Andrew Kazlow: [00:00:00] Are you telling me that your very first seed investment was a successful exit? 

Eric Alfuth: if a founder cannot explain to me in real simple terms, what their business is, why it exists and how it makes money. Then I really start to question, is there something really here or are they just hoping to get lucky and. Maybe get bought out.  

Eric Alfuth: I tell them, don't, don't invest in any deal for the first six months, because everything is going to look amazing. 

Eric Alfuth: Everything is going to look interesting.  

Eric Alfuth: once you make that choice to quit your day job and go start a company. 

Eric Alfuth: Your life changes. All of a sudden, you don't have any meetings. Your phone's not ringing. You're not getting emails. It's a very quiet, very difficult scenario for a lot of people.  My guest today is Eric Alfuth. Eric is an [00:01:00] investor and an advisor with over 20 years of experience. He's the managing partner currently of Caymont Ventures, which focuses on early stage VC investments along with, at the same time, serving as a board member and advisor for emerging companies. His other day job, uh, is working as the president of the Houston angel network, which is one of the largest and most active angel groups in the country. 

Andrew Kazlow: Prior to launching Caymont, uh, Eric, helped launch and sell two energy companies, uh, a public exit and a private sale. Before his entrepreneurial journey. Eric led a high yield credit hedge fund, uh, and managed a 4 billion international fund for AIG investments. He began his career as an equity research analyst with Prudential Securities for a number one ranked institutional investor team. 

Andrew Kazlow: Uh, and Eric proudly holds two degrees from Texas A& M university [00:02:00] and a master's degree from Harvard university. Eric, thank you so much for being here today. 

Eric Alfuth: I appreciate it. That's, uh, yeah, you, you make me sound way more interesting than I am, so I appreciate that. 

Andrew Kazlow: Well, I'm not the one that has that background. You are, sir. So, glad to have you. It's an honor to be with you today. So I am very excited about our conversation today. I think you bring a really interesting set of experiences. so I have 1000 questions for you, but to start, I would love to hear just a little bit more color about how you got involved in the angel investing world. In the first place.  

Eric Alfuth: It's been an interesting process because, as you go in reverse order from my bio, you know, I started off equity research you know, big institutional, you know, our clients for the big, the fidelities of the world, the big mutual funds that you would typically hear about. 

Eric Alfuth: You know, and then moved into managing large portfolios, kind of got a [00:03:00] little bit disenfranchised because I think for me, I wanted to get more involved in the day to day operations of a company. So, had an opportunity to transition into exactly that was CFO of a couple of different energy companies. 

Eric Alfuth: And realize that, you know, as much as I like the corporate world, I still liked the finance side. And I said, well, how do I. How do I bridge all this together? So I actually had a, it was years ago I had a friend who introduced me to a company that was looking for capital and I had a chance to invest in them and I was like, well, this is really interesting. 

Eric Alfuth: It was their, it was their seed stage round and you know, I followed them up and they did their A round or B round and ended up being relatively successful. To me that kind of got me hooked to, I love the 

Andrew Kazlow: wait, hold on. I have to, I have to interrupt you and ask. Are you telling me that your very first seed investment was a successful exit? 

Eric Alfuth: Well, uh, I got, so I sold into the B round, but the company ultimately went bankrupt. [00:04:00] Yeah. 

Andrew Kazlow: exit for you. Wow. That's incredible. Okay. 

Eric Alfuth: it's a, it's a story, I think, so it actually was a company that started off as a way to, it was a precursor for self driving cars, and they were trying to test the technology. Yeah. And what they found is they were actually using these little racetracks and using your phone Bluetooth interface to drive the cars around these little racetracks. It actually became one of the largest actually one of the hottest toys on the market for that for that year it actually, we think it was featured on Good Morning America and, a bunch of different places. But it's a typical story of a company that grew too fast and kind of outgrew their runway. Didn't really, they thought the market was going to keep going. They thought their customers were going to keep buying and eventually they, built up too much inventory, customer interest fell off, and the company ended up folding. Yeah. 

Andrew Kazlow: Wow, okay. Well, I want to come back to maybe some lessons learned from that experience. It sounds like [00:05:00] perhaps one of those takeaways is get out when things are looking up, but we'll come back to that. I interrupted you. Please continue with your background and how you got plugged in. 

Eric Alfuth: Yeah, no, so, you know, after that I, you know, and then when we sold our last company in in 2019 you know, I said, well, I finally have a chance to do this full time. So to me, I like the ability to, work with emerging companies, work with founders, help structure, how they're going to go about achieving success, and then also be investing alongside of them. 

Eric Alfuth: You know, there was, there are so many founders that I've met that, they have a great idea, but they don't know how to take the business from idea all the way through actual revenue generation. And, I said, look, I have a background here where I can I can do that. I've seen, you know, the investing side, the finance side, the the whole side of the business. 

Eric Alfuth: So, it's a great place where I can just apply all of those lessons learned. 

Andrew Kazlow: I love it. So you've been actively full time in the angel investment space. You've also got your venture fund, but you've been in this ecosystem full time [00:06:00] for about five years now. Is that right? 

Eric Alfuth: Yeah. Yeah, wow, yeah, that long. 

Andrew Kazlow: Yeah. 

Andrew Kazlow: 2019 further away every day. Hmm. 

Eric Alfuth: Yeah, no, it's uh, and it's been, you know, it's been fun. I mean, You know, and what's what I what I find is exciting is there's ways to apply like I was actually having breakfast today with somebody completely unrelated industry is a nonprofit. 

Eric Alfuth: We're trying to think about how to convey what this company does. And I said, Well, you know, this is kind of like angel investing. And all of a sudden, she's like, Wow, that totally makes sense. So, you know, it's kind of neat how you can connect this industry to all kinds of different areas. 

Andrew Kazlow: Totally. Well, and that's one of the things I love about the space. I haven't been in it as long as you, but the variety here and the constant exposure to new ideas, new innovation, even just the people that you are around, everybody seems to be very energetic to say the least, and perhaps optimistic. So it's a fun, it's a fun group to be engaged with. 

Andrew Kazlow: [00:07:00] Yeah. 

Eric Alfuth: kind of building, building and solving things that look, it may or may not work. But, you know, that's why you get up in the morning, right? You're like, Hey, I, I believe in what I'm doing. I believe in what I'm building. 

Eric Alfuth: So I'm going to, I'm going to go and do it, you know, because that's, I think, one of the biggest challenges that I've seen for founders is. All right. You know, you kind of do a little bit of, you know, the DCF on your career, right? It's like, I can go get a job making X and then probably over the next five or ten years I can make, you know, here's my discounted valuation of what I can make versus if I go do a startup, you know, my odds of success are, you know, truthfully fairly low. 

Eric Alfuth: Um, and what does that mean? You know, you're, you're, you end up finding the people that are doing it for the passion, you know, for the excitement, for the interest. 

Andrew Kazlow: I think that I love that point. doing the DCF on your career and making a decision. Um, so I'd love if you could tell us a little bit more about your current work. So you serve in two capacities, one as, [00:08:00] uh, the, the principal at Caymont as well as the president at the Houston Angel Network. I'd love if you could tell us a little bit more about both of those organizations and the work that you do today. 

Andrew Kazlow: Okay. 

Eric Alfuth: there's differences and similarities. So, I mean, with came on what we do is, you know, we're we're seed through Syria. The investors were sector agnostic. Um, you know, so we look across multiple different companies, but we also do a lot of work with our portfolio companies. You know, we get involved with them either, you know, board positions or advisory positions. 

Eric Alfuth: so our goal is to bring more than capital. And again, it's not it's not a requirement. Um, But it's something that we've found is very helpful for companies to go in and say, here, you know, here's our background here that we can bring, you know, right now it's a it's a solo GP process. So I have a an advisory board, but I don't have any, employees per se. 

Eric Alfuth: You know, the difference, I think, is with the Houston Angel Network. You know, it's a group of little over 100 investors. You know, we all invest [00:09:00] individually, but we come together collectively as a group to discuss ideas and discuss companies. And it's more about, you know, one of the things that's, it's interesting is the managing the Houston Angel Network is, I think, is more about just managing the people in the process, you know, because it's, can you get the process right? 

Eric Alfuth: Can you, can you get, you know, can you understand, can you get these people from, because we get a lot of people that come in and say, look, I've never done angel investing before. I'm really curious what it is. So a lot of what we do is the educational component as well. Is okay. We'll bring you in now. 

Eric Alfuth: Let's kind of bring you up to speed on what angel investing is. What are term sheets? What should you look for in a deal? How should you do diligence? And really kind of be that bridge for them as they start their career into angel investing almost from square one. And, you know, to me, it's, it's a little bit different. 

Eric Alfuth: It's almost like, so what we do with our fund with, you know, helping founders in that journey with the angel network, we kind of help angels in that journey. Yeah. 

Andrew Kazlow: Hmm. I love that. And I'm curious. At the [00:10:00] Houston angel network. What does that mean? How do you actually do that? Because investment, early stage investment education could look a million different ways. What does Han do to help with that educational process? Like walk me through the mechanics of how you actually go about educating a new member. 

Andrew Kazlow: Like I come join Han next week. How do you help me learn? 

Eric Alfuth: So we try to do a lot of educational events. You know, clear. We'll do speaker series. We'll bring in people from, you know, maybe have different backgrounds. Maybe it's an accounting person. Maybe it's a lawyer, or even different industry backgrounds to give our members exposure. 

Eric Alfuth: Um, we also have, four industry verticals that look at that different deals as they come in. Um, and one of the things that I always do is I encourage new members. You know, maybe they came from an energy background. I tell them, go look at, you know, go, go become part of the life science vertical, go become part of the tech vertical. 

Eric Alfuth: And the idea there is to get them exposure. So you can, you can listen in, [00:11:00] you can hear, you can pay attention to the diligence questions. We do, we do a few throughout the year. We do, I think, two or three different day long seminars. we do in usually in the first half of the year, we do an angel 101. 

Eric Alfuth: It's kind of angel one on one bootcamp to where. It's a full day seminar and we, we educate investors on basically what is angel investing, how to think about angel investing, how to look at a company, how to do basic term sheet analysis. Um, so really it's kind of, it's almost that intro to angel investing, um, which is very helpful. 

Eric Alfuth: But I think the biggest thing that we do is, is we're very careful on screening our potential members. You know, so our goal is. We want people that can come in and be part of a collaborative environment, be people that come in and say, you know, maybe I've done angel investing for five years. I want to teach other people what I'm doing. 

Eric Alfuth: I want to convey my knowledge to other people. and that's really what we look for as we bring in new members. If we can find somebody [00:12:00] that's, that has that background grade, but it's also, if we find somebody that's very new to angel investing, you know, are they open to You know, learning, are they open to asking questions? 

Eric Alfuth: You know, one thing we also do is we pair every new member with a mentor. So, as they come into the organization, we, we, we merge them with a, somebody that has more experience. So, you know, when you're going through the diligence process, you see something or, you know, something comes up and you're like, I don't understand what this is. 

Eric Alfuth: I don't want to raise my hand in a, in a, in a group of 10 or 15 people. It gives them somebody to go talk to about it. 

Andrew Kazlow: Hmm. I love that. Well, it sounds like a very thoughtful. Approach. And perhaps one of the ways that Houston angel network can kind of differentiate itself from other groups because education is a huge challenge. I mean, there is a lot involved there. so I, I can 

Eric Alfuth: will say, you know, it's a. And it's interesting because when I, so I joined the angel, the Houston Angel Network, probably it was, it was probably right around five or six years ago. and it was very different than, so we've really worked hard to make it a very open [00:13:00] network. 

Eric Alfuth: I remember. the first meeting I went to is, you know, it's like everybody kind of was sitting at their table and they were all their own little table clicks and it was just, you know, it was hard to break into it. Right. And that's, you know, you'll, you'll see that, I think, in a lot of different organizations. 

Eric Alfuth: Um, you know, but our goal was to make it as open and inviting as we can. No, 

Andrew Kazlow: about something that I think you're uniquely positioned to chat about. And that is the topic for today specifically. This concept of developing kind of a macro thesis, and then taking that thesis to the micro and finding particular opportunities that support that. 

Andrew Kazlow: You've clearly had to do this as part of your work at Caymont, as well as, as you educate angels, make your own individual angel investments. you've been doing this for several years now. And so I'd love to. Just kind of open the [00:14:00] floor for how you think about maybe why that is an important thing to do, as opposed to just following any deal that, that, that comes along. 

Andrew Kazlow: As you and I prepped for today, this was a key topic that you wanted to speak into. So I'd love to hear, maybe as a starting point, why, why is it important in your perspective to develop a macro perspective? Hmm. Hmm. 

Eric Alfuth: it's and I think the one of the things, you know, I've, you know, I started my career in the public markets. And one of the things I was always, you know, as, as with any public markets, you're kind of on this three month time horizon. It's, you know, you, you jump from Q1 earnings to Q2 earnings, Q3 earnings, and that's your horizon. 

Eric Alfuth: You know, that's where a lot of investors invest. I mean, you look at, you know, the average hold time for stocks are usually less than 12 months for a lot of these, a lot of these big institutions. You know, so for me, when I got into angel investing, I was like, you know, these are long term investments. 

Eric Alfuth: They don't have that liquidity. You know, I can't [00:15:00] invest in in a company today and six months later say, okay, I'm done. I'm out. You're you got to look long term. And to me, that's one of the reasons why, we look for the thesis. And the other reason is, you know, you can find I think it also helps in our deal screen because you can see you can get a pipeline of deals. 

Eric Alfuth: Like we see we see deals all the time. But you have to have some underlying foundational thesis to say, why do I like this deal? You know, it could be a deal that looks really good on paper, but then you got to think through, okay, where is this going to be in 3 to 5 years? What's going to change in the macro environment that either makes this company super successful or is going to really, you know, not allow this company to continue? 

Eric Alfuth: You know, and I think we've seen a lot of that. You know, recently, rather, you could even you can even go back and say, you know, an A. I come like, you know, artificial intelligence. You know, I've been around technically since the fifties. All right. But, you know, in in the sixties and seventies, if you invested in an A. 

Eric Alfuth: I company, [00:16:00] great. Well, the technology wasn't there yet. You know, today, the technology is there. So, you know, that's that's what we look for. And what we also look for, too, is, You know, I like to do. I like to do a lot of reading a lot of research, and I'm always thinking, like, what's where's the inflection point of an industry? 

Eric Alfuth: And this is something that we tell our investors is we like to find companies building at the inflection point of an industry. All right. So it's it's what's that key problem in industries facing? And can we go find a company that may be trying to solve that? 

Andrew Kazlow: I think this is really interesting because it touches on the, team versus market debate. I mean, the classic conversation, right? Are you investing in betting on the team? Are you betting on the market? It sounds to me like perhaps this concept, at least in your view, perhaps you would fall more on the market side, not devaluing the importance of the team, but if you had to pick between the two. [00:17:00] Would you say that that's true or would you say they're, they're balanced in your perspective? 

Eric Alfuth: I would, I would probably lean toward the team, um, because I think the, the key is it's a, it's a long term concept. So if we can kind of get the general idea of, you know, we like this industry, we like this concept and this team is building at that concept. But if for whatever reason that particular concept doesn't work, right, that solution doesn't work, I want to make sure I have a team that I'm backing. 

Eric Alfuth: That can pivot and then say, okay, where else can we find a way to apply this? You know, what else can we do here to, to really kind of use the capital that we've raised to go and be successful. 

Andrew Kazlow: So if there was a, let's say you got introduced to an entrepreneur that was working in a space that you didn't know anything about, you really liked the person, you know, everything else about the deal was amazing, but you didn't have a particularly strong belief about the market or awareness of [00:18:00] that market. 

Andrew Kazlow: How would you evaluate that deal? Or would you even look at that deal? 

Eric Alfuth: I would ask that, that founder, that entrepreneur explained to me, your, your business and how you make money. And make sure I understand it. Cause that's one thing I found is when I go into an industry that, you know, Like, you know, you take like some of the life science stuff or some of the real esoteric industries, you know, like edge computing and stuff like that, where, you know, you can kind of go down the rabbit hole of companies and you're like, wow, I didn't even know that existed. 

Eric Alfuth: But if a founder to me, if a founder cannot explain to me in real simple terms, what their business is, why it exists and how it makes money. Then I really start to question, you know, is there something really here or are they just hoping to get lucky and. Maybe get bought out. You know, I had a and I've had so many conversations with founders where they Where they jump right into here's my product and here's why it's amazing and i'm like, well, let's back up here But what [00:19:00] makes your product amazing, you know, what is your market you're going after? 

Eric Alfuth: and and the other side of that too is You know, i've got to make sure that you know as the company grows up Can they continue to raise money? You know angels are great because a lot of angels will invest in a very specific niche vertical. That's their background You But as you get bigger, you start going to VCs, you're raising your C series, your D series, you know, those are more generalist funds. 

Eric Alfuth: So, you know, can you really build and explain that business? 

Andrew Kazlow: Interesting. So it sounds like you're open to considering markets and perhaps developing a thesis based on a super compelling team. 

Eric Alfuth: Oh, yeah, like I did, um, you know, like, I think it was, what, two years ago, I, I did a, uh, a life science deal. And, you know, I'm not, I'm not a life science expert in any way. you know, but the company could explain, in very simple terms, what, what they were doing, why they were doing it. And they also had a thesis on how they're going to make money before they got FDA approval. 

Eric Alfuth: I was like, [00:20:00] wow, that's really, that's really impressive that they've thought through all these steps in this. 

Andrew Kazlow: That's interesting. I think one of the challenges I hear a lot of angels discuss is when there's a very compelling presenter. Right. It's just a good salesman. He's able to clearly communicate all those things. Has a pretty well thought out plan, you know, seems amazing, but it's not a space that they understand particularly well. What advice would you have for angels evaluating those kinds of opportunities? Because I think, I think being, being informed by the entrepreneur is important and learning about a market is important, but there's 

Eric Alfuth: Oh yeah. 

Andrew Kazlow: as I'm sure you've seen, It's important to make sure that you understand the market independent from what the entrepreneur is telling you, because they are incentivized more than anybody to raise capital. 

Andrew Kazlow: They believe in this thing, right? They're, they're betting their career in a lot of ways on whatever it is that they're working on. [00:21:00] Talk through how you think about kind of that, that dance of being open to learning from an entrepreneur, but putting a line in the sand and doing your own analysis on the market. 

Eric Alfuth: Yeah, and I think that's very important because I think that's one of the challenges with early angel investors is that whole fear of missing out. You know, I've, I've watched so many pitches where. You see a founder that is, like you said, like a really good salesperson, right, like they can pitch, they could probably come and pitch any company that you give them and make it sound phenomenal. 

Eric Alfuth: Um, you know, so I think part of it is it kind of goes back to a little bit of it's, you know, I'm always skeptical when I, when I meet companies, I'm always looking for, you know, what's going to derail this company, what's going to go wrong with this company. But it also helps to have, and this is something I've always tried in my career, is to build a really good base of context outside of, you know, my core industries that I grew up in. 

Eric Alfuth: You know, I love meeting people in different industries, and I love [00:22:00] asking them all kinds of questions about what they do, how they look at stuff. Because that way I know when I come to them with a deal, they can give me, hey, here's, you know, here's what we think of this. Um, you know, a good example is Several years ago, I had a deal in the defense industry and this was a company very, very well sold. 

Eric Alfuth: I mean, they were featured in the Wall Street Journal, CNBC, you know, they were, they were touted as like the next best thing. So a couple of people that are on my advisory board are Navy SEALs. So I went to them and I said, Hey, what do you guys think of this? And they're like, Oh, that's, that's disaster. 

Eric Alfuth: Like that'll never work. I was like, wow. Okay. So it kind of gave me a different perspective to go back and. And reevaluate it from a different lens. And when I put that perspective on it, I was like, okay, now I see that there's three to four things that really have to line up for this company to make it. 

Eric Alfuth: Yeah. They're the founder is a great salesperson, but they got a couple of hurdles they got to make and ironically, you know, they're, they're still [00:23:00] stuck in kind of this, they can't quite launch yet. They're still struggling to get launched. so that's, that's a great example of why I think it's important for angels to have a broad network and be willing to go to, you know, you go to your network and say, Hey, I'm looking at this deal. 

Eric Alfuth: What do you think of it? or, or to be able to go to somebody and say, Hey, I, I like this deal. Give me your feedback and be able to hear somebody tell you. No, this is probably not a great idea. You know, it's to be able to change your perspective on stuff like that, and to realize, okay, I don't know everything, I'm going to other people, and I'm, looking for their feedback as well.  

Andrew Kazlow: I'd love to hear for maybe a newer angel that's trying to develop a thesis for themselves for the first time. I'd love to hear what questions you would ask them or how you would advise a newer angel to go about starting the process of building out their own personal thesis.[00:24:00]  

Eric Alfuth: Yeah, it's, you know, one of the, one of the things I tell some of our early members, you know, when somebody joins the Houston Angel Network, and hasn't done angel investing before, you know, I, I tell them, don't, don't invest in any deal for the first six months. You know, because everything is going to look amazing. 

Eric Alfuth: Everything is going to look interesting. You know, take the time. To listen to the pitches, listen to founders, talk to founders, listen to the diligence questions, you know, expose yourself to the ecosystem, because I guarantee if you go back after six months and you look at the deals that you thought were good, they might not be as great as you thought they were. 

Eric Alfuth: So, you know, take that time, do those reps, do the, you know, listen to the conversations, listen to what other people are asking, because there's so many things that You know, like, like we talked about before, I mean, every founder is going to make their company sound amazing. You know, you, you have 5 to 10 minutes to present your company. 

Eric Alfuth: Of course, it's [00:25:00] going to sound like the greatest thing ever, right? So that's, that's, you know, one of the big things that I always tell people. The second one is, is, you know, if it's a, if it's a consumer facing product or even a B2B company, you know, would you or the company you work for actually buy this product or service? I've seen that a lot, too, you know, we've seen service companies come through and when you think about it, you're like, well, this sounds really great, but I don't know if I'd ever use that. Okay, well, listen to that, you know, and then the third thing I'd tell tell new angels is, you know, just make sure you really understand how a company makes money again. 

Eric Alfuth: That kind of goes back to do you understand the core thesis of the business and is that sustainable? You know, can, can you go and could you go and tell your friend, here's why I invested in this company. Here's how they make money. Here's why I think they're going to be successful. And if you can't conceptualize that, then you really got to think about why am I investing in this? 

Andrew Kazlow: [00:26:00] Could you give an example of maybe one or two broad beliefs or theses that you hold that have driven, like directly have driven investment decisions, in, as much or as little detail as you like, but I'd love if you could just give a couple of examples for these, a thesis you've built out based on your analysis of the market that has led to one or more deals. 

Eric Alfuth: Yeah. So, you know, , an interesting one is, is years ago I invested in a company and they were, they were kind of a B to, B to C, um, logistics company. And they solved a problem that, in the back of my mind, I, I always had. So they did, they were kind of an apartment logistics company and they, they would help, you know, when you move into a new apartment. 

Eric Alfuth: You know, my big thing with apartments was I could never, you know, move, you know, move into an apartment. You're like, how do I find the right dry cleaners, dog walkers, pet sitters? You know, it, it's tough [00:27:00] because you're in a new city and you don't know anybody. And, I was always like, there's got to be a better way to do this. 

Eric Alfuth: Like, why is the leasing agency or leasing office not understand this? And this company came along and they, they solved the problem. They had the solution to the problem. I had people that I talked to and I asked them about this and they said, no, that'll never work because you're going to be charging the residents a monthly fee for this. 

Eric Alfuth: You know, they're going to, they're going to argue they don't like it or, you know, it's just another thing for the, for the leasing people to manage. Yeah. And I said, okay, I get that, but this is also a problem that personally I, I get to see a solution for. So that was one where I kind of went with my, it's solving a problem that I saw in the market. 

Eric Alfuth: It's solving a problem that I really had. And, you know, so far they've been really, I think they just raised their, their B round, you know, about a year ago. 

Andrew Kazlow: Hmm. 

Eric Alfuth: Another one was a, was a company that we invested in, and it was a thesis driven company. It was in the sports tech world, and it was our play on the whole college athletes [00:28:00] getting paid, 

Andrew Kazlow: Hmm. 

Eric Alfuth: and it's a, you know, it's, it's normally, so normally our fund, we typically invest in, you know, more software driven companies, we don't do, you know, for us to do consumer stuff is pretty rare, but this company was making a carbon fiber insole. 

Eric Alfuth: And our thesis was, you know, as. As these athletes start to get paid for stuff, well, you know, they still have to wear the brand that their team specifies, right, because a lot of brands will say, look, we only wear Reebok shoes, we only have Nike shoes, whatever, right, so they can't change the outside of it, but what they can change is the inside of it. 

Eric Alfuth: So that was our thesis, is these athletes, as they go forward, are going to want something that they can modify. You know, again, that company, you know, they did, uh, I think they tripled their revenue in about two years now. Um, so it's just completely taken off. But again, it was the whole NIL thing is really what pushed them over the edge. 

Eric Alfuth: Um, and, you know, to me, that's, that's kind of [00:29:00] taking multiple different perspectives on something and saying, okay, how do we, how do we bring this back to a thesis that's, that's a potential investment opportunity. 

Andrew Kazlow: Super interesting. So it sounds like there was a couple of, a couple approaches here that you just talked to. The first one was a problem, more of a problem driven investment where you recognized, okay, this is a real problem. I've personally experienced it. I understand this well because of my personal experience and so therefore I'm comfortable making this bet. 

Andrew Kazlow: The second one was. A little bit different in that you kind of were watching this macro trend around NIL changes and thinking about, okay, what are the implications here? How do we, like, what opportunities are there to play into this thing that's already happening? And this particular company fit really well with that belief that you developed independently. 

Andrew Kazlow: Mm 

Eric Alfuth: yeah, I mean, I think that's, you know, that's to me, it kind of goes back to the whole the [00:30:00] idea of like, you know, as a as an angel as a as a VC, you really want to build, you know, where's your thesis, right? So then when you see companies, once you have that long term thesis, or idea of where you think an industry or, you know, is going to go, then you kind of bounce those companies off that thesis. 

Eric Alfuth: Right. Right. To say, okay, this company may look really exciting and really industry interesting. Does it fit with kind of where we think things are going? 

Andrew Kazlow: I'm curious what, what some of the Trends or industries that you're watching currently are. 

Eric Alfuth: And you're gonna, you're gonna let us, you know, disclose our secret, secret 

Andrew Kazlow: Maybe just give me one, give me one thing that you're watching and it can't be AI. 

Eric Alfuth: Now, you know, well, so I think, you know, I think you're seeing a lot of different things. I think for, for us, like the life science space, you know, you're starting to see a lot of, a lot more personalized medicine. You know, years ago I, uh, there was a company that I was working with and they were doing, they were doing [00:31:00] actually genetic prototyping for pain meds. 

Eric Alfuth: And that, so that, you know, so when a patient would come into the hospital for, if they had, you know, maybe like a cancer patient or somebody that needed pain medication over a longer period of time, they could tailor that to that individual person. And, you know, that was a technology that actually came out of, mapping transplants. 

Eric Alfuth: So they kind of took that concept and applied it to a different one. Um, you know, energy space, I think, is going to be very interesting. You know, as we see, you know, the whole idea of the whole, you know, small modular nuclear reactors becoming a thing. And, you know, I don't want to, you know, you said don't touch on AI. 

Eric Alfuth: But I think it's interesting because the demand for AI data centers is going to likely drive the need for small modular reactors. You know, can we put a small nuclear facility? You know, back of a semi truck, right, into a data center, power that data center, over time people become more comfortable with the idea of, oh, wait, I'm living next to a nuclear reactor, oh, it didn't blow up, it didn't melt [00:32:00] down. 

Eric Alfuth: You know, does that then, push out that industry? You know, we're, we're looking at a lot of stuff in the educational 

Andrew Kazlow: allow that one since it, since it was ancillary. 

Eric Alfuth: Yeah, I mean like, you know, like educational tech, right, it's like, you know, how do you, how do you shift from, you know, teachers teaching a class of 30 to, Kind of reversing it, right? 

Eric Alfuth: So the students are kind of running at their own pace. You know, like another one, you know, like FinTech, that's a big one for us that we're looking at right now is, you know, all the, all the different things with contracts and banking, you know, blockchain works really well for that, you know, so why can't you take, you know, I came out of oil and gas, right? 

Eric Alfuth: So every time we would lease acreage, we had to send somebody down to the courthouse, they had to dig through the record, they had to photocopy them, they had to bring them back to the office. You could just put that on blockchain, you could have it audited, easily transferable, and verifiable. It's stuff like that. 

Eric Alfuth: I think the challenge that we're going to face, you know, one of the things that I keep seeing [00:33:00] with the, with the kind of the downside of AI, if you want to go back to that a little bit, is in literary tech. You know, I think that's going to be a big challenge of how do you take, You know, a written word and say, was this human created or was this AI created? 

Andrew Kazlow: Hmm. 

Eric Alfuth: And there's a lot of discussion on that right now. Even that, you know, you kind of go into like cybersecurity, right? There's so much discussion now on how do I know you're you? Like, how do I know I'm sitting here talking to Andrew? Like you could be, you know, you could be an AI generated algorithm right now. 

Eric Alfuth: You know, so it's, how do we verify that? You know, how do we, how do we protect people? So. I think there's a, there's a lot of interesting things happening. For us, we kind of build these, these, these concepts. So then when we see a company, we can say, okay, that company has the potential to make that inflection point in, in an industry because of what they're doing. 

Andrew Kazlow: Super interesting. So as kind of a, I'll use the word generalist investor, given that you're interested in a variety of different industries, how do [00:34:00] you. Maybe from a Caymont perspective, go about analyzing an opportunity. You know, once you've said, okay, this aligns with the general thesis, I'm interested, let's have a conversation. 

Andrew Kazlow: You've gotten to know the entrepreneur a little bit, seeing their data room. What are the like last few boxes that you tend to find yourself checking from like a risk standpoint? Obviously as a, as a GP, you have a different obligation than a lot of Angels do. But I'm curious, kind of, what does that last few steps of diligence look like for you? 

Eric Alfuth: Yeah, I think, some of the, you know, some of the last. Things that we really look at is. assuming all the data room checks out, one of the things that we really focus on is, is the team and the transition. You know, one of my questions that I love to ask founders is, is really two questions is, first of all, who tells, you know, in your day to day job. 

Eric Alfuth: So who's on your advisory board and do they have the power to stand up [00:35:00] and say, look, this is not a great idea. And the second thing is I love to ask founders, okay, tell me when you think it's going to be time for you to step aside and bring in a CEO that can continue to manage this company to the next level. 

Eric Alfuth: You know, those are those, because those become some of the biggest arguments, that investors can have with their, with their founders, because it, you know, it's tough to let go. You, you develop something from, from day one. And it's your baby, right? It's like, you don't want to give it up. But at some point you have to step aside because your skill set is great because you can take a product from concept all the way through, you know, MVP, but that doesn't mean you can take a company from, you know, 1 of revenue to 100, 000, 000 of revenue, you know, totally different skill sets. 

Andrew Kazlow: That's really, really interesting. I I'm curious, is that board oversight question, related to, or inspired at all by the open AI, events of last year, I think that was last year. Right. When, uh, [00:36:00] the board kind of imploded and there was all this attention on. Uh, early stage board structures. Was that, has that always been a key question for you or has that evolved over the last couple of years? 

Eric Alfuth: no, that that's always actually been way before that, 

Andrew Kazlow: Okay. So you were ahead of the curve then. 

Eric Alfuth: Well, so, you know, yeah, actually, so I came to that question, actually about 20 years ago. So when I was doing equity research, you know, we had, we had the, I guess, one of our claim to fame is we had one of the first sell ratings on Enron stock. 

Eric Alfuth: And one of the things that I, that always really surprised me was you had this group of executives running Enron, and then you had this board that was, you know, the who's who of, you know, defense and government and everything, right? It really well structured board, you know, that everybody would recognize. 

Eric Alfuth: How did this disconnect happen? And, you know, to me, I realized that the executives were basically running unchecked, like the board didn't [00:37:00] tell them no, like the board never asked the hard questions. The board never, never held them really accountable. And to me, I was like, wow, that is very important. You know, I think you, you saw that, you know, you kind of carry that through, right? 

Eric Alfuth: Like all the other big, the big disasters like Theranos, right? Like had a board, but there was not a single biotech person on that board. You know, it was, it's like, okay, well, of course, they're not going to say, wait a minute, this is, this is a bad idea, or you shouldn't be doing this, or why are you doing this? 

Eric Alfuth: So to me, it's always been a very powerful question, I think, because you have to have that check and balance, you know, because you have a leadership team that sometimes can get so in the weeds of their company, and they start to think what they're doing is the right thing. And it's hard for them sometimes to separate that and say, okay, what's the 30, 000 foot level perspective on this? 

Eric Alfuth: Are we really doing, what's the benefit of the investors or the shareholders? So yeah, so that, that question actually goes back quite, quite far. But it's, you know, you bring up great examples. I mean, it's, it's served me [00:38:00] well, many times and I've, I've gotten a lot of, I've gotten a lot of founders that will either give me like a dirty look or a double take when I asked that question of them, kind of who tells you no, And that also gives me a great perspective on who they are, because, you know, I've met founders that say, well, well, nobody tells me no, like, I'm, I'm my own boss, you know, that's why I quit corporate world to come and do my own thing. 

Eric Alfuth: Yeah, so it's, it's a, it's a very powerful question. 

Andrew Kazlow: Yeah, I love that. And I think it's interesting even to ask that as early as the seed stage and series a, you know, when these companies are really young, seeing kind of their initial Openness to that oversight to think is to your point, very telling of their capacity to scale. At what stage do you expect an entrepreneur to have some kind of a board in place? 

Andrew Kazlow: Like I go start a company next week and then I go start to try and get a little bit of traction. Like, should I [00:39:00] be worrying about a board at that point? Or is that a later, a later thing? Like, at what point are you expecting there to be a robust management structure in place. 

Eric Alfuth: You know, I think if you're, if you're out raising, you know, your seed round where you're talking to true third parties, people that you might not know. You know, you should have an advisory board in place. You should have some type of a board that is a founder. It's somebody holding you accountable. But it's also for the investors. 

Eric Alfuth: They should want somebody holding that founder accountable. They should want somebody. But it's not even accountability. It's it's providing that founder the resources where they can go to somebody and say, Hey, I got a question here. I'm running into challenges here. I'm burnt out here. What do I do? You know, it's it's that whole range, right? 

Eric Alfuth: It's like, it's your support system. And I think, you know, with with, then that's something that I always tell people that say, Hey, I want to go start a company, you know, maybe, maybe you worked [00:40:00] at a big corporation for 20 years, right? And you, you, you, you really want to go do your own thing. And I think was very important for founders to realize is once you make that choice to quit your day job and go start a company. 

Eric Alfuth: Your life changes. All of a sudden, you don't have any meetings. Your phone's not ringing. You're not getting emails. It's a very quiet, very difficult scenario for a lot of people. And I think that's why a lot of people try to do that and fail because they don't realize all of a sudden you don't have a support network around you. 

Eric Alfuth: You gotta go find that support network. You know, you have nobody structuring your day. It's hard. It's hard to do that. So, you know, I think that's important for, for founders to, you know, as early as you can go build that advisory board. You know, surround yourself with the people that can be that support network for you. 

Andrew Kazlow: I love it. I think that's a really powerful diligence question, right? For angels to consider. That's not one that I hear often talked about, right? People look at the team and they'll say, oh, who's the team? I, I really focus on the team, but. [00:41:00] Not always does that flow all the way down to who's, who's on their advisory board and then who are there like actual structural, leadership. 

Andrew Kazlow: Like what is the actual structure of the company? And that doesn't always make it into the angels limited diligence. So I think that's a really interesting point. Eric, I have one last question for you, but before I get to that, anything that That we haven't covered or talked about today that you feel would be of interest to our audience based on your experience. 

Eric Alfuth: You know, I think we've we've definitely covered a lot. I mean, I think, you know, angel investing is it's a it's a really exciting place. You're you know, you're it's you're getting the chance to invest in the future, getting the chance to fund the future of our economy, the future of what's what's gonna happen. 

Eric Alfuth: And, you know, as much as people say, you know, you give you hear all these dire statistics, like one in 10 angel investments make money. You know, at some point, you've got to think about, well, yes, but also it gives you a chance to become [00:42:00] part of this ecosystem where you are helping people build the future. 

Eric Alfuth: You know, so maybe the founder that you back, you know, maybe, maybe you lose all your money on that deal, but maybe the chance that you can go in and you can mentor that person and they can then go on to find another company. You just never know where it's going to go. And I, and I will say, for angels, it's. 

Eric Alfuth: I would tell people it's more than just the money, you know, the, the 25 or 50 grand you're going to put into a company, is helpful, but, you know, take time to offer that founder your advice. You know, say, Hey, you know, here's my phone number. Call me, text me, reach out to me. If you have problems, I'm here for you and check in with that founder. 

Eric Alfuth: That's, one thing I found is very important. Has. As angels, you know, all the founders that we, we fund them and they're, you know, their heads down, they're just working on their company and I every couple months I just reach out and hey, how's it going? How's it going? I haven't heard from you. 

Eric Alfuth: How's it going? And, you know, that's to me. That's a big thing that [00:43:00] angels I think need to be very cognizant of doing of really being supportive of their founders of reaching out because a lot of times. You know, founders are, they don't want to reach out to the angels because they're worried that, well, I don't want to bother my investors. 

Eric Alfuth: I don't want to look like I'm weak. I don't want to look like I don't know what I'm doing. You know, angels are there for you. Now, once you get to like your, you know, B round, C round, you know, yeah, then maybe you got to be a little, a little careful of that. But, angels are there. I mean, there's a reason they call them angels. 

Eric Alfuth: You know, there's a reason that term is there, because it's, it's capital, but it's also support. It's capital, but it's that network that they bring to you. So, you know, make sure it's always a two way street. 

Andrew Kazlow: I love that. And I think you're, you're hitting on what makes the angel investing community really unique. And that is this collaborative element, right? As, as soon as you write a check. Okay. You turn around and become that entrepreneur's biggest advocate. And, there's this community kind of sharing. You even mentioned it earlier, going [00:44:00] to your friends and getting input from others, right? 

Andrew Kazlow: That, that is super fundamental to being an effective angel investor. So I love that point. My last question for you, Eric, is how can our audience stay connected with you? I think you have a pretty interesting resource to point us towards, but how can we stay connected to you? 

Eric Alfuth: so I do, you know, for the past couple years I've been writing, on Substack. So it's, uh, I think it's, you know, it's caymont. substack. com. The goal there was, I started probably two to three years ago, just writing about lessons learned. Either as, as an angel, as an investor, or as somebody that's mentoring startup companies. 

Eric Alfuth: And, you know, it's stuff like, Hey, what, what are the challenges that I've seen founders encounter? Um, you know, we've also looked at a few, you know, You know, places where angel or people may have invested in companies, what they miss, you know, it just, we kind of try to cover a lot of variety, but try to keep it interesting. 

Eric Alfuth: Also very active on LinkedIn as well. So, you know, hit me up there and then, you [00:45:00] know, always open to, to people willing to email me. I, uh, I try to respond to as many as I can, um, and try to be as helpful as I can as well. 

Andrew Kazlow: Love it. Well, Eric, thank you so much for your time today. This has been a true pleasure. Very appreciative of the time and attention and look forward to sharing this. enjoy the rest of your day. We'll talk soon.