Hi, Breakfast Club members!

I’m writing this week’s newsletter from LA.

If you’re in LA and want to grab coffee and go for a walk, hit me up.

Heading to Boston next week to host Breakfast Club and will attend Tech Stars Demo Day, also on the 6th. And then will be back in New York.

Thanks to Citizens/Rob Hughes for sponsoring today’s newsletter.

• NYC Tech Breakfast Club [Thursday, Dec 14]

• Boston Tech Breakfast Club [Wednesday, Dec 6]

• Term Sheets

• Breakfast Club Member Interview with Super Angel, Steve Walsh

Hi, Breakfast Club members!

I’m writing this week’s newsletter from LA.

If you’re in LA and want to grab coffee and go for a walk, hit me up.

Heading to Boston next week to host Breakfast Club and will attend Tech Stars Demo Day, also on the 6th. And then will be back in New York.

December NYC Tech Breakfast Club (Holiday Edition)

NYC December 14th (It’s a Thursday)

Breakfast Club OG and elite VC, Lori Berenberg, is back to cohost the final Tech Breakfast Club of the year. It’s going to be a Holiday Breakfast Party.

We’re teaming up with Mike Wolkon, founder of Night Inn, for a bespoke breakfast experience—this will be the most elevated and gourmet Breakfast Club yet!

Night Inn brings live, curated experiences to you—from interactive wine & food pairings to cocktail making—led by the industry’s best. They work with private groups and companies to create exceptional events.

Sign up by clicking the image, or either of the two buttons below or this hyperlink right here.

Boston December 6th (Wednesday)

Kylie Bourjaily, Jay Parekh, and I are gathering to celebrate Jackson Fordyce and Josiah Simons from our favorite VC news podcast, Venture Daily.

If you’re not already familiar with Venture Daily—you should be.

Sign up by clicking this link or the button below

Breakfast Club Expansion: Los Angeles

We’re going to LA in January—sign up.

Stay tuned for details!

Citizens ❤️‍🔥 Startups

Special thanks to Rob Hughes and Citizens for sponsoring Boston Tech Breakfast Club. Rob is building out the VC/Innovation banking practice at Citizens, after almost a decade at First Republic. He specializes in working with emerging innovators and fund managers and is the #1 guy to know in Boston (my words, not his). 

Shoot him an email at [email protected]

Short Term Sheets

In the frothiest part of 2020/2021 I witnessed a lot of enthusiasm around having a really short term sheet – VC’s would often present having a 1-page term sheet as (air quotes) “founder friendly.”

In most cases, this is exactly the opposite of the truth. Instead of waiting to figure out material terms in the documents after you’ve locked yourself into an exclusivity period (term sheets have a “no shop” exclusivity requirement), iron them out now. Negotiate a term sheet that clearly states the core economic and control terms.

This doesn’t require killing a deal with weeks of negotiation. It just means slowing down enough (usually a few days) to understand key terms and have some honest discussions with the VCs.  

If there’s ambiguity – for instance maybe the term sheet says the “preferred will have customary protections” – get those protections defined. Otherwise, your lawyers and their lawyers will waste time (and money) arguing later over what “customary” or “standard” really means (it really means nothing), and you’ll be at a substantial disadvantage because of your term sheet’s no shop terms.

Any speed advantage of a short term sheet is usually outweighed by the drawbacks of punting heavier negotiation to a context in which founders are disadvantaged. By taking the time to educate yourself and negotiate a bit more in the term sheet, the overall deal will usually close faster, and with fewer power and economics-oriented “gotchas.” 

About Morgan
Morgan, besides running Tech Breakfast Club, is a Startup Lawyer at Optimal, an elite lean boutique startup law firm repping clients funded by a16z, Sequoia, Kleiner, Accel, and countless other VCs. He works with clients from formation to exit, in collaboration with Optimal’s partners.

Steve Walsh cannot be denied

One of the highlights of expanding Tech Breakfast Club to Boston has been connecting with Steve Walsh and learning more about his journey from VP at Comcast to now. He’s amassed a portfolio of 60+ angel investments and dedicated his life to helping founders.

Of course you want a tier 1 VC on your cap table, but you should also strive to find a couple super angels, like Steve Walsh - angels who will be relentless in figuring out ways to help.

How’d you end up here?
A bit by accident. I was a 25-year operator.

I like to say I spent the first part of my life building billion-dollar businesses for other people. At companies like Cox and Comcast. I helped them launch b2b units. At Comcast, we grew it from nothing to 10 billion. Then in 2018, I'm like, “Okay, this was fun. But I've had enough.” Regardless of how high in an organization you get - and I was a vice president at the largest broadband company in the world - I still had a life where somebody else could tell me what to do, when to show up, how I had to act, what I had to do, and that just got old. 

I didn't know what the next thing would look like. I was an investor in public and private markets. I started to do a lot of alternative investments – wine, art, crypto – so startups just made sense.

I have this gigantic network that I've built over 25 years of super helpful people and I know how to invest. Why don't I see if I can help founders. I know how to build businesses. So that's what I started doing and one lead to two and two lead to five. And next thing, you know, it's 62 portfolio companies later.

So when you get high up a major company – and Comcast, for those who don’t know is $175 billion company – there’s some amazing perks. Life gets pretty good... 
There wasn’t a sporting event that I couldn’t get into. Superbowl, Final Four, World Series, pick one. I miss that a lot. 

When we started our division, it was just three of us - 

Yeah, say more about what you built at Comcast.
The cable companies have always been known for residential services. They ignored the business space until the early 2000’s. Then all of a sudden, they're like, “well, we have this network. It runs past all these businesses to get to these residential neighborhoods. What if we started selling to businesses?”

They didn’t have the experience to do that. That was my background – “Hey, here's how you package it. Here's how you present it to business clients.” 

We started from scratch. 

How did you get that experience?
I was in the telecom industry. I started way back when it was pagers. Then it went to wireless. PCS. The Nextel days –

That was the Wild West. Before the dot com boom. Everyone forgets about the wireless boom
I cut my teeth on building B2B sales organizations and have done it at every level. Sales Rep to SVP. 

Okay, so they bring you in at Comcast –
Yeah, so at my first meeting ever, with the SVP who hired me, it’s three of us in the room, and I'm like, “how many markets do we need to launch?” 
He's says “25 markets in the next two years.” 
I’m like “okay, how much money do we have?”
“Unlimited capital as much as you can spend.”
“How many people have been hired?”
“In the whole country?”
“Yeah”
“So, including the three of us in this conversation...”
“Yeah”
“Three”
“What's next?
He stands up, and he looks at me and he goes, “I don't know, you're the two frickin smart guys we hired to figure this out.” And he walks out of the room. That was the first meeting and then 10 years later, it's a $10 billion business.

I felt like that gave me good groundwork for building a business from scratch.

You’ve made the point that you’re not the zero to one guy. You’re the one to 10,000 guy
I really am. I don’t do well when someone says, “I have a whiteboard, Steve, what should I build?”

I do well when someone says, “I built this crappy version one of our product, we put it in front of as many people as we could 100 people bought it. And then six months later, 1000 people bought it. And now instead of no revenue, we have $10,000 or $20,000 a month in revenue. And if we just had some capital, this could go from $10,000 a month to $100,000 a month quickly.”

I understand how to scale that. I understand how to take something that's already existing, has some traction, and connect it with my network and the resources they need. 

How did you make the jump from Comcast to life as a full-time angel investor?
I left comcast, went to Aruba, went to LA, took six months to relax. I started talking to a bunch of founders. I quickly recognized that a lot of these founders were incredible at building a product but struggled at the business stuff that I knew. 

“Steve, how do I hire a bunch of salespeople? What the hell is a comp plan and how much should be at risk versus salary? Or how do I build an enterprise sales team? Steve, I got this great product, I'm not going to hire people to sell it.”

They don't understand any of that. I just started helping them connect the dots.

I started going to demo days. Techstars, Y Combinator, other accelerators. When I started 90% of my deal flow was from proactively reaching out. Now, five years later, 90% of my deal flow is coming to me because it’s either founders I’ve worked with, their friends, or investors that I’ve co-invested with who bring me in on a new deal. Now it’s a lot of fun. 

Who is someone you love coinvesting with?
Matt Wilson. He runs a firm called Allied Venture Capital out of Calgary –

Did not expect Calgary
I didn’t either. I’ve known Matt five years. We have co-invested in probably 17 companies. We’ve syndicated seven. He’s tremendously smart. Former founder himself. He’s from Toronto originally. Loves to ski, so he wants to be close to skiing. He writes the best deal memo I’ve seen. He’s the embodiment of the give first mentality. Matt and I just hit it off. And when I have a deal that I love, or a founder that I love, he's always my first call. 

I tell him that I will give him first dibs at any good deal I have because he treats my founders with the utmost respect. He goes out of his way to be helpful, even if he doesn't invest. And I just think he just does business the right way. 

Tell me about a winner that you and Matt invested in together
My seventh exit – it’s a company called Zen Sports. Just exited in August. The company got bought by a private equity firm that’s doing a roll up of sports betting companies. 

I helped them get their Nevada gaming license. I had experience with Nevada gaming regulations. So, when I was working with Zen, they asked for help getting the license – and it was kind of fun. 

Even though I didn't work for the company, I had to go through the same certification process to get a license, which took over a year. I got investigated by former FBI agents and they went deep. They’re asking, “has anyone in the family been arrested?” all the way back to my grandparents. It was insane. I had to give like five years’ worth of tax returns. So, I actually got licensed for gaming licenses in Nevada as part of this through one of my startups. And Matt was a co investor.

They exited last year for $15 million. The founder wasn't psyched. He wanted to see this through. But what I liked was that everybody in the company got a job with the new company. Everybody got raises because the company buying them was three times the size. The CEO stayed on. Everybody gets equity in the new company that's likely going public. 

I talked to the CEO and I'm like, “Mark, you have not only done this once, this is your second company - you've exited both. You're giving everyone on the cap table a chance at upside with this acquisition. My only question for you is when are you starting the third company? And can I help you get the first money?”

As an Angel, only investing your own money, does that change the way you look at investments compared to a fund?
I joke that any x is a good x for me – I don’t need to have 50x. I’m not trying to return a $100m fund. I don’t want to be a fund manager. I want my energy to go to helping founders. I don’t want to manage LP’s. But on the other hand, this is my money – I could be putting it into one of my kid’s college fund. If I invest, my job is to make you wildly successful. So if you don’t want me to constantly try to help you and making intros, don’t take my money.  

The way I think about portfolio construction is that 90% don’t actually go to zero. I’m five and a half years in and of the 62 companies I’ve invested in, 60 are still around – only 2 have gone out of business. My math tells me that 50% will go out of business. Company 6 or 7 will probably be even money. 8 and 9 maybe 50x. And then number 10 will be the outlier. To get a Unicorn you need 30 investments. I don’t think, I know I’ll have 2 unicorns out of the 60. 

How did you get up to speed on sourcing deals, portfolio construction, all the things specific to venture investing?
I’m a pretty outgoing person, I have no problem talking to strangers. I was candid – I just started reaching out to some of the biggest angels of all time – Jason Calacanis, Zach Coelius, etc. I told them my story and that I was starting to invest in startups and didn’t want to lose my shirt, I want to provide tremendous value. 

Jason was easy 

[beginning an incredibly accurate J Cal impersonation]

“READ MY FUCKING BOOK. I’m on CNBC. Listen to my podcast. I’ve got the best pod in the world.”

Actually, an incredible resource – only spent like 30 bucks to buy his book, Angel, everything else is free. Definitely a must read about how to provide value at the earliest stages. 
It’s sad that this will just be a transcript because that was an A+ impersonation of J Cal. 

Tell me about Hands on Angel – where did the phrase come from? 
I was on an Australian podcast a couple of years ago and the host says “you’re really hands on – you’re a hands on angel.” My brother listened to the interview and goes “that’s the brand, that’s the website. That’s who you are. That’s how people should think of you.” It’s interesting – I leaned into it and founders started coming to me, not just looking for intros but looking for help with their pitch deck, help with hiring, help with strategy. I don’t need a board seat, or founder shares, or a long-term agreement, or a high retainer – let me just help. If I’m bringing value great, if not, kick me to the curb. If I want to come in, I’ll do it with my own money. 

You’re married – did you have to convince your wife that this was a viable career switch?
My wife is my best friend in the world. When I left Comcast, most wives would not be thrilled – big company, lots of benefits, lots of cash. She was like “oh thank god.” She saw how tired I was. I was exhausted every day. I had an assistant, who is a good friend of mine to this day, whose entire job was to walk me from meeting to meeting – I’d have 15 a day. She’d come to me at noon and say you have 300 unread emails. Here’s the 50 we have to respond to now. That’s my whole life. Oh, and your wife called, she wants to make sure you eat. This blows – it just did. Now, fast forward, I do exactly what I want, when I want and I only do business with my friends, people I care about, like Rob Hughes at Citizens.

How has being a dad and being very involved in your sons’ lives informed how you mentor founders?
I've got a bunch of founders, I know their spouse, I know their kids. I know their parents. One of my founders invited my wife and I to his wedding last year in Slovenia — in a castle. There were 50 people at the wedding. I was the only person on the cap table there. 

I'm sitting with them in a wine cellar in a castle at like two in the morning. And I'm like, “what am I doing here?” And the founder is like, he said, “look, man, you were one of our first investors, you helped us raise 3 million bucks. You're sitting on our board now. We can't think of not having you here. You're part of our family.”

When I met his parents, I said to his father, “your son is a really good entrepreneur, he's an even better person. And there's nothing I wouldn't do for him — nothing, raise capital, get customers – anything to make him be successful.”

When my wife and I were back in the car, on the way to the hotel, late at night, I was like, “I don't want to do anything else than this. This is it. This is the shit, man. It just is.” 

Having kids – I get the millennial/gen z world view. 

A good example, because it wasn't prevalent when I was 22, is the importance placed on respect. optionality, and feeling valued. When I was 22, respect was earned. You didn't get respect for a long time until you achieve something and someone paid attention. 

You don’t have to wait around to do something big. There’s no more asking for permission. 

Also, I appreciate the invite to your party at Art Basel – tell me about the party you’re hosting in Miami
I invested in this company, ROOK. Two founders – immigrants, one from Germany, one from Mexico City. Fabulous guys - they went through TechStars. Launched a great product got 20 customers - $2 million in contracts. Couldn't raise money to save their life. 

Why?
Just had never done it before and raising money is hard. It's complicated. I love their product, its b2b SaaS using an API that connects to every wearable and collects data. So, they integrate with Apple, Garmin, and Whoop. They take the data – your insurance company wants the data presented this way to know when someone worked out — you're an athletic trainer, you want the data presented this way, etc. 

I said “look, I love your product. I love you guys. Can I be candid? Your deck sucks and you're talking to the wrong people.” That's it. 

So, we started putting them in front of funds, angel investors, Matt Wilson – I intro’d them to Cross Ocean Ventures. Cross Ocean only invests in immigrant founders. And next thing, you know, they raised 1.9 million. We converted the company from a Mexican Corp to a Delaware C Corp.

So Marco, one of the founders, he’s moving the family to Miami. It's a big deal. He’s got a wife and two young children. So - hands on angel - I go, “Great. I'll help you. What do you need? What do you want? Do you need introductions?” And he goes, “Steve, we really want to raise the next round, maybe an A. But we don't know the Miami ecosystem.” 

I know Miami. Let's throw a party. Art Basel happens in December. People that like high end art tend to like investing in startups, a lot of investors come. Let's throw a party on South Beach.

If you made it this far - reply with an early stage startup you’re excited about