Welcome back to Inside the Mind of a NYC Angel Investor, a popular series at AlleyWatch in which we speak with New York City-based Angel Investors. In the hot seat this time is Edward Lando of Lando Ventures. He has made investments in over 120 startups in a very short period of time and names in the portfolio include The Infatuation, Reddit, Built Robotics, Parsely Health, Current, and Simple Contacts.
We caught up with Edward on a nice fall day in Nomad to talk more about his start in startup investing, investment philosophy, the value he brings to founders, how writing a smaller check actually is an advantage in getting into competitive deals, and much, much, more…
If you are a NYC-based Angel interested in participating in this series, please send us an email. We’d love to chat. If you are interested in sponsoring this series that showcases the leading minds in angel investing in NYC, we’d also love to chat. Send us a note.
Reza Chowdhury, AlleyWatch: Please tell us a little bit about your background, how you started investing in startups, and how you got to where you are today.
Edward Lando, Lando Ventures: When I was in college I started asking more questions. Until then, I’d more readily accepted reality as I experienced it. I did work for the classes I liked but ignored the ones I found boring and instead started building products with my closest friends. Some of these turned into companies. We built everything from e-commerce sites to EMR systems to mobile social apps – whatever popped into our minds. When I graduated I moved out West after getting accepted into Y Combinator for GovPredict, a company I started with my close friend Emil Pitkin, who was a Statistics Ph.D. student at Wharton at the time and also my TA.
Over the next couple of years, I realized that what gives me the most energy is to partner up with my closest friends and build ambitious things with them. And finding new people early, as early as possible, while they are still secrets. Investing became a way for me to work with many people. It’s one of the fastest ways to learn a lot because you interact with many different personalities, styles, outlooks on the world. It’s also a great way to develop new friendships because you go deeper building something together than doing pretty much anything else. You’re at war against the world, on the same small team.
In a very short amount of time, you have invested in over 120 companies. How do you effectively manage so many investments with such a lean team?
I am still figuring it out. I like to help in bursts because I find it to be a very efficient format – helping a team finish their round, hire someone, make a big decision. I don’t think as an investor you should be over actively involved. If you’re an essential part of the team then you should be there in the trenches every day but otherwise, you should trust that a great team will figure things out on their own.
But I like holding contradictory beliefs and balance this by saying that I do believe in creating unfair advantages for the founders I work with. There is a powerful network effect that develops when you have a family of companies that can share resources and learn from each other. I have many ideas around this.
Is there a specific investment thesis that you deploy? Where is the sweet spot?
I’m a generalist, which means that I get to indulge myself in whatever interests me. It’s a very nice spot to be in. I think a lot of investors pretend to care more about their theses than they do and just use them for marketing/the illusion of differentiation. From what I’ve seen, no matter how prepared with hypotheses you may be, your best companies will often surprise you. It’s like falling in love. You think you have all the traits lined up but then someone shows up and you fall for them despite a lot of things.
My main motivation is to get involved with people and companies that feel like they have no upper limit, that I find exciting and positive forces in the world. Timing wise, my sweet spot is pre or right after launch. Sometimes, I participate in slightly later rounds. A great company is still very much worth it at series A or B, even for an angel.
With such an approach, do you participate in follow-on rounds?
If I can and it makes sense, yes. If you really hit a winner, there are ways to raise external capital to follow on as well, which is nice.
You’ve mentioned to me that you like seeking out the “under-rated entrepreneurs”. Please tell us more about that philosophy.
Well, it’s like value investing in the stock market.
You want to find people and companies that are priced lower than what they are actually worth. When you notice an exceptional trait in a founder, what you are really betting on is that you see some powerful intrinsic value that is too discreet for others to notice. Those others are concerned about more obvious signs of impending success and social proof, but you see it. And as time passes, if you are right, what was not very evident becomes much more evident and everyone begins to agree. The underrated entrepreneur then becomes correctly or even overrated 🙂 It’s more fun to look for underrated opportunities. You have a chance at being legendary, of course at making more money too. And in a world where there is so much capital, why be a commodity? Everyone wants to invest in something that is working. And if you can, great, you’ll probably do well. But where you’ll do best is before then, when it is not as clear.
Any plans to launch a formal LP backed fund in the future?
This sounds like the “Are you ever going to run for office?” question. I like my setup right now because of the independence and flexibility I have. If I can keep those qualities and if it makes sense, who knows.
Given that you are writing so many checks and the check size is relatively smaller than what an institutionally backed venture firm brings, how do you ensure that you are given an allotment in deals that you want to be in?
It is mostly an advantage to write smaller checks. You are not competitive but more collaborative. You can come into the same round as VCs or before. The way to get allocation given the small check size is to have a great reputation. And that mostly comes from whether you make an effort to be there and help founders even in the toughest moments. That type of loyalty does engender real gratitude.
Does your background as a founder help and if yes, how so?
Yes. In fact, I am not an investor. I just happen to be a founder who is involved in multiple projects. I’ve never believed in the distinction between the two. Often, the best founders are capital allocators. How would you classify Warren Buffett or Bernard Arnault? This is a Silicon Valley invention.
What are you excited about right now, from an investment standpoint?
I’ve always believed that entrepreneurship is applied philosophy. We live at a very exciting moment in time where you can actually fix the things you don’t like about the human condition – the things that are painful and horrible like the Black Plague was. So in that frame of thought, a couple of the areas I care most about are fighting aging, living healthier lives (physically and emotionally), self-actualizing, learning, meeting significant others, eating well, and more…
Imagine this – an entrepreneur has courted you and you haven’t committed to the deal yet. When you are ready to pull the trigger and offer a term sheet, you find out that the round is filled. What are your initial thoughts and what do you do to ensure that this does not happen again?
This is rare given my check size. If the founder really wants to let me in, they almost always can. But it has happened a few times where I put in a lot of effort to help the founder (high-quality introductions, advice, committing early etc) and when came the time to close the round, they didn’t let me in.
Sometimes they even let in people I introduced them to and not me, which I find a little ridiculous/a breach of common etiquette and common sense. The real, unpolished answer is that because I value loyalty so much, I no longer really want to work with them at that point so I don’t push for it. Investing in someone is a partnership. In fact, one of the investors I most admire phrases it as investing “with” someone. You are wiring money over for the pleasure and privilege of working side by side with a team. Why would you do that with people who are going to behave that way? They are not the long-term partners you want – it really is a double opt-in relationship.
Investing in someone is a partnership. In fact, one of the investors I most admire phrases it as investing “with” someone. You are wiring money over for the pleasure and privilege of working side by side with a team. Why would you do that with people who are going to behave that way? They are not the long-term partners you want – it really is a double opt-in relationship.
But it also makes me wonder what I could do better. What additional value could I provide to teams such that I really never miss anything?
What do you need to see from teams, both qualitatively and quantitatively, in order to invest?
Lifeforce. The irresistible, irrepressible urge to move forward and make rapid progress in an exciting market.
Also: crisp, simple, clear thinking. Knowing what the next steps are.
What metrics do entrepreneurs do overlook or not place enough emphasis on that are important to consider when you are evaluating investment merit of a business?
I think almost all human beings are not honest with themselves. About what they are good and bad at, what they’re messing up. In the case of founders, often they lie to themselves as to whether they’re working on something promising and delay getting real revenue and growth because reality is painful.
What can entrepreneurs do to ensure that the relationship between investor and company is fruitful post investment?
Make progress and be communicative and extremely honest in sharing what’s going on.
What are some things that you repeatedly see early-stage companies and founders struggle with?
Making rapid progress, being more aggressive, being less patient. Most people are way too patient.
I’ve learned that most walls you run into are imaginary walls. You can either smash repeatedly against them in frustration or walk around them.
Also, knowing what’s next. It’s not going to the next networking event and hanging with VCs when you’ve already raised your seed round. What are the next moves? The very best founders seem to think about that all the time and therefore know straight off the bat.
Finally, picking a great market at the right time. I really do believe from what I’ve seen that a rising tide will sweep you along with it. There is luck and art in picking markets.
Making rapid progress, being more aggressive, being less patient. Most people are way too patient.
I’ve learned that most walls you run into are imaginary walls. You can either smash repeatedly against them in frustration or walk around them.
Also, knowing what’s next. It’s not going to the next networking event and hanging with VCs when you’ve already raised your seed round. What are the next moves? The very best founders seem to think about that all the time and therefore know straight off the bat.
Finally, picking a great market at the right time. I really do believe from what I’ve seen that a rising tide will sweep you along with it. There is luck and art in picking markets.
Quick Hits:
Who do you admire in the startup world and why?
Kevin Ryan – he moves blazingly fast and builds great companies over and over. I have huge admiration for how boldly he does things.
Lee Linden – incredibly loyal, decisive, smart, modest. Every founder can benefit from having him as a partner.
What’s the last book you read?
Tuesdays with Morrie. Very short and not necessarily a great piece of literature. But I enjoyed it. I like books that encourage you to zoom out, remember how short and fragile life is and what is important to focus on. People need regular recalibration.
What’s your favorite restaurant in the city?
There’s a little Italian hole in the wall place in the Upper West Side that has delicious homemade pasta and that is a well-kept secret.
What’s your favorite fall activity in NYC?
Wandering around the West Village, Brooklyn Heights, or maybe driving up the Hudson to Rhode Island.
