AI, Startup Investing, Due Diligence, & Angel Investing | TCA Venture Group Panel • 3

00:00:00 I'm a personally also Android investor aside from my day job I probably made already like close to 30 or maybe 40 Investments I would suggest do not do do diligence I mean this is controversial but it's just a waste of time I I like the founder I like the business I write a check welcome back everyone super excited to have you here I'm Lucas poles the managing partner of Pegasus Angel accelerator for another episode of VC unfiltered today we're taking you behind the scenes of an event that Tech Hast

00:00:31 Angels one of the largest Angel networks through here a couple weeks ago we've got a bunch of great panel of venture capitalist that came and gave unfiltered advice to some of the investors and so take a listen hi uh my name is sanjie RA I run River guide Labs U AI background uh then me out to start a few companies uh was a hired CEO and now I'm I run an investment firm called River guide Labs um we do very very sector agnostic not just Tech but infrastructure things like that um all across the world I also organize

00:01:08 events I think somebody the in the first panel talked about organizing events I also organize events as well where we we invite experts to talk about um subject matter expertise and so really looking forward to this uh panel here hi guys uh my name is Ean I'm a partner at Imark Ventures we're a local Boutique firm focused on on deep Tech investing we manage about $100 million under uh two main funds and uh another sort like close $100 million dollar under other side Vehicles so uh been investing in uh

00:01:43 deep Tech and AI for almost 10 years I was working with another firm before and being in the private investing for quite a bit so happy to share some of my uh observations I guess we all know um and this is the analogy I heard recently data is the new oil so since that's the oil is what makes a lot of country a lot of money and I'm a straight shooter I go straight to the tough question how do we make money in deep Tech and AI what how are you evaluating where you like literally how you monetize it good

00:02:27 question I'm not going to tell you how to make money cuz uh Secret L for hour that's what we want no I'm just kidding just kidding so I I guess it's a hard question deep Tech investing has been a pretty new thing for the last few years right so uh I would say you know to really make money here is basically the same thing other Tech investing right deep Tech just a subsector of tech right so the fundamentals are very similar with other Tech business right so aim for grow right you have to be gross driven versus quote unquote

00:02:59 Revenue driven right so all the others lessons we learned years of investing Tech Decades of tech investing still sort of like true for deep Tech investing right so although I would disagree on data is key in in this era so uh like investing data companies will not make you money for sure right so that that that's that's one thing we learned and and there's a lot of pitfalls in the in in the space right so I would say I don't think anybody have a good answer on how to make money but I sure know how to not invest right so

00:03:28 I'll say I know a lot of an you know things we shouldn't do but uh I just have be honest Nobody Knows the answer of how to make money deep tag yet can you go ahead and elaborate what shouldn't we do yeah like it's a lot of things we shouldn't do right like for example uh chasing the hype isn't one thing you know for sure to lose money right so we we all been through the bubble times like you know multiple times right so chasing the bubble and buy high sell low is always a way to lose money and this is especially true

00:03:59 right now in deep Tech especially AIS and all the jet AIS and Big Data all kind of stuff right so it's for sure a way to lose money right so but it's also a lot of way to you know monetize that momentum right so like we obviously try to moment M monetize that that that that momentum of AI and stuff but you know chasing the only chasing the hype is for sure the way to lose money right so and obviously uh figure out the way to actually make a profit business right so most deep tech company in the world in

00:04:27 the country right now does not have a sust business right they have a cool tack but no business right so that's I'm saying you know I constantly worry about is most of the company out there they have cool T but no business which honestly that's that's not the way to to run a business right so and this this can go on but that's the few thing to get started but markets of course it though you don't have to have Revenue you just have to have a good story and you have have the right Founders um attached to it and that b build the

00:05:00 story and it becomes the hype and so I guess no one has the answer to it but at the end of the day that's also why we're trying to tap into the B you panelist is right uh help us you know you in the area expertise we are looking at it from the outside and I'm going wow look at all these company going up high and high and higher and high multiple and they're saying it's only going to get better because I actually read um Eric Schmid who was the the axc uh the Google xcoo he says AI is not overhyped and he said

00:05:43 that last month so it was not overhype everybody except to expected to go higher but we're also in that era where this could be the Wild Wild West look at the internet era the ones that started are the one that left behind AOL is going gone right so how do we go through all that and figure out okay at Le this one's sensible actually we won't go there this finish the first question yes I I'll answer that question and answer the question that he answered as well uh so how do you make money in AI the way

00:06:15 and this is my opinion it's I don't I do believe that AI is not overhyped uh in the general sense of the word but specific companies are and it's hard to tell one from the other uh so the way we approach investing and we we invest typically larger amounts uh than venture or or Angel uh we invest in things like data centers uh things that are always needed no matter what uh in uh and just there's a lot of uh work to do on that front There's real estate there's you know the pipes that take uh that fiber

00:06:50 optics for example there's a ton of work that has to do that it's obviously not core Tech my background is I'm an engineer and uh data scientist U but as I learned as I looked into the space on how do you exactly make money in AI I can't tell the good companies from the bad yet but I know that everybody needs infrastructure so we're spending a lot of time in infrastructure uh in funding infrastructure that has outsized volumes this could be a real estate deal it sounds like it but it has 20x return in

00:07:22 3 years talk to me about it later if You' like but it's it's quite interesting this this crazy crazy numbers there on the flip side on the question of U what to look out for I would say policy is an important aspect regulations and such and and there's there's there's this notion that somebody some some of you may have heard is called Sovereign Tech which is I own ownership of my data not Facebook not Google or whatever and that that is gaining some momentum I'm not sure where it'll go but the reality is that at some

00:07:54 point government regulation will come in and it'll be hard to monetize data in the traditional sense that access or expedent and those folks did for a long time um so my my take on it is that keep an eye out for uh companies that are focusing on data as the as the asset I think you also mentioned that that data is not the acid and from that s standpoint but but reality is that you have to you really have to look at the combination of first- party data as well as the uh application layer on top of

00:08:27 the the data science that goes behind it so next question I have and I I share this story with some of my um peer um because I I I'm the president of TCC and so we are in Orange County and so we are a lot of MetLife science deal and so that's what we invest in primarily but if you remember we are called Tech Coast Angel so I am like we want to do Tech so what I did was I start follow the Hecker house and I flew to San Francisco and I start grabbing and you know put in all these founders of the AI deal and I get on

00:09:13 Zoom call with them because I am like these are the hot deal they just come out of their um you know the the Hecker house and so on the zoom call I bring my zag director I bring in my VP and we're try to understand what they're doing and and they are also trying to understand what we're doing but here's the catch it's not they're trying to get my money it's they are trying to interview to decide who they will take the money from so that's AI so here's my question how do we find the deal cuz I failed so uh

00:09:50 like I said earlier I'm not an angel so I've spent a lot of time building pipelines of deal flows from universities uh MIT stand Harvard Etc Berkeley UCLA as well um and and also through people who work at uh the big tech companies uh there they usually are the leading indicator of of a startup being created these are just very tested things you can always you know figure your way out but we also have relationships with VCS with other Angel groups and such uh just establish uh pipelines of uh communication ahead

00:10:28 of time so you're not waiting for the the hot deal it's like you get a steady flow and then you evaluate how to say yes or no uh based not on the hype because there a lot of people make decisions on what are what is somebody else doing right just evaluate it based on your own criteria and see if it's a good fit or not for your thesis and look at your portfolio as a whole um I also because of the nature of the work I do uh which is larger size deals I work with the attorneys CPAs Auditors and such wealth advisers who are looking to

00:11:06 exit or looking to do whatever I'm a I'm an investment banker now so so that that's the source of my deal flow and through that I also get some early stage uh deal flow as well so for whoever is interested I can send out like maybe a newsletter or something like that to to give you guys access to some of my deal flow I don't know how to do maybe I'll talk to you about that on exactly how to do that but I got too much to handle yeah I'm not going to lie this is a a problem for for Angel group I know I

00:11:33 know I'm talking to a bunch of Angel group but you know getting deal flow for Angel group is almost impossible nowadays right it just there's no good solutions to be honest right it's a it is a very competitive market out there even for us we have to fight for deals every day and this is literally my day job right I have to go fight for deals every day and we have to prove value to the entrepreneurs right right so and for a you know every fund right now like our size or bigger size goes to an earlier

00:12:00 stage so there's really no room for Angel for most deals right just to be completely honest right I'm just a brutally honest person right so there's there's no room for in most deals for Angels right that's just reality but that doesn't mean you know there's no opportunity to invest at all right so for for most of cases I would say angels has to have a special focus on a very special Niche sector to win deals right if you're just a angel investor will say okay I'm just going to invest in every single deals I saw that I think is good

00:12:31 uh guarantee you won't be able to see any good deals right so the the good angels we work with a lot of different angel investor the good ands are all senior entrepreneurs or senior Executives at some company and they only invest in that particular sector like we we know a lot of angro investor that are running a robotic company and they only invest in robotic companies right or AI entrepreneur you know funer for proxy we know them they they for example only invest in AI deals right so you have to

00:12:58 have a vertic ized focus in order to win deals and Source deals if you just go is a traditional sense like 20 years ago I'm just going to open up a portal and let people apply for it nobody going to apply for it right just just reality right so you have to have a very strategic focus in one vertical that's only way you can win deals right so and and for for us as institutional investors even for us we need to have a focus now right because everybody is trying to compete deals right if I just say I'm investing address in B2B SS

00:13:33 that's literally 90% of the deals on the market you can never win a deal right so and honestly uh for the for the hot AI J AI deals no matter what you're going to have this problem right so I think I think the real solution is you just have to really invest in deals that are underappreciated right the hot deal doesn't mean it's always a good deal early stage right so we've no deals that raiseed hundreds of million dollar in seed run and still dies in two years right and we also know companies that

00:14:06 couldn't raise the seed run and end up raising millions of dollars actually kab bio one of our portfolio company they struggled to raise the seed Ron we were one of the first investor and then they raised more than $60 million right after that right so the good company doesn't always means a hard company right so you just have to really think through what's really your strategic focus in what sector right so uh but yeah I mean another way to do it is honestly go out and talk to people more right so you

00:14:36 know so much of the our job my job is to now work with different Founders and different senior people you have to spend time now working people and now working with the right people right so if you want to Source good deals you have to talk to Founders a lot of Founders right so that's the only way there's no other way it's honestly it's a tough Market out there so it's still seller Market it's still not a buyer Market even though it's think it's a buyer Market still pretty much a seller Market I'm a personally also Ang

00:15:04 investor aside from my day job I probably made already like close to 30 or may 40 investment uh you know personally not aside from my day job the you know the only way you can get one of the way you can get good deal flows is to constantly start investing right because I know I talked to a lot of different friends Angels they just don't invest I mean they're angel investor but they made like one investment two investment a year right so it's just not going to work cuz you have to build your reputation in the community right if you

00:15:31 never write any significant check at Android investor like why would people want to talk to you guys right it just doesn't make sense right so as as individual Android investor build up the track record is extremely important and you're going to lose some money honestly because this highrisk investment you're going to 80% you're going to lose that money right but it's it's a power law game but but but like so much of a pitfall of Android investor is do they don't invest that that's just literally

00:15:57 the problem of being Android investor in Southern California like if I go to I go to Bay Area almost every week Bay Area Angels they write a lot of checks right so they are very active every Android investor write a few checks every month maybe like some rot like 10 15 checks a year or even month right so it's really active there but over here you know once once every month once every quarter once every year sometimes right so like you're just not going to have the just the the build up the network you need it

00:16:30 right so you have to start investing you have to spend that much money right so that's the thing to in order to get deal flow you have to start invested first the deal is not going to just come over to you just by like default right so right okay so now I know where my deal flow is coming from this guy okay so the next question is I got a deal flow from you guys I need to do diligence and it's a chicken and egg thing you say I need to invest a lot to get a lot of deal but I can't invest a lot unless I really know a lot and so

00:17:05 how do I or as a group in the angel level how do we equip ourself and how do you do the due diligent like you come in you have a it's very popular everybody's using a CMR customer service a digital hell there's certain application that's really hot right now but how do you do due diligent on that how do you validate the tech so prior to my Investment Banking and investment background I spent 30 years running companies and in the course of doing that I established relationships with hundreds if not

00:17:42 thousands of uh Executives and such so like you I Rely a lot on them and I have uh so there's like it's like here right so there's probably thousands of people who are quote unot on call to hey can you check can you check this out and and somebody else might be maybe it's next next year up is people who work at UH VCS like you know an associate or somebody like that who whose day job it is to evaluate methodically so I have a few hundred people like that who uh participate in this so it's like a it's

00:18:13 it's a community aspect where you you keep you share the rewards as well like they're not doing it for free uh I'll give them advisor shares or portion of the carry or something like that and that's that's the way that they can get involved and what I get out of it is expertise there's no way that if even if I had 50 people that they'll be able to match the expertise of everything that's being built out there and uh so I rely on networks of networks and just sharing the wealth which is in in my case it is

00:18:42 carry or or Equity or cash or something like that and that way it you're not you're not asking somebody for a favor they're getting something out of it yeah I mean just acto on the all the all the other knowledges so uh for us as the institutional fund we do a lot of diligence Works internally but we also have third party diligence services that doing technical diligence for us but that's also you know we also build a deep Network within the sectors we like to invest in like for example in synthetic biology we spend a lot of time

00:19:14 on we pretty much know all the top researchers in the world that can actually validate technology for us right but that's where having a focus is helpful and important because that's only way you can know the people who you can talk to right so and obviously you know we have a lot of different third party we can tap into and do this market research and all kind of stuff and we always do you know internally do our reference call ourself we do you know a customer reference all kind of stuff right just obviously list of stuff we do

00:19:42 as institutional fund although for Angel Investing again I I don't know the top topic as Angel Investing I would suggest do not do due diligence like do not do any diligence I mean this is controversial but diligence is overrated for Android investing like like it's it's use less I mean not even joking it's it's it's just a waste of time and effort you should not do the origence at anual investing you should only investing any company if you trust the founder not trust the T or business that's my philosophy and investing

00:20:12 honestly uh I made more money investing in people I trust then the the the investing I just kind of like doing bunch of diligence Ango investing earlier stage right so I did bunch of diligence do all that work read bunch of market report use the perplexity to do the research and work honestly right like it's at early stage it doesn't matter customer attraction doesn't matter the product doesn't matter every company will pivot you will end up investing a complete different company in two years right so

00:20:41 it just doesn't really matter right honestly it's a waste of time angels for angels to invest and do diligence I mean honestly that's the truth and if you talk to any serious angel investor in Bay Area Eric Schmidt he has the fund but he's also a good good Ang investor Peter til they will tell you we don't do diligence when I write angro check like it just I I like the funer I like the business I write a check it's it's honestly a waste of time to think about diligence for for Android investing like

00:21:11 I not a joke for real it's like what you're going to do D now though like they have nothing I agree with him uh probably not to the level not to the extent that he's talking about but one thing I will say that you can do other than liking the founder uh is to to see how transparent they are like are they able to open up about issues uh in the company that may occur that in never going to occur down the road so the transparency piece is an important angle that you can assess as an angel investor in in a meeting or two

00:21:46 uh like did they say that they're going to send something and did they actually send it like are they are they being defensive about the questions that you're asking about or are they like they understand it and they have a good like let's brain on this through so people who are transparent generally make good founder CEOs early State CEOs in my opinion I also Angel invested for about 10 years now uh about around the same number of companies that he has so yeah that that's that's I would say an

00:22:13 important thing that you can do um oh there's a question there how do you evaluate a non-technical Founder as a deep Tech founder if the value that you creating to the buyer uh of your product or service is fundamentally technical in nature then you should P up with somebody who is an expert in that area but and if you're let's say it's a good pading between go to market let's say you to go to market on and operations on the other person's technical side on the technical side well in that case you

00:22:44 have to learn how to talk to talk the CL you know the things that the your buyers will care about forget about the investors and angels and whatever they don't matter what matters is your relationship with your future customer and how much how will they treat you the the pair of you right you and your technical co-founder it's really important to establish that as early as possible even if you're thinking of starting a deep tech company today I'm very against non-technical funders starting a deep tech company it's just

00:23:13 impossible right I mean it depends if you want to do a a chat gbt rapper go ahead you can do it uh but if you want to start a nuclear fusion company I don't know how I want to start a nuclear fusion company how can I do it without like a a PhD Nuclear Physics for example right so but I'm also very against with the only technical founder right so you always need a little bit B right so uh I mean we have too many horror stories like serenos and all kind of stuff right so uh it's it's a tricky thing but like

00:23:41 overall I think in in particular in deep Tech you do need a technical Founders and you do need very good technical Founders in my opinion and you typically need a you know some sort of like peer review research to really back your claim right so versus that you know sending a snake o which to be honest so many of them out there right so uh yeah I'm I'm against to it but again like I also seen companies that essentially a non- technical founder but very legit you know like a senior executive start

00:24:09 company and I hard a bunch of people work around him right so it could work it just a personally I don't really like it but it's it's not saying it will never work right so so back to the due diligence I agree and I disagree I kind of agree not have to do due diligent in a way because because I love telling the story I invited a friend to go to a forum that we hosted she was a ex Banker Finance year she set through a whole day of a presentation at the next day she said I gave one of the founder a check

00:24:48 and I say excuse me you're supposed to do due diligence she says no I like the founder I gave him a check and so two years years later she had an exit and so she's 100% but I think from us angel that does do due diligent regularly I like to think that's our security blanket it's hard to like blindo and jump off the cliff that's what it feels like without due diligent I would think that's what most of us would agree um so we're still going to like maybe dip into it a little bit so the next question is is now that

00:25:30 we're kind of doing due diligent or skipping it and we like it okay we like the founder how do you assess valuation it's flying high everybody jumping in with the same hot deal do you just go with the flow and just valuation doesn't count in this era as far as Ai and DET Tech goes is that how it is again controversial thoughts I'm just a controversial sorry not trying to be deliberately doing the is but yes go in the flow valuation kind of doesn't matter for Android for Android investing even for VC investing right

00:26:06 because people don't talk about this enough I mean if you go to any like website you don't read this but you probably read about this but early stage investing Venture investing is a PowerAll game right it's not about consistently making small Wings it's about having the big wings it's not a real estate investment it's not a private Equity it's about power law it's about winning big right so in the typical early stage at Android stage even at series a the valuation typically doesn't matter too much obviously for us

00:26:38 we we we do carefully look at it when we need a deal with priceing correctly all that but as an Android investor most of the time the price is reasonable already is already priced reasonable to some degree right so if if you think it's too too crzy don't do it but honestly most of the time earlier stage it's very binary it neither become a huge company or it become a zero right so at that time you know chasing that 20% discount 30% discount kind of doesn't really matter if you just from the whole big

00:27:09 picture if you do the maass it doesn't matter CU you know asking for 20% discount for zero company this is still zero right so any number times zero still zero right and if you own very tiny piece of Google it's still very huge amount of money right so chase the momentum is the right thing in menture honestly people don't it's that's the thing it's very counterintuitive right you don't you don't want to think like you know I don't care about valuation but I I tend to uh think about valuation as U not a

00:27:42 the most critical piece but an important piece in Angel um it it's not in my opinion it's not like it doesn't matter at all it does matter for the reason that that gentleman described it's you don't want to get crushed you're going to get crushed regardless but you don't want to get crushed a ton more than you absolutely have to if you don't have bargaining power it is what it is in that case ban up with other Angels who putting in Small Checks and then maybe can have a lead angel investor whatever

00:28:08 it is uh you know you can you can find your way through that but I would recommend not just giving it up uh and at least have a discussion about it like why do you think it's valued at $80 million when it's nothing's absolutely done um so anyway that's my take okay now we exited um do you have any you know all the company would talk about their exit have you experienced or seeing any really good exit since it's still kind of early stage for us we we do have a few exit that are good for us but it's a

00:28:44 private acquisition by public company or secondary sales we sold a lot of secondaries on the market on top of the market you know valuation is pretty crazy and we think we already made enough money so we deal we're very careful about secondary sales so we've been very we've be managing liquidity for our particular fund very well although that might not be option for Android investor the typical block is too small to do secondary sales but I there there the you know I guess broadly speaking deep tech there are very good

00:29:13 exit happen in last few years in particular in AI for example MOS ml sold to data break for about2 billion dollar and uh huging F just bought a few other business right so and sales force bought a lot of different business right so I was say there's a lot of ACD happening but mostly on the uh MAA Side by bigger company on the public side it's very much a depressing world right so the even the company goes through the IPO or or spec pretty much just all died right so but there are very good exit happened

00:29:46 uh in m space there's a reason I asked that question so if you experience exit and we're seeing a lot of exits around what do you perceive is the variable or the denominator or the parameter that exist that allow or make those company have an exit is it the founder is it the technology I I i' like to pick your thought on that use as MOS ml as example is purely the founder and Technology right cuz you know companies like data break or maybe even Salesforce they do a lot of acquisition as defense

00:30:29 type of acquisition it's particularly true right now in this age of generative AI right so company buys a lot of the best teams out there right so uh you know you can you can think about this as a glorified Aqua hire in the sense of they have best team in for example Ash Computing and then you know uh uh data break bought the whole te for2 billion dollars right so a lot of the application in deep Tech will be around stuff like that right around acquisition of the team the talent the technology underlying

00:31:03 technology uh obviously that will be in my opinion will be 80 to 90% of the companies sold in this space right for for now but eventually it's going to turn into a business game where we have to have real revenues and real business right but we're not there yet to be completely honest right so how many company in AI that has decent amount of Revenue right now right it's not many open Ai and Tropic or something like that right so in the short term will'll still be very much Tac driven tent driven and founder driven so this is

00:31:33 obviously llms have changed the world in a lot of ways but if you go back a little bit further for deep tech companies it is truly how uh it's all about m& it's not about public markets U and you know you got a from an exit standpoint you as a angel investor should start feeding in uh connections that you may already have to potential strategic buyers down the road uh um those things are are critical because you got to maintain and develop those relationships over time because it is a matter of who you know at the end of the

00:32:05 day uh to be able to shape your road map as well as uh Drive the right conversations at the right valuations when you do exit um so I think it's it is something that you can control as far as the product in Tech I couldn't agree more it was it's it's just really comes out to the product in Tech less so about the distribution side um and let's talk about defense for example right in defense technology like there's not that many companies out I mean people who can buy defense technology other than a few

00:32:36 countries around the world um if you think about semiconductors you know it's pretty crowded you know everybody wants to get acquired by Intel Nvidia AMD and such so it just depends on what vertical you're in you got to pick the vertical of course that you are knowledgeable about and uh figure out what you want to do from an as an angel investor how you can influence that that aspect of it and think of think of the exit your exit strategy your your own personal money as well as the uh as well as when you uh

00:33:05 the the company should exit uh which are not the same thing of course uh when you put in the check right so this is the transparency of the founder the you like the founder and how can I get my money back okay so we're going to open to Q&A what are some immediate red flags for a pitch deck that claims to have an AR so for me if it's it cannot be a thin wrapper around some chat gpsh thing that that is I would not call that deep Tech at all that is just yeah that that's that doesn't count so so the question is

00:33:42 how do you detect that red flag that was your question I would ask technical questions along how is it built how is it built until you get a response where they say I don't know or you get a satisfactory answer and if it's I don't know then is it because they don't know because the right the technical f is not in the room or because they just don't know because it's somebody else's technology um but if it's let's pick another example like sondu or something in that case you really have to understand the background

00:34:08 of the person who's talking to you it is a very deep technical you know world out there in terms of for semiconductors nuclear fusion you there's no bsing there you got to know your stuff actually how would you suggest between due diligence your question is what how deep should you go in due diligence for uh for tech for the Deep Tech aspect of things we touched upon this a little bit before my my perspective is take a take I mean it's usually the founders are more qualified than I am in that particular area that's why they starting

00:34:44 a company in that area and I'm not um and so there's a level of uh almost respect that I have for them so what I do is I in that case I rely on my team the one I told you about of the hundreds of people who are who may in fact be world-class people in some cases happened that I had the advisor of this person when this person got their PHD and they know about the space in a pretty fundamental way so you just have to I mean I it's obviously depending on your network but I I invest in multiple domains I'm not a I am a

00:35:17 generalist uh um I don't have a single Lane but that's why I develop those relationships across multiple sectors not just deep Tech but uh other areas as well I mean I I can't just maybe add yeah agree but but also again on the diligence piece uh I I'm not sure if you can actually look at the code and just doing really really that type of level of diligence right so at some level you have to find the network people to help you validate the funer not the tack again I mean you know if you talk to any

00:35:46 other VC engine investor they will tell you team is the number one if you want to do deligence do diligence on the team not the tack not the product it's just uh you know uh uh you can validate the tack by do diligence on on the team as well right so if they are a great team great researchers in AI sure they might have some good one if they are just kind of Faking it and then your adviser easily get some loost on your conversation hey this guy probably not some some of the probably is not the real tack right so uh do more diligence

00:36:16 on the team not the tack right like reading the code base doesn't help for us in particularly we we care about obviously compe very very much and for us one of the way we do diligence is around customer reference because we are very much deep in customer reference while we do in diligence we do average 3 to five reference cost of each of the investment we LED and and and during the process we always ask the potential customers or customers like why do you choose this guy and how many other competitors you

00:36:48 actually talk to right so a lot of time you know they the customers know a lot of more than more than us right so their customer talk to three or four competitive already right they they will tell us you know company a is the best because of some certain things right so because the end of the day you have to sell to a customer right so we do a lot of the competitive analysis based on customer reference that's I would say it's very important for us but as aside from that we obviously again we we do

00:37:15 all the traditional competitive analysis and Landscape research right so you know we can obviously do a lot of research on that but end of the day you know the buyers is is the one who ultimately made the purchase decisions right you have have to really make doing work around that right so uh but again like for Android investor for and stage at Android invested lot of time they have no customer right so like that's just not going to happen you cannot have a customer reference C they have no customer right so talking about deep T

00:37:45 how do you guys think about pents and IP and IP protection very loud but I think it depends for us uh for some type of company uh we really care about IP and and pattern and for some other type of company we we really don't care uh typically for software related stuff uh we don't really care about IPS or anything cuz you know you can't really do it but for some of the more physical science Material Science or some of the more system engineer work we definitely care about IP a lot and for me for us it's not only like we care

00:38:20 about IP but we also care about freedom to operate for the future you know potential lawsuit right CU that happened very often deep tack that people Sue each other I don't know we know the lawyers want to make some money I guess so uh this this very common so we want to make sure at least the company has freedom to operate that can actually operate in the space it's very clean IP space all kind of stuff right so we do care for certain companies and we don't really care for example for AI nobody

00:38:47 have IP quote unquote right so everybody kind of use you know their own secret sauce right like trading secret is more important right so uh but yeah it's a that's a good question yeah more or less what he said uh trade secrets are sometimes more valuable than uh filing um patents uh and freedom prop is is the name of the game it's really you don't a lot of people file patterns to feel good about it and and think that that's valuable down the road from a valuation standpoint my suggestion is don't worry

00:39:19 too much about that just focus on making profit uh because that is that never goes out of fashion okay we're going to wrap up and what I like each panelist to do is give our audience one key takeaway for the day by the way e Angels don't do due diligent is not it okay use as much collective bargaining power as you can as Angels uh especially if you know other people are going to considering putting in money here uh so that you can ask those questions what valuation where the go um those those things are

00:39:54 important take away our number one suggestion for me will be let's start writing checks to the whole So-Cal ecosystem because we need more angels to write more active checks right so and you know let's let's just uh write more checks for the for this year honestly that's just my my suggestion and it will be great for the community as well write more [Applause] checks thanks everyone for listening really appreciate it catch us on the next one subscribe to substack looking forward to it