0:00:00 - (Steven Diedrich): The average investor had not made money because 2/3 of investors were in less than five years. But if you try to drive a university program just on student experience, you can lose touch with the real aspect of are you serving investors? Well, an intern is really just a pain for eight weeks as they learn what's going on. Right. I mean, you're babysitting essentially, and then they're really helpful for two weeks and then they're gone.

0:00:26 - (Andrew Kazlow): Welcome to the Diligent observer, where we help angel investors see what most miss. I'm your host, Andrew, and every week we explore what works, what doesn't, and why through conversations with experienced startup investors and operators. My guest today is Steven Diedrich, executive director of the Baylor Angel Network, one of the most active university affiliated angel groups in the world. In this episode, Stephen breaks down how band's industry leading two year student analyst program works, what it takes to develop a university angel community, and how Band thinks about serving three very different stakeholders, students, investors, and founders.

0:01:04 - (Andrew Kazlow): I hope you enjoy learning from Steven as much as I did.

0:01:14 - (Andrew Kazlow): Stephen, thank you for being with me today.

0:01:16 - (Steven Diedrich): Yeah, it's a pleasure to be here.

0:01:17 - (Andrew Kazlow): Well, I have been pestering you for like a year to sit down with me and we finally made it happen because I saw you in the hall and was able to drag you over by hands and feet to sit down at this booth with me. We are here in Westminster, Colorado at the ACA Annual summit and super excited to be able to sit down together to ask you a few questions.

0:01:40 - (Steven Diedrich): Yeah, no, this is great. I know we've traded emails about getting together and all you had to do is ask me in person, right? Who knew?

0:01:47 - (Andrew Kazlow): Here we are. It's a magical thing, in person. So, Stephen, one of the things that I really want to hear more about because Baylor Angel Network has become

0:01:58 - (Steven Diedrich): world

0:01:58 - (Andrew Kazlow): renowned, I would say, at least in the angel community, for the excellence in your student analyst program. I mean, the, the band analyst program is something that if you don't know and you're listening to this is absolutely incredible. I want to hear more about how it works and why it's so special and all of that, but as a starting point, I'd love to hear how you got involved with the band analyst program. Take me back to the origin for Stephen Diedrich.

0:02:23 - (Steven Diedrich): Yeah, so I mean, my origin was actually as an analyst in the program. So I did my undergrad at Baylor University and had a roommate who nudged me and said, hey, we should apply for this special program, the band analyst program. And I didn't know really what it was. And I thought, sure, why not? Funny enough, you know, interviewed and they brought six of us on and I got to be an analyst my junior and senior year.

0:02:49 - (Steven Diedrich): And essentially what it was doing there is. It was, it was a new program at the university, had been around for just, I think three years. And they were trying to develop this network that, you know, angel network, connecting investors with entrepreneurs. But its connection at Baylor University really flavored even from the beginning what its priority was going to be. And that was experiential student education.

0:03:09 - (Steven Diedrich): So as I was finishing up my studies, I got to be an analyst in the program, look at some startups, interact with investors. And then I left and never thought much about it again except that, you know, it was the highlight of my education there and my closest friends did it with me. And so it was, you know, just, it was something I looked back on fondly. Fast forward a couple years, I worked in industry.

0:03:29 - (Steven Diedrich): I went to grad school, Texas A and M. So, you know, we've got that connection. I know, I forgot anyway. But yeah, as I was leaving A and M, Baylor had an opportunity for me to come back as the executive director. And someone on the advisory board actually called me to say this was coming up and asked if I would apply. And they pitched it this way of you're so engaged in industry, angel network side of it, you can be teaching some students.

0:03:55 - (Steven Diedrich): They knew I had a passion for education and they also pitched me on it's in Waco. And not being a big city guy myself, I kind of like the idea of getting back to my hometown, smaller city, slower pace of life, and, you know, from there, I guess the rest is history.

0:04:09 - (Andrew Kazlow): Amazing. So what was it? I mean, thinking back to that, that first experience going through the program, like, what were the main things that stood out to you as a student? I want to hear more about the current. But for you, like, what were the, you know, one to three nuggets that you, as you look back, you're like, man, that was what made this special.

0:04:29 - (Steven Diedrich): Yeah. I think as a student, the key thing I remember right was the interactions with the investors. And so, you know, we're looking at a different companies and you've got like the funnel that's coming through. And so I actually can't remember a single company that I screened, but it was all, you know, innovative stuff and that was neat. But as I spoke to the investors who served as the deal advisors and mentors, it was amazing to me to hear the way they thought about these things. Right. That experience that they brought that as a 20, 21 year old, I just didn't have.

0:04:58 - (Steven Diedrich): And so that was the lasting impact of it and the relationships that I built there.

0:05:02 - (Andrew Kazlow): It's fascinating that you don't remember any of the deals, but you remember the investors. That's. That's potentially worth exploring. Tell me how the network has grown since then. So you joined. Well, you experienced it as a student in year three. Walk me through kind of the evolution of BAN as a network. And then since you joined, maybe some of the high points for what. What has evolved.

0:05:27 - (Steven Diedrich): So, you know, the network is stewarded by different. I mean, they had one faculty member through most of that time before I came in, and then I think they had two or three executive directors that stewarded it in different ways. And what they saw was the network grew, you know, from a couple guys to get hit about 30, and then it got up to 50. But then it started to slow down a little bit again right before I came in. It was a time of transition.

0:05:50 - (Steven Diedrich): You know, the faculty member had retired, the director had stepped down, and they were looking to figure out, okay, what are we doing here? But over that time, the network had invested, you know, about a million a year, a little over that, had really gotten to fund some neat companies, had seen some success in the exits and realization, and always kept that devotion to what are we doing for student education?

0:06:10 - (Steven Diedrich): How are we letting students come in and be a real part of everything we're doing here now. When I joined, like I said, it was kind of a transitional period. I started first just as the staff director at the university, helping on the network side, and then after the year, took over the academic curriculum as well. So having had the chance to teach as an adjunct at Baylor when I was in grad school, you know, my experience there at Texas A and M as well, it was neat to be able to come and look at the analyst program and really re envision like staying true to the core priority, which was we want quality deal flow and engaged investors to create this environment by which our students can be learning and growing.

0:06:50 - (Steven Diedrich): And Baylor's number one priority is that student experience. But if you try to drive a university program just on student experience, you can lose touch with, I'd say, the real aspect of are you serving investors well, are you treating entrepreneurs well and developing this good reputation in the market as a group that provides value capital, expertise, whatever that is. And I think if you only focus on building a network, you can alienate the faculty side of things.

0:07:19 - (Steven Diedrich): You can almost divide it one of the great blessings we have at Baylor is the network actually sits within the university. And so, you know, when I teach it is a finance course, your students are getting credit. And so we built this curriculum that really aims to bring on a student at the beginning of their junior year. And so there's four semesters in the sequence that aims to build them up, have some transition where seniors are working with juniors, so you have that handoff peer to peer, but also have that academic curriculum along with the practical experience that they're growing as they take on more and more responsibility.

0:07:51 - (Steven Diedrich): So modeled after what you see in industry with internships to a full time offer. But also always staying true to this idea that universities are not trade schools. Right. We're not just about creating workers or just create, you know, placements. You know, our goal is to be pouring into the lives of young men and women to develop their critical thought, expose them to new ideas so that they leave the university better, more thoughtful, you know, kind of questioning things, challenging assumptions to expand the forefront of knowledge. And I love that theoretical mandate of the university that you can almost miss if you're just focusing on job placements.

0:08:26 - (Steven Diedrich): So Maybe that's the PhD studies coming out a little bit. And what I get excited about there but.

0:08:31 - (Andrew Kazlow): Well, what's interesting about this is, you know, every university ecosystem in theory and many just angel groups in theory, get excited about the opportunity to work with students. I mean it's just such an obvious way to 1 get free slash low cost resources to run the process at the investor group which is often cash strapped. It's a non profit, you know, really not here to build an enterprise. And so it's an amazing way to get some resourcing and to provide a great experience for the students, give back, make connections with the investors. Like all this is great in theory, but one of the things I've noticed is really hard to do is to get that recipe right.

0:09:12 - (Andrew Kazlow): You talked about kind of the mixture of if you prioritize, you know, one party at the expense of the others, it tends to dilute the quality. Say more about like why this has worked at Baylor. You mentioned that you have some unique ingredients to this package, the academic structure and I think that's really special. So say more about like what? Why has it been so successful in your opinion?

0:09:39 - (Steven Diedrich): You know, I think it starts with supportive administration. So you know, when they were first starting this, the, the dean of the business school took a chance on it. Right. I mean it went all the way to, even to general counsel to try to Understand, like, what are the risks to the university? Like, they're about protecting the mission as a nonprofit educational institution. And we're talking about creating an angel network here that's making investments. And so, like, there was a lot of caution and clear lines where it was. This is the extent to what Baylor is doing. And once someone wants to make an investment, Baylor's not involved in that investment decision.

0:10:12 - (Steven Diedrich): I mean, and that's a very clear hard line. We also had our development or advancement team, right, that works on gifts, that was supportive of this. And sometimes you can run into things where, you know, if a development officer is trying to get gifts in, but then you're asking these guys to invest in companies, you could almost get this fear that you're stealing money. And what I love is that our advancement team looks at the Baylor angel network and says, you know, someone gives out of one pocket and they invest out of another, right? These are different allocations of someone's resources and what they're going to do with their money.

0:10:45 - (Steven Diedrich): And they've actually brought members in to say, this is a great way to get involved. You want to see the impact we're having on students as a university. You want to get involved, mentoring, giving back kind of at this point in your life. And it's created stronger relationships between the university and our alumni and even non alumni that have gotten involved as investors. So, you know, the support from the university is, is huge, you know, and, and again, even departments, our finance department, our entrepreneurship department, and you know, just as a note on there, Baylor University has, I think, one of the top ranked entrepreneurship departments. And what I love about it is it, it has contributed to this innovative mindset that I'd say, right, like, I always look at this and say, I wasn't an entrepreneur entrepreneur. I haven't started a business and, you know, kind of in the traditional sense, nor was an entrepreneurship major. And yet what we want to be doing, even as kind of more of a finance guy, I'd kind of classify myself as is we want to be entrepreneurial and innovative in everything we're doing so that we're doing things better today than the way we did them yesterday.

0:11:44 - (Steven Diedrich): And so when you have that ecosystem that comes together, I think it allows something like this to grow in a really great way.

0:11:53 - (Andrew Kazlow): As you may have noticed, we are recording this conversation live from the Angel Capital association annual Summit. Now, if you're not familiar with the aca, this is the world's largest professional organization specifically designed for angel investors. So if you're serious about this ecosystem or just generally interested in learning more. The ACA's education, resources and community are definitely worth checking out. You can go to angelcapitalassociation.org

0:12:20 - (Andrew Kazlow): and I gotta say this is our second year live recording in the room and I had an absolute blast. Cannot wait to come back for future years and I hope to see you there.

0:12:31 - (Andrew Kazlow): Well, it's interesting the way you talk about the university support and this blending with the business development and kind of the university growth structure, say like a little bit more mechanically how that works because it's really creative and I think particularly for anyone listening that is working in a university ecosystem which by the way there's a ton of. There's 2,700 four year universities in this country and every one of them, I guarantee you, wants to have a community like this. But many have tried and failed for a variety of reasons. Many are still trying. We're part of, I'm familiar with, there's a group called the University Angel Group here.

0:13:07 - (Andrew Kazlow): There's meetings happening at ACA between this group, you know, trying to help build these communities. So like go one level deeper, like mechanically, how does this get? Investing out of one pocket, giving out of the other. Work for you guys?

0:13:20 - (Steven Diedrich): Yeah, so. And I'll get different universities that have reached out and I'm always happy to get on a call now once you post this, I might get a few, few outreaches. No, which is good because my view of it is we've got a, a unique and excellent program that's impacting the next generation of leaders. And the more universities that can be doing that successfully, I think it's better for just students.

0:13:44 - (Steven Diedrich): Right. It's better for our, our country and what we're doing right in the future. The first question I start with is what is the priority as you're thinking about doing an angel network or an angel program? And that's where I like that. The clarity that I have is we're not primarily about alumni engagement. Like if you kind of think about the alumni groups, we're not primarily about developing better donor relations. If you think about the development's mission like they have clear mandates.

0:14:11 - (Steven Diedrich): Nor are we kind of primarily about just giving students a chance to learn about this. Like you could do that in a classroom or with case studies or you know, raising a fund that the students then get to allocate themselves. I know that I am operating under the conviction that our number one priority is experiential student education. So we want a well run network. Again, those engaged investors in quality Deal flow that's going that we can then place these students within along with having that focus on the curriculum that goes through. And so like when I look at the support we need to do this, like you can run an angel network, engaging the investors and sourcing the deal flow and not be connected to the university.

0:14:52 - (Steven Diedrich): You can hire interns. But you know, the, I always joke that an intern is really just a pain for eight weeks as they learn what's going on. Right. I mean you're babysitting essentially and then they're really helpful for two weeks and then they're gone. Right. I mean that's a 10 week internship model and you don't always have a ton of overlap and so you're always training. And I think most angel groups, like as I think about, if I didn't have the tide of the university, we would really struggle to think how do we build up an educational and training platform to get the students ramped up for just an internship.

0:15:25 - (Steven Diedrich): And that's what I love about our two year model here is we interview students, we bring them on and then they take and of course, right, it's a three hour like four credit finance elective called Entrepreneurial Finance, which I teach. And that's where we bring the Baylor Angel Network cases that I've developed into the classroom. And we start with how do you listen to a pitch? How do you conduct diligence to identify risk and see the potential value?

0:15:49 - (Steven Diedrich): That's the trade off you're looking at. And then we get into how do you structure these investments to align incentives. Right. Talking about those economics control terms and how you make sure that you and the founder are going in the same direction. That way the students know this stuff. And then we talk about, okay, now they operate and you exit. And so they get technical training, we do modeling like they do, I mean all the stuff you'd expect in a class. But that's roughly the model I go to. That way these students are ready to either be analysts in our program their senior year or I mean, go intern at other angel groups which we've placed at, you know, student interns at other angel groups too.

0:16:22 - (Steven Diedrich): And all that junior year while they're taking these classes. So again, that's the university support of offering courses that, that we teach. We're also having them shadow our senior analysts so they're actually learning from the year ahead of them. And you know, it's always fun to hear from the seniors of like, man, our juniors, they don't really, you know, they don't really know what's going on. I thought they'd know this.

0:16:42 - (Steven Diedrich): Keep in mind, that was you a year ago, right? I mean, the amount that they learn and ramp up surprises even them when they look back. But that handoff from one group to the other, right, it's like they're, they're teaching. The next generation also adds to their educational experience, though. Like, you're talking about seniors who are graduating now, not just having learned to analyze companies, but they have recruited, they conduct the interviews, they hire the team, they train them, they make the selections on who they hire full time, essentially to be senior analysts and which students in our junior program just do the junior year program. Because that's another thing we've done is expand this to impact more students.

0:17:19 - (Steven Diedrich): There's a limit to how many students can be senior analysts just from a. How many students can I manage in that whole program? But we wanted more students at the university to be able to at least touch and feel this at different levels of impact. And so, you know, as you kind of think about, okay, this is all the stuff that we're tactically doing with our students to affect their education. It does benefit the Angel Network. Like we talk about our mission. Like, our mission is to be one of the best angel networks, uniquely advantaged by our impact on the next generation of leaders.

0:17:51 - (Steven Diedrich): Now, that could be the founders we're impacting and the way we want to support them and be good investors and advisors. But even more so, it's, you know, this next generation of leaders is we're impacting our students at the university mandate, right, as an employee at Baylor, but also as investors in this mentorship and giving back. And so, you know, it's, you build this environment right, where the students are doing a lot of, and learning from multiple places, classroom, peers, and these members mentor.

0:18:21 - (Andrew Kazlow): What's exciting to me about this model is how consistent it's been over the years. And why that's exciting is because you're now in a season where I think the group, from what I have observed, having been to a couple meetings and connected with quite a few former analysts, is experiencing this beautiful cycle where now you have former analysts that are running businesses, running funds, joining as members that are coming back through.

0:18:52 - (Andrew Kazlow): And it's this whole community of folks that have been through the analyst program specifically and are continuing to engage after. How many, how many students have been through the analyst program?

0:19:03 - (Steven Diedrich): Oh, we're, we're over a hundred now. I, I wish I knew the number. It started with three, by the way, and then it went to four and then six, and now we do about eight to 10 senior analysts. Now, that's just the senior analyst program. We have about 15 juniors each year. And then in entrepreneurial finance, I mean, it has been lots of students through that elective course where we brought that

0:19:23 - (Andrew Kazlow): in, and they're everywhere. Like, I interviewed Amy Brandenburg.

0:19:26 - (Steven Diedrich): Oh, yeah.

0:19:27 - (Andrew Kazlow): A former band analyst, was on this podcast, episode 51. I believe she's now running Denver Ventures. Like, these people end up in really powerful, fascinating finance roles across industry and particularly in the venture ecosystem.

0:19:42 - (Steven Diedrich): When I've loved it that, yes, we've had some join as members. And that started with actually, you know, my call Drew Mate, by the way. It's like the first one was, hey, you know, I'm trying to grow membership here. Would you join? Right. So that was an easy one.

0:19:54 - (Andrew Kazlow): Still counts.

0:19:55 - (Steven Diedrich): It does, it does. So I'll always appreciate John and Joseph and Chris. I mean, these were. These were peers in the analyst program with me, right, Who. Who joined at first, but then we also had, you know, one of the Tim, he was the first class of ban analyst, and he came and pitched this kind of entrepreneurial fund that he was starting, you know, kind of related to the business he was in. He was like, you know what? We'll come pitch to the Baylor Angel Network. And that also helped one of our priorities of, yes, we're an angel group. Most of our deals are true kind of traditional angel venture stuff, but we want to be an investor group. And so, you know, having a former analyst come and pitch, join as a member, pitch kind of their opportunity was awesome.

0:20:37 - (Steven Diedrich): Had another one he had student named John. He was a couple years behind me at Baylor, but when he left the private equity firm he was at when, you know, kind of fundless sponsor model put together a deal. And what he had been told as a senior by one of our investors was, listen, John, when. When you start your own business, I want to invest in you, you think about this, right? Like, as angels, they're mentoring these students and top students. Like, of course, you kind of have this idea of like, hey, I want to back you when you're ready.

0:21:07 - (Steven Diedrich): And so John called me one day and said, hey, you know, I'm leaving. I'm kind of putting this together. I'm trying to do something, you know, along these lines. Put a deal together myself. Awesome. Acquiring a business and wanted to kind of grow it and turn it around, you know, the same playbook he'd been doing there at Main Street. And his. His statement to me was I remember some of the members had said this to me, had an impact on him. Right? I mean, it set the trajectory of his career. He's like, and so I've got most of the money lined up.

0:21:37 - (Steven Diedrich): He didn't need to come raise from our group, but he's like, but I want to because of the way that y' all had believed in me as a student. And so you can also have that lasting impact and finding these great students who, you know, 10 years down the road, when they're ready to do something, you've got that relationship. Like, it just. These are the dividends that when we started this, I don't know if anyone ever imagined. And I've loved to be able to be stewarding our program during this season, right. Where some of these other returns were coming.

0:22:03 - (Andrew Kazlow): That is the magic of angel investing, in my view, is this. That kind of bond, the commitment, the relationships that are built in the angel community are just so different from any other kind of investment because it's so intimate and personal. And I just. Oh, gives me chills hearing you say that. Okay, so walk me through. Where does the program go from here? It sounds like more of the same. Keep showing up, keep running a great experiential learning program for the students, keep having great members, keep building this culture that centers around all of this. Like, what besides continuing, what's working well, what's coming down the pipe at Baylor?

0:22:47 - (Steven Diedrich): Well, you know, and that's. That's a great question. Something we're always thinking about. Because I always say, like, while history doesn't really repeat itself, it usually rhymes. Right. Like, I heard that at one point, I was like, I love this because every class of analysts is a little different, and yet our mission stays the same of, you know, what we're. Who we're trying to serve. Well, you know, again, that's the students, the members, you know, investors and the founders. Right. Entrepreneurs that we're backing, as I look at, would be easy to get comfortable and just keep doing the same. But I think that's not the best approach to take with any angel group. Right.

0:23:23 - (Steven Diedrich): And this is how I define entrepreneurship in my class, actually. We start the first day of class talking about, how do you define this? And I had one of the investors in our group, he puts it this way. He always says entrepreneurship. He sees it as, how do you do something differently today than the way we did it yesterday? So as I look ahead, you know, there's all these ideas floating around. Some are, you know, revolve around, how do we Serve our members well.

0:23:51 - (Steven Diedrich): And that is always looking at, you know, members are getting value out of a couple things. You know, there's the investments, there's the giving back of mentoring students uniquely at our group. There is the networking opportunities and then the continuing education. And so we're always looking at, like at a university, how do we continually educate and actually maybe have better, stronger member educational resources and events? So we do an education day. We actually have one coming up later this week.

0:24:18 - (Steven Diedrich): Focus on AI. Using it as an angel or investing in it kind of is the two approaches we're taking. So how do we build that out in a stronger way for member education? The other piece I always look at is how do we continually innovate on our deal flow? Right? Making sure that members, when they're investing, not only are they seeing quality deals, but they're also seeing unique deals, things that come across that help them earn a return on their investment.

0:24:42 - (Steven Diedrich): You know, and so whether that is through the affiliated fund that we kind of have on the outside that we point members toward if they want to get diverse exposure to angels, some of the alt investments that we've brought in, and we're in conversations again with people on the outside that are friends of the network kind of piece of this. And, you know, what does this look like to pursue maybe even a more focused alt investment strategy for the members of our group?

0:25:05 - (Steven Diedrich): The other thing that we've looked at is, okay, how do we partner as a better, you know, neighbor to priorities that Baylor's already doing, Right. They're with their Office of Innovation, the entrepreneurship program, the pitch competitions. Like, there's always, you know, new things that the university is doing that we want to be a good friend to staying in our swim lane as an investor group, but being like a strong partner to advocate for the interest. Not just at Baylor, though, but, you know, kind of throughout the state of Texas and beyond.

0:25:31 - (Steven Diedrich): And then I am always focusing on how do we think about impacting more students. Right now, the Baylor Angel Network is primarily undergrads. And, you know, we've, we've grown that impact by expanding our Junior Assistance Program so that, you know, someone's not just in for two years, but it's, you know, we've got a broader scope junior year, a more narrow focus on student senior year, and then bringing in entrepreneurial finance. But we don't really engage with the graduate school very much. I mean, I think they have in the past, as I, you know, kind of understand things we've tried. And I'd love to See that more. The other piece is like, how do we engage with other networks in ways. And we've been having some fun conversations about this, like with other local angel groups and VCs that we have either placed graduates at or we have friends that are partners there. Say, could we be working on a program that helps place students more at interns or working internships that have come through the balance? There is. We still have an Angel Network that we want our analysts at, you know, but, you know, we had one of our, one of our student, you know, junior assistants.

0:26:34 - (Steven Diedrich): He did the junior year program and then started working at Ambassadors Impact Network. And I love to see that because, you know, excellent student. And I got to catch up with him actually at a wedding just a couple months ago, you know, and we kind of have this idea that, you know, how do we help these students in their careers, not just look at them as valuable to the Baylor Angel.

0:26:55 - (Andrew Kazlow): A quick note before we continue the conversation. Alongside the Diligent observer podcast and newsletter, I also run an outsourced operations service specifically built to serve Angel Networks. My team handles things like initial screening, social media, newsletter prep, platform management, and

0:27:09 - (Andrew Kazlow): a whole lot more.

0:27:11 - (Andrew Kazlow): The kinds of things that either aren't getting done or shouldn't be done by busy community leaders. If that sounds interesting to you, send me a note. Now back to it.

0:27:21 - (Andrew Kazlow): Wow. A lot on your mind. This is exciting to hear that we're doing more of the same and there's all these growth vectors. I would be remiss if I didn't ask a little more about the fund structure and how that works, because it sounds like that provides quite a bit of value to the members as part of their experience. And one of the unique things I've observed just from having attended a couple BAN events is the way that all the members are totally on board and there in large part because they're excited about this culture of supporting the analysts. Like the analyst program is the centerpiece of the network, in my experience, from a cultural standpoint, and it's still professional. And all the other things you described say more about the fund and how that fits in to all this and how you guys have made that work, I imagine that it's provided a lot of value. So tell me more about how it works.

0:28:20 - (Steven Diedrich): Yeah, so when I joined the Baylor Angel Network, and it kind of starts there because I joined and I kept hearing individuals make this comment of, hey, it's been around a long time and we've, we've seen no exits or profitable ones. And so I Just kept hearing, and I thought, well, that must be true. I then started digging into, okay, what. What's our portfolio? How do we. How do we track data better? Which, by the way, like, if any groups are listening and they're not tracking data that their investors are making and sharing that with the ACA for these insights that they put together, like, I think that's a huge miss because, like, as an investor, I want to be thinking about, like, okay, how have I done what's worked out well, what investments pan out and what are those common trends that beget success or failure?

0:29:01 - (Steven Diedrich): And so started looking at that, and what I found was that this, this refrain of, like, well, we haven't had any good exit yet. It's actually not true. We. We'd even had an exit where someone had turned around and given gifts to the university out of their profits, right? But just hadn't said, oh, this was because I made money.

0:29:17 - (Andrew Kazlow): Right?

0:29:17 - (Steven Diedrich): I mean, it just. No one knew about it because we weren't tracking that.

0:29:21 - (Andrew Kazlow): This is like Apex Angel Network reality of like, we got all these guys together, we're loosely investing. Somebody does, well, forgets to send the note to tell everybody about it, and you find out three years later that they had a 50x, you're like, what?

0:29:35 - (Steven Diedrich): Yeah, why didn't we know this? We should have solved. No, but, but this is what happened. Looking at the numbers, our returns on investments made were in line with like, Rob Wilt Bank's articles on angel investing, right? Those seminal articles that came out in 06 and 2017 and such. We're in line with that. Great. Half of them failing, you know, one out of ten make the, the portfolio. Okay. But the average investor had not made money, right? That median individual, because two thirds of investors were in less than five deals.

0:30:11 - (Steven Diedrich): So again, as you, as I kind of look at this, it's like, all right, so our best two performing investors, one had invested in 20 companies so well diversified, the other had invested in two. One failed, one was a home run. So luck, right? I mean, you. Diversification or luck? You pick. But that middle investor had seen no returns because he'd been in, you know, he decided, I'm going to put in $50,000. Or she'd said, I'm going to do $100,000 of, you know, kind of exploring the venture angel space.

0:30:41 - (Steven Diedrich): And they invest and then they wait and two, three years pass. And three years is the average time frame it takes to start seeing that first exit, which is a failure statistically. And then they see another one that's a failure. And then they make 1x and they decide, I'm not doing this, I must be bad at this, I must be bad, I'm going to stop. And what you then find is, okay, so how do we serve members? Well, like I said, like my focus is student experiential education.

0:31:05 - (Steven Diedrich): But if we want the academic program, we need to have a world class network that is defined and uniquely advantaged by our student program. And so how do we serve members? Well, they need to make money when they invest. It's not a gift, it's an investment. And if we have an issue of not enough diversification and I know you can take different approaches on this because specialization and getting lucky can get you a higher overall portfolio return.

0:31:32 - (Steven Diedrich): But that's not a portfolio per se. Right. And so, you know, I kind of came up with this, you know, perspective that we really need to make sure that we are offering our network a way to get, you know, invest through a vehicle to get that diverse exposure. That way a member can come in and join and they may decide, I'm going to do $25,000 in this deal because I like it, like keep that going. They're going to be more involved, they're going to own that investment, you know, talk to the founder and provide the value that angels provide.

0:31:58 - (Steven Diedrich): Love that and don't want to go away from it. But we also can say, by the way, every other year outside of the university scope, right? We just, we want to be encouraging, you know, a member fund that is going to be investing over two years is the way the fund operates in about 15, 16 companies. And the idea there is you are getting your index fund type exposure, right? You're, they have an investment committee on the fund. It's not a true strict sidecar. They're looking at companies are making individual investment decisions on this to decide, you know, what should we invest in.

0:32:30 - (Steven Diedrich): But then a member can come in and they can opt in or out, there's no requirement. And they can get that diverse exposure with, you know, $100,000 and decide the two or three or four that they're going to invest in directly that serves members, it also serves founders. Because we can come in and point to the fund, we can actually serve a little better and it increases the dollar size that we're investing in these companies.

0:32:52 - (Steven Diedrich): So providing more capital to founders and you know, that third stakeholder group that I care about, you know, just passionately as a students, the fund is outside of Baylor, but it makes us a better network as the Student program and we are interns out of it. So summer internships, when, when I have the students here during the semester, they leave for the summer. The fund has actually been able to hire a student intern in the summertime to come in and continue to get that exposure, that experience with an angel fund.

0:33:21 - (Andrew Kazlow): So if you're, you're talking with a university ecosystem that is like, this is amazing, Stephen. We've tried three different things. None of it's worked. How would you coach this person to think about getting something like this moving in their ecosystem? It sounds like based on what you've described, that probably starts with getting university leadership on board. Tons of different recipes for how this has actually played out at universities across the continent. Tell me your three kind of key words of advice of what you'd encourage somebody that cares about this, that gets excited hearing you talk and is like, we need this in our community.

0:33:59 - (Andrew Kazlow): How would you encourage them?

0:34:01 - (Steven Diedrich): I mean, I think you have a well defined priority. All right, like if the priority is alumni engagement or if the priority is bringing more funding to tech, being commercialized out of the university, that's going to flavor the whole way they approach it. Right. And I, I, you know, I shared our priority, experiential student education. Okay. So having that well defined priority is number one. And then you go to get the support from the people you need to. Right. Whether that's the development team, that's the administration, that is faculty.

0:34:30 - (Steven Diedrich): So you know, I'm uniquely a, you know, kind of serving this role where I teach the courses. Um, you know, and I'm the director of the network. Um, and we have an associate director that helps for the hands on. Because I can't be all things to all people. Like I, I think sometimes someone that's passionate will think I'll just, I'll do all this. But you really need multiple people with different complimentary strengths coming in there as well.

0:34:52 - (Steven Diedrich): Um, and you know this, we've had different associate directors. You know, one, two of them have been former analysts. One of them, you know, his actually college roommate I think was an analyst. And so like they've been familiar and had this passion that plays in. And so you know that right now that's Caroline, phenomenal job. Right? But you know, so you build this team around this as well. That is really helping hit on everything you need to. So again, define that priority as a university and then get the right people on board to support it as you go.

0:35:21 - (Steven Diedrich): And you know, I'm talking about the university support here because that can be one of the biggest roadblocks, that just kills us before it gets going. The other piece that you know is kind of that next one that you'll need is strong support on the outside. Like the Baylor Angel Network started because one alumni of Baylor University had this idea that what if we started a network where people would give out of their profits to the university. Right. Kind of sought that way. This would benefit Baylor.

0:35:45 - (Steven Diedrich): And then through Bob's vision there, conversations with the dean, connecting with Bill Petty as the faculty that kind of started leading this and laid that groundwork for what it looked. One of my favorite professors, by the way. That is what got it going. But if you don't have the support of alumni or even just outside friends of the university that actually come in and support this, you know, giving of resources, of time and, you know, investing some of the money here and there, it won't get going either.

0:36:14 - (Steven Diedrich): And so, I mean, there's a ton of stakeholder groups, and it's okay. How do we intentionally serve them, you know, to achieve this mission and what our priority is? So, again, defining that priority is number one. In my mind, it's gold.

0:36:26 - (Andrew Kazlow): Stephen, thank you for joining me and thank you for walking us through the band's story. In a lot of ways, it's super fun to hear, and I look forward very much to our next conversation.

0:36:35 - (Steven Diedrich): Yeah, no, I appreciate the time.

0:36:40 - (Andrew Kazlow): Thanks for 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. Subscribe today@the diligentobserver.com.