Tzakhi (00:01.346)
Hi Phil.
Phil McSweeney (00:03.603)
Alright, it's Saki.
Tzakhi (00:05.726)
Thanks for coming. We're doing another episode of the Meet.Capital podcast for startups. And I'm very privileged and honored to have Phil McSweeney with me today. Phil, you have such an interesting bio for early stage startup founders, which are our audience. I know you've done a lot in the world of startups. You're on the board of a few startups. You've invested in many startups.
And you've written a book about how angels think, which is called Angel Think, very appropriate, which helps founders understand how angels think so that they can connect with them in an effective way. And I think that's super important and interesting. Would you like to add anything about your bio for our listeners?
Phil McSweeney (00:41.299)
Yep. Yeah.
Phil McSweeney (00:57.163)
Well, let me say thank you for inviting me to be on your podcast, which is great. And yes, I am a chair of a company and a mentor and advisor for a few other companies. And I've been in the sector startup land 16 years and about three, well, during lockdown, during Covid, I decided to write, try and write down some experiences.
of what I'd learned from lots of founders pitching to me for money and to help founders, particularly early stage founders, realise that they're in a very difficult contest, a competition, to try to get competitive advantage, to be at the front of the field, if you like, when they're trying to raise money.
from investors because various statistics I see, 5%, 10% probably of most of founders actually get invested in. So how do you get into that small group of successful people that raise money? Because if you're gonna grow, if you're gonna scale, you've worked out that you need it.
Tzakhi (02:23.274)
Yeah. And I think, I think an important aspect of being one of those that are able to raise is the ability to connect with your investors. I think it's always true. I mean, I think also when you get a VC, you're also in the end talking with one of the partners usually that is leading the investments, but it's especially true with angels that are individuals. And in the end, it's
Phil McSweeney (02:34.962)
Yeah.
Tzakhi (02:50.018)
the founder or the founding team and that individual and how they connect and how they collaborate and how they work together. And I know a lot of your book is about that part, the human aspect of the connection between the founders and the angels. Let's try to kind of, just from the starting point, what is the best way to start building a good relationship with an angel when you first meet them, let's say?
Phil McSweeney (03:23.331)
I think the challenge occurs before that, which is how are you going to get to meet them? Because you can do what a lot of people do, which is blind. You go onto LinkedIn, you find all these people that have got Angel in their profile, or you buy lists of Angels or investors, and you just blindly kind of...
Tzakhi (03:29.262)
Okay.
Phil McSweeney (03:52.339)
shotgun market your pitch deck out there and say you know I'm doing this I'm doing that or whatever and in almost all cases it leads to nothing and it's a waste of time because you haven't done that bit that sort of attempts to match up what you're doing with what an investor's interest might be the kinds of things they're likely to invest in so I think you need to do some work first to try to
your ideal investor, what they look like, what they invest in, what they've invested in recently, have they had an exit, etc. To find out what you can. But if you're very early stage, I think another thing that founders often do is come to an investor with the finished product.
and say, I've built this, would you invest in it? Whereas, you know, often, angel investors, if they've got some particular expertise in your sector, might be interested at an earlier stage saying, you know, I've been in this sector for a while, I've got some ideas, if your product did X, you know, then you're more likely to get a market, you're more likely to sell it, or you're more likely to get people invest in it. So I think you've got to try and
do some early relationship building with some people that you've got to search out, you know, through networking, through asking around, getting people to refer you to other people and so on. But when you can get to that point of having a meeting, and normally people want to see a pitch deck, you know, as a precursor to
having a meeting. A pitch deck often acts as a filter. It enables an investor to say, I'm really not interested at all. But you know, if you get to that meeting, then I think the it's important to just simple things, you know, to be able to build a rapport with somebody to not. I sometimes meet people that say, ah, you're the investor, high coffee.
Phil McSweeney (06:13.959)
let me pitch, you know, and they're kind of straight into the business without saying, it'd be interesting to hear a bit about your background, where you come from, you know, what's led you to, you know, being interested in this sector, you know, and what common ground have we got that we can, that when we meet next time, we would be able to discuss, you know.
Tzakhi (06:40.194)
Yep.
Phil McSweeney (06:40.319)
Did you go to the same school? Have you got kids that play for the same football team? You know, those kinds of human things, you know, that are important in a relationship.
Tzakhi (06:49.226)
Yeah, I think a couple of thoughts about what you've said. Well, first is, you know, angel investors come in all kinds and there are investors that want to purely invest or just looking at the opportunity and they are investors that want to be involved and they want, they're only in it if they're really close up with the founders, either advising them, sometimes even joining the team.
early on and I think it's important to kind of distinguish between that and try to identify that early on even before the initial outreach. And I'm curious to hear what you say about that. Another point is there's the initial outreach which I actually do believe it can be often technical just as a kind of filter. We do A, B, C. We've achieved. We've achieved.
Phil McSweeney (07:38.601)
Yeah.
Tzakhi (07:43.366)
ABC and now is that interesting enough to start a conversation? Once there is a conversation, I think any conversation with anyone in any business context probably should not just start with getting straight to business unless, I don't know, there's really a request for that for under certain special circumstances. But usually business starts with creating some kind of rapport and some kind of human connection.
Phil McSweeney (08:07.729)
Yeah.
Tzakhi (08:12.914)
angel investing probably even more so, especially if the angel investor is of the type that wants to be involved.
Phil McSweeney (08:19.795)
Yes, I think if you are a pure passive investor, you're not really too bothered, whether it's right or wrong, but you might not be too bothered about the skills or attributes of the person themselves. You're making an investment decision on the business case, really. So you might say, well,
might as well spend a lot of time looking at crowdfunding platforms because you rarely get to meet the founders in any depth at all. You're just putting some money against a good idea, good business case, good financial projections, some talk of exit in the future, etc. But if you want to get to
Phil McSweeney (09:17.271)
And I think in my experience, you know, more people would like to do this than, than do. And it's, and it can be difficult finding the time. But you, you know, people buy from people, there's this no like trust kind of line, if you like, you get to know people, you work out whether you've got some chemistry with them, you get to trust them, and then you're much more comfortable in giving them, you know.
certainly larger sums of money. You don't tend to give large sums of money to people that you don't know as a rule of thumb. And that takes time, you know, to build that relationship. You might want to meet people two or three times rather than just once to do your kind of human due diligence, if you like, as well as, you know, what you'll find in their data room.
Tzakhi (10:07.286)
Yeah.
Tzakhi (10:14.346)
Yeah. Okay, so now we've got to the point where we have a founder meeting an angel. What is the right way to approach it? How to build that relationship from the start?
Phil McSweeney (10:30.407)
Yeah, I think as a founder, you need to be aware that investors are going to be looking for certain things. And they, you know, whenever I talk to serial investors or VCs, they say, the decision about whether I'm going to invest.
is largely about you. I've heard people say it's 60% you or it's 80% you or it's more than 80% you. If you think someone is really competent then you're fairly confident that whatever idea they talk to you about in the first place will not look the same in three, four, five years time.
they'll have adjusted to the market, they'll have pivoted, they'll have reworked it in some way, shape or form. So the idea is not critical in the form that you present it, so long as I form the view that you are flexible, that you can adjust to whatever adjustments that you need to make.
But the things that you might look for as an investor, sizing up a founder is certain attributes like, do they have belief in themselves, regardless of what they're pitching? Are they a really confident person that could do anything, whatever it was?
Do they have ambition? You know, whatever it is that they're doing, can they scale it? You know, are they committed to want to make it bigger? You know, bigger and better. And have they got, you know, that kind of basket of things that people call determination, resilience, grit, the ability to, you know, get up again after they've been knocked down?
Phil McSweeney (12:53.279)
can they run through a wall, these kind of analogies that people use. One of my favorite ones is, can you be thrown out of a plane and build an aeroplane before you hit the ground? I mean, it's these kinds of qualities that you think this person is a winner, this person is a survivor. So you're, yeah.
Tzakhi (13:18.226)
Yeah, I think you're right about that in the book about coming off as a winner and presenting yourself that way to an investor.
Phil McSweeney (13:25.224)
Yes.
Yes, yeah, so you know you and I suppose that needs to be balanced a bit with some humility, that you are looking for people that are curious, that are going to learn, you know, that might listen to other people and
I mean, you invest in people that can be self-opinionated, fine, you know, headstrong, you know, great. When it kind of gets too much towards arrogance, like I just do not listen to anybody at all, then, you know, that begins to be a bit of a red flag.
Tzakhi (14:09.79)
Yeah. And how to start that kind of relationship in terms of when coming into a meeting, is it just about kind of adjusting yourself to the investor in terms of how you tell the story? I mean, one thing that I wrote about in the past is about also being very attentive and listening to
what the investor is interested in and, you know, showing some empathy to their needs and their interests and doing that right from the starting point.
Phil McSweeney (14:49.511)
I think that's important and you're trying to get to a match, if you like. It's a long-term relationship. I think that if you might decide about certain investors that they're not for you and I think it's important as a founder to...
to make decisions about people that you want to work with and that you'd rather not have on your cap table because they don't bring what you want in addition to money. And I think founders find it quite difficult sometimes to turn down anybody's money because they need the money. The money is kind of almost the most important thing to them but I think they need to sometimes think about that. But...
Tzakhi (15:46.486)
A winner is not a beggar. I mean, coming back to your previous point, if you're, if you come with confidence, then you also have the ability to say no, even when you're offered something that you want, if it doesn't really match what you need.
Phil McSweeney (15:47.083)
I always say yes. Yeah, yeah.
Phil McSweeney (16:00.491)
I think that one of the worst qualities a founder can exhibit is neediness. You know, I'm desperate for you, I'm desperate for the money, you know. But you know, you have to, as you say, you have to be confident that you've got a great idea and you're the guide to deliver it. And then if they want to jump on board with that, then all well and good. I think the things that help...
Phil McSweeney (16:27.723)
from a founder's point of view to present to investors is where they've got their purpose from. So it might come in an origin story or a founder story or a road to Damascus experience or whatever. The reason I'm doing this is because, some people think they haven't got a good origin story within them, but I think often if you talk to them and
and kind of dig a bit deeper, you can usually find that they have a motivation or a purpose for what they're doing. So I think that's one thing. And then I think that the other thing I think is their ability to paint a vision for you of what they're trying to achieve that shows the scale of their ambition. You know, they are
They're bringing a product or a service into the world to change something for somebody. It might be a niche of people, might be quite small, but it's important, or it might be a bigger group of people. And when you lay out that kind of vision, what you're, as a founder, what you're trying to do is offer the challenge to an investor to come on that journey with you.
And I often, just because it's a kind of well-known example, I think about Christopher Columbus in this, as an example. What people were looking for at the time were whether there was a different route to get to India because they were having to sail around the Cape, Southern Cape of Africa to get to India.
from Spain and Portugal and so on. So it was taking, you know, weeks and weeks and weeks and cost and shipping. So he said, I'm gonna try and find a different route to India by going west. And so he just presented this vision to, I think the King and Queen of Spain, I seem to remember, you know, and said, join me, you know, you need to fund my ships, but what...
Phil McSweeney (18:56.903)
what I will find will be treasure riches, wealth, a different route to India and so on. So I'm kind of laying out the challenge to you to join me in this journey. And I think there's a kind of emotional attraction there from investors to participate, to be part of the pioneering, if you like, of.
of delivering this vision.
Tzakhi (19:28.902)
I think often an angel investor is someone that has already done something in their life and probably at a later stage of their life. And the founder is often at the earlier stage and just building themselves and their company. And for the investor, there is an opportunity to kind of relive the adventure part of the journey and the early days. And I think there's a lot of that on a psychological level.
Phil McSweeney (19:53.511)
Yes. Yeah.
Phil McSweeney (19:58.863)
Yes, it's a kind of vicarious thing, isn't it?
Tzakhi (20:01.546)
Yeah.
Phil McSweeney (20:03.967)
Vicarious excitement or something, yeah.
Tzakhi (20:07.146)
Yeah, and I think founders need to remember that they're offering that opportunity to investors.
Phil McSweeney (20:17.875)
Yeah, yes. Yeah, going back to what we were saying before we started recording, which is, be the prize. I am the prize. You're investing in me because I'm going to deliver this.
Tzakhi (20:36.638)
Okay. There's one more question I wanted to kind of bring up because I think we kind of touched upon it previously a bit, but it's something that a lot of early stage founders come across, which is they need the money, they need to raise money. They need a lot of help in many ways, but primarily they need money to just move things forward. And they meet an investor, an angel investor. And a lot of the time before
an offer has been made to investors, maybe an offer to advise or work together in some other way. How do you think founders should see that kind of offer or treat it? Because on one hand, a lot of founders are afraid of people that are just not really intending to invest and trying to take equity for...
take it and it's out there. It does happen that people take advantage of founders in that way. And on the other hand, founders do need help. And sometimes an investor might be a potential investor but they just don't have enough certainty at the time of the encounter to make that investment. So they wanna stay involved and maybe try to advise for a while before they go into investing. So I just...
We'd like to hear your thoughts on this and how should founders think about it.
Phil McSweeney (22:05.783)
I think founders need a certain weariness because I hear quite a lot of stories from people saying this on LinkedIn, for example, and one or two personal experiences. There are some people that pose as investors with the view to trying to sell you a service.
they're not serious investors at all but and you approach them because you know you need investment and you get into a conversation and suddenly they've got you know they want to build you a website or they want whatever you know they and I think you know a founder needs to ask some pointed questions like how many
How many investments have you made? You know, in what companies? Could I talk to founders of those companies? When was your last investment? You know, what kind, what kinds of size of investment do you make? You know, to try to kind of weedle out, you know, people that might not be serious investors. Having said that, there are other roles, if you like.
that founders...
Phil McSweeney (23:37.483)
could value more than some do. And so I'll describe too briefly, and sometimes they come in the same person, but there might be a mentor that's got, you know, quite a lot of experience in the sector that you're trying to build into, that might be able to say, you know, with my experience from what I know of the sector.
do this, don't do that, these are the mistakes I've made, you know, this is what the market's looking for, etc. And you would benefit from their advice and they may or may not invest and you can't guarantee that but their advice is worth having. And then there might be people that I would call accountability coaches or accountability partners that may not know a great deal about your sector.
but that you might work with because they help keep you on track. They're the people that you would discuss, the milestones that you're trying to achieve, the goals that you're setting yourself for, the people that challenge you and say, last time we met you said you do X, how's that going? What obstacles have you got? Can I help you talk through or get around some of those obstacles? So those, they're kind of discreet.
the different roles, but you might find them in the same person. And you might find investment in the same person, you know, so there's kind of three pots there, if you like, that I'm talking about.
Tzakhi (25:14.95)
Yeah. And I think a lot of this can be also solved by doing prior research, which is the point. I mean, if you look at someone's bio and they're an investor, but they're also CMO of a marketing agency, not out of bad intention, they're likely to try to offer you services from their digital marketing agency. It's just, you know, if...
Phil McSweeney (25:41.715)
Yeah.
Tzakhi (25:44.398)
And you can, it's actually quite easy to see those things in advance if you look for them.
Phil McSweeney (25:52.164)
Yes
Tzakhi (25:53.654)
I mean, if you look at someone's profile on LinkedIn and they're clearly offering a service and they're an investor, I'd say here you should be more pessimistic than optimistic about reaching out to them because if what they say under profile is that they want to sell you something, then that's what they'll say to you when you meet them. It's just most likely. So that's just one of the things that founders should probably look out for.
Phil McSweeney (25:55.269)
I mean it happens, you know.
Phil McSweeney (26:18.887)
Yeah.
Tzakhi (26:23.766)
and use as a kind of screening criteria before they decide to approach an investor.
Phil McSweeney (26:31.283)
Yeah, yeah. Yeah, I mean.
Investors generally have day jobs, so what is it? I mean, some are retired, but some people like the idea of a bit of consultancy in their semi-retirement. So I often mentor people that are
in role transition themselves. They're looking to get into the advisor space, you know, in the startup world because...
Tzakhi (27:06.05)
Mm.
Phil McSweeney (27:13.904)
because it's an opportunity for them.
Tzakhi (27:17.502)
Yeah. And these are people that have experience in working with startups previously, or just people that have professional knowledge?
Phil McSweeney (27:30.327)
Yeah, no, we're often not. They, you know, if I painted a kind of pen picture of them, they might be in their 50s, thinking about the third chapter of their life, you know, what they might do in that third chapter of their life when they come out of a kind of corporate environment, how they might use those skills, you know, of...
managing large teams of people, working internationally, you know, being a leader, et cetera, where could they apply those skills and still be, you know, be thinking that they're semi-retired as it were, not drawing a big salary somewhere, getting rid of some of that stress and pressure, but they might think, well, you know, here's a burgeoning startup sector where...
As you were saying, lots of younger people without some of those skills and experiences might benefit from that. So can we get into some partnership arrangement where it might be pro bono to begin with, but when you get to a series A sort of size, then you can begin to pay me a fee, an advisory fee.
Tzakhi (28:55.014)
So you think a good advisor for startup, if they're starting out, would offer a lot for free to startup founders to help them.
Phil McSweeney (29:04.114)
I think it's an early stage, you know, if you're pre-seed or seed and...
Phil McSweeney (29:13.251)
An advisor should be cognizant of your own financial position, I think, and not... So if you're trying to raise money and you're successful, you wouldn't want... Or as much as that money as possible should be diverted, or not diverted, oriented towards selling, growing the product, growing the market, you know.
paying people that you need to do that. You know, you mentioned CMO or sales people, legal advice possibly, and you need to work out, you know, what else you might need and the extent to which any of that is free or affordable. But I think the...
I do it quite a lot with people. I have a period where I might work on a pro bono basis on the understanding that they get to a certain threshold and then I'd be expected to be reimbursed for my time.
Tzakhi (30:29.706)
I think that's fair and realistic because really a lot of early stage founders can't really afford to take the kind of help otherwise. Okay, Phil, thanks so much. I think people should be looking up your book. I know it's on Amazon, Angel Think. Oh yes, please. Yeah.
Phil McSweeney (30:49.971)
Can I just flash it on the screen? Yeah, so here it is and it's on Amazon. And my good news this week is that I got, I got to 51 five-star reviews. So I was trying to meet my own KPI of getting 50 five-star reviews and I achieved it earlier this week.
Tzakhi (31:06.774)
Congrats!
Tzakhi (31:16.122)
Awesome. So people, should they go to the Amazon page, or do you have a website for it? Or should I link them?
Phil McSweeney (31:23.885)
No, go to Amazon. Yeah, I mean, I'm you know, you can link with me on LinkedIn Phil McSweeney, but you know, if you're interested in the book, then Amazon.
Tzakhi (31:25.139)
Okay.
Tzakhi (31:36.046)
Cool. We'll have that link in the bio of the, in the description, sorry, of the podcast. Phil, thanks so much. This was very, very interesting and very useful, I think, for Startup Founders. And thank you.
Phil McSweeney (31:51.251)
Yeah, no, it's been great to speak, yeah. And thanks for the opportunity again. That's good.
Tzakhi (31:56.566)
All the best.
Phil McSweeney (31:58.152)
Alright, cheers.
Tzakhi (31:59.246)
Cheers.
