DevReady PodcastDevReady Podcast E27 – Ins and Outs of Startup Investing with Angel Investor Hamish Hughes

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On today’s episode, Andrew and Anthony speak with angel investor Hamish Hughes about how he got his start as an investor, and how the process of seeking investment rounds actually works.

After a short stint in politics, he was drawn to the VC world based on how popular it was in the UK. Moved by how under-developed the industry was in Australia, he took up investing work there.

Hamish discusses the role that investors play in the early stages of startup development and takeoff, and he shares some of his own stories. He explains some of the things that startups really need to consider before even approaching an investor, how to contact investors successfully, and how to scale after funding the founding of the company.

Andrew and Anthony also pick Hamish’s brain about the world of VC investing, what makes companies successful, and how to avoid failure (if you’re in the 10% of companies that succeed).

The best takeaways from today’s episode are centered around demystifying the investment process, as well as some of the tips Hamish offers up to debunk investing myths. Best practice is to have a good idea, don’t worry about others stealing it, and don’t expect investors to buy into something if the potential for return is not high.

And above all: be actionable. There are a hundred million dollar ideas—but only some are executed.

Topics Covered:

  • How angel investors actually fund startups.
  • The kinds of projects angel investors tend to work on.
  • What startups need to do to continue to attract investors early on.
  • Documenting and prepping the first round.
  • Advisory boards are not in the guts of the business.
  • The problem of the “mid-life crisis” entrepreneur.
  • Why you should avoid NDAs as a startup.
  • Reputations are painstakingly built and easily destroyed.
  • Niching is just as interesting as a common, but valuable, idea.
  • Risk is fine, but the return for an investor needs to be correspondingly high.
  • Valuable doesn’t necessarily need to mean tangible.
  • Scaling after the first round of seed funding.
  • IPOing as an option for funding.
  • Hamish’s tips.
  • You need something with an easily translatable narrative.
  • Hamish’s thoughts about the future of investment houses.

Key Quotes:

  • “The biggest investment I was overseeing was about $4M.” (7:35)
  • “In between [family funding and institutional funding] is the valley of death.” (11:20)
  • “Anything beyond five months, you’re guessing; anything beyond three years is a pure work of fiction.” (13:10)
  • “You can outsource the initial stages, but at a certain point, you have to be able to bring it in-house.” (19:48)
  • “90% of companies will fail…even if you do everything right.” (25:20)
  • “Any investor with any experience is going to walk away from an NDA.” (32:45)
  • “Idea and execution are two very different things—the company that is successful is the one that executes on [their idea].” (34:45)
  • “Do your homework on the investors as much as they are doing homework as you.” (44:30)
  • “Most angels are only making two or three investments a year.” (46:00)
  • “The rule of thumb for investing in IPOs is…locking in a 20% return on what the IPO actually is.” (55:20)
  • “You need to have an upside in the market that’s easily explainable.” (57:25)

Contact Hamish:

LinkedIn: Hamish Hughes

His email: hamish@fairhavenadvisers.au