In this article, I will address five common questions that I receive from individual investors about Tundra Angels or our investing activity. These are real questions that I receive from individual investors, whether in person or via Zoom. 

Going forward, I will periodically write additional articles where I tackle other questions that I have received from individual investors about Tundra Angels.

If you want to submit an anonymous question for me to cover and post about in a future article, please use the link here to access the one-question form (I won’t even ask for your name).

Before we get to the first questions, first, I need to share some context:

Investing in high growth tech startups is still largely still uncharted territory in our state. 

Is this an awareness problem - that investors don’t know about Tundra Angels, or other contexts to access early stage startup deals? In some cases, sure.

But I've had complete strangers tell me via email or social media that "I'm familiar with Tundra Angels..." such as in the screenshot below of an individual investor who I communicated with via email.

In many ways, lack of awareness is not as much of a factor that I originally thought. 

I recently started seeing that another major limiting factor is actually a lack of knowledge. A lack of knowledge of what it means to invest in high growth startups.

Individual investors may think, "I don't know much about tech startups, high growth, venture capital, etc. So how can I invest in it?"

I encounter individual investors all the time that have a real estate portfolio, or even a small private equity portfolio. But investing directly into a software startup? A biotech startup, recently spun out from a Wisconsin university? Or, a high growth consumer packaged goods play? These scenarios are definitely not as common in the portfolio of a given individual investor that I speak to. 

But it’s not surprise. Wisconsin isn’t Silicon Valley, or Austin, where tech startups and the associated opportunity is prolific and on every street corner.

Yet, a lack of knowledge of the space does not mean a lack of opportunity.

For example, this coming Friday, Tundra Angels investors will be the CEO pitch from one of the top portfolio companies in the Tundra Angels portfolio. This company very well may eventually be the first unicorn (> $1 billion valuation) company in the Tundra Angels portfolio. 

New investors in this company will get in at a very attractive valuation compared to what the company will be valued at in 2027. 

I know VCs in my network that are also investors in this company who tell me, "This company is special." When I tell them what valuation we entered at when we initially invested years ago, their jaw drops, "Oh my God. That's going to be incredible for you guys."

On one hand Tundra Angels has access to this caliber of investment opportunities. 

But on the other hand, the knowledge gap exists. 

So one of the main antedotes to this is to provide clarity, provide knowledge, over and over, to help individual investors see.

Now, onto a sampling of five questions that I often get.

No. 

A venture fund is a model where the fund manager does require a dollar commitment up front and then calls the capital over time. That's not what Tundra Angels is. 

Tundra Angels, on the other hand, is an annual membership fee which gives an investor access to highly curated VC-level deals and a community of CEOs, Presidents, and executivs to help de-risk our investment decisions. The decision then, is up to them. 

In fact, when I clarify this point in a live conversation, this is often the moment when the energy shifts in the conversation. 

When they release that my ask or reason for the meeting isn't to get them to invest $250,000 but rather, "Hey, do you want to join this exclusive community of investors and get access to top notch deals," the commitment required is worlds apart. 

Members pay an annual fee, $3,000 for an individual, and that fee gets you access. The pitch meetings, the deal flow, the diligence discussions, the other members and their expertise. Then you decide, deal by deal, whether to invest anything at all. If a company pitches and it isn't for you, you pass. Nobody calls your capital. There is no committed capital to call.

Now, I tell every member - angel investing is not about picking the winners, but rather by playing the numbers, so the way to make money in angel investing is to build a strong portfolio of companies over time. 

The time commitment is not onerous. Trust me, I ensure that everyone sees the deals and has the ability to invest or pass. 

I love this question, and I am happy to lay it out. 

Tundra Angels' "pay the bills" money comes from annual fees and sponsorships. This is short-term operational money. It is for the logistics for our quarterly pitch meetings, several pieces of our software infrastructure, a part time admin person, my salary, etc. 

Then, Tundra Angels' / my upside opportunity comes from what is called "carried interest." Carried interest is essentially, I participate in the return when an investment has a liquidity event above and beyond the initial investment. The way it works in practice is that investors first get their money back, and then Tundra Angels LLC (me) participates as a percentage of what the investors receive above and beyond their initial investment.  

I rarely get any push back about each of these because investors know that 1) I need to live to continue to do this work, and 2) I need to be properly incentivized to find and invest in the best deals out there, no questions asked. It affects how I find, source, gather enthusiasm, and support the companies in the time that follows our investment.

The bottom line is this - if you are looking to invest with a pile of capital that you're going to need in the short or mid-term, Tundra Angels is likely not your context. 

This pile of capital falls into the "I don't need this money and want to do something outside of the box that doesn't feel vanilla. Something fun, exciting, different, where I am make an impact but see more dollars back in a return, etc." 

Then that's way more of the mindset that is appropriate for the space. 

If you're comparing this venture capital asset class to your other options, it goes like this - real estate pays rent along the way. Stocks you can sell tomorrow morning. A startup investment pays you at one moment: the liquidity event, which almost always means the company gets acquired. (IPOs happen, but rarely. Acquisition is the realistic picture.)

On average, I tell people five to seven years. And the honest answer is that different companies run on different clocks. We have a battery technology company in our portfolio that is easily a ten-year + play. It's batteries. A later-stage software company that already has millions in revenue can be much closer to its exit. That's one reason a portfolio should hold companies at different stages, which I wrote about recently.

And I'll be transparent, the way I am in every one of these conversations: Tundra Angels has been investing for more than five years, and we have not had an exit yet. That is not a warning sign. That’s typical for the space.

The full version of this one, which I heard twice in one morning from two different investors: "I get that you see a lot of software deals. But how do I know a software company won't just get replaced by AI a few months after I invest?"

I have a name for what they're asking about. I call it the "Risk of AI displacement."

I'll be straight with you: every investor in the country is still building their answer to this question, including me. Here is how I think about it today:

I ask myself this question, "Is the atomic unit of this startup opportunity based on AI, such that it would not be possible to be solved without AI? 

In category 1, AI is an enabler of the solution. 

Or, is it based on some underlying technology, unique data, or the solve of a market problem that would still be significant, independent of AI?" 

In category 2, AI is a force-multiplier of the solution. 

In my opinion, we have gotten quite good at answering that question. I am leery of the opportuntiies that are only in category 1. But for the startups that are in category 2, those are worth paying attention to. 

This week, if all goes according to plan, our 25th investment will be publically announced, and next week's issue will be about why Tundra Angels invested in that company. That is squarely in the category 2, which is what made us very excited. You will hear more about that soon. 

Every opportunity, whether from a brother-in-law or a multi-exit startup CEO.

Individual investors need to get objective, get expertise, and get outside of the walls of their own mind and heart. That’s what we are able to do at Tundra Angels for the companies we invest in and it works wonderfully.

I’m going to throw this out - if you want an unaltered opinion on a deal you are considering, hit me up. I’ll keep the conversation and details anonymous. I can literally give you several things to ask about or think about as you consider that.

That's the first five. All real, all from actual conversations with individual investors at one time.

Now it's your turn. Whatever you're wondering about, this asset class, early stage deals, something sitting on your desk right now, or Tundra Angels itself - hit the link here, submit an anonymous question.

Based on the nature of the area and how this asset class is newer, there are no stupid questions.

Through this process, and through this weekly newsletter, I am hoping to be a guide for you in this asset class of angel investing and venture capital.

See you next Wednesday.

-Matthew

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