😇 Angel interview #3: Ali Altaf

"I like to invest in a founder who deeply cares about a problem space and really wants to change things. I want to help as much as possible and want to make sure our motivations are aligned. "

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Can you give a quick introduction of yourself?

I'm Ali. I'm a product manager at Pinterest and I've been there for 5 years. I spent 3.5 years in engineering and the last 1.5 years in product management. I started angel investing just over 1 year ago, initially through a scout program.

Once I realized how much I enjoyed it, I started putting my own money in as well. Towards the end of last year, I realized that there were a lot of people who wanted to angel invest but found it to be a pretty opaque and intimidating process. Within Pinterest, there were a couple of hundred people who were interested in getting started.

Myself and a couple of other investors who were at Pinterest started an angel investing syndicate. It's now been six months since we started and we've done five investments together. As of yesterday, over 200 employees and alumni are a part of the syndicate.

I realized there were a lot of people who wanted to angel invest but found it to be a pretty opaque and intimidating process.

What gave you the idea to start a syndicate?

Pinterest had just IPO'd (they IPO'd in April 2019) and there were people who now had cash and wanted to invest it somewhere, some of it in riskier assets such as venture. There happened to be a few of us who had started angel investing. Initially, we didn't know whether we wanted to create an opportunity for a lot of us to talk together and provide guidance or whether we should start a syndicate.

Around that time, we happened to meet the founders of the Lyft syndicate and loved the idea of a company-specific syndicate. The Pinterest brand is really strong and we decided to put the syndicate together. AngelList honestly makes starting a syndicate very easy because they handle all of the legal and financial paperwork.

Pinterest is in the social commerce sector. What type of investments do you make through the syndicate and do you lean toward the same vertical?

The common theme for PinAngels (the Pinterest syndicate) is that everyone either works at or has worked at Pinterest. But everyone also had a pretty successful career before and after Pinterest. So we invest across every single vertical.

Funnily enough, we have only done 1 consumer deal. Partially, that's because consumer is difficult. There's not that much consumer stuff out there. Most of our investments have been enterprise. Because we have people from all over the world we've done deals across the world: 1 in the US, 1 in Latin America, and 1 in India. It's because we have huge networks across every major market, it's easy to do diligence, even if you are not familiar with that market.

How many investments have you made so far?

About 15 investments, either individually, through a scout program, or via the syndicate. The PinAngels syndicate has made 5 investments over the last 6 months.

How often are you investing?

My investing comes in bursts: I'll spend six weeks not focusing on investing because I'm busy at work and then I might spend 2-3 weeks speaking to companies, going back and forth.

You mentioned that you have a day job being a product manager and that you are also spending time angel investing. How much on average of time do you feel like you're spending on angel investing?

It comes in bursts. It's not like in every given week I'll spend 10 hours.

Instead, I'll go through 3 weeks spending 1-2 hours responding to emails and looking at decks, and then I'll spend 2 weeks in a row spending 15 hours where I'll speak to a lot of founders and I'll do a lot of diligence. When there's a slower work week, I try to do a lot more investing.

It sounds like your workload during your day job will affect how much time you spend on angel investing.

For sure. There are some weeks where I'm just working all the time and it's just not possible.

Do you have an aim for the number of investments that you want to make per year?

No. The reason I don't is that I want to set a minimum bar for my investments, regardless of a quota.

If I meet a really interesting company and I think it's promising and I have the capital to invest, I'll invest. If I go 3 months, not meeting any companies that meet the bar, I won't invest.

One of the benefits of having a goal is you're more aggressive about outreach and speaking to companies. I try to speak to a founder every couple of weeks, 3 founders every 2 weeks. At this point, because I've made some investments and over time met other investors, I've made the process of learning about companies raising, more fluid. In the last 3 months, I've only done 1 investment.

How do you think about cheque size?

There are a few variables. At some point, I sat down and I said "over the next three years, this is the number I'm comfortable investing".

I want to make sure I invest in roughly 15 to 20 companies. The reason for that is I think I'm going to make a lot of mistakes. I want to make sure I'm learning a lot and I think volume is important to learn. I have decided on a max check size and another variable is the stage of the company. If they're in a later stage, I'm okay putting in a larger chunk of money because it's pretty direct. Certain companies also have minimum check sizes.

The reason for [investing in 15-20 companies over the next three years] is that I think I'm going to make a lot of mistakes. I want to make sure I'm learning a lot and I think volume is important to learn.

Let's say it's the week where you're spending 15 hours a week on angel investing. How do you typically break down that time?

There are a few things:

  • Outreach is relatively quick. I'll go through LinkedIn and my network and do all the outreach at once.

  • I'll speak directly to 2-3 founders for 30-60 minutes. In that meeting, if I think the company is interesting, I'll do some due diligence.

  • If I continue to due diligence, I spend 5-10 hours on that company.

The 15 hours is very skewed typically towards one or two companies, where 2-3 hours are speaking to founders, and the rest of it is researching the market.

What are some criteria you use when doing due diligence?

Broadly, every investor looks at some combination of team, product and market. Given that I only have an hour with the founders, the diligence is obviously limited. The things I'll try to figure out is:

  1. Are they operating in a relatively large market? Can they expand into another big market?

  2. What is the founder's product intuition? What separates them from other people operating in that market?

  3. How effective are they at executing? That last one's a little tricky to figure out in an hour, but you can kind of get a sense for their iteration speed and how quickly they're learning about their product in the market.

Every investor looks at some combination of team, product and market.

The last 2 evaluation criteria sound like they are really about the founder.

I invest typically at the seed round or just before that. You have pretty limited information, you're not going to see signals of product-market fit at that point.

What you really need to figure out is: "Is there a big market this founder is going after? Will the founder actually execute successfully in this space?"

The one thing I've been warned against several times is the misunderstanding between you and the founder around your understanding of the market. You need to make sure that you're listening to exactly what they say they're going to do and that you agree that that in itself is a great market.

Let's take VR as an example. Can you delve further into how you and the founder might think differently about a market?

That's a really good example because everyone has different opinions about how this market should play out. You meet really smart founders in the AR VR space. I think it's very important to make sure you understand what they're trying to build and not rely on your perception of where VR is headed. That's a tricky thing to do, at least for me, because I get overexcited about the market and I just think about what I'm imagining where the market is going.

Pivoting a little bit, how do you balance angel investing with your day job?

I feel lucky, I enjoy my day job a lot. I also get a lot of energy out of investing. Speaking to founders who have these crazy visions for what they want to do, even when I don't invest in the company, is a lot of fun.

They're putting their life on the line to build out something over several years. That's very energizing and pretty inspiring. If there's a market that I think is interesting, reading a lot about that market is a lot of fun. It's also a lot of fun to apply my skills to help a founder.

Do you tell your boss that you're angel investing or discuss your angel investing?

I'm pretty open about it. Initially, I was a little concerned that if I was to open about it, people would get concerned that I'm not focused at work. But when I got to the point where I felt like people trusted that I did my job effectively, I didn't mind sharing that I was doing this on the side.

I'm pretty open about [angel investing] [...] When I got to the point where I felt like people trusted that I did my job effectively, I didn't mind sharing that I was doing this on the side.

You mentioned that you have a lot of fun while angel investing. What is the main reason that you angel invest?

There's a great blog post written by Alex Danco, an ex investor and jut an amazing writer - you should read everything he writes because it's amazing. He talks about how angel investors are in it not just for financial returns, but also for the social returns. I buy that.

In addition, for me, there is something amazing about meeting a founder who has a vision, even if it's in a small market, that they've decided that they care about. It's incredible to see a team sit down and say "this is what we're going to build. We're not going to make any income for a couple of years and we're going to produce something from scratch."

It's incredible to see a team sit down and say "this is what we're going to build. We're not going to make any income for a couple of years and we're going to produce something from scratch."

I agree with you. There are a lot of the companies that are extremely successful now but they don't publicize the fact that they've been near death multiple times and that it's pretty common.

I know, and you really get to see that journey as an angel.

Do you have an investment strategy?

I don't have a top-down thesis where I say "this is where I think the world is headed, let me go find founders who are making products in that space". For me, it's very much about speaking to as many smart founders as possible and find the ones who are operating in a huge market and have an incredible product that makes me think that they have a good chance of building a massive company. I've invested in a weather forecasting company, standard enterprise software companies, and alternative meat.

[My investment strategy] is very much about speaking to as many smart founders as possible and find the ones who are operating in a huge market and have an incredible product that makes me think that they have a good chance of building a massive company.

How do you source? With a criterium such as "smart founders", it feels harder to find the signal of a smart founder from the get-go.

... Which is why the number of conversations that actually result in me doing diligence is a pretty low percentage. I'll look for founders that have an interesting operating experience in an industry that they're building a company in.

I might know someone who worked with them and I can get further validation there. Then, I just need to have that conversation and trust my judgment. To be fair, I'm not going to have a clue if my judgment makes any sense for several years to come.

How do you figure out who to reach out to?

For example, for someone starting a VR company, I'd want to see whether they have some operating experience in a high growth VR company. I'll do some custom LinkedIn queries to find "founder", "co-founder" titles where their bio mentions VR. You can do that same process in different verticals. It's a rough heuristic.

We talked a little about due diligence. Do you have a unique question that you always ask when you have a call with a founder?

There's one question I like to ask. I'm surprised this is a unique question, but a couple of times a founder has said no one's asked them this question. I always try to understand why they're starting a company.

I don't think there's a perfect answer to that question and it's not a trick question. Personally I just like to understand when I'm investing. I like to invest in a founder who deeply cares about a problem space and really wants to change things. I want to help as much as possible and want to make sure our motivations are aligned.

I like to invest in a founder who deeply cares about a problem space and really wants to change things. I want to help as much as possible and want to make sure our motivations are aligned.

Let's say there's a startup that you want to invest in. How do you convince them to take your check or someone else's?

There are two different scenarios.

One is if we're investing as the Pinterest syndicate group. It's much more straightforward. The founder will have access to hundreds of operators across basically every single role and across every stage of the company for a pretty cheap price.

As an individual, I think there are a couple of things. One is that I have 5 years of experience at one of the most successful consumer companies. A lot of the world is shifting towards learning from the consumer world, especially enterprise. The second thing is I make myself available to the founder. I think it's important early on to be super useful so that you can refer founders to other founders you worked with.

Let's say you've invested in a startup. How often do you stay in touch with the founder and how involved are you?

Super high variance, that's 100%, founder-driven. There are some investments where they send an update every quarter and I'll respond to the update. There are some founders that will reach out more frequently for a new feature they're building and ask for feedback.

Sounds like the minimum communication is once a quarter.

For the most part. Most companies will send out an update and they'll usually include requests for help from their investors in those updates.

What tools do you use for angel investing?

LinkedIn for finding people and then market research very much depends on what market it's in. Industry reports give a high-level understanding of the market.

What's one investment you're proudest of?

There one company that is personally very meaningful to me called Mighty Health. Mighty is building a digital wellness product to keep people in great cardiovascular shape as they get older. They're iterating right now but in general, I have a lot of family members who have suffered from cardiovascular problems and it's incredible to take a pretty simple technology to scale out amazing gear to people who either can't afford it or have access to it. That really speaks to the power of technology in a really powerful way.

It's incredible to take a pretty simple technology to scale out amazing gear to people who either can't afford it or have access to it. That really speaks to the power of technology in a really powerful way.

What would you say are some of the biggest challenges with angel investing?

There are so many, especially when you're starting out. I think access to good deals is so difficult because money has become a commodity. You have to find amazing companies and then you have to convince these amazing companies to take you into the round. Those are just very difficult things if you don't have a network.

I think access to good deals is so difficult because money has become a commodity. You have to find amazing companies and then you have to convince these amazing companies to take you into the round. Those are just very difficult things if you don't have a network.

What's the number one piece of advice you would want to share with aspiring angel investors?

Be useful. Often when I hear about people investing, the power dynamic is a little off where they think, "I'm doing the founder of favor".

It's important to flip that equation in your head and realize the founder is doing you a favor by letting you in on this amazing journey. That changes everything from how you email founders to how you speak to founders and how you interview founders.

Thanks for sharing your thoughts today. Last question: where can people follow you or reach out to you?

They can reach me at ali.altaf9 [at] gmail [dot] com