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Together is the Way
3 takeaways from my conversation with Patrick Farrell, Executive Director of Potomac Angel Capital
Investing together is just better than investing alone.
Today, I’m breaking down 3 takeaways from my discussion with Patrick Farrell, Co-Founder and Executive Director of Potomac Angel Capital.
Check out our full conversation + how to connect with Patrick here:
The Observer Express
Don’t have time to read the entire post right now? No worries, here are today’s 3 takeaways:
Don’t be Afraid to Say “No” if it’s Outside the Bulls-eye. Staying focused on the group’s core thesis is really hard to do, but is essential.
Take the Time to Ask Personal Questions. This tends to reveal unique insights about the business.
Angel Investment Sweet Spot: 5-10hr of Work. Above or below actually reduces the likelihood of investment.
1. Don’t be Afraid to Say “no” if it’s Outside the Bulls-eye
I appreciated Patrick sharing this lesson learned. While it’s great to be flexible and opportunistic, Patrick’s point illustrates how it’s so important for investor communities to exercise self-control and focus on the things that fit the group’s thesis.
At one point we had an opportunity to invest in a later-stage company. We were investing alongside a major US investor. It was something that the broader market of angels were not seeing. But it was way outside our thesis, we didn't really have a relationship with the founder of the team, and we had no influence over anything that was going on. We just thought it was a good investing opportunity. And we learned our lesson because to date, of our 14 investments only one has failed and it was this one. It was the latest stage. It was the one that seemingly had the least amount of risk, but it was also the one that was most outside our thesis.
And so if I were to go back to a previous me, I would say, Hey, don't be afraid to say no to great opportunities because they don't fit your thesis. They don't fit what your group is all about. Being intentional about that will help curate the right people to join the group.
2. Take the Time to Ask Personal Questions
One way to level up “Team” diligence? Make the time to ask personal questions and really get to know somebody.
I think you can actually learn a lot about somebody when you ask them more personal questions. “Hey, tell me about your hobbies. Tell me about your daily rhythm. What do you care about outside of this? Tell me about your relationships.”
Learning those details that are seemingly innocuous can open up a lot of insight.
I'm thinking particularly of a founder. We learned by asking all those questions that this person had just made an extreme sacrifice on behalf of his employees and on behalf of his business. We're just asking questions about how they think about life. And we just learn this gargantuan detail, and we're like, oh my gosh, this guy is exemplifying all of those values.
And he really is who he says he is. And by the way, he has put his money where his mouth is. And that really spurred some of our investors to invest alongside them. Because at that point we were kind of 50 50 on whether we liked the business model and like the business, but once we learned that it was a huge accelerator.
3. Angel Investment Sweet Spot: 5-10 Hours of Work
Patrick’s rule of thumb: angels are most likely to invest if they spend between 5-10 hours working on a deal.
Grant Van Cleve, who is a partner at Tech Coast Angels (TCA), one of the bigger angel groups in California, read me some stats and what they had realized through their research at TCA was that if an angel spent less than five hours on a deal, they were unlikely to invest, but if they spent more than 10 hours on a deal, they were also unlikely to invest.
So there's some sweet spot between five to 10 hours. And look, I don't know if that can be validated for everybody. It's not like, “Hey, once we get in those zones, there’s totally no chance that angels invest,” but what they really learned is that there is this sweet spot and that I carried that forward and said to myself, well, how do we hit that sweet spot?
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3 Lessons Learned
The line between selling yourself well and gross self-promotion is very thin.🗣️While trapped in a painful conversation at a recent networking event, I was struck by this thought. Someone talking about themselves and their work is fine; after all, learning about what other people are working on is part of what makes networking fun. But it’s SO SO SO IMPORTANT to balance that self-disclosure with genuine curiosity about others. Otherwise, the counterparty is 100% leaving that conversation with a bad taste in their mouth.
Key product mgmt question: Where do you want to spend your resources?🎯This week I had a super helpful product conversation with Eric Schneider, an experienced entrepreneur and fractional CPO. My biggest takeaway? “You can’t do everything well. Focus and outsource/automate the rest.” Also a lesson in networking: Eric has delivered huge value for me without requiring anything in return. THAT is how you network well, and that’s why I’m happily sharing his name (unprompted) with you.
Consistent thoughtful content really does earn street cred.🎙️I felt something shift this week. If you’re reading this, you may know I’ve spent a ton of time and energy building The Diligent Observer brand over the last year, and especially over the last ~3mo with the launch of the podcast. This week, I had multiple conversations where someone referenced the pod/newsletter, and something felt different about the tone. It’s like there’s a new level of respect and appreciation for what I have to say and for the PitchFact brand. Pretty cool to experience.
3 Interesting Links
Tune in next week for a breakdown of my conversation with a Senior Principal at one of the largest and most active VCs in the US.
Until then, thanks for reading - have a great week.
-Andrew
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About Me
I cultivate flourishing.
I'm also the CEO of PitchFact, where our mission is to cultivate flourishing specifically through efficient and collaborative early-stage diligence. I'm a proud husband, grateful father, and honest friend. My love languages include brisket, bourbon, and espresso.