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The Diligent Observer Podcast
Episode 40: "Fuel for the Economic Engine" | Angel Capital Association CEO Patrick Gouhin on Professionalizing Angel Investing, Expanding Accreditation Pathways, and Cultivating Startup Ecosystems
Insights from an aerospace engineer turned association leader who's working to transform angel investing from "black art" to science while representing 15,000+ members deploying approximately $1 billion in private capital annually
Today's episode explores three ideas that caught my attention:
- The path from art to science - Pat drew a fascinating parallel between angel investing and project management's evolution over 50 years. I wonder what 3 letter certification name we’ll land on!
- Accreditation through education - Pat's vision of certification as an alternative path to accredited investor status could democratize access to the asset class.
- Qualitative vs. quantitative tension - Pat's engineering background initially drove him toward standardization, but his board pushed back, emphasizing "gut feel." This reminds me how the subjective, “gut-feel” elements remain central to the angel investment process.
I explore these ideas and more with Patrick Gouhin, CEO of Angel Capital Association. With 35+ years of experience leading professional societies - including the International Society of Automation and the American Institute of Aeronautics and Astronautics - Patrick combines his technical background with extensive community-building expertise to create educational pathways, knowledge infrastructure, and standards for the angel investing ecosystem.
During our conversation, Patrick shares:
- How an estimated 20 million Americans qualify financially as accredited investors but most don't participate - representing a massive untapped resource for funding innovation across the country.
- His perspective that angel investors need a minimum of 10 investments (preferably 30) and must approach the asset class with patience, as failures typically appear in the first five years while winners emerge later.
- The ACA's strategy of providing low-barrier entry points to angel education (annual membership of $310) as an onramp before prospective angels commit to larger group membership fees and investment minimums.
Connect with Patrick
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Patrick Gouhin: [00:00:00] Angels are the fuel for the economic engine that is the entrepreneur.
Angel investing is patient capital. It takes time.
We're trying to demystify angel investing in a very direct way to say this is a high risk asset class. You need to make sure that you know what you're doing, but if you have a proper portfolio that's diversified and you make enough bets.
The odds would say you are gonna get a return that will outperform the stock market in that. So, the game for us at this point is to try and communicate that message in a very clear, and concise way to those 20 million individuals, pull a higher percentage them in to say, Hmm, I think I might want to check this out.
Andrew Kazlow: Welcome to the Diligent Observer, the first podcast exclusively focused on helping angels see what others miss. I'm your host, Andrew, and every week we explore what works, what doesn't, and why through conversations with experienced [00:01:00] startup investors and operators.
My guest today is Patrick Gouhin, CEO of the Angel Capital Association, where he's spearheading efforts to professionalize the global angel investing community. During our conversation, Pat reveals how standardizing education and best practices could reshape accredited investor requirements, explains why angel investing must be approached as both a team sport and patient capital, and shares his vision for mobilizing 20 million potential accredited investors across America. I hope you enjoy learning from Pat as much as I did.
One quick note before we jump in. If you're an angel investor or thinking about becoming one, you need to know about the Angel Capital Association. The ACA is an incredible community for connecting with experienced investors, tapping into tons of well-documented best practices and training resources, and just generally keeping up to speed with what's happening in the angel space.
Now I've really enjoyed getting connected over the [00:02:00] last few years and that's why I'm so excited to partner with the ACA to bring you this special series of episodes live from their annual summit in Denver. If you're serious about angel investing, you will definitely want to check them out.
Pat, thank you for being with me today.
Patrick Gouhin: Pleasure to be here.
Andrew Kazlow: So Pat, you are in the midst of what has been a very long week here at the Angel Capital Association. We are wrapping up day three in just a few hours. First question, how are you feeling right now?
Patrick Gouhin: Energized. Great. Which isn't typically the response you might get at the end of a conference. It's been a great week. And, I'm fueled by the energy of all of the folks here, our members and the partners that we've got. So, uh, it's all good.
Andrew Kazlow: Well, it has been an incredible event. So Pat, tell me what are you excited about right now as the CEO of the ACA, which is doing so much great work. What's most exciting to you?
Patrick Gouhin: Well, this is really a big week for us because it's the one time of the year where our members get together, and [00:03:00] so, uh, we've had a great week, about 360 people or so from all over the country.
Actually, a few international folks as well, sharing stories. Some of them good, some of them bad, but everybody, uh, I think relating with each other and, I've got people that are first timers here as well as those that have been here going back to day one 20 years ago, and everybody says, I go away with something. New friends, and I've learned nuggets to take that.
So that's what it's all about for us, is making that happen.
Andrew Kazlow: Any nuggets that you personally will take away from this week?
Patrick Gouhin: The biggest one for me really is with all going on around the world and with the economy and the uncertainty. I kind of expected there to be a little air of doom and gloom, but we have not seen that at all.
It's been nothing but energy. You know, On day one we talked about, hey, when you're in a challenging environment and there are headwinds, look for an opportunity to excel. And, I've heard that phrase used several times this week about how do we reframe the conversation And, even though there are these headwinds,
[00:04:00] what are the opportunities in there? You know, a reception or whatever, I'll walk up into a group of, and they're talking about that, How can we turn this into a positive or here's where the real opportunity is, and it's nice to see that conversation going on, and I think that momentum will carry itself.
After this event back home to the angel groups, and then we're gonna be right back here next year. I expect there to be, you know, a lot of energy picked up from the energy coming outta this week, next year.
Andrew Kazlow: Pat, I'd love to hear just a little bit more about your story and how you made it into this seat.
I've only recently gotten to know you and I would just be curious to hear more about your story.
Patrick Gouhin: You know, it's an interesting story. The short story is that I like to say I'm in my third career and I haven't left the, As of the alphabet. Uh, I started in aerospace and then, I spent years in automation.
And then about six years ago, moved into angel investing. So three careers and, haven't left the, As of the alphabet yet by education. I am an aerospace engineer, and then have spent 35 years or so [00:05:00] in various association management, roles and capacities. So, that's really what we're trying to do at ACA is to take this organization that's been around for about 20 years and, turn it into a professional society, a professional organization that's really about being the steward of the community. The community of angel investing.
Andrew Kazlow: So say more about that. You emphasize the word professional. I know you've got a lot of thought into that word, specifically te tell us more about what that means.
Patrick Gouhin: Yeah, so what that means to me, you know, as, and again, as an engineer coming out of engineering organizations, they're based on the principles of physics that have been around for hundreds of years.
You can talk about the medical professional, legal, again, hundreds of years of, of knowledge that's there. That really creates a body of knowledge that brings out the science of whatever that community is. Now, if you compare that to angel investing. It's only been around for a couple of decades.
We're 20 years old. You could probably make the argument that there was angel investors around another [00:06:00] 10 years or so before that, but that's still relatively young, 30 years or so. So if you look at the overall body of knowledge, we don't have anywhere near what those more professional disciplines do. I think as any kind of industry progresses, you move from that black art along the lines to a science based upon the data, based upon the curated knowledge.
And so the example I like to give a lot is that if you take something like project management, and you go back 50 years or so. That was an art that there were people that did it, but you couldn't go to any university or community college and take a class or get a degree or anything on it.
And there were just people that were good at it, but nobody really studied it or knew why. Then came along this little organization called the Project Management Institute, or PMI, and they created what they called the PIM BOK, the Program Management Body of Knowledge. And if you look today, 50 years later you've got hundreds of, thousands of [00:07:00] certified project managers around the world. Government contracts require you to be a PMP. They've really brought out the science of project management where you can go to pretty much any college or community college, anywhere around the world and take courses in it.
Andrew Kazlow: Hmm.
Patrick Gouhin: So, I would like to see us be on a similar curve relative to angel investing, to demystify it, and turn it into a science based upon all the data and curated knowledge that's out there.
Andrew Kazlow: It seems to me that is happening in a number of ways, but one of those is through the courses and the certifications that the ACA has actually begun offering for members who complete certain classes. Can you tell us more about that?
Patrick Gouhin: Well, you're looking maybe a little bit into a crystal ball there. And today we do not have certifications. We have what we call, Angel University and in Bill Payne's, Angel University. Bill Payne was one of the legends of the community. And he and several of our members, his colleagues curated a curriculum.
We're up to about 12 courses now that we [00:08:00] call Angel University. There's an advanced set, and a basic set, we just recently launched an AU on demand, Angel University on demand set for those that can't participate when we're doing the virtual or face-to-face offerings. And, today we offer what we call certificates of completion for that.
But ultimately what we would like to see is those evolved into a full blown certification where there is an examination behind that, where you proved your basic competency against that knowledge. And unlike a lot of the academic programs that are out there, this is not theoretical. Our courses are taught by, in the curriculum comes from practitioners, angels that have been doing it.
And so if all of the stars aligned, what we would like to see in the future would be an acceptance for an examination and a certification in this, that would allow another path to the accredited investor status. Therefore, those that don't necessarily meet the financial [00:09:00] thresholds could take the courses.
They could take an exam, they could pass it, and boom, get into private placements based upon that. But that's beyond our control. You know, we would need the support of the government on that, and we're having those conversations. But, that I think would, do a lot to bring the community together and to set the baseline education, because this is a high risk asset class and we want everybody to be educated and to know what the risks are.
Andrew Kazlow: Do you see a world 5 to 10, 20 years from now maybe where the accreditation requirements are actually adjusted to include something like this. Like, if you were to have your perfect world, explain to me what 10 years from now angel investing looks like.
Patrick Gouhin: Yeah, so, uh,
In 2020, the Securities and Exchange Commission that really controls the accredited investor definition and what it's all about, opened it up to allow for three different
on-ramps, if you will, to accredited investor status. They included, FINRA Series 7, 65 and 82. I think I got those [00:10:00] numbers right. Examination. And so if someone passes those today, and they don't meet the financial thresholds, they can be considered an accredited investor. But from my membership's perspective, those three examinations don't necessarily represent all that it means to be an angel investor and how one should approach due diligence and valuations and all those things.
So that's why our argument is, Hey, SEC, that's fine, but we think there should be some additional on-ramps. One of those should be successful completion of Angel University.
Andrew Kazlow: Well, I love that. I, I think it's such an important thing to establish the sufficient protections to protect the investor from getting into an asset class that they don't fully understand.
I had John Harbison on recently, and he was explaining to us how the data is showing that most of your exits show up, or most of your shutdowns show up in the first five years.
Patrick Gouhin: Right!
Andrew Kazlow: And most of your winners show up after five years. And so if the model is, oh [00:11:00] yeah, let's give this a try, see how it goes.
And then based on that, I'll evolve my strategy. It's destined to fail because the first couple of deals are most likely gonna not make it, and so I think having a proper level of education protects investors from burning themselves and opting out of what is such an interesting asset class. A counterpoint that I'd be curious to hear your take on is,
so much of the ethos of the angel investor is that it is somewhat informal. It's you know, the, the dinner meetings, the one-on-one relationship, you know, all businesses relationship. Sure. But angel investing is just such a special kind of capital deployment and that I am writing a check to help you, an entrepreneur that I know personally, build your company.
And there's no intermediary essentially. That's very unique, very direct, very personal, very intimate as a form of investing. So talk about kind of that tension between professionalizing and [00:12:00] requiring this structure to be able to access the asset class versus the beauty of the informality and the organic nature of it.
Patrick Gouhin: Yeah, you know, That's a, a great point and it really is there. First, let me say that John is another one of those legends of the community that studies data beyond belief and comes up with great findings. So certainly a brilliant guy. To your point, there's a qualitative aspect of it and a quantitative aspect of it.
And I came in as an engineer from standards organizations saying. Wow, we should standardize all of this stuff. And this really would eliminate a lot of those you know, losses and failures and things. Very quickly, my board at the time said, this is about gut feel.
Andrew Kazlow: Yeah.
Patrick Gouhin: And you can talk about standards all you want, but there's no place for that, and before the pandemic, right? It was about we can't do anything virtually. We gotta look the investor or the entrepreneur in the eye, and we gotta be able to kick the tires and do all those. We need to have he or she come into the local meeting. Well, guess what? Pandemic happens. That opportunity was taken away. Groups [00:13:00] really struggled, but they pivoted. And they figured out how to keep deal flow coming and how to do this virtually. And I think that was a beautiful thing because once that happened and they realized, oh, we can do this, it also opened up coming out of the pandemic syndication opportunities where they said, we've been looking for deal flow only in our backyard.
Maybe we should expand that radius a little bit, talk to other groups, build trust with them, build a relationship, and that benefits the entrepreneurs as well, right? I. So, I do think that there's both parts of it. There is a subjective, qualitative part about, gee, just sitting here. You know, Andrew, are you a good guy or not?
And I've got a feeling and usually those feelings are pretty right, right? We all know that. So that's part of it. But at the end of the day, you can't argue if you've had 10 investments and these 10 are failures and there's a common theme in there, you probably don't want to do that again. You probably wanna try to improve your odds moving forward.
Andrew Kazlow: Yeah. I love that. Well, certainly excited [00:14:00] to see how the space evolves and at your leadership, in a lot of ways that's gonna happen. So, so talk a little bit more about through the a CA, some of the initiatives, some of the things that are happening maybe behind the scenes that the average angel is just not familiar with.
Because most of us as angels who have a few hours to spare, we show up to a meeting once a month, maybe once a quarter. Invest in a few deals a year, and that's about all we can allocate. 'cause we're running our own companies or serving as an executive somewhere, family, all of that. There's a lot that's happening through the ACA that most of us don't know about.
So tell me about some of the things that the ACA is working on that most people don't have keen insight into.
Patrick Gouhin: I think that, again, it comes back to this model of knowledge and what is that based on? 20 years ago when we were found, we had a dozen or so groups that came together. They had a very common need. They were all trying to figure this out together. They were in different parts of the country and they grew together over 20 years.
That became the baseline [00:15:00] of who we are today. That was wonderful. But now we had some groups that started in 2010 and 2015. Those original groups from 2005 and 2000 are still here, but they're advanced their seasons. They're bigger than the others. And so the challenge we have is, we don't have the
homogenous environment that we did 20 years ago. We've got the seasoned groups, the large groups, we've got new groups, we've got funds, we've got networks all trying to figure out what to do and where to go on the coast, in the middle of the country. Some are importing deal flow, some are exporting deal flow.
Some have a challenge with diverse founders that they're trying to bring in. So, you know, all of these things, we're trying to work as the power of the network, but you can't do it with the cookie cutter approach. Right? And so on top of that, we have been focused on those groups. They are our bread and butter.
They always will be. But part of my belief is that the SEC says through the [00:16:00] last US Census Bureau. That there are on the order of 20 million individuals in the US that could pass the financial threshold to be accredited investors as the steward of this community. I feel part of our responsibility is to tell that story and get the excitement from those 20 million to say, Hey, we're a lot of times baby boomers that are retired, they have their health, they have their wealth, they have subject matter expertise, they have their network, they wanna give back some way. Well, this is a wonderful way to jump into the game. Take a small percentage of your overall assets, 5%, 10%, put 'em to work in a fun way locally to help the next generation of entrepreneurs.
And then you know you're gonna give back to your local community as well. So how do we do that? We're trying to demystify angel investing in a very direct way to say this is a high asset, a high risk asset class. You need to make sure that you know what you're [00:17:00] doing, but if you have a proper portfolio that's diversified and you make enough bets.
The odds would say you are gonna get a return that will outperform the stock market in that. So, the game for us at this point is to try and communicate that message in a very clear, and concise way to those 20 million individuals pull a higher percentage them in to say, Hmm, I think I might want to check this out.
Become a member of ACA. Go to some of those classes. Listen to the hundreds of webinars that we have. Unfortunately, some of those are from those pioneers that are no longer with us, but we've got memorialized in these webinars. So you can learn a lot from that. And then, you know, maybe you spend a year or so doing that and you say, gee.
This is right for me. I want to do more. How do I make my investment? Well, ACA is not an investment organization. That's what our member groups do. So I see part of our role as flushing out, from the community, those that would have an [00:18:00] interest, giving them a baseline education and then turning them over to our groups to provide that next generation of angel investor that's gonna keep capital flowing to local economies all over the US, not just on the coast, which is still primarily where the VCs are.
Andrew Kazlow: Sure. So if I'm an individual listening to this, let's say maybe I'm a part of a group, maybe I'm not a part of a group, Like, like should I join the ACA. you know, Should I come here for resources?
Or should I just go to my local group? How do I interact with the ACA? Is that for individuals or is only for group leadership?
Patrick Gouhin: So again, being a conservative engineer and from that mindset, I think everybody should do their homework. Our dues is presently, $310 a year. That I think if you
needed professional services of some kind, and you had to go to a doctor, a lawyer, whatever it may be, you're gonna pay a couple hundred dollars an hour at least, right? So $300 to ACA, and you get access to hundreds of webinars on all of these topics that you can watch [00:19:00] whenever you want. If you were trying to get that knowledge from professionals on a real-time basis or whatever, you'd pay tens of thousands if not more.
And so I think there's a low barrier to entry there, right? You pay 300, you watch all those things and you say, this is right for me, or this is not right for me. And that's what I think, we need to crack that nut to be able to say, Hmm, here's the low barrier to entry to get into that.
Spend $300 and if you don't like it, you walk away and you got some knowledge, right? You're better off. On the other hand is, if you get excited and passionate, like everybody that's here and says, my gosh, I wanna get involved, I wanna do more, what do I do? That's where it's a great opportunity to get into a group.
'Cause a lot of time these groups have two things. One, a much higher membership fee because they got a different infrastructure and then a minimum level of investment that they expect. So if you don't really know about this, you're probably not gonna commit. To 50 grand or a hundred grand or 250 grand in investments in the next year, three years, five years, or [00:20:00] whatever.
Andrew Kazlow: Sure.
Patrick Gouhin: So that's how I see it playing out. Low barrier to entry. Get your comfort up, get your knowledge up, and then go in at different levels when you're ready to make those investments.
Andrew Kazlow: Okay, Pat, final thoughts for our listeners. Many of whom are going to be newer angels, many of whom are more experienced angels, 15, 20 plus deals in their portfolio.
Patrick Gouhin: I guess I would give you two main ones. One is it's a team sport. This is about networking and whether you go to that local group or you come to a meeting like this, the network is so powerful and everybody is friendly, right? And cordial. So get out there and make friends, build a network and you'd be surprised what you learn about. The next part of it really comes with, what we hear all the time, but I don't think people really think about it. And that's that angel investing is patient capital. It takes time. So this kind of goes back to your conversation with John about the failures usually happen first.
So if you come in and you make three investments in the first five years, [00:21:00] and they all fail and you don't get any exits. You're kind of like, forget this, I'm done. I'm outta here. Well, we know the data tells you that you need to have a diversified portfolio at a bare minimum. 10 companies all better if you've got 30 or so and you need to ride out the full cycle.
And we like to say, oh, well, those exits will start rolling in five years. Sometimes they do, but a lot of times it's seven years, it's 10 years. It takes longer. So be patient and consider it a team sport.
Andrew Kazlow: Well Pat, thank you for taking a few minutes out of your crazy schedule this week to sit down with us. It's been a pleasure and look forward very much to the next conversation.
Patrick Gouhin: Well, thank you very much for doing this, Andrew. And, uh, all of us telling the story that's gonna make a difference. And think of the power that can come from mobilizing this community, bringing more investors in here, as we like to say at ACA, angels are the fuel for the economic engine that is the entrepreneur.
Andrew Kazlow: Thanks for [00:22:00] listening to this episode of The Diligent Observer. I'm your host, Andrew, and if you're an angel investor looking for essential angel intel in five minutes every week, I think you'd enjoy my newsletter. I send my best stuff, interesting deals, and more straight to your inbox so you never miss a thing.
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