How Operators Can Become Great Angel Investors

Pamela Hsieh: 0:00

For me, understanding your customer is really important. So if I ask a question and it gave me any indication that you haven't spoken to your customer to come to this conclusion, that's actually the biggest red flag to me.

‍Amardeep Parmar: 0:21

Operators as angel investors. Why should operators be on your cap table? Why do operators make good angel investors? What value can they add f For operators? What should they be looking for? How do they find the right founders? How can you build good relationships between operators, angel investors and founders and so so much more. To help us answer this, we have Pamela Say, who's a nine-time angel investor and spent over a decade at Alipay and Alibaba, leading the efforts to expand into Europe. She's got a huge amount of operating experience and she's learned so much about angel investing in such a short amount of time. You're going to enjoy this episode. I'm Amar from the BAE HQ and this podcast is powered by HSBC Innovation Banking. So, Pamela, great to have you on today. We're talking all about angel investing and, coming from an operator background, what actually is an angel investor? I think a lot of people don't really understand this.

Pamela Hsieh: 1:21

Angel investing, I think, in a sense, is to put your money in startups that you believe in. And compared to other investors, I think angel tends to put more personal efforts to build a relationship with the startups and try to help them scale to being able to raise from other VCs. So more involvement, not just on the money side, but also to advise them how to scale.

Amardeep Parmar: 1:47

So, coming from an operator background and getting into angel investing, there's going to be some operators listening right now thinking about doing this and there's going to be some founders that are thinking about should I have operators on my cap table and why should I get operators as my angel investors? So why is it a good idea for operators to angel invest and for founders to take that cash and take them on board?

Pamela Hsieh: 2:08

Yeah. So I think the advantage of having an operator is that they actually have scaling the business themselves and that they know how to grow it. Yeah, just on top of money, they could actually advise you on go-to-market strategy. So, for example, when I joined Alibaba in 2009, I worked with the company for 10 years and then brought the brand to European markets and scaled it to become where it is today. So I think that's an experience which you probably can't get from other investors. So having an operator on board in your specific area or industries, I think that's quite crucial.

Amardeep Parmar: 2:52

You obviously started angel investing the last couple of years and they've learned so much in the last, in that period. What's some of the biggest lessons that you've learned in the last couple of years that you wish you knew when you started angel investing?

Pamela Hsieh: 3:03

So if it's an advice for prospect like potential angel investors I think I actually didn't know this back then, but this is super important. So it's a power law right, it's the same as how VC wins. Y you have to invest in enough quantity of startups in order to have one or two to hit the home run. So it's a power law, and the minimum number of startups you need to put the money in is 20. So that's something I didn't know back then, which is ridiculous. So have a think on how you want to allocate your assets in terms of investment, like how much of it should be on some less risky assets like properties, how much should it be on stocks, for example, and how much should it be on angel investing and have that portion divided by 20. That's the ticket size you have to invest in the startups.

Amardeep Parmar: 4:03

And so you're obviously picking different companies to invest in. Right and from your experience from Alibaba and all the things you've done, how do you pick which leaders to invest in? What makes someone stand out as a leader to you that you think is worth putting your money down?

Pamela Hsieh: 4:19

I'm a very numbers-driven person, so the first thing I always look at is the traction and they have viewed. So yeah, whether that's mr arr or even number of users, I try to find any indication on it. Has some product market fit if it's very early stage? I've come across a founder who actually interviewed their potential customers. So it's an insurtech company. It's very new, it's not even in the market yet, but she actually had an MVP and she went to a hundred potential customers, one by one. She collected all the feedback, put it in an Excel file and showed to all the investors. That's super convincing. So the first thing I look at is traction and also the speed, how fast you you read it takes to reach that milestone. That's actually what really stands out for for me.

Pamela Hsieh: 5:15

There are other ones. So, for example, um, what's your motivation? It's a very tough journey, like for anyone, right? So we need to know why you want to set this up, why you want to go through this super difficult journey, like you might have to sacrifice, um, the time with your family, your friends. So I need to know why and also I would look at if you have any unfair advantage.

Pamela Hsieh: 5:41

So, um, maybe you already worked in the same industry before you know it inside out, or you may have I don't know a family business in the same sector. So I came across a founder and I actually put the money in them. They actually built the same product for their previous company, which is a very big enterprise company. For some reason the project didn't get approved in the end, but they already had the markup. They decided to quit the company and also to launch their own business. So they know who are the clients, what do they really want from this product. They know how to reach out to them. So that's some kind of unfair advantage that I value a lot.

Amardeep Parmar: 6:26

And what's the effective strategies for entrepreneurs? Once you've talked to them, do they maintain a relationship right? How? Because lots of people pitch and they'll talk to so many different investors but they struggle to actually maintain their relationship, so they don't do it effectively. What advice do you have for founders there where they're talking to investors and they want to keep them strong and warm in the future?

Pamela Hsieh: 6:45

It's a relationship building process, same as you know when you meet a friend. You might, you know, really click on with the friend you know. In the first meetup you might not, but it's OK, I have like. I believe you should just keep the potential investor in the loop. I have this example.

Pamela Hsieh: 7:08

I met this founder in one event. It was still very early stage in his startup journey. I didn't pay too much attention, but I agreed for him to add me to his investor update email. I receive this update every month. I have to say this is super persistent. I'm in many companies' email updates. Some of them they do once a quarter. They forgot about it. I've never seen them anymore, but this founder is super persistent. I always get updates from him and one day I saw that they reached more than 1 million GMV. Then that's something. And then that actually drew my attention and I started to talk to the founder and I tried to understand them more in terms of what they do. So I think, yeah, don't give up. Try to and continue the conversation with them and show them that you can make it with actually real figures to share.

Amardeep Parmar: 8:07

So does this founder's name begin with P.

Pamela Hsieh: 8:10

Yes.

Amardeep Parmar: 8:12

I think I know who you're talking about. S so you mentioned there about the numbers.

Amardeep Parmar: 8:19

I think one of the things I struggle with sometimes and I see this quite a lot is that lots of founders will focus their decks and their focus of credibility around awards or things like that which I'd love to hear your opinion on that where a lot of founders will nominate themselves for awards or they try really hard to get this kind of press attention or attention on those kind of awards side things. How much do you pay attention to that versus, like you said, the numbers? Because I always think about from my own perspective is I don't really care about the award, I care about what did you do to earn that award. If you can tell me like I did this to earn the award, that's amazing, but if it's like you just nominated, yourself and there's no other competition.

Amardeep Parmar: 8:56

It's not so impressive. So how important is that? Do you think? Does awards and does talks and things like that. Does that help your perception?

Pamela Hsieh: 9:04

I would say it depends on the nature of the award as well. So, as you mentioned, there are so many awards out there, so I would actually look at who is the organizer for now to grant that award. But, as you said, I totally agree, right, it's not just about the award, that's kind of the icing on the cake. So I still would again, like I look at numbers, I always ask for the access to data room and try to check the P&L, like what's their monetization model? How are they planning to distribute their investment? So we use their money to achieve what they needed to achieve, like how they allocate their money, where do they spend their money on, and also their projection on you know where they see the biggest growth. So that's super important to me, more than the award that they have got.

Amardeep Parmar: 10:00

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Amardeep Parmar: 10:47

What are the things that people should avoid saying to you if they're hoping to someday get your investment?

Pamela Hsieh: 10:50

For me, like, understanding your customer is really important. So when I, if I ask a question and I it gave me any indication that you haven't spoken to your customer to come to this conclusion, that's actually the biggest red flag to me. Um, the second is any other I don't know reason to make me feel that you are not credible. So, for example, you might have said that, oh, you have raised money from this angel and I might know that angel, I might have you know, figure out that's not true. Or you are just having a conversation. That's a no, no, no to me.

Amardeep Parmar: 11:27

Yeah, I think this happens quite a lot. People don't realize that this world can sometimes be quite small.

Pamela Hsieh: 11:33

Exactly. Everybody knows everyone.

Amardeep Parmar: 11:35

Yeah, when someone will say to me like, oh, I'm friends with this person, I'd love to have a chat, they'll ask that person, like, are you actually friends with them? And say, no, we've only met once, like three years ago. So it's like it doesn't pay to do those kind of tactics. It's always, it's always best to be honest, right, the more honest you are, then you can't get in trouble. And one interesting thing now so obviously you've invested in a few companies and what's the best way for people who've got angel investors already to make the best use of the operators in their network? How do they make use of the people who angels is it you mentioned about monthly updates. How have you found that? How do you find that relationship with making sure that you keep up to date and making sure you're able to help these startups as much as you can?

Pamela Hsieh: 12:12

so I have like nine um companies in my portfolio. I have to say every founder is so different so you can see that some founders they just don't need much help. They just know, you know how to run the business. There are obviously so many challenges that they have to overcome, but they know how to do it. They know where to find the resource.

Pamela Hsieh: 12:34

Some founders I feel that they might need help, but it's in a way that they are very, very clear on the monthly update. I love I actually read, do read these monthly updates. Usually it's like highlights, lowlights and asks. So, for example, one of the founders it's again, she's super diligent, so she needs to build sorry, she needs to find the pilot customers and she sent this link to the file with a list of customers she's speaking to and she wished to speak to the company name and also the potential job titles that she's trying to get in touch with, and then she would send this to all the investors and try to help her to build a connection. So it's a very easy way for me to help her if I happen to know these companies. So I think, yeah, this is a very good way to ask for help from investors.

Amardeep Parmar: 13:36

What I always say as well is, and what I'm trying to get better at myself, is the specificity, right? So it's like if you ask something like that, where it's like this is exactly what I need, it's much easier to help, w Whereas when you ask like, oh, I need help in this area, then because there's extra work needing to be done by the person who's going to help, often it'll just get put down in the to-do list, right? Whereas I think that's a big thing people need to work on and I need to work on myself is like, when I'm asking for help, it should be really specific and also be relevant, right? It's got to be a question they're asking you which you need potentially help with. The other thing, too, is you obviously invest through angel networks as well as your own money, right? So sometimes am I right in thinking some of your investments are you personally and then some of them are you as part of an angel syndicate? Is that right?

Pamela Hsieh: 14:27

Yeah.

Amardeep Parmar: 14:30

And for a founder's perspective here, how much do you think they should be looking at approaching angel investors individually versus working really hard and trying to get a syndicate involved? What advice would you have for founders there?

Pamela Hsieh: 14:42

If I were them, I would try to approach the syndicates because they already have the network, they have built the reputation and then they have yeah, it's a community of people who share the same investment thesis, right? So there are some syndicates out there backing female founders, some back diverse founders. So it's very clear in terms you to just approach these syndicates and introduce who you are and try to talk to them. I know that they might have other criteria you have to meet. For example, you might have secured a lead investor already, but at least you understand each syndicate's criteria by talking to them. So I would approach syndicates in the first place, but saying that I think you should also try to talk to, like super angels. But, yeah, ask angels to introduce angels for you when you speak to angels or syndicates. If they say no, ask them who else I should speak to. Right, ask them to make introductions for you and that's how you expand your investor like potential investor list.

Amardeep Parmar: 16:04

So just before we go into quick questions what's your personal investment thesis? You mentioned about what types of founders you're looking for. Do you have any specific niches or like how do you come to which kind of companies you want to invest in from that perspective? Could you share more of that?

Pamela Hsieh: 16:17

When I started, like two years ago, I thought I would be investing in e-commerce, fintech or software business based on my personal background. But what I really it's just I don't know. My passion, like what my heart tells me, is that I would really like to help my grand founders, founders from underrepresented background, maybe because I am like I'm not a founder, but I am, you know, one myself. I moved to this country 18 years ago, so then it's like a journey. I found that, okay, I'm super passionate about backing founders from underrepresented background. I started to talk to them. I realized I'm actually agnostic, because it's all about the founder him or herself. It's about if I believe in his vision and if I believe in he could make a success with that vision. So I'm pretty agnostic now, but my fundamental thesis is to back diverse founders.

Amardeep Parmar: 17:23

So now, moving on to quickfire questions who are three British Asians you think are doing amazing work right now and you'd love to shout them out?

Pamela Hsieh: 17:31

Actually, the first one I would like to mention is you. So I think what you are doing is truly great. I always mention you to any other potential like british, asian founders or even other community leads. I always mention about you, right? So, yeah, thank you for contributing so much to the community and I think it's a great thing to do. The second one I would like to shout out Ambra. She is the founder of Juniper. So actually I mentioned about her story before, so she's the one who is super diligent, right. She's very clear in what she asks from investors and she's going to events, try to build her pilot customers. So I think she's doing a great job. And the last one is Peony Li, the founder of Jude. Yeah, probably many of you know. So she went on Dragon's Den and she actually pushed the business to the next level. You know the awareness she has built around the business. I think it's something that should be, should be talked about .

Amardeep Parmar: 18:37

Awesome. Thank you for including me in that. That's very kind of you, and if people want to find out more about you and what you're up to, where should they go to?

Pamela Hsieh: 18:43

I think the best would be my L inkedIn profile

Amardeep Parmar: 18:46

Is there anything you need help with right now that people could reach out and help you with?

Pamela Hsieh: 18:50

I'm like I have a lot of ideas on what I would like to do next, but, as me, I'm just like that. I have, like, very like many ideas. So I just needed to spend some time on, yeah, exploring different options and see what I would like to do next. But right now I'm doing some advisory roles for startups on growth strategy, digital marketing, go-to-market, etc. So if anybody needs help, feel free to reach out to me on that end awesome, so thank you so much for coming on again.

Amardeep Parmar: 19:20

Have you got any final words?

Pamela Hsieh: 19:22

No, I think it's a an honor to be on this podcast and thank you so much for having me.

Amardeep Parmar: 19:30

Thank you for watching, Don't forget to subscribe. See you next time.

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