so what, what I define as founder culture fit is all of these things that would suggest they have an entrepreneurial mindset. And, and it's, it's like a one is a dedication to learning, right? There's a bunch [00:17:00] of questions about how much they read. How much they listen to podcasts, et cetera. Like I'm a voracious reader. I read a ton and just all the time, right? Book summaries, full length books, et cetera. And so one thing that I've seen with really successful founders. Is they're dedicated to learning. They often have an advanced degree, speak multiple languages, voracious reader, listen to podcasts.

They're It's very—they're very, intentional about learning. And so that's one of those. So, so we have several questions that are yes no either you do this or you don't. Right. And it, it's quantified. So we kind, uh, can, uh, measure that. And another one is business development acumen. Right? Like, are you a serial entrepreneur?

Have you found that in other businesses? Have you had a successful exit? You know, a bunch of questions around business acumen, right? Uh, you know, so a perseverance. We wanna assess, have you done hard things? Because running a startup is hard. You're gonna have so many [00:18:00] days that you want to just roll over and die.

Just quit. Right. And give up. And so as an investor, I wanna know. Okay. Uh, and, and, and you can't just ask 'em like, how, how diligent are you? Or, you know, or tell me about your level of perseverance. And of course, everybody's gonna like 

self-select. Oh, I'm, I would never give

However Yeah. But if we, but the questions that we ask. You can't cheat on them, right? Like so, so we came up with a whole list of stuff, for example, oh, were you in the military? Right? That's that's one level of hard. But then were you in special operations? That's a way, another level of hard, or were you a pilot, you know, like a fighter pilot, right. Or you know, any kind of specialized we would go, wow.

Another level of hard is did you attend a military academy and not just attend? Did you graduate from a military academy? Right. That's, that's hard because you're doing like full-time military plus full-time college. And so, [00:19:00] uh, did you attend a boarding school or a private, you know, a board boarding school, private military academy during high school?

That's, that's another level of hard compared to just, I went to high school. Right? So we're asking specific questions all around perseverance, and one of them is, were you a collegiate athlete? So if someone's a collegiate athlete at a, you know, a, a major university, I know that that means they've been working really hard for at least 10, if not 15 years. Right. That's a whole another level of hard. And so we just ask really simple questions. Yes or no, you know, did you have a special operations role or were you're a fighter pilot or, or et cetera in the military. Did you attend a Mili Military Academy? Yes or no? You know, were you a colleague, an athlete, right?

And so what we're discerning from these yes no questions is we're scoring their level of perseverance. Have they signed up and completed? Something that's really hard and ideally several things [00:20:00] right now we can ask 10 questions like that. You know, I think four maxes out before you go. Yeah. We don't expect everybody to, you know, have that, have gone through all those profiles, but we're just looking for enough evidence of

of perseverance.

'cause that's one of those key traits of being the entrepreneurial mindset. Another one is financial acumen, creativity. Oh, creativity is fun. You know, have you, have you ever, um, you know all about have you coded a software app? Have you created a work of art? Do you have a patent? There's a whole bunch of things around creativity.

Have you acted in a, you know, community play, you know, those kinds of things that would just suggest creativity, um, et cetera. You get the idea.

Andrew Kazlow: Wade, do you get a lot of pushback from founders on the I I know it's yes. No, but still this takes material time investment and as a founder, your time is like the thing. And so there's this sense, at least in the angel world where. Uh, it feels like the storyline is that the [00:21:00] best or most compelling founders don't have the time, or won't make the time to, to go through a really thorough process like that because they have other options, right?

Because they're constantly doing this value exchange of like, is this, you know, is this investment in my time worth it versus the next thing? Do you get a lot of pushback from founders due to the depth of your process or have you figured out how to keep it pretty tight so that that's not often pushback?

Wade Myers: That's a great question. No, it's very tight and it's way less than a typical application.

a typical Angel network has an application form and it's all these blocky texts. Tell us all about this. Tell us all about that. Tell us all about this. a couple of things. It takes a long time to write that, you know, up to 1000 words.

Describe your background or describe your bio or describe your experiences as a founder. Um, it's hard to write all that. The other thing, it's hard to read it.

I 

don't want to take the time to read, you know, again, a thousand a month of, of blocky [00:22:00] text. So we've designed it where it's super fast. I mean, it's really easy. Did you attend a military academy? Yes. No. Did you do this? You know, so there's like, in that culture fit analysis, there's probably 25 questions around founder culture fit. It's just 25. Yes. No, it's just click, click, click, click, click, click, you're done. Right? And so, but what that tells us in the background, we're developing this whole score and this whole profile based on that. And so I, so give me a couple bullet points on somebody like I bumped into somebody at business school. Okay, get this. Not only was he an Army ranger, right, which is Special Operations, but he won the Best Ranger competition. I mean he literally was at the top of the top and Best Ranger. You got Navy Seals, you got Green Berets, you got Army Rangers.

Anybody in special ops comes to that, right? And so, and he went to Harvard for his MBA and he was a Baker Scholar, top 5% of the class. And I just remember sitting, I said, I wanna, I wanna keep track of you. Uh, you know, you know, I [00:23:00] want, I wanna know, I wanna follow your success, right? Because the filters that he went through and then he landed on Wall Street with Goldman Sachs, right?

Top top investment banking firm. So it's like, oh my goodness. So just those few bullet points, tell me so much about that. Right? So to, to win the best ranger, first you have to have gone through all the military and he was West Point, undergrad, Harvard, MBA, right? So just go. That tells me more than reading a blocky thing.

And I don't wanna force you to sit down and fill out a whole application that just takes absolutely forever. Right? So, uh, to answer the question, it's very, it's very quick. I think founders love it because they say, oh wow, it was really easy. And I actually learned, they're telling us, I learned how to present my experiences and in, in a more articulate way.

Andrew Kazlow: Wade I love this because the, I mean this, this feels very [00:24:00] distinct from, as you said, the typical angel approach, which is transparently, I think the angel ecosystem as a whole kind of has a bad rap for being this. You know, informal buddy buddy kind of thing. And so there, there are really thoughtful, intentional strategic angels that provide huge value and are very thoughtful about, you know, honoring founder's time.

Clearly you're one of these examples, but I love the counter positioning of this strategy as compared to the. Quote unquote, average community angel investing as a, named thing has really only been around for like 30 years now. You know, mid 90s kind of band of angels, um, that timeframe. But you've been doing this and benefiting from this for longer than that.

And so I'd love to hear, you know, maybe just like walk me through your take on the angel space as you've developed throughout your career and then. Maybe as you look forward the next few [00:25:00] years, let's say that the whole world adopts, you know, this mindset and the angel ecosystem just like levels up and they get it, you know, what does the next five or 10 or 20 look like?

Wade Myers: So in general, early stage financing. So if I include angels, early stage venture capital firms, you know, all the way up to growth stage venture capital in general, this. Whole early stage investing space is extremely inefficient. Extremely inefficient. It's like a needle in the haystack. So there's, there's a million startups per year in the US and about three, four sales attempt to raise capital. And, uh, you know, and only like, you know what less than 1% is successful. So, and then, and then you have angels that, you know, like maybe you're a, a member of an angel network, maybe once a month there's an event and there's two or three founders that are there pitching. And if you're like me, if you're a software angel. you go oh, none of 'em are software. I wasted my time coming and it's just this, why [00:26:00] isn't it more efficient to match up? You know? So over the years I've seen, I've seen this industry kind of nascent, you know, kind of rise, but it was always informal and I've, I've raised a ton of capital for all my startups and pitched a lot of angels. And it's always hard. You, you know, they're in hard to get in touch with. Angels are busy. They're doing something else. This is a side gig for Angels. You know, once in a while I'll, I'll remind a founder of that and it's like, oh, yeah, yeah. I mean, they're, it's hard to get in front of them. It's hard to get a meeting. Yeah. Maybe you can pitch to a network. Yes. They kind of flock together, but, you know, it's, it's difficult And so it is a very informal, very inefficient. Highly unstructured process And my attitude as a process guy is this should be much, much easier. So I, I like crowdfunding sites. I like where, you know, there's kind of a marketplace and that's what we're, we're building with.

Uh, one of the companies I started in response to this is Proforma to say, I [00:27:00] wanna start up to come and build a profile and have a marketplace and, and have all this diligence and scored and filtered. And so I want to be able to say. This is what I look for. Let me go intentionally look for that, or someone can, you know, submit based on what I'm looking for and really match make.

Right? It's like a dating site. It should be, it should be simpler. So what online dating did for dating as opposed to going to bar, hoping to meet somebody in the old days, right? Um, there we need more of this sort of, you know, angel-founder dating process. Like a matchmaking. And that's, that's what we're building with proforma. Just to solve that problem. But also what goes with that is the need for diligence. Just like dating sites realize, Hey, we need to vet these guys on here. Right? We need, we need to make sure there, there's safety and all that. Right? In a similar way, it's like. we wanna vet founders, um, and uh, 'cause someone's gonna write a check.

You kind of typically don't have to vet them too much, right? You're more worried about, in this case, there's always one side of the [00:28:00] marketplace that sort of needs vetting. You know, with, with, with dating, it's the man with, uh, with, uh, founders and angels, that's kind of the founder. You just want to, you want to, you wanna get the background. And so how this is maturing, I think, and where it will go with just more and more structure like that to where there's, you'll see more, I think, scoring and, and um, you know, filtering and, and matching to make it more efficient. And I think more, um, angel funds, right? Because, you know, um, if, if a typical angel. is investing once or twice a year. um, you know, you, you kind of wanna do at least 10 or 20 angel investments right? Through through proper allocation. And maybe you do that within two or three years. Um, type thing. it, I think a lot of angels as they write. About that fifth or sixth check kind of go, is there a way to put this in a pool to where it's a little more, um, you know, diversified and I can write just a [00:29:00] check once and I have all this admin and get all these K ones and everything, you know, all that. And so I think what we'll see is more structure where, you know, we're combining angel's efforts together into angel funds. We're doing more matchmaking and it's gonna become more institutionalized. And at the same time, I think, well, we've already seen the Trump administration just as, as they're already making a move to basically deregulate and make it easier for the common man to invest, where you don't have to be accredited. You know, there's, it's like that, the joke that says, oh, one of the. You know, easiest ways to create wealth investing in startups. Uh, it, we, we've kept the, um, you know, the common man away from that. We're trying to protect him. Now they can go to Vegas and blow all his money, but we're not gonna let him invest in startups where the power law would suggest one in every 10.

It's gonna be a huge hit. Right. And so all you gotta do is invest in a hundred and you're gonna have 10 hits. It's gonna, it should be, it should work out with the power law. So I think as we, as [00:30:00] we see more structure and more kind of institutionalization of angel investing, we'll also see the bottom of the pyramid open up to where more and more people can, will be allowed to invest and more capital will flow into startups. And, uh, and that structure will be necessary for the less sophisticated investor, right? That, that the market opens up to. And so that's where I see it going.

Andrew Kazlow: What do you think happens to the community elements around this? Because one of the most interesting things to me about the angel investor as a distinct kind of investor profile is motivations are often not. Profit maximization like that is often a motivation, but not the only motivation. And so there are these, you know, community elements, the giving back elements.

What do you think the Angel Network of 10 years or 20 years from now looks like?

Wade Myers: I think there's always gonna be an in-person element. [00:31:00] Right. There's a number of angel networks I'm involved in where you do enjoy getting together for those gatherings and having a meal and a glass of wine and just talking about stuff, even if the pitches aren't exactly a fit. Right. And you know, I have a venture studio, which is, I, I don't know if you know what a venture studio is, but it's kind of a combination of VC fund, incubator, accelerator, founding team. And so we have a bunch of angels that just come in and hang out. So we've told them, okay. first Monday of every month, come in all day and sit through all of the updates of all of our startups in our venture studio and just hang out with us, have lunch with us. And there's this community aspect. They love that.

Right? So that's a part of angel investing that you can't automate away or or, you know, or, or, or provide too much structure. So I think, you can have like a, you know, nationwide marketplaces, angels still do like to come together. If nothing else, just for the social aspect and, and then they can kind of connect with a founder or two or three and say, [00:32:00] Hey, I'm willing to help. I'll join your board or your board of advisors. I can make a few introductions. Right. There's always that aspect of it. 'cause angel investors, I think we always have a heart for wanting to help founders and so you're right, there's kind of a both, but we see that with a lot of marketplaces where there's a, where there's a, a broad marketplace kind of online, but there's also, you know, local events. I just think that even the local events could be much, much more structured. So we're working with, uh, a number of, uh, angel networks on, Hey, use all this process that I've been talking about to filter through, to invite more and more people to apply. Uh, make it really simple and then you can sort of pre tease your angels.

Hey, when you come show up on Tuesday, here's who's gonna be pitching. Here's all their background information. And just really make everything a lot easier, but still don't, don't, uh, eliminate the social aspect of it.

Andrew Kazlow: What revenue models for these [00:33:00] communities get you excited or what do you think is the right model? Uh, the typical quote unquote vanilla Angel community right now is built around a, you know, there's some, some small fee. It's a thousand bucks to a few grand, and that gets me access to all of the infrastructure and systems and I can come to the events and all that.

Uh, and then I can participate if I like or if I don't, maybe some have expectations, some. Are more open-ended, then you have the sort of hint syndicate model, uh, and then you've got the, the fund. Some groups have one, some groups have all three of these. There's, there's some flexibility. I, I'm curious what you think about as the ideal like, uh, revenue model here for kinda the infrastructure providers for this capital allocation to happen.

Wade Myers: Yes. So if I think of it as an angel investor, I, I would prefer not to pay like a couple thousand a year and just hope that I might see some deals. [00:34:00] I would rather pay a transaction fee for the deals I do invest in and just say, Hey, let me look at 'em all. Let me show up. I'll pay for my meal, et cetera. And, uh, and then, but if I do invest, I, you know. say I'm putting in 25K who cares if the, you know, there's 500K transaction fee? You know, it, it, so to me it'd be like, charge me when I actually

invest 

Andrew Kazlow: Hmm.

Wade Myers: I tend to like that kind of revenue model better as an angel. Now, if I put my founder hat on and say, okay, as a founder in a similar way, I'd rather not sign up and pay a subscription fee for a platform. Uh, like a lot of the crowdfunding sites charge you a fair amount upfront, and then they're gonna charge you warrants and so forth. By the time they're done, they're gonna take a 10% bite outta your raise. You go, yikes, I'm gonna give you a hundred grand for a million dollars. I would rather, as a founder, have a similar revenue model to say, well, if I only pay $500 transaction fee, for example, for every angel check. I got 10 checks, I paid $5,000. [00:35:00] Who cares? It's a flat fee, right? It's like flat fee realtors, right?

Andrew Kazlow: Hmm.

Wade Myers: Realtors don't 

need to get 6%, you know, it's like, hey, there's, it's kind of a flat effort for me, uh, on, on something like that. So as a founder, I would like to pay a transaction fee as well. Hey, I'll join your platform.

It's all free. I'll fill in my information. I'll try to get matched with a whole bunch of people, and I'm only gonna pay. For each check a transaction fee. I think that's the cleanest and simplest way for everyone. Now, obviously an angel network does have expenses, so maybe they're, but, but a lot of them are, you know, 2,000 or 3000 or more per year.

It's like that, you know, that puts off some angels and the feedback we've gotten is, Hey, pay a lot less. Maybe when you show up, you just pay for that meal or whatever the expense is. But then if you're using some kind of a platform that only charges when you write a check. I think now we're charging only when there's some sort of success I would do flat fee, not a percentage.

Trying to avoid the whole FINRA broker

Andrew Kazlow: Oh yeah.

Wade Myers: So that, [00:36:00] so that, that's what I would recommend.

Andrew Kazlow: I love it. Uh. Wade, there's so many. I'm trying, I have like five questions in my head right now. I can't decide which one to ask you. If you were sitting down with somebody that's excited about the private market opportunity, maybe they just had a liquidity event and they're like, okay, I have some capital to provide.

I want to carve out a slice for these private investments. You're brand new. Like I have no idea what it even means to be an angel investor. You've done this a couple of times, both as a founder and investor. Where would you encourage someone like that to start?

Wade Myers: Yeah. So the first thing I would do is talk 'em through an allocation strategy, right? And uh, 'cause once in a while I'll get a question like, Hey, my brother-in-law's doing this thing. I'm thinking about putting in 50k What do you think? And I go, whoa, whoa, whoa, whoa. If you're gonna be an angel, you gotta do at least 10. So you're thinking about 50K for this [00:37:00] one, you another, you know, 450K about 500. So you get about 500K total you wanna put into angel investments, right? They kind of go, well, no, and, and what? 500K in angel investments would indicate that if you're gonna put 10% into private capital, private equity, there's angel, there's venture, there's private equity, there's LBOs, and if you're putting 500K just into the angel slice, that means you probably have about 5 million you're putting into all the private equity across that landscape, right? Because, and that's only about 10% of your liquid net worth allocation. So that means you have about 50 million, you're allocating. 45 million to other stuff, 10% to private equity, and then maybe 10 or 15% of that into early stage angel. And then of that, you know, 10 or 15 or 20%, you're gonna put in the private equity. You wanna put that to at least 10 deals. And that's how I go from a 50

grand check ti'll you must be worth 50 million of liquid net worth. And, and so just that allocation schema helps people understand to go, [00:38:00] oh, so I need to be prepared to write 10. of these checks. Yes. So typical angels like 25 or 50k Super angels, you know, 100 to 50. But let's take a typical angel. So 10 25, that's a quarter million. But that better not be more than just a few percent of your liquid net worth.

So the first thing I do is do allocation strategy, and then I kind of go, okay, now what you want to do is you wanna invest in a company where you can add a ton of value immediately through your network. Introductions, business savvy, the business model expertise, right? Where you just built and sold the company.

Similar. And on the other side, for founders, I'm always saying, Hey, your best angel is one that. Really understands your, your, your market really understands the problem, understands your customer set, can introduce you to a whole bunch of people because they wanna write a check and immediately know that they've, it dramatically increased the value. and angels like being involved generally. And so that's what makes the most sense. It's really sort [00:39:00] of a matchup of bringing in all, everything that Angel knows and everybody they know into that startup, they invest in. So then if I'm coaching someone on being a brand new angel investor, it's like seek opportunities provide a lot of leverage and you can immediately, you know, add that kind of value.

And that really helps them understand, oh, so I shouldn't invest in my brother-in-law's business just because it sounds interesting. No, if you don't know a lot about that, don't do

it You have to know enough to do your own diligence and understand it and add value to it. So that's where I'd start with coaching a brand new angel.

Andrew Kazlow: And where do I go if I want deal flow, if I want to find opportunities? Like how, how would you start?

Wade Myers: Yes. Well there's, there's, there are a lot of online resources. There's crowdfunding sites which are just perfect for and fine for angels to get started. And there's the angel networks. Every major city in the US for example, there's every major city has angel networks. I'm in the Dallas-Fort Worth area. We have probably at least a dozen [00:40:00] angel networks. And then there's all, me, all the incubators and accelerators tend to have demo days, right? So every major metro area has like Techstars Plug and Play Accelerator, and about every three to six months they're having demo days of founders that they've run through their accelerator program, for example. And so you can easily go to those demo days and see 10, 15 pitches all at once, right? And then most major metro areas have. Startup ecosystems that are. You know, convening of founders and, you know, it's kind of funny, mostly founders, you know, if an angel shows up, it's like everybody chases the angel around the room, you know? Uh, but if you are an angel

Andrew Kazlow: It's a Dating site right.

Wade Myers: yeah, yeah. But if you go to like startup Grind, for example, like here in Dallas-Fort Worth, I think there's. At least three or four chapters of Startup Grind, or it's a startup community, but it's almost exclusively founders. But man, if an angel shows up there, I mean, oh wow. You know, it's a target rich environment. So there's, um, yeah, [00:41:00] that's what I would tell someone to do is just, you know, look up all those kinds of startup ecosystems from, uh, uh, the startup groups to accelerators, incubators, demo days, angel networks, et cetera.

Andrew Kazlow: And, and I think one of the, one of the pieces that I'd be curious, curious about is how you would encourage them to start thinking about and developing a thesis that they can then build this systematic methodology around. Because everything, like you said, everybody you meet, you, you like and you get excited about.

I mean, the natural angel inclination is to. Wow, this is cool. Like how, how can I help you? Is maybe this is a great fit for me. Um, everything looks good the first six months. Um, how would you coach someone to put together a thesis and a strategy around filtering?

Wade Myers: Yeah, it's, it's almost, uh, the, the filtering for the investor side is very similar to some of the founder filtering, right? So, like, a friend of mine just retired. He, he ran a, a fairly large defense contracting [00:42:00] company, DOD contractor, right? So he's, he's pretty deep on tech. Uh, really deep on defense, knows everybody in defense, right?

Knows all the contracting offices, et cetera. I mean, just unbelievably well connected. So someone like him where he is just kind of getting started as an angel investor, it's kind of simple. It's like, yeah, look for small, you know, you know, defense focused opportunities, you know, startups that are building something and maybe a lot of it's gonna be AI or, or software that, you know, kind of a new, new innovations. For that industry because you can help take 'em to market. You know who to introduce 'em to, you know how it works. You can provide a lot of that expertise to them. So they might be really good at innovating around ai, for example. But you know how to help translate that into something that's gonna be market ready. And so yeah, it's for the, uh, an brand new angel investor, it's, it's look at all of your experiences and your network, the industries that you're an expert at, and all the kind of [00:43:00] contacts that you have, and the whole idea is, and you really want to add all of that on top of the capital, because if you're just writing the check and then you don't, there's nothing else to add to it that's not nearly as effective as it could be.

Andrew Kazlow: Yeah. Love it. Wade this is fantastic. Okay. We only have a few minutes left. I would be remiss if I didn't ask you for at least one or two. Stories on, um, how angel investing has been meaningful to you and your story or lessons learned, uh, that you would leave our audience with. I did a little bit of research, so I have a couple specifics in mind, but curious if you have a story or two that you would like to leave us with.

Wade Myers: Yeah So one of my, uh, very early startups, uh, I had a, I, I thought was gonna be a great idea, right? And I, I went to my angel, my initial angel investor and said, who else do you think should invest? And so he, he, uh, introduces me to his friend. And then his friend invested, and then, um, I, [00:44:00] I was, I angel invested in another friend's business. This is really interesting. So I'm a brand new founder. I've just got started, but I started angel investing immediately and I was in this kind of, uh, you know, startup networking where there was a bunch of us building dot Com you know, this is like 1997, right? That era. And, um, and so I, I, I wrote several checks and they all wrote checks in my startup. So we all invested in each other, which is kind of interesting. And then we kind of, we joined each other's boards, right? So I go to the very first board meeting of one of my friend's businesses that I put a small check into, and he had this super angel on the board. And I'm sitting right next to him with this board go this, this guy's great.

And he goes, what are you up to? And I describe my starter. He goes, Hey, swing by my office, right? And I swing by his office and he, I would describe him as a super angel. It's really funny. So I'm, kind of pitching him and, and then he just pulls out his checkbook and he writes a [00:45:00] hundred thousand dollars check, right?

He slides it over to me and he kind of asks more questions. I'm pitching him, and then he reaches over. He grabs a check, he tears it up. He writes another one for 150,000. He goes, I want to invest even more, right? It's kind of fun. And, and then he goes, okay, I want you to meet a couple of my friends. And so from through him, he, I had five more angels. All invest between 100,000 and 250,000 So this is all like super angel territory. Now I'm, I'm well beyond the 20, chasing 20 fives and fifties. Right. And, um. This is a dot com day. So it was frothy and, and all of that. But, uh, then one of my, uh, friends from business school, uh, he flies out to visit me, wants to know what I'm doing, and I had invested in the deal that he had invested into.

So he kind came out and, and he, and he says, okay, I want you to come to New York and I, I want you to come in and do a pitch. So he had a hedge fund. And so I, I fly out there and I show up, and then there's. [00:46:00] The room just fills up. I mean, there's like, you know, 12, 15 guys crammed around this conference table and they're going, Hey, get, you know, do your pitch.

And so I'm kind of pitching and then one of the guys goes, Hey, wait a minute. Um, are you, have you partnered with, uh, you, he named this company that I had done a license deal with. I said yes. And he goes, oh, and they had just gone public. And he goes, oh, I talked to that CEO, I'm an investor in that company.

And he goes, he said he is gonna acquire your company. And all of a sudden everybody else is looking around the room, you know? So my buddy who invited me. Pulls out his checkbook and he writes a hundred thousand dollars check and slides it across the table. And every el, everybody else is going, wait a minute, no one said to bring our checkbook.

Wait, what? Stop are you? Is it only, is it tonight only, right? Is it, do I have to have a check right now? And I'm like, no, no, no. And I had some blank subscription forms, you know? And they're like, don't cut me out. Don't cut me out. And that, and what they heard was this guy who did really well. 'cause this company had gone public. Had talked to [00:47:00] the CEO, said he is gonna buy me. And that's true. We were talking about already acquired me. Right. And that entire group, every single one of them invested a minimum of a hundred. And then I'm thinking it's over, but it's not. So my friend goes, oh, by the way, tomorrow, pop down to Goldman's office. Uh, I, I have a friend. I just want, I want you to meet. Right? And so then I go down and he goes, go, go up to the trading floor. And so I go to Goldman and, um. I go up to the floor, the elevator opens, and this guy meets me and he goes, wait a minute, are are, are you that Army ranger? That's ra, you know, that got such and such company?

And, and I, I've never met him. I don't, and didn't even know his name. And I go, yeah. And he goes. Don't cut me out. Hang on, hang on. You know? And then he goes and he gets like two or three more people and, and, uh, they grab me in a room and they're all saying, what do you have, do you have paperwork for us?

You know? And uh, and then I'm in this room and they're saying, they [00:48:00] start asking me questions and I'm just kind of talking. And a guy had slipped in. He sits there. I have no idea who he was or what, you know, what his role was. And when we're done, he goes. Hey, I'm so and so. I run our brand new venture fund. We went to our private bankers and we raised a a billion dollar venture fund for dot coms. Can I fly out to see you? And so this is again, all from one friend invited me, you know, and so I go, sure. He flies out the next week and then, uh, he flew back. We did some paperwork and he wired 25 million from Goldman. And it's like, okay, this is nutty. But that's an example of one angel led to another, led to another, led to another, me doing an angel investment, you know, led to, you know, sitting next to this board guy, you know, board member at a board meeting super angels, you know, et cetera. And so angels flock together. Angels can lead you to other angels. And when you [00:49:00] start getting momentum and when you get a room of angels together and they think there's scarcity, like how much are you raising? I started off saying, I'm only raising two million on that round. I raised four. I called in and my secretary said, what is going on?

The fax machine's going crazy. Of course, this is 30 some years ago, right? The old tech, right. She goes, the fax machine's just going crazy, you know? And so I, I had the cap at four, closed it, and then immediately opened it for Goldman's 25 million, right? At a higher valuation. But, uh, that's, that's fun.

That's a story for you.

Andrew Kazlow: That's wild. Does that, so does that still happen in your mind over the next few years? Right now everything's process and AI and you gotta go through this, you know, workflow. Do we lose some of that? You know, do we lose some of that? Like does that story happen to the next founder in five years?

Wade Myers: Well, so right now it's happening with ai. It's kind of like what I'm seeing going on with ai. Now, the Frothiness [00:50:00] is very similar to the dot com 

you know, uh, from, uh, kind of 1998 to 2001, right? It feels very, very similar, 25, 26 years later. Uh, so, but you know, not quite as much. It's most, that happens mostly in Silicon Valley,

Not in the outlying pockets because there's so much sense of following the herd. And if you hear that someone gave them a term sheet, then it kind of, you know, really, really gets it going. But we're talking about angel investing and to a, to a certain extent, angels don't get caught up in that kind of frothiness as much. In that case, it just happened to be that heady time of, you know, the.com boom and getting a bunch of angels in a room. And I didn't ask my friend to, I didn't know he had a checkbook. He literally wrote the check and stood across the table and it started this avalanche.

And, uh, know, and so it's like, there it is, but I think it, [00:51:00] it could, it's, it's being duplicated somewhat with AI right now. I.

Andrew Kazlow: Well, I'll be interested to see how, uh. The next generation experiences, angel investing. So Wade, this has been a pleasure. Thank you so much for making the time to join me today and to share these insights. I look forward very much to our next conversation.

Wade Myers: Very good. Thank you.

Andrew Kazlow: Okay.

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