😇 Angel interview #5: Andy Ayim
"I always say that relationships and knowledge work similar to how money compounds over time: the more you invest in it, the more it really grows in interesting ways over time."
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Andy is a prolific writer, speaker, and educator on product management and angel investing in the United Kingdom. He was featured on Forbes as a top 25 leading Black British Business person to follow (link), in the top 25 list of angels shaping the UK ecosystem (link), and has started an educational program called Angel investing school. The next cohort is scheduled this month.
Can you give a quick introduction of yourself?
My name is Andy, I'm a father, a husband, and founder many times. I'm someone that's optimized to live a life around doing the things that I actually want to do with my time. Part-time, I run an angel investing school that teaches professionals from all backgrounds how to get started and invest in startups. Part-time, I run a product management consulting service that works with large corporates and highly-regulated industries and helps them create and grow their product management practices.
I'm someone that's optimized to live a life around doing the things that I actually want to do with my time.
How did you first get introduced to angel investing?
I made an investment about six, seven years ago. It was quite significant for me at the time because I invested £5,000 GBP, which was a lot to me at that young age. I'm 32 now.
It was into an engineering company that was working across Africa. I invested out of passion and I did a lack of due diligence as a consequence of that. That company basically went under because they were suffering from contract risk: their suppliers and the clients that they were providing services to weren't paying within the agreed payment terms. Therefore, they had liquidity issues and didn't have enough working capital to sustain themselves and stay alive to service their contracts. It taught me an expensive lesson.
Since then as a product manager, I've always tried to address my high-risk assumptions upfront in a more cost-effective way. I think once you have that product mindset, it's so applicable to so many different areas of life, as well as investing for example. I always try and justify it to myself so that it's guilt-free by saying that actually it's cheaper than going and doing an MBA.
I think once you have that product mindset, it's so applicable to so many different areas of life, as well as investing for example.
That's such a great way to frame it because you think about the cost of an MBA and how you can spread that cost out.
It's like you get a network from an MBA, you get a network with founders and investors as well. It's all sunk costs, it's just the value of the ROI from sunk costs.
How did you find this first company to invest in? Did this company reach out to you and share that you could invest in them? Did you know from an early age that investing in a company was possible?
One of the downsides of venture capital and angel investing is that it's very network-driven. This company was introduced to me by a friend and 80% of the angels I've spoken to get their first deals from introductions.
This company was introduced by a mutual friend who I respect and know very well. So there's an element of reputational trust there. At the same time, I didn't have the experience or knowledge or access to a network of people that could teach me the importance of what you need to carry out when sourcing and assessing founders, which is what I'm now teaching in my course. Actually, it's really more of a course about critical thinking, decision-making, and mental models to be honest. Everything they learn is all widely applicable.
80% of the angels I've spoken to get their first deals from introductions.
I think it's crazy that critical thinking and frameworks are not something we learn in school.
It should honestly be a core part of our curriculum: how to make smart decisions on a consistent basis, how to develop your personal values, what do you care about, where are your boundaries? Yes, we shouldn't have to figure that out as an adult. It's quite worrying actually.
I see that in the US too. I went to a French high school and part of the curriculum was philosophy classes. I came to the US after high school and it has helped me so much, just being able to apply concepts and consider my values.
Philosophy is what I wanted to start studying at university and I didn't at the time because I had a bias towards "I need to study this subject to get this job", which is such a shame in hindsight.
Your first investment was six or seven years ago. How many investments have you made so far?
I've made about seven investments so far and I'm on the board of a friend's company that I invested in called Translate Culture. They get founders to focus on retention marketing and leveraging that data to inform more cost-effective customer acquisition. So how do you keep the customers that you're acquiring? How do you use those insights to acquire them at a more cost-effective rate to start understanding your customers more deeply?
You mentioned you're on the board of that company now. How did that happen?
The interesting thing is that my friend is growing Translate Culture almost like a family-owned business. He's not trying to seek VC capital. He's just trying to seek trusted advisors that can help him decision-making, fill in his knowledge gaps, and help him achieve his sales targets as revenue is re-invested into organic growth.
When he started that company, the founder's name is Mas. I helped him with business development. We created this roadmap together of how we can get enough clients to bridge the gap and allow him to work part-time, then work full-time on his dream. We successfully did that and now he's working full time on Translate Culture. I think as a reward for working productively together, we've got this arrangement now. But he has also been a personal friend for over 15 years. We co-founded a business together about 10-11 years ago.
It sounds like you've built a relationship and you know how you would work together.
It's really hard for me to make an investment because I have to meet people so many times and get to know them deeply, have broad conversations with them to really understand their decision-making principles, their values, how they view of the world, how they operate, how they deal with pressure. It's almost like a probation period for me.
It means that I can't move quickly on deals as a consequence of that and I'm now moving into a space actually where I'm considering more micro private equity deals. I want to acquire small businesses and or invest in them, specifically those who are on the VC track and focused on organic growth.
I have to meet people so many times and get to know them deeply, have broad conversations with them to really understand their decision-making principles, their values, how they view of the world, how they operate, how they deal with pressure. It's almost like a probation period for me.
These are businesses that I want to become part of management to help them grow. It's a very different approach and it's something that interests me and aligns with me because I always think about measuring my life in decades and not days. It's all about nurturing long-term relationships with family-owned so businesses that they are here to sustain long term growth and legacy. It aligns with my long-term portfolio theory, the same thing that I do with value investing in stocks, shares, funds, or index trackers. It's all very aligned in terms of strategy.
I always think about measuring my life in decades and not days.
It sounds like you take a larger part of a company and get more involved. I imagine that means you make fewer investments because it takes more time and energy. Do you aim for a number of investments per year?
Because I'm moving into this different model, where instead of just investing $5-10k as part of a bigger round, I'm deploying $100k, or $150k, I put more money at risk. For me to put that money at risk, I need to be able to afford to do that. It means that I have a lot more money that's safely allocated before I can afford to do that.
This is a 3-5 year journey that I'm talking to about. The second-order consequence of that is I can't invest in startups in the short term because of that. I'm stockpiling essentially.
It sounds like a multi-year project.
Absolutely. I've got a 10-year financial goal. There are three steps, three achievements along that journey. The first is to get married, which can be expensive. The second, I'm actually 95% of the way there with that, is to buy a forever home for my family next year. I'm confident I can but it's a three-year journey.
The final one is to really go into acquiring small businesses. I want my family to run at least one of those small businesses and be part of one of the deals I want to do in the future. In 10 years, if I look back, I've succeeded if I've achieved those three things.
In terms of impact in the ecosystem and to founders, I'm always been very giving of my time. I will try and find scalable ways that I can support founders. Angel investments were one vehicle for doing that. I have a weekly newsletter that goes out that talks about minorities in tech in the UK specifically (You can subscribe at andyayim.com). There are different, more scalable ways through content. I'm learning to serve people one-to-many, rather than one-to-one because I can't always be in the room.
How much time do you spend a week with these companies that you've invested in?
It's a balance. When I initially invest in a company, there might be an immediate need and I'm more intensely spending time with them. It might co-creating their strategy, their roadmap, I might do a visioning session with them. I might even do an agile working session with them to get them into the right workflow on how to work together and then I'm hands-off.
After, I'm just being responsive to the email updates. They might send an email update, once a month, once a quarter, and then I just respond to that. I'll reply, I'll say encouraging things, "looking good metrics wise", or just ask them if they want an ear to listen and just offer to be there and offer to be emotionally intelligent. I'll see when I can just be a good listener and just be responsive and be there for them.
The other half is how good can I be at connecting the dots and connecting them to relevant people at relevant times. So at the moment with one of our invest in investments, Trim-it, I'm making some introductions because he's reached out to me and he's very specific with what he needs help with. I've got people in my network that can actually help him that thing.
There are three ways that I think an investor really adds value when they're responsive.
Filling knowledge gaps or founders. Some of those are known knowns, like I need help with growth, some unknown knowns, like an action plan that I need help with, you need OKRs but you just don't know what that thing is. Some are unknown unknowns, like this person doesn't recognize it but they need executive coaching. They need to learn how to become that leader in that company that they've now started.
Access to networks. A lot of founders just need introductions into their networks. They don't know how to navigate big corporates, they don't know about how to build a weighted sales pipelines, they're not spending too much time with big clients, and not enough time selling to smaller clients that can generate new revenue.
Fundraising and money. they need a bridge loan, or venture debt, or they need a loan or another round of funding in 15 months. These are their milestones. They'll ask me: "Can you make introductions to specific investors? Are these the right kind of metrics that those investors sort of think about?"
So those are the three ways I help founder: fill in knowledge gaps, access to network, and access to capital.
Looking at the list, it feels like it's also the last two that are particularly geared towards first-time founders.
That's my sweet spot. Second-time founders often have the pick of the bunch, they've been on the rodeo before, they've got a certain relationship before. There's a bias with previous investors that invested or missed out to say, "I want to get in on your next venture, regardless of what it is."
It's a bias because a historical track record is not a good indicator of future performance. But again, I got access to my friend's business because of the existing relationship, even though he says he's a third-time founder.
I've invested to get access because he wasn't raising money and he's not really trying to go down the VC track. That's where networks can be helpful, but at the same time, closed networks make it harder for diverse founders to feel good on the ships and raise that money.
Closed networks make it harder for diverse founders to feel good on the ships and raise that money.
It sounds like you do have a very hands-on approach. How do you balance the angel investing with your day job, the product management consultancy?
I'm very conscious of my time.
Monday to Wednesday, I work on the products consultancy. My client is in Switzerland, so I work remotely with them. Thursday and Friday, I try to spend time with the family as much as possible. But also use that time in April and September to run The Angel Investing School.
I'm very intentional with the boundaries around my work and family life. I'm not trying to run the school five or six times a year. I'm not trying to scale it fast. I'm just trying to do what works for me. That's what I want to do. But I've created a playbook so I might actually train the trainer to enable other people to run it in their local markets.
I'm compartmentalizing a lot of the work that I have to do today to fit around my lifestyle design. I'm an early riser. So between 5am and 9am, I do deep work. That could be deep work on founder support, it could be work that I need to do for the angel investing school or curating my weekly newsletter. That's the time that I really use in a structured way to really go deep because it is uninterrupted and a beautiful time of the day to just focus and get work done.
I'm compartmentalizing a lot of the work that I have to do today to fit around my lifestyle design. [...] Between 5am and 9am, I do deep work. [...] That's the time that I really use in a structured way to really go deep because it is uninterrupted and a beautiful time of the day to just focus and get work done.
You have specific rituals during the week around how you're using your time. It's very regimented.
It might not work for everyone but I do what works for me. My risk profile in my life changes and evolves and I need to be malleable and move off of that. I've got a 3-year-old daughter now. That means I need to bend to fit around her and my family. They're the sun of my solar system. I try and revolve around them, rather than work. For most, work is the sun of their universe. They work with a company and their life revolves around that company.
[My family is] the sun of my solar system. I try and revolve around them, rather than work.
Being in Silicon Valley, I can see the work ethos being super important and a top priority for a lot of people.
I lived out in San Francisco for about 7 months in 2015. I worked with a few of the VCs then connecting the startups to corporates. What is meaningful for me is that if I'm on my deathbed, and I know this sounds morbid, I'm not going to think about my smartphone, my laptop, my investment portfolio, or my forever home. I'm going to want to spend more time with my loved ones and family. So why wait till I die when I can do that today? That's why I've decided that I need to optimize for it today because why wait till I retire and live on the beach. I can have as much as possible today.
I wonder why people have such different priorities based on the different times of their lives.
Sometimes you need a trigger, a pivotal experience or moment. It could be suffering grief, being unemployed, going backpacking, etc. But there's just something special about spending time in the wilderness in solitude and just having conversations with yourself.
The solitude part can help you reflect and is a good counteractor to busy work.
It's very easy to get caught up, especially in a fast-moving city, like San Francisco or London.
Going back to angel investing, what are some unique questions that you ask founders when doing due diligence?
I've got a five-star due diligence checklist mainly when I invest in family-owned businesses.
[Interviewer note: I find that these can apply for start-ups too]
The first is capital efficiency. I want businesses that are capital efficient and have strong margins of 50% or more. That rules out early-stage startups who haven't even got traction yet.
I look at unit economics to understand if they really understand their customer behavior and how to acquire that customer relatively cheaply.
I want to understand the lifetime value of that customer. That rules out a lot of early-stage founders because to get lifetime value, they need some time to collect 15 months of data. I would argue, you need 18 months of data to really build up that profile.
I like when a business reinvests a lot of their cash flow into growth and have a high return on capital employed. It's a very private equity approach again.
I look at repeatable business models at scale. Have they actually achieved product-market fit? Do they understand the levers to pull to acquire more of the same customers? Do they understand deeply who those customers are? So that's the first thing of customer efficiency.
The second is I like playing the long game. I see whether my incentives are aligned with this company around playing the long game and building the legacy and they don't want to exit early whether that means selling to a private equity firm or getting acquired by a bigger company.
It's important to understand where in this person's lifecycle they are. I always try and tease that out if I can, and then look at the principles they use in making smart decisions on a consistent basis. In assessing the founding team, I always think deeply about:
Why now?
Why is this founding team well-positioned to grow this business?
Why are they doing this idea ( what is the mission)?
Is their attention divided or focused on executing this idea?
What principles do founders use to make smart decisions on a consistent basis?
I look at the founder to measure their customer-obsession and how well they understand the business.
Questions I ask:
Are they meaningful with their vision and their strategy?
Are they goal-orientated?
Do you understand the problem?
Do they obsess over customers, not competition?
Do they understand how to grow organically through just delivering a great product experience? From registration fruits or repeated use?
Is there a high level of like word of mouth recommendations because people love this product?
Do they create free content, community, and great product experiences?
I lean on my product expertise. I always try and look deeply at the product, the customer in their market positioning. I always try and look for the community especially in modern-day products. It was the founding team is really going deep on understanding their core beliefs and values.
I always try and look for evidence of nonconformity in the founder's background and what they learn from that.
Have they gone backpacking?
Have they started a club?
Have they been the president of the entrepreneur society?
What have they continued to learn outside of school?
How do they react during bad times? How did he react when the metrics aren't doing so well?
How do they overcome adversity?
Have they got signals of resilience in the stories that they tell me about how they grew up and the things that they've done in their life?
You know, I love when founders have skin in the game when they've invested not only time but their own money in their business and when they feel like they're serving something bigger than themselves. They're in servitude to something, because those people often are more willing to go further than the average person because this is more meaningful to them.
I look for people who can inspire followership. How many people that they've worked with at previous companies have followed them here because they believe in them, they want to work with them again? They're opportunity magnets.
I look for people that are focused. So no side gigs, I don't want to hear that they've got five board roles or two other ideas. The interesting thing with criteria is that there's a level of bias. People are going to succeed who aren't in these criteria, for example, someone who manages Twitter and Square at the same time, and that's okay. I'm okay missing out on that.
I love when founders have skin in the game, when they've invested not only time but their own money in their business and and when they really truly feel like they're serving something bigger than themselves.
5. Am I a good fit for them as an investor?
I asked founders to evaluate if I can fill the knowledge gaps, and bring introductions into networks or business development. Am I responsive? Can I provide the capital and introductions to capital when they need it? The last thing is that honestly, they should ask are we value-aligned? Can we work productively together? Because if not, then it's not going to work in the long term.
Has there ever been a time where you've had to convince someone to take your check over someone else's?
When I was in my role at Backstage Capital and we invested in Tambua Health, a Kenyan based start-up. From that day to now they are oversubscribed with investors that want to invest in that round. But what really took me over the edge when I got to know the founder and the founding team was their personal story and relationship they had with the problem that they want to solve.
The fact that the person says to me in our conversation, "this is my life's work". I believed him in my heart and I saw that check into his business as the opportunity and the privilege to go along this journey of supporting someone doing their life's work regardless of how it turns out.
He knew that I would be here to support and help as much as I can along this journey. We worked quite regularly unstructured and ad hoc to check-in on each other's families and to see how we're doing.
We became friends, I think it's nonsense to compartmentalize who can and can't become your friend. Your colleague is your friend. Your peer at university is your friend. You can make friends anywhere. It's the same founder sometimes. That's a deal that I think emotional intelligence brought me into the deal and the end of the day.
He took your check because you connected on an emotional level.
There are also founders that I've missed out on but with whom I have a great relationship. They're still gonna raise in the future again and I think they would consider taking a check for me because of the relationship.
It seems like what defines angel investing that people don't talk about are the relationships, it's actually caring for other people.
Absolutely. I always say that relationships and knowledge work similar to how money compounds over time: the more you invest in it, the more it really grows in interesting ways over time.
I always say that relationships and knowledge work similar to how money compounds over time: the more you invest in it, the more it really grows in interesting ways over time.
Do you use any tools for angel investing?
I'm a heavy user of Notion. Notion is my internal wiki where I have my carry out my due diligence and my basic spreadsheets. It's my CRM where I track my relationships with different people and the meetings I had with them. I can look back at like this person in my CRM, and the 12 meetings we've had over this year, and the dots between things that I've noticed during those meetings. I'm a heavy user of Notion for angel investing.
I also use Google Sheets when I want to do something more complicated around due diligence. I also use Google Docs with lawyers or for things like term sheets. It's easy to collaborate and highlight and send things back. My tech stack is broader than that. But for angel investors specifically, I think that's it.
Is there an investment that you're proudest of?
Is it cheesy to say the investments I've made in myself?
I think that's a good answer.
Spending time to be introspective and developing guiding principles, mental models and ways of making decisions has really strengthened my ability to coach others and to empathize and connect with people. When you connect the dots, through product management and writing and nurturing relationships, it's quite powerful and unique when you can bring to the table.
This year, I invested in a micro private equity course and a pre marriage course which is a whole other experience on learning about communication skills. But those are the investments are really important those investments that I've made into myself.
What's the number one piece of advice you want to share with aspiring angel investors?
Direction over speed. When you first get into angel investing, it's easy to get excited and deploy all of your money within the first two months in the first couple of deals that you see when really it's really about portfolio strategy. It's about thinking how can I invest in 20 businesses because the probability of failure for new businesses is so high and how can I spread my risk across industry business models, geographies, and make sure I have a really diverse range of startups and every sense of the word, actually.
Then how can I double down and follow on on my winners in 12 or 18 months, I save enough money, I saved two-thirds of my capital, so that I can deploy more capital and the five out of the 20 stocks, I really do well, and that requires discipline.
Direction over speed.
Where can people follow you or reach out to you?
People can follow me on Instagram here, Twitter @AndyHVC, LinkedIn here and on my website andyayim.com, where you can sign up to my newsletter.
My angel investing school is at https://angelinvestingschool.com/.
We would love to hear from you. Do you have any questions for Andy around angel investing? Feel free to leave a comment below.