Collect the Dots
Why assessing member interest is important for angel network operators and how to do it well
Unforgettable
Years ago, a presenter said something that I’ll never forget:
“Before you can connect the dots, you have to collect the dots.”
Seems obvious, right?
But the reality is not so simple.
The Observer Express
Don’t have time to read the entire post right now? No worries, here are the main points:
Some decisions can, and should, be made on “gut feeling”. Others, however, require data, logic, and research.
Angel network operators benefit from collecting data throughout the entire Angel Ops process, but it is of critical importance they do so immediately following a pitch. To make an informed decision about whether each presenter should move forward in the network’s process, leaders need to know if members are interested or not.
The cost of moving forward depends on the specific process structure chosen. However, that cost must be understood and considered when selecting the appropriate assessment methodology, which is the focus of the third supporting job in the Engage stage. The basic assessment styles are None, Informal, Formal, and White-Glove.
Real Talk
Let’s be honest with each other.
How often do you find yourself trying to skip that first step? I, for one, am constantly tempted to “go with my gut” and make “fast decisions” rather than face the challenge of collecting hard data.
Which Pasta Sauce?
Sometimes those quick, gut-driven decisions are for the best. For example, last night my wife and I visited our favorite local Italian place, and I had to decide if I wanted my spaghetti with carbonara or amatriciana sauce. I went with the carbonara. Why? Because it sounded better. I went with my gut.
But some choices are much, much weightier than what kind of sauce to order. In those situations, trusting only one’s gut is a surefire way to guarantee poor choices. In those situations, data, logic, and research are required. In his book “Thinking, Fast and Slow,” Daniel Kahneman dive much deeper into this topic, and he breaks down how the “fast brain” (our gut) and “slow brain” (logic, reason, and study) serve very different, yet equally vital purposes.
So what does it look like for an angel network operator to engage their “slow brain” and collect the right dots?
On Target
Data collection is important throughout the entire Angel Ops process. However, there is one point where collecting great data is particularly essential: immediately following the pitch. Community operators need to understand if members are interested or not. Why? Because that is the only way to validate if the selected companies were on target.
How Does this Work Again?
Like it or not, angel network operators cannot make an investment decision for their members (funds aside). Each angel is responsible for their own decisions, which is part of the beauty of the angel investing process. However, the decision they are in charge of making is whether the network decides to continue devoting resources to support each deal.
It’s important to remember here that the objective of an angel network is to consummate deals. So if it appears there is substantial interest in a deal, it is in the network’s best interest to continue putting resources behind helping its members through the process and making it happen.
If, on the other hand, it looks like there’s little/no interest, the best decision is often to “release” the deal into the wild, so to speak. Once a deal has been “released” from the process, the founder is informed that there are no further actions required of them, which helps close the communication loop and provides much-needed clarity. Then, if any investors are interested or become interested later on, they are encouraged to engage directly with the founder.
Yes or No
Therefore, the single most important question for community leaders to answer following a company pitch is this: should we continue investing our limited resources to support this opportunity?
That’s probably the most important sentence in this post. So let me repeat it:
Therefore, the single most important question for community leaders to answer following a company pitch is this: should we continue investing our limited resources to support this opportunity?
There are only two possible answers: yes or no.
It’s a Big Decision
Deciding whether to keep or kill an opportunity is not an easy one. However, I firmly believe that a well-structured process for assessing member interest can make the decision much simpler.
And that is the entire focus of the last job in the Engage step of Angel Ops: Assess Member Interest.
Let’s get into it.
Angel Ops Step 3: Engage, Supporting Job #3: Assess Member Interest
As a quick refresher, Angel Ops, which I introduced in this post, seeks to map an answer to the following question: What does the process at a world-class angel network look like? Angel Ops is focused on the backend process of running deals and groups the workflow into 5 core steps. In last week’s post, I introduced the second job within the Engage step: Run a Great Pitch Event, which is a fairly complex task that involves delivering on 6 key requirements, which I expand upon in that post. The overall objective of this phase is to connect the best applying companies with network members and gauge interest, which culminates in a decision to proceed with deeper scrutiny.
Engage
Job: Connect the best companies with the network and gauge member interest.
Progressive Outcome: Proceed - Deals with sufficient interest move on to receive deeper scrutiny.
Within each core step, there are 3 “supporting” jobs-to-be-done that contribute to the primary job. This week, we’ll explore the final supporting job within the third step: Assess Member Interest.
What Does it Cost to Say “Yes”?
That depends on what the next step is.
Sometimes investors have seen enough just from the pitch event to make an investment decision. This is especially true if the pitch event is extremely well run and if the deal perfectly fits an investor’s personal thesis. However, in my experience, it is rare for an angel investor to commit exclusively based on one pitch day.
What Else is Needed?
Usually, some kind of additional engagement is needed. Perhaps it’s a follow-up meeting, doing some independent research, or asking a specific friend what they think about the opportunity. Whatever the follow-up action is, the point is that most of the time pitch day alone does not provide all the information an investor needs to make an effective investment decision.*
For some communities, there is no formal next step – the network’s process is intentionally basic, and it’s all “on the members” to follow up with each founder if they’re interested. This tends to be where many communities start out, since it is simple, low-cost, and involves minimal process. In contrast, more mature communities tend to have a very well-defined next step, such as the formation of a research team to perform additional analysis, a pre-scheduled follow-up meeting, or a specific diligence step.
*Note: I have noticed newer members with less than 1 year of experience in angel investing tend to get easily excited and commit more quickly. In my opinion, these newer angels tend to benefit the most from a well-structured process that helps them slow down a bit and fully engage their “slow brain”.
So, What’s the Right Assessment Process for My Community?
There are 4 basic types of “member assessment” processes I’ve observed, ranked from least direct cost to highest direct cost. It’s ultimately up to each operator to decide which approach is best, since they can each be a great option in the right situation.
None
Some communities have zero processes in place for collecting member interest. This is (obviously) the lowest direct-cost option. The approach can work reasonably well when there is no formal “next step” in place since the network’s involvement ends and all responsibility transfers to members. However, this lack of data leaves network operators in the dark as to what their members do and do not like seeing, which makes Angel Ops Step 1: Source, and Step 2: Evaluate much more difficult.
Informal
Other communities run a fairly informal data collection process. For example, I’ve seen operators ask members for a hand raise if they like a deal. Some simply say “Let us know if you’re interested in or have questions about any of our presenters and we’ll be happy to help”. These informal approaches are a great starting point for a network hoping to better understand member interest levels since they’re essentially no-cost. They serve as a quick pulse check on interest and provide some level of feedback, but the limitation is they rely heavily on members being self-motivated enough to raise their hand or reach out.
Formal
Well-developed communities tend to rely on a formal system of data collection regarding member interest levels. This most often takes the form of a quick survey sent out via email or via a deal management platform. These surveys require more resources to develop and manage but they give operators a richer understanding of their members’ experience. They can supplement a simple “Are you interested, yes or no” with questions like: How much are you considering investing? What did you like about the deal? What questions do you still have? For example, let’s suppose that I have 4 members interested in a deal. With an informal hand raise, that’s about all the info I would get. Now, what if I also knew that those 4 members were considering a collective investment between $80,000 - $135,000, they were impressed by the company’s traction so far, and still have several questions about the team’s background. I don’t know about you, but I’d rather be in the second situation. Formal data collection processes enable that kind of insight.
White-Glove
As well-intentioned as they may be, I’ve learned most people seem to hate taking surveys. Plain and simple. So, to truly get the very best feedback, some communities go above and beyond - they reach out to each member directly. I’m not talking about an impersonal mass email - I’m talking about a 1-1 phone call or a meeting. This is undeniably tedious and time-consuming but can dramatically improve response rates and member engagement levels.
Final Thoughts
Collecting the right “dots” after a founder’s pitch allows angel network operators to make effective decisions about whether that deal should receive continued network support. Understanding the level of member interest is essential to enabling this decision, which is why the final job within the Engage step of Angel Ops is to Assess Member Interest.
What do you think?
How does your community assess member interest levels in a deal? What works well about that process, and what could be improved?
Weekly Observations: 3 Lessons Learned
This week I had the honor of sharing a meal with Flip Flippen and Chris White from The Flippen Group. They’ve been through it all. In preparation for the meeting, I also read their book, The Flip Side, which I recommend. Their stories and experience were so impactful that I decided to focus all 3 of my Weekly Observations on my takeaways from that one meeting. Here are the top 3 things I learned:
Relationships are everything.🤝
This ethos permeated every word that came out of Flip’s mouth. The advice is not new. But the deep conviction, intensity, and wholehearted focus with which it was communicated was striking. The single most valuable use of a founder’s time is building relationships. Full stop. And no relationship is more important than the spousal relationship - I was shocked by this, but Flip spent at least 1/3 of our time asking and talking about my marriage. In his view, the strength (or lack thereof) of that relationship is foundational to all others - a strong marriage is the foundation for a strong business, even if the other spouse is not directly involved in the day-to-day work.
There’s only one way to earn your stripes.🦓
To start a successful business, you gotta work like crazy. Most of the stuff online about “follow these 3 easy steps to get rich” is garbage. It takes a ridiculous amount of hard work. Starting from nothing requires trying a lot of things to see what sticks, and the founders usually do everything themselves because they simply don’t have the resources to outsource much. Per point #1, relationships are more important than personal health. Working early and staying late are entrepreneurship table stakes. Most people shouldn’t become founders, and those who do should expect to be very tired.
5 killer mistakes for young founders like me.💣
Wrong hire💼
Your first hire(s) can break you. Choose wisely.
Wrong client💵
Some clients will cost you more than they earn. Learn to spot and fire them ASAP.
Under communicating who you are🧬
Who you are is what draws employees, clients, and investors. Blast it.
It’s not about the money💰
It’s all about the people and the problems you’re solving for them. Focus.
Getting distracted😵
#1 job: build relationships, cast the vision, bring in business. Anything else is a suboptimal use of time and should be outsourced ASAP.
Thanks for reading, have a great week.
-Andrew