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[MUSIC]

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Huge amount. And then there's the model of convergence, where is technology married with

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therapeutics or life science, for example, if I take a therapeutic and I add AI and data analytics

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to it, I now have a drug discovery engine that can help me find the right targets. And maybe I'm

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just selling the data from that to other people, or maybe I'm taking each promising target and

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carrying it all the way through FDA approval. Welcome back to the Executive Connect podcast.

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Today's guest is a legend in the startup funding world, halls the founder and CEO of 10 Capital

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Network, a powerhouse connecting startups with over 17,000 investors. Their network has fueled the

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rise of countless ventures, helping them raise a whopping 900 million in Capital. If you're a startup

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founder seeking funding, you won't want to miss this episode. Welcome hall.

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Thanks for having me, Melissa. Looking forward to this call today.

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Thanks for being here. Now I'm going to jump right in. So 25 years of angel investing.

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From your perspective, how have the landscape evolved and changed over the last few years?

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Well, it certainly filled out with more investment types. When we got here, there were standard

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VCs and then there were angels. And when I started doing angel investing in the late 90s,

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people would literally stand up and ask for five million dollars to build a web company. And

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back then you had to build your own server farm and pay your marital wages for everything,

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which is very expensive. And then five years, six years later, the business had evolved where you

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didn't, you only need $500,000 to invest in a startup. And so most of those deals moved from the

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venture capital world down into the angel world. And that's all there was. There was angels in the

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cities. Over the last 10 years, 15 years, we've actually seen the rise of crowdfunding, regulation CF,

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where people, anybody can invest. And this is for those who have a very large network of people

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that want to put in on average $500 into their deal. And then we've seen the rise of the micro VC fund,

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the sub-100 million dollar venture capital fund, which comes down and looks very much like an angel group

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as far as the sector and stage that they come in. They come a little bit earlier and for smaller rounds.

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So we see more people coming into it. And finally, there's the syndication group where people come in

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and angels don't set up joining a group. They just join together for each deal that they want to be

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in. And they just do a syndication for each one. And you can be in this deal, but not that deal. And so

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and they're not necessarily in a formal group. So we're seeing more groups come together to fill out

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the ecosystem with more choices for investors to invest. I'm curious too with the major changes in

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technology over the last few years. How has that changed the way venture capital is sourced and how

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you make decisions? Well, one of the biggest changes most recently is that the whole world has

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moved online through the pandemic. We moved to zoom and then discovered how much a more efficient

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that was. When I started the Central Taxes Angel Network, I started three of them and first one was

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CTAN in 2006. I remember I was sitting there one day in the downtown Headliners Club where we went

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downtown to do everything screen, diligence, percent, etc. That half of what we could be, half of what

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we were doing could have been done online. In fact, if you were online, you could use your tools to

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do more diligence, more research as somebody's pitching. You can look at their competition, check

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their evaluation and so forth because you had the tools there. It was a bad form back then to be

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pulling out your phone and typing on it while somebody's pitching even though I was trying to

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research. If you move online, you actually get a lot more resources available to you to analyze the

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pitch and what's going on there. That's one of the biggest changes is that up front, there's so much

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more that's going to be done as far as introductions online is going to be through zoom. Then the second

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and third meeting may go in person if that goes. The one thing we found is that it's very hard to close

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online. It's easy to open the dialogue, but it's hard to close. The other thing is that there's

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many more tools out there now for analyzing startups or AI tools coming on the marketplace and other

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things for doing that. We see a lot more in the way of technology coming into enhanced the experience.

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In most cases, they're assistive. They're helping you make a decision not making it for you.

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Now, you're a fellow podcaster and you have your own podcasts and I'm curious from your perspective,

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what role does podcasts play in educating investors and entrepreneurs today?

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When we were talking to many angel group leaders and one of the most common complaints I had from

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them was they said, "I wish I had put in more institutional knowledge." In the angel world, especially

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in an angel group, you have people coming in that are new with this and in the early days they're

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making mistakes and they're learning and then they get better and just about the time they get

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really good at it, they retire and move on to something else. Here comes the next group and there

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is learning all the same mistakes and making all the same mistakes over again and you kind of wish

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you could have learned from the previous group. When I started investor connect, I wanted to be able

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to capture the knowledge of investors to share it with follow-on investors. Primarily, we've done 650

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interviews with mostly angel VC and family offices and they talked about how they invest,

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why they invest, where they invest and how they do it. You can learn a lot if you listen to what other

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people do, how much they put into research, how much they weigh the team and those type of things and

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it does vary from one group to the next but there are some common things one can learn about it.

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So hopefully you can build some institutional knowledge where you can maintain the learnings of

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the group as you go forward and so that's why we did ours. That's fantastic. That's a lot, right?

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Can you share a little bit and maybe a couple of success stories that you've had over the

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this last 25 years? Well, from an investing point of view, when we started CTAN, we had two home runs

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that came out of the first group. When I started CTAN, I was basically on the board in charge of

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membership because that was the first guy to sign up and then after two months, we lost our director.

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So I became the director and I helped recruit basically 50 investors to come into the network

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and then we invested about 5 million collectively into 20 startups of which two turned into home runs.

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One was a 40X return, the other was a 35X return and that really propelled the group onward. So it's great

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to have wins upfront. Typically you get one or two wins every five years of that nature and we had two

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right up front which really helped move the group forward. So there's a lot of fun to do that.

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And then we helped do other things like the Bay of Angel Network who was a university-based group

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and so we had a, I think the win there was the experience the students got because they were doing

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the deal flow and the diligence for us and they were actually helping us with figuring out which

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deals to invest in. And it was a great experience for them to work with real deals, real money, real

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investors. And of course they had great tools to put into their portfolio because they were putting

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in 2025 hours and diligence into each deal, cap table analysis, the whole thing. You can go to your

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first employer and say, "I've done this kind of analysis on these real deals here." It makes a big

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difference for the students in getting a great job and a great experience.

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That's amazing. Now how did you get into this space, Hall? How did you start in this industry?

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I'm curious. Was there any unique ways that you found Angel investing and being part of C-Tan?

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Maybe you could share a little bit about that.

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Sure. Well, when I was in undergrad my father got me investing into stocks and then in

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graduate school we got into sector stocks and if you just keep working your way up into different

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funds and different instruments, eventually you get to Angel investing as one of the ways to invest.

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And I worked for a company called National Instruments. They went public in '95. I was an early

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employee there so I wanted to start investing as an Angel investor. And we had a group in the

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90s called the Capital Network here in Austin that ran from '95 to 2002 and they got tied to the

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.com world. But I went to it and made one investment, lost all my money and learned that this is

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harder than it looks. And I wanted to join a group to learn how to do Angel investing. So the best

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thing, the best advice I get people is go find a like-minded group of investors in your area

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and join them and learn from the others. Don't make, don't write a check in the first three months.

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Just watch what the others do and what questions they ask and how they diligence it in from that

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you pick it up pretty quickly there. Over time you have to do more formal study around diligence,

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term sheets and the like. But upfront you're just trying to figure out what's in the game and what's

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not in the game and working with other Angel investors is one of the best ways to start.

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That's great. Any other tips for people who have never done this type of investing or who

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have never invested before outside of maybe a standard 401k and their primary residence? Any other

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tips that they should look for besides joining a group? You can invest in a fund. Sometimes you,

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if you have a thesis around a certain sector like I think the world is going to AI or blockchain

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or Vintech, you can find a fund out there that manages it. And with many funds comes a community

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or a network of people and you can be a part of their program and learn from their investment,

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how they do it, why they do it and so forth. So a well selected fund can also be very helpful in

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getting into the space because you can use that as a mentorship exercise as well as an investment one.

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That's great. Now with technology and AI like you mentioned, what do you believe are going to be

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some of the biggest challenges with venture capital and angel investments?

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It's always a challenge to find the right deals out there and there is a move with AI and data

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analytics to use a data driven approach, look at what's successful in other areas and try to map that

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into the market coming up. The challenge with that though is that in I think the next 10 years,

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we're going to see an explosion of new technology, especially in life science, where there's not a whole

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lot of data available. You're going into a new area and I found that so the biggest ones I have came

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from the new areas that weren't yet proven out. Once it's proven out, well everybody figured out

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where the goal is so everybody's over there mining that gold before you get there. And so as

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heart, you have to be a little bit on the cutting edge to do making out size return in the angel

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investing world. Sometimes you get lucky but for the most part you just have to be in the right space

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at the right time and that's usually a little bit beyond what is currently proven or known to be true.

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Yeah, it feels like everybody's in, I don't know if it's just me, everyone's in AI and software now.

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I feel like that's the big thing and there's so many companies now to look at and they all have

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kind of their unique spin on them. So just kind of looking ahead, like you kind of mentioned on

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just what are some trends out like you mentioned life sciences? Is there any other kind of trends

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that you see outside of that coming up and maybe things that entrepreneurs can prepare for

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or challenges? Well, one of the biggest is life science. It used to be about 10% of our

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deal flow. Now it's about 50% of our deal flow and what may not be obvious is the fact that

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there were advancements or tools that came out that lower the cost of life science or starting a

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life science company. You could do things with the lower cost wet lab space and with lower cost

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testing and array and diagnostic tools. So there's an explosion of startups out there that are

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each picking a novel target and taking it through to the process of getting FDA approval. So there's

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a huge amount and then there's the model of convergence where is technology married with

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therapeutics or life science. For example, if I take a therapeutic and I add AI and data analytics

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to it, I now have a drug discovery engine that can help me find the right targets and maybe I'm

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just selling the data from that to other people or maybe I'm taking each promising target and

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carrying it all the way through FDA approval. So convergence, the combination of tack-in,

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medical device and therapeutics is an area to really watch because I think that's going to really

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be a supercharged era. We talk about Moore's Law where everything doubles in 18 months. Well here,

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everything's going to be tripling in 18 months given the technologies behind DNA sequencing and

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that of AI coming together is going to be a very supercharged model to look at.

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That's great. Any nuggets of wisdom for those? I know I've seen a lot of buzz on my LinkedIn profile

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where people are leaving their jobs of many years and starting companies. Any kind of nuggets of wisdom

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for those new founders that are, you know, they've been a W2 employee for the majority of their life

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and now they're launching a new business in a space they're experts in. Any kind of nuggets of wisdom

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that you can share with our listeners? Well, in the world of startup, it really takes the network

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to build a great startup and so you want to start building your network. You want to know people

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and the industry that you're in, you want to start with an industry, you know something about it,

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you can become an expert because I think the winners often come from those who have a insight into

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the industry that others don't have. So you're looking for that insight that says this is how

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this really works and you build a startup around that and then if you have the right network to help

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you raise funding, you tell you build the product, you go to market, you sell it, you know it comes down

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to being able to fulfill all of those requirements to make it all take it all the way through.

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Yeah, absolutely. I've seen some people pivot completely, maybe they've been in retail forever

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and now they're going into cybersecurity and I, a lot of these net new business, I don't see

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the correlation, like you mentioned having a good network, you know, that saying your network is your

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network, it comes to mind and if you have experience in one field, staying in that field and kind of

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finding solutions or problems that are in that field make a lot of sense to me. I know I recently

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sat in on a pitch for a baby bottle company that redid and retooled how baby bottles are,

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you know, on the market and they've done amazing, staggering numbers and it's just a bottle with a

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different top on it and so I think I love the people are coming and inventing new ways to do things

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and it's awesome to see some of these startup companies create amazing businesses really quick.

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What are you seeing the, what business is there a specific sector that's growing faster right now?

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Is it tech? Is it AI? Is it, you know, healthcare? Is there any one industry that's really, you know,

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innovating and making new, you know, raising new dollars right now? Well, healthcare is one that's

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always raising dollars and is such a big market. You don't have to go very far to convince people

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there's money there and there's also a lot of problems to be solved so it's one of the best markets to

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go after from a startup point of view but in this, it's a big market. There's a lot of money that goes

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into it from all angles so I think that's probably the one that always is available in driving.

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Everything else like AI is enabling technology that helps you get there. There are other sectors

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like aerospace, transportation and so forth but I always looked at healthcare as being one of the

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biggest ones to be a part of so and that that's always going to be true. Even in recession,

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people still need the solutions to come out of that. That's great. So just kind of in closing any

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final like maybe the top three things for people to that we haven't talked about that you can share

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any other, you know, tips from your perspective that you can share with our listeners.

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Sure. So in raising funding it's all about the team. You want to find the team that really can

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take you all the way there. In any startup failure I invested in it ultimately came down to the team

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just was not up to the task so you always want to make sure you get the team that is up to the task

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and is a great one in that case. And then to always make sure that you're working in the,

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I like to say that the cutting edge you need to go out a little ways from your comfort zone in order

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to find new opportunities. If you stay back in the comfort zone you're probably going to be

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crowded out from too many other competitors and you need to have a little running room space to

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do the project on your own. And then on the third is I think working with the, in the angel world

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it's it comes down to sharing the deal flow and the diligence. So you always want to go out and

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give first and pay it forward first to in order to build a network of people that will help you

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help enough other people get what they want you'll get what you want. And that's that's a key part

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of the angel mantra so make sure that you're out giving to the other people in the network.

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That's great feedback. You know I've listened to a couple of pitches recently and some were really

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really great and others seem like it was the first time they've ever talked about their businesses

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but they've been around for ten or so years. So when it comes to actually the pitch

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anything you can share about the actual pitch to the listeners or any like recommend like practice

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of course practice your pitch any kind of key takeaways for people that are pitching.

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Well always like the idea of the city of a pitch being a monologue turned it into a collaboration

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involved the investor in the process as you pitch and gain some level of feedback along the way.

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You know mentioned the problem the solution how it works and then check interest what do you think

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about that and see if you're tracking along or if they're tracking along with you as you go through

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it and try to figure out where they consider the risks and the deal are and so you want dialogue with

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it. I have some of the viewers that is just a wall of words and we're grinding through every slide no

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matter what and in the end they don't really know if they if the message landed or not. And so

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the key is to take the investor on the journey with you and not run them over with with your deck and

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make sure that you get make it a two-way conversation even if it's not meant to be try to get some

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feedback along the way so you understand it by the end what's working and what's not or where you go

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from here. That's great. I think you've shared amazing tips and good feedback for our listeners and

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I want to thank you so much for being on the Executive Connect podcast today. Any final thoughts,

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hall or anything? No thanks for having me on here Melissa appreciate all the great work you guys do

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and looking forward to all the wonderful things you have coming up podcasting you'll find is a great

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way to meet people and learn a ton about the industry and I'm sure you're going to enjoy the ride.

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Thank you so much and that's the Executive Connect podcast.