Raimonds: [00:00:00] We are good to go. So Gary, thanks for joining this Bad To Better podcast session by Bad Ideas Fund. So awesome to have the chance to pick your brain on angel investing. And before I throw questions at you, I wanted to give a quick intro on your background. So you're a founding partner at Specialist pc, which is a 50 million fund.

Raimonds: And you've backed over. 45 teams. You've been an early investor in Bolt, in Viff, in Monet in K module, Starship Nft Port to name just the least, just a few. And you are essentially one of the most prominent VCs in the region. You are voted number one startup investor by stony and tech founders. And you've not, not only investor, but you are an entrepreneur and operator.

Raimonds: You with having 15 plus experience both in building companies and scaling them as well as [00:01:00] investing. And I've been fortunate to have you on my cap table for my first startup. But before you became a vc, you were very active angel investor. Let's, mm-hmm. Go back to that period. Tell me about how did you start?

Gerri: Mm-hmm. Yes. I actually, I think it was around like, like 12, 13 years ago. And, and how it started was that At, at, at this time? I, I, I had got started you know, I had good experience in, in business development of, of, and sales of tech, tech companies. And I sometimes like attended different hackathon and, and, and different like develop developer events.

Gerri: And I saw that there were teams at this time that actually were really good technically. But, but did not really know how to make a, a good idea into a business. And then I, I, during this some, you know, garage events and, and hackathons, I, I, I started to [00:02:00] help such companies. And then at the same time, I also saw that I, I helped them actually to, to build these good ideas like into intercompany.

Gerri: Just, just like for, as, as, as a, as a, like a small mission. But then I also saw that they, they all. Almost always also needed some, some initial capital. And at this time it was different time, definitely as compared to now because okay. Skype was already around, but, but, but there were not really there were very few angel investors around in, in Estonia.

Gerri: Also. SmartCap had just started there, like like state sponsored like, like Kind of a VC VC fund and, and, and, and but the condition for them to invest always was that they, they need to have a private investment as well. And then me and my business partner Riva, we actually like, took together, we, we, we took together and, and started to invest into these teams that we, we like, had helped and that we saw that had good potential.

Gerri: And and that's, that's how, how we, we, we, we got [00:03:00] started and And yeah, I think as, as, as part of the first three investments that we made, actually, we got really interesting outcomes. Like like one, I think one of the fir all the first three we, I think made almost at the same time. One, one was Moniz, which is a good company going, going on well, Like a C round stage.

Gerri: Another one was actually one which, which went the bankrupt. And the third one was was vital Fields, which weighed an exit to, to Monsanto, like I think three years later. So, so really we, we saw all different kinds of outcomes already. Already, very early on. And, and, and I think it was definitely interesting interesting like like lesson for us to, to to, to actually see, because yeah, at this time almost all the investments we made, they were of course pre-seed very, very, very early pre, pre-seed investments.

Gerri: And yeah, then, then we continued and, and and yeah, it, it really turned out [00:04:00] well. And, and And then I think like seven, eight years later, both me and Riva, we found that that, you know, our, our the companies that, that, that we, we had been running previously, they actually, you know, were somehow like matured and then we both felt that that we, we maybe wanted to do this investing full-time.

Gerri: And we also actually had a, had a number of people who always wanted to co-invest with us because they, they, they, they, they saw that, that that, that, you know, the, the, the investments that, that we picked generally were, were, we're doing, doing good. So we, we started the first fund. And, but then, and of course with the first fund, and even, even right now, we actually still want to keep quite a lot of the like, angel mindset still.

Gerri: Like, which is that we you know, usually want to invest earlier. Both funds with, with the first one and second one, we actually focus mostly on pre seed and seed investments. Then also we almost always co-invest.[00:05:00] So there are funds like in in, in Europe and US, and even in our region actually, which, which often want to kind of take the whole round and, and, and, and have a minimum ownership targets and stuff like this.

Gerri: So, so we don't have it. So also I think this comes from our angel background that we, we always, either we invite somebody that we. We, we like to join the round or then we are being, we are, we, we are invited. So, so we saw that it's, it's more value actually of, of cooperating, of, of investing together with, with someone who, who actually seems, seems for us to be a really good fit for the company.

Gerri: So so that's also maybe something that we have definitely taken from the angel investing times, and then maybe also the kind of relatively low bureaucracy that, that we want to have. Both, both in our own own fund and also basically, basically towards the company. So of course, you know that if, if you run it as, as a regulated fund, then you have some, some more, more formal requirements as compared to to just engine investing alone, where you just just invest your own, own, own resources.[00:06:00]

Gerri: But but, but we still want to keep, keep this on a relatively low level and, and, and also, you know, decide and, and, and then go, go, go on this without the process, you know, quite fast. Because that's what we see that early phase entrepreneurs are of often, you know, evaluate highly. And what was

Raimonds: your biggest miss and how did it change your mindset

Gerri: Maybe we, yeah, maybe, maybe one of the companies that we actually, where we, where we delayed the decision was PTO and, and Estonian companies, which ta which does automated the negotiations. So so, so there we actually the first round, although the entrepreneur was, was Marty Rand, actually.

Gerri: He was, he was ex ex founder from our own portfolio companies from Vital Fields. But the initial idea was just so, so like, kind of unclear and, and, and wasn't maybe articulated as well as, as, [00:07:00] as we would've wanted. So, so, so, so we missed it. And then of course, late later on, we wanted to get on board, but, but there were already other funds that, that had a minimum requirements and wanted to get the whole rounds and, and it, it was difficult.

Gerri: So maybe we, you know, as, as we sometimes also actually can, can invest in later phase. Okay. We might, you know we might Try to try to, we might invest again at some point, but of course now it's would be already like a hundred, a hundred times higher value as at this time. So maybe, maybe, maybe what what we learned from this definitely was that or, or we, we, we, we, we, we already knew that actually when, when you have a good conviction, then, then maybe sometimes, and the companies early, so early that it's hard to find some.

Gerri: Hard proof points then, you know, rather decide quickly and, and, and, and, and, and, and take the deal. And if you start to look for like hard proof points, then, then they might be difficult to get in, in, in such an early phase. And basically, you know, in, in [00:08:00] these cases you should just, just trust your feeling and, and, and belief in, in, in the, in the founders.

Gerri: And if this is strong, then, then, then, you know, like decide faster on these kind of deals. So essentially

Raimonds: you. You are operating without enough information.

Gerri: Yes, and you need to make a decision fast. Yes, yes. Especially if it's like age round or prey round. Then in many cases there isn't much background information that you can collect, especially if, you know, of course you need to do a good due diligence or entrepreneurs if you don't know them in advance.

Gerri: But in this cases, we knew the founders in advance, so we didn't, we knew they were good guys, and, and we, we, we, we we, we wanted to, to, to we, we knew that, you know, we believe, But, but then, you know, we, we, we took some time actually to kind of start validating market. We, we, which really we didn't get.

Gerri: We, we, we spent I think few weeks and, and we didn't get any reasonable information because the market was just not there at this time. There was no [00:09:00] such thing as automated negotiations. So, so it didn't really help us much. Everybody told that. It's just like, why, why anybody else is not doing it. So, so any experts we talk today that said, okay, if, if, if it would've been possible to do it, then somebody would be doing it.

Gerri: Which, which is really the advice that, that, that right now we are almost always neglecting if you see a good company and if, if, if the good we, we, we, even right now, actually even today, we have at, at our table one company that where, where if you talk to experts, they will tell that, you know, it's suspiciously you know, The, the idea is such that you know, if it were possible to do it, somebody would be doing it.

Gerri: But th this is the advice now that we are always, almost always like it doesn't add any value. We, we are like, like neglecting if somebody tells like this, because in very o in very often actually, if you, if you have a very good company in early phase you know, then, then it's, it's, it's never a good reasoning not to invest.

Gerri: If you just ask it, why is somebody else not doing it? Okay, then [00:10:00] this is gonna be these guys that do it and then get to the, get to the world leader position possibly. So yeah, maybe, maybe that was something also that we learned that don't, don't trust this kind of feedback. That, that this can be completely negoti, like neglected.

Raimonds: You were exposed very early on to early stage bolt, early stage. What if. Founders how did they stand out from other, mm-hmm.

Gerri: Companies? Yes, actually in both, we didn't invest in the very, very first round. So, so there, there, there we, we also missed a certain number of X because, not investing in, in the very early round, but yeah, very in, very, really, we, we were the first very first investors and even like helped to, to solve all the mess that there was there, like with a cap table and everything.

Gerri: So, so, but, but the, the, the, the, maybe the kind of ex one exercise that we, we, and, and why these two founders actually were quite exceptional. Was that [00:11:00] in In many cases you are looking for some kind of, you know, ho, ho like typical very good founder. He's the one that has got experience in the field where he's going to do the company at.

Gerri: So for example, the guy previously has worked at some, you know, I don't know like good examples like sale for example, Estonian like startup where the guys had previously built up like AML and fraud detection in Skype and Wise. And of course now when, when they went to do their own company, which, which provides fraud detection and a ml anti-money laundering for all the fintechs, it's kind of a, you know, no-brainer that these guys know what they are, what they, what they're going to be doing.

Gerri: But, but once in a while, maybe it's, it's only like once a year or something, you sometimes find, have the founder who, who almost, who doesn't have any of these like, kind of qualifications, so to say. But but so, so what, what we do is that, But if for some reason a really young founder sounds convincing to me, then, then the way I think [00:12:00] about this is if this guy, you know, I'm quite experienced investor and if for some reason a 20 year old entrepreneur sounds convincing to me, then there is a better likelihood that the same kind of founder can also now attract, you know, because next 10, 10 people in the company almost always need to be like relatively experienced.

Gerri: Because you know, if, if, if, if the entrepreneur himself doesn't have any experience, okay, he needs to have somebody who has got experience. And then if he's convinced to me, then also I trust better that he's able to find this next persons, or at least you know, is able to attract the, the next persons which are more, more experience to join the team, which, again, incre increases the likelihood.

Gerri: And that was exactly actually the case with, with, with, especially with with Carl and then with with Marcus as well. Like Marcus, of course, Marco has had his older brother joining. Who, who was, who had Skype experience and everything else, but, but but o Carl from RIF actually in really early ish to, to attract PON and to join as a, as a, [00:13:00] as a like, like CTO who was previously, who had run basic Skype's operations.

Gerri: Who was head of Skype actually operation in Estonia. And, and I, I, I was really surprised at, at how, how come that, you know, 20 year old guy was able to attract such experienced guy. It's, it's the same thing that actually worked that he, he was due, due to, due to some, some. Unknown reason, very convincing.

Gerri: And, and, and, and, yeah. So, so there is also rationale that in that then he's able, and even if I introduce some, some more experienced guy to to, to him from my network, I at least have bigger trust that this guy, you know, can convince the, the, the, the, the more experienced people to join as, as a first like 10 or 20 employees.

Gerri: So, so, so that's, yeah. That's maybe something that, that, that maybe we, we saw. When, when we talk to, and, and then also another test of course is that, that I, I try to imagine, which is I try to imagine if, if, if this, if [00:14:00] he's able to run like 15, a hundred people, which is again, like, you know, it's not like any kind of quantitative argument.

Gerri: But, but, but you, you just, when you talk to the, to the person like several times, sometimes even if the founders might be inex, exper, inexperienced and very young, you still see that they have this. This, this capability, capability to articulate the vision and pull also in, into, into, into their vision and, and, and, and, and then, then you see that, okay, I, I, I, I, I see that this, I kind of trust that even if he has 50 or a hundred people, then, then he, he can run the company.

Gerri: That's, that's kind of some, some kind of our, our observations from, from this view. Like very, very young founders. Like, like, like Marco and, and.

Raimonds: So sound like in all of the cases where how you evaluate the deal, you evaluate based on two things, it sounds on the founder and the team and how big the market is.

Raimonds: Yeah, yeah,

Gerri: yeah. Basically sum

Raimonds: up and

Gerri: is there anything [00:15:00] else? Yeah. Yeah. Actually this, this, how big the market is is, is also important point that we have. We have definitely not invested at some points where we see that it's, it's just like a two niche problem. And then we tell to the founder that we really like you, but just, you know, when this company goes down and you start something new, then we'd like to invest.

Gerri: So, so, so, so but more, more, more or less. That's that. In the early phase, of course, you know, if we get to the seed phase, then we already look at more, more typical stuff, like also, you know, other first signs of, of traction and, and, and, and if, if there is like at least two markets where, where the company's operating so that we see that, that the founder is able to do something beyond his own like personal network to to whom he's able to sell.

Gerri: But in the very early phases, it's basically kind of, yeah, size of the market and, and, and the, and the team. And of course team is more, more important, but because companies often two pivots. And how,

Raimonds: how do you what was the best advice you've received when you were starting out [00:16:00] angel investing?

Gerri: One, one advice was actually really good that I, that I got from, Alan Martinson was that who had actually run his own fund before that.

Gerri: This was m Martinson, three Grand Venture partners or something. And, and, and, and then he said that, and I, I see this also actually with other Asian investors, offers that when you start. Then you feel like basically in, in, in a way that, okay, companies come to you and then you are like important person who like charges what these companies are doing.

Gerri: And then you have a tendency to maybe invest too fast in the beginning. And, and we see the same, a bit of a fatigue now, right now also among the like angel communities in our region, which have, which maybe, you know, after the Weiss went public and Bolton Pipe Drive became a big companies and, you know, many, quite, quite number of people from this companies actually starting to angel investing.

Gerri: And, and, and we are very excited initially, but but, but you know, when you do it on [00:17:00] your own, you actually discover that there's. Even in the very early phase deals there, there's still a lot of stuff you need to do in order to validate the, the founders and, and the market. And, and then, then at some point then maybe half a year or year or, or, or, or two years later, you see that the companies that will be, are doing bad in your portfolio.

Gerri: They already, you know, start going out and need more money, but the ones which, which later on will be doing good, they are not yet clear. Within this like short period. So, so, so you, you, you, you, you, you will almost all of them at some point, like will pull back a bit and tell, okay, now, now, now let's wait on how, how this, these guys that potentially will be winners, how, how they will be doing.

Gerri: And then, then I'll, I, I'll maybe start, start investing again. So that's maybe one observation I have made. And another definitely, it wasn't maybe even so much of an advice, but, but like our, our own observation was that mm. Again, if you start doing it in a way, it's, it's easy to feel in the beginning that [00:18:00] yes, companies come to me and I'm the kind of important guy.

Gerri: And then sometimes, you know, you might not what can happen, but you will not respond to like properly. You, if you decide not to invest, you will. You just, you, you, you just become silent at some point and just not reply. But, but we saw that actually. It, it, it's, it's, it's even if you, in many cases, like even reasonable rejections, matching the, the rejections code is, is equally important because you know the same guy very easily.

Gerri: The company in, in a year's time or two years time actually might start doing really well, and then you are the one that wants to get in. And if you're neglecting the neglected the person before and just, you know, not rep responses or promise something and not kept your promise, then then then, you know, of course the chances of of you being taken are, are, are so much slower.

Gerri: And again, you know, the guy's friends might start new company and, and, and, and, and they will ask how these guys are okay. He even didn't respond [00:19:00] to me. And, and, and although he promised to, to give us some kind of feedback within, within, within a week or so, or two weeks, And again, you know, he, he might not come to you.

Gerri: So, so we also have saw that really, although you are kind of in a power position in some ways by, by being the one who gives the money, then actually it's, it's an entrepreneur who is, who is on the like dri driving seat. And you should, you, you, you should not be the guy actually who, who will be like, I dunno, heavily late for the meetings or just, you know, not reply if you have promised or, or stuff like this.

Gerri: So actually to, to treat. To entrepreneurs with respect and, and give reasonable like rejections, hopefully with, with some kind of reasoning, at least if you can. And if you like the company, then actually help them a bit and, and, and, and and do some introductions maybe if you want to stay relevant for them in, in a years time,

Raimonds: and this has been my experience with you, you have been, I've had something like 20 Estonian angel investors on my cap table.

Raimonds: You are by far the most helpful. And [00:20:00] supportive even when shit hits the fan. And also have this very, very humble approach and helpfulness. So I can only attest to that what you were saying. Yeah. Thanks. What would you like you started full-time angel investing, how about people who want to keep working on the projects they are building?

Raimonds: But invest on on the side. How can they make this happen?

Gerri: I, I think in this case, I think there's two possibilities basically. One is that, of course, you still can, can keep doing it on your own and, but just invest to these companies where you almost instantly see that you want to invest. But then I think that the, the, the, the two other ways are basically it's, it's really good that actually like.

Gerri: Like syndicates or consortiums like, like like you actually have, have, have, have turned to like, have, have happened here. And it, it's happened everywhere. And, and I think it's, it's really good that that bad ideas actually has, has also [00:21:00] implemented now the same concept here. And we, we are already happy to, we already have made co-investments together with you and, and we think it's, it's really like a good, good way actually for angel investors to, to be part of like, like some somewhat bigger, bigger syndicated consortia.

Gerri: But at the same time, if you want in some deals, be on the driving seat, then every, each of each one of your entrepreneurs actually can be this kind of lead, lead in certain cases and, and validate the deal more thoroughly. And, and, and, and so, so you are not completely out of, you know, like like, like actually being directly in touch with the company.

Gerri: Another option, of course, of course, is to, to, to, you know, invest to, to, through a fund. But of course, you know, if you want to be active in investor on your own then, then, you know, in, in funds actually there's maybe less active involvement from, from, from your side. So, so, so I think it a bit depends on, on if, if you still feel that, that you have got some time left and you sometimes want to go deeper with some deals, then I, I, I feel that actually that consortia like, or, or, or a fund of type of, [00:22:00] of bad ideas is, is, is really good option to, to, to, to join it and, and, and and,

Raimonds: and go on.

Raimonds: Any final advice tips or mistakes to avoid for startup builders looking to start angel investing?

Gerri: Mm. Yeah, I, I, I think it, it really makes sense to, to do it together with someone. Like sometimes, sometimes it can be like, you can put together maybe three, four engines. And invest, invest together and basically analyze still together.

Gerri: It can be the bad ideas type of type of fund actually through which to invest. So I, I, I, I would really recommend maybe not so much to go alone, but, but go, go through, because then the learning process also is that just so much faster. It's, it's, because very often I see that this this angel investing, it's even these people that do it they usually, you know, already have.

Gerri: [00:23:00] Like certain financial capability so that, okay, return is important, but even more important is the kind of learning process that they actually want, want to, they, they want to talk to interesting entrepreneurs. They, they want to learn during this process. And if you do it alone, then it's, then it's, then it's much more difficult than you don't learn so much, but if you do it together with someone, then you really multiply this, this experience.

Gerri: So, so, so that's, that's, that's really what, what I believe,

Raimonds: which sounds like this is the reason why you are doing angel investing and now we see investing the returns are important, but learning in life

Gerri: is even more. Yes, of course. If, if you go more professional, like with a fund, then then the more and more it starts to become like a more model based or like return oriented activity.

Gerri: Yeah. But for, for me still, it's actually lot, lot of, even right now I'm a, I'm a like, like basically found founding partner of a fund. This curiosity still is, is one of the main motivators for me. Not only the financial [00:24:00] reports. I, I, I really. Like sometimes consciously we start to learn like a new segment, like more recently deep Tech.

Gerri: We, we, we, we, we consciously made some first investments there and then now maybe took a bit more active road than we, than we usually do. Just, just to learn and be able to, to, to, to develop ourself further and then then be able to be a better investment. Also investor also in more segments than just the ones that we have known so far.

Raimonds: Fantastic. Then that's a wrap.

Gerri: Thanks. Good. Thanks, Raymond.