0:00:00 - (Rick Timmins): We have data to demonstrate that to our members. My highest return was a pharmaceutical company of 70x. Successful angel investings will take five to eight years. We require them to go to a two hour class that we put together that says this is how you need to be a good angel investor.

0:00:20 - (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 Rick Timmins, a Six Sigma black belt who spent decades improving financial operations at Motorola and Cisco before applying that same level of rigor to angel investing at the Central Texas Angel Network, one of the most data driven angel groups on the planet.

0:00:47 - (Andrew Kazlow): In this episode, rick explains his 78 metric tracking system, why 2/3 of angel groups are operating as what he calls

0:00:54 - (Andrew Kazlow): supper clubs, and the quiet collapse of

0:00:56 - (Andrew Kazlow): secondary markets that many investors simply aren't paying enough attention to. I hope you enjoy learning from Rick as much as I did.

0:01:12 - (Andrew Kazlow): Rick, thank you for being listened.

0:01:14 - (Rick Timmins): Thank you, Andrew. Pleasure to be here. Thank you for having me over here to do this kind of discussion. I look very much forward to it.

0:01:21 - (Andrew Kazlow): Likewise. Well, we are seated in the corner office, I like to say, of the Angel Capital association annual summary, definitely in the corner here in Westminster, Colorado. And you are wearing a pin, a button that says ask me about data. So I, I have to open by asking you about data. Tell me more.

0:01:40 - (Rick Timmins): So data is something that I grew to know, understand and appreciate in my professional career. I worked for two companies in the finance organizations of these two companies, Motorola Semiconductor and Cisco Systems in the Bay Area. Motorola Semiconductor, early on in my career became a major advocate for the term Six Sigma. Six Sigma is a term that allows for you to understand how to eliminate mistakes and be better at something that you're doing.

0:02:22 - (Rick Timmins): And in fact, a book was written about this. I can't remember the author's name. I actually went to his training class in Florida in the late 70s, early 80s and graduated with a degree in Six Sigma. I became a black belt in Six Sigma.

0:02:38 - (Andrew Kazlow): So you were a black belt before it was. Before it was cool. Now it feels like everybody's talking about it, but you were there.

0:02:42 - (Rick Timmins): In the 70s and 80s, I became a black belt in quality and I began knowing what needed to be done to improve processes and terms and be better at things. And I started to implement that at Motorola and that took many, many years. Fortunately, I did move to Cisco in my career after 23 years at Motorola and I became the Assistant CFO and VP of Finance at Cisco.

0:03:15 - (Andrew Kazlow): So you were in both an operations role and in finance, or were you just in finance?

0:03:19 - (Rick Timmins): This is strictly finance.

0:03:20 - (Andrew Kazlow): So you were applying six Six Sigma concepts in finance.

0:03:23 - (Rick Timmins): Exactly right. Only in finance. When I joined Cisco in 1995, it took Cisco Systems, I'm not making this up, three weeks to close its books every month, three weeks. This is a company that had, in round numbers, about a billion dollars in revenue. I was appalled, disappointed and shocked, in that order. So I took all of the learnings that I had grown to appreciate while at Motorola Semiconductor and put those processes into Cisco.

0:03:59 - (Rick Timmins): And fortunately, the CEO John Chambers and the cfo, Larry Carter, gave me, quote, free reign to do that. So over the course of four years, by 1999, there was enough quality improvements in what the finance organization was doing to close the books. And with the routers and switches and tools that Cisco was selling to its customers and implementing inside our company and the Six Sigma processes that we would now putting in place that three week close onto one day.

0:04:41 - (Andrew Kazlow): One day for how big of a company?

0:04:44 - (Rick Timmins): At that time in 1999, the company was in round numbers, $10 billion company on an annual basis. So a billion dollars a month practically, and we were closing the books in one day. That's how much processes we had automated, taken out the people effect of doing things, eliminated errors that we were tracking and implemented a Six Sigma process, all based on data that we were acquiring to learn from our mistakes. That data was the key driver that made this happen.

0:05:19 - (Rick Timmins): I retired from Cisco in 2007 with that one day close. In fact, I moved on to other jobs in Cisco. It now still has a one day close. By the way, it is a 40 to $50 billion company. I know some of the people still there, they close the books in one day.

0:05:35 - (Andrew Kazlow): I mean, these are two of them. Some of the most consequential technology companies of the last 50 years that we're talking about here.

0:05:43 - (Rick Timmins): Yes, that's right. So it was a wonderful journey that we were on that allowed through leadership and did a lot of hard work by a lot of people to get to that point.

0:05:52 - (Andrew Kazlow): And just before we move on, say a word or two about like, what were the main resistances or main roadblocks that you ran into thematically across both organizations to this more rigorous implementation of financial

0:06:10 - (Rick Timmins): structure. Two roadblocks, one understandable, the other one I couldn't live with kind of scenario. The first understandable one is that people did not know what they were doing in terms of Causing these things to be take more time. You have to put in front of people, you are doing this and it's taking you two days to do this when it should take you two hours. Why is that happening? You had to identify the processes, identify where these things were happening and how you can automate or eliminate errors in that process.

0:06:46 - (Rick Timmins): It turns out in the work that we were doing in finance, 50% of the work that was happening in that organization was because people did not do it right the first time. Can you imagine an organization that 50% of the people, 50% of the hours and 50% of the work is attributable to something being done incorrectly the first time. The second item that was appalling to me was people didn't want to sign on to understand what it took to be be at that six sigma level or to eliminate mistakes. They just didn't understand.

0:07:22 - (Rick Timmins): So the education, awareness and communication to people to cause them to better understand and appreciate things was a big journey too. Fortunately, we had John Chambers, our leader at the time, who did understand that and gave me and many other people the free hands to do that. He was very customer focused, led that customer focus effort into inside our organizations and we got better. In fact, there was a time in 2002 when I became the number one speaker to customers at Cisco Systems. You thought, what does that mean?

0:07:59 - (Rick Timmins): Yeah, you think an engineer talking about a router or a switch, was it? No, it was all these companies wanting to come and say, wait a minute, how can you close the books in one day? So I had to build a presentation to talk to. I was talking to customers one a week for three years. I was talking to customers about how to do this. They come, they came to buy a router or a switch. They wanted to hear about how they were doing. We were closing the books in one day.

0:08:24 - (Rick Timmins): I was number one speaker in our customer service organization for like three years. It was funny.

0:08:30 - (Andrew Kazlow): That's hilarious.

0:08:31 - (Rick Timmins): So that data journey after I left Cisco continued in my world, so to speak. After working at a VC firm in Austin where we located because of my children and grandchildren were there. I got involved with venture capital and frankly I didn't enjoy it a whole lot. But I was very, very interested in entrepreneurs. The reason I got interested in entrepreneurs because at Cisco, while I was there, we acquired 250 companies.

0:09:03 - (Rick Timmins): And from 1995 to 2002, when I was involved in the finance organization's role in that process, I led our due diligence teams on integration of companies into Cisco. We could integrate A company we were acquiring in 30 days. They were on our systems, they were on our tools, they were using our processes. We had full time resources dedicated to integrating acquired companies into Cisco, not leaving them out there to fend for themselves.

0:09:33 - (Rick Timmins): You are now part of our team and we're going to help you do that. So that whole process of meeting these entrepreneurs who we were acquiring, one a week for a while, there was such a impression, left such an impression on me with these entrepreneurs in these companies, many of them startup companies, that I got interested in knowing more about these people. And as a result of that relationship that we have that I had built at Cisco, I wanted to get more involved in startups and became an angel investor after VC activity in Austin.

0:10:12 - (Rick Timmins): And so I started my first VC, excuse me, angel investing activities in 2010. I joined Cisco in 2000, excuse me, CTAN, Central Texas Angel Network in 2011. And I have to admit I was not a good angel investor at that time. I learned how many of us are

0:10:33 - (Andrew Kazlow): when we get started.

0:10:34 - (Rick Timmins): That's exactly right. That's a very good point. And as a result of me getting more involved with entrepreneurs, I was asked to join the board of Cisco in 2012, which I did. We had a seven person board and CTAN had been around for six years at the time. And I remember in one of the board meetings asking our board members, what are we doing? Are we making any money? Are we successful at this? Crickets. No one knew.

0:11:04 - (Rick Timmins): No one shocked and dismayed with that fact. So I set upon myself the task of trying to understand what we were doing with our investments. Are we making money? Are we learning from our investments? And so on. Fortunately, there was some directors or leaders of CTAN prior to me getting involved with this process because I became the board chair in 2013 that had kept records of what we had invested in for those six or seven years.

0:11:37 - (Rick Timmins): And I was able to go back with those records and start to understand, okay, wait a minute. That company shut down three years ago or this other company that we had invested in 24 months ago had an exit. No one knew about it or we weren't publishing the facts around it. I now have gotten to the point where I still do this tracking of our investments and many, many metrics associated with these startup companies now, so that we now have a portfolio of investments, 233 investments, of which 151 companies have either exited or shut down.

0:12:15 - (Rick Timmins): And I know what those returns are. I know down to each company. I know we built processes, Six Sigma processes that track these kinds of metrics we now measure. We now have 78 metrics that we track in CTAN, our investment portfolio. 78. It's on 48 spreadsheets on my computer and many, many PowerPoint presentations. I don't have the know the smarts other than Excel, which I'm very good at in PowerPoint to do this.

0:12:56 - (Rick Timmins): Other people have wanted me to put it in other Google Docs and all kinds of other platforms. I haven't done it. I'm not good enough.

0:13:03 - (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

0:13:30 - (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.

0:13:40 - (Andrew Kazlow): So Rick, let me interrupt just to ask the question because I speak to a lot of finance oriented individuals coming from in a big company world that just never quite make the transition into this startup land. It's kind of a wild west.

0:13:58 - (Rick Timmins): It is.

0:13:58 - (Andrew Kazlow): You know, we'll get cash flows when it's just so different. What was it about the impressions you had from those 250plus businesses over the years that made you so willing to kind of cross that chasm, so to speak?

0:14:17 - (Rick Timmins): It really stems from the fact that I had to not only know in terms of having the data about what we were doing, but how and why we were doing in terms of performance. So I started to see the returns, I started to see the companies go out of business, I started seeing trends that I started capturing. Did we do a follow on round? Was the entrepreneur experience the first time? Did what industries that were you in and verticals? So many things. I started wanting to know more about these companies and I started building a database of knowledge that caused us to start seeing not only the performance but the whys and the hows.

0:15:06 - (Rick Timmins): And that was the most enlightening type of process built over the time span of about two years or so. I'll put it in the 12, 13, 14, 2012, 13 and 14 horizon that finally caused us to see wait a minute, we're seeing these industries be more successful, we're seeing these type of follow on rounds be more successful. We're seeing this type of analysis of a company versus that no analysis of a company yield better results.

0:15:35 - (Rick Timmins): Many, many metrics started to quote bear out in terms of likelihoods of success that we were able to build a understanding over time of what it took and over the what it took to be a successful angel investor. But this did not come immediately. Like I said, it took three or four years of data starting to look at. At that time that was a portfolio of a hundred companies. Now it's 230 companies and many more companies that we've passed on that we track data on.

0:16:10 - (Andrew Kazlow): So it seems like this you had this like slow realization that you could apply the same techniques and concepts from decades of work in the angel network space. And at the time back in the 2010s there were a couple others that were starting to think in this direction. But this wasn't really commonplace in large part because angel investing as an organized function is so new.

0:16:37 - (Rick Timmins): It is. So you are hitting a home run when you say that. I certainly didn't see it with the groups I was affiliated with primarily in Texas, and only my involvement in the Angel Capital association, of which CTAN was a member and my attendance at these kinds of summit events allowed me to meet and see other angels investors that are were having successes. And so the knowledge being gained from other groups and my participation in the in this work, that was another level step up in terms of knowledge created the opportunity for me to either A affirm what we were doing was appropriate and correct, or B learn and add additional things that we could put into our knowledge base that would enhance our opportunities for success. And I had both of those kinds of awakenings happen as a result of this kind of involvement. Well, now I can tell you the 10 most data centric angel groups in the country and there are easily 10 of them.

0:17:43 - (Rick Timmins): But I can also tell you that even today, 2/3 of the angel organizations in North America are what I call supper clubs.

0:17:57 - (Andrew Kazlow): Articulate the the definition of a supper club.

0:17:59 - (Rick Timmins): A supper club is individuals who join an angel group. They go to a dinner meeting once a month, every other month, every other six weeks or so. They have four or five angels, excuse me, four or five entrepreneurs pitch to them. They get together, have a little coffee or talk after the meeting and say I'm going to write a check. And they do. Do they track any performance metrics? Do they track any metrics that help determine what they are investing in? No. Do they do due diligence?

0:18:28 - (Rick Timmins): No. Do they do further work in terms of involvement post Investment? No, that happens with 65% of the angel groups in North America that are in that stage today. So there's a tremendous amount of education and awareness that still needs to come to this asset class.

0:18:50 - (Andrew Kazlow): I couldn't agree more. It's interesting because one of the questions we get asked often in our, in our work working with angel groups is why is that important to track, you know, all of this behind that's not as important. We need to find great companies and run this event and that, that the urgent becomes far more important than the importance. And I see that all over the place. It's difficult to articulate, no, no, no long term benefit. This is going to help you get the right company in the room.

0:19:21 - (Rick Timmins): And Andrew, I have talked to many, many angel groups over the years to get them along this journey. Now I know resources and time is a, is an issue with many angel groups. Many angel groups, the smaller ones, 75 or less members, don't even have a full time executive director. They don't have the time and many of their members to do the kind of work that needs to be done. But if they look at it a little differently about trying to create a process to be a little more aware of doing due diligence or being aware of vetting companies or doing some work post investment, that kind of stuff, you can spend some hours doing that kind of work and be better at it.

0:20:03 - (Rick Timmins): Doesn't have to be 100 hours a month. It could be something less than that. And we've built tools and process ideas, excuse me, that will allow in the groups to do that kind of activity. But you have to have the willingness and to some extent the passion to want to do that kind of activity, to devote time to it. You can't just come to a meeting once a month, have a glass of wine and a nice dinner and decide to write a check and think you're doing a good job.

0:20:30 - (Rick Timmins): You're doing a disservice, oftentimes just as much to the entrepreneur as you're doing to yourself. And getting angels to an angel groups to understand that is a, a lot of work unfortunately.

0:20:43 - (Andrew Kazlow): So let's continue this, this journey because I think it will help to articulate some more of the AHAs and the insights into why this effort is so valuable. And here we sit, you know, 15, 20 years into your journey as an angel, where you've distilled some of these lessons along with other great investor communities around the country. Highlight for me some of the most maybe counterintuitive or unexpected learnings that you have built conviction around over the last 10 years. Let's say as you move from being as, as you describe, not a very good angel to hopefully a little bit better today.

0:21:18 - (Rick Timmins): Well, I would say it's a combination of things. It's not one that I could put my hand on and say oh, that was the one idea or the one thing that we did or that said that caused us to flip the whole thing and become successful. It's a number of things, Andrew, that we have learned from involvement post investment. You know, the returns are seven times higher for us when we're a board member versus not a board member or Tech Coast Angels, a 400 member angel group, it's 14 times higher.

0:21:53 - (Rick Timmins): The due diligence versus no due diligence. When we sit down and write a 30 page due diligence report versus the ones that we don't do diligence on and the members go off and still write checks which still happens in our group. It's a 40% internal return versus a 4% internal return. Internal rate of return 10x 10x 10x. When we do follow on versus initial rounds, when we do the opportunity to work with the entrepreneur, as I said, post investment it's big.

0:22:24 - (Rick Timmins): When we do the opportunity to look at the, the kinds of companies you need to invest in. It's not just when I came out of the tech industry. My first half dozen companies were tech companies because I felt confidence in that. That's wrong. I learned it's wrong. A portfolio of different vertical industries allows you to become more successful or creates the probability. And we have data to demonstrate that to our members.

0:22:53 - (Rick Timmins): My highest return was a pharmaceutical company of 70x. I can't spell pharmacy, but I did rely on the due diligence of my associates in CTAN who were very, very good doctors, for instance, who wrote excellent reports on this company that caused me to write a check. A space company. What do I know about space? A 38x return because of what I learned from other members of our organization. So this diversification of industries is also important. I've learned how to do that and we coach our members how to do this.

0:23:32 - (Rick Timmins): So there's about eight or nine different things that we've learned from our, from our various analytics that we've done over time. And we actually now require our members to go to a class on angel investing. Most people who come to us and our angel investors have had successful careers. They're not, they have, they have built wealth now that they're willing to put into this class. Called angel investing.

0:24:01 - (Rick Timmins): And they think they're really smart, but they're not smart when it comes to angel investing. We require them to go to a two hour class that we put together that says this is how you need to be a good angel investor.

0:24:13 - (Andrew Kazlow): Like literally, I have to go to this class or I can't join. I can't.

0:24:16 - (Rick Timmins): You won't take my money, we won't take your money unless you come to us and down the road attend this class. Now we have, we put it on three or four times a year so you'll get to it. And we have to tell our members, particularly the new ones that join, you're going to see a lot more failures in the beginning than you are successes. And what happens is I notice that many members, after making three or four investments, see most of the two or three of them go out of business.

0:24:46 - (Rick Timmins): That's a very frustrating thing for many people. Hey, I'm not doing this. This is crazy.

0:24:50 - (Andrew Kazlow): I must be bad at it.

0:24:51 - (Rick Timmins): I must be bad at it. Exactly right. Successful angel investing will take five to eight years. You're going to have to not only take it in terms of time, but also involvement. We want you to come to our meetings and be or have a willingness to get involved. Attendance, participation and due diligence. Meeting and getting acquainted with entrepreneurs to many, many activities we have inside the tech community or startup world in Austin. All these things are important.

0:25:27 - (Rick Timmins): Give time. And even after saying all that and preaching that like we're going out of style, we still have 20% of our members every year that rotate out.

0:25:41 - (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

0:25:56 - (Andrew Kazlow): a whole lot more.

0:25:57 - (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.

0:26:05 - (Andrew Kazlow): Now back to it. Hearing you describe all this, just incredibly obvious, right? You have the data that gives conviction.

0:26:12 - (Rick Timmins): Yes.

0:26:13 - (Andrew Kazlow): That is rare.

0:26:15 - (Rick Timmins): Right?

0:26:16 - (Andrew Kazlow): You can't stand on a stage and preach, this will deliver in any financial world without real data. So help me understand. Why are so many investor groups not doing this? Why are so many members not latching onto like, where is the gap in your opinion? Is it because I'm hypothesizing here based on what I've learned just from a few years, Is it because it doesn't feel fun and it's not this is partly a hobby because this is part of my portfolio, but not the core.

0:26:44 - (Rick Timmins): They work for 20, 30, 40 years, sometimes in their previous careers to create success. The last thing many people want to do is all of a sudden have to spend 10 hours next week writing a due diligence report with four other

0:27:00 - (Andrew Kazlow): guys or gals or there's the person on the other side that like, that is fun.

0:27:04 - (Rick Timmins): Yeah.

0:27:04 - (Andrew Kazlow): For them. And they're like, I can't wait.

0:27:06 - (Rick Timmins): Yes.

0:27:07 - (Andrew Kazlow): To spend a day.

0:27:08 - (Rick Timmins): But there's a lot of them on the other side who don't want to do that all of a sudden, hey, I'm golfing from 10 to 2. I'm coming to a CTAN meeting from 5 to 7. And you want me to what now? Get together for the next three days with four other folks to write a due diligence report that's going to take me collectively 10 or 15 hours? No, no, I don't think so. I don't think so. So there's a lot of a lack of understanding of what it takes to be successful in this asset class.

0:27:39 - (Rick Timmins): And I do call it an asset class, just as I would a public markets an asset class. This is a class that you need to develop knowledge of to be better at. That's not something that is well understood, particularly with people who are, quote, retired or they have another job. Many, probably half the people who are in this asset class as angel investors. I don't know the metric on that Exactly.

0:28:08 - (Andrew Kazlow): That's number 79.

0:28:09 - (Rick Timmins): Yeah. I would say half of them still have full time jobs. And so their willingness or opportunity to give to that process that I'm, I've been describing here for a while is not there.

0:28:23 - (Andrew Kazlow): So you're on a podcast. A lot of angel investors, angel network leaders are going to see this. How would you. It almost feels like there's different categories of investor communities. There's the supper clubs as you describe them, and then there's the professional investment group. And maybe one of the problems in the marketplace is when those definitions get conflated. Because it feels like some supper clubs, as you described them, would consider themselves a professional group, but then are lacking these core elements that are part of your definition.

0:28:52 - (Andrew Kazlow): How do we better educate the angel network market now Its, whatever, 30th year of existence? I, I argue you could. I'd be curious if you agree with this, but I argue that 1995 ish Band of Angels got started.

0:29:06 - (Rick Timmins): Yes. First. That's a good first group.

0:29:08 - (Andrew Kazlow): So I benchmark, we're around 30 years old as an asset class that's appropriate. How do we better educate this community around these definitions? Because I mean we just heard a keynote that definitions are everywhere in this world and that's probably never going to change. But this one feels important.

0:29:26 - (Rick Timmins): Yes. You know, it's, it's a journey. I, I have been preaching this now as I've learned and I've gotten to the point where I feel like sometimes barking to people who aren't listening. So it's. And I've given webinars on this how to do it. Why did. Even without having a full time resource, how you can do this, how many hours it can take and all that, this is something that's going to take still years and years of education and awareness. Angel Camp association is one way.

0:30:01 - (Rick Timmins): There are organizations within the venture capital world that can help us do this and I'm trying to work with some of those folks. This is not something that's going to happen overnight. Here we are to your point. 30 years into this journey and we still have 2/3 of the clubs or angel groups in that category of not doing this appropriately. Is it getting better? Yes, but it's getting better at a relatively speaking slow pace.

0:30:29 - (Rick Timmins): Slow pace. It just takes time for people to better understand that. I don't know how to get all of a sudden clap my hands and get 10 more groups who are going to sign on to collect their data and better analyze their ability to be successful. I don't know how to do that other than continue my preaching and talking and awareness communication training, education. I just taught a class here from 10:30 to 12:30 this morning on how to build a angel portfolio. We had 26 people in attendance.

0:31:05 - (Rick Timmins): I did that class in the summer of last year. We had 80 people online. We do them on Zoom primarily. So creating awareness is taking time. Hopefully over time we get better. Okay.

0:31:19 - (Andrew Kazlow): So I would love to keep talking about this so quick hitters as we move on. Things that are happening right now that people aren't talking about enough in your opinion?

0:31:29 - (Rick Timmins): Two things. One, I see it because some of our members are experiencing but it doesn't get enough attention. The secondary markets in this world of angel investing is almost dried up. We had opportunities a few years ago in secondary markets to get in round numbers 75 to 80% of our realized value in a, in a company based on the valuations as they were getting additional rounds of capital, that's down to probably 25 or 40. 25 to 40% now. Wow. So secondary markets are, have disappeared post Covid so that's one thing that's not getting enough attention.

0:32:16 - (Andrew Kazlow): Any thoughts on why? I want to hear the second point.

0:32:18 - (Rick Timmins): But people are putting their attention on other things like the AI activity. So SAS companies in particular are having a lot of struggle with secondary markets. We've seen it in our portfolio, we've seen it in other portfolios within Texas and Texas is still a very, very good market. But that's something that is concerning to me. It's going to take a while to bring that back. The other thing is the IPO market is particularly in SaaS companies is also significantly shut down.

0:32:46 - (Rick Timmins): That's okay because most of the greatest exits that we've experienced and most of that I have seen for other angel groups is M and A if not ipo. So I'm not significantly worried about that. And then the other thing that is getting talked about a little more than, than is the amount of money that AI is picking up. Like the concentration, the concentration of money that's going into that asset class is astounding.

0:33:19 - (Rick Timmins): Astounding. I've got, I, I, I didn't see it when it was happening in SaaS companies that were 15, 20 years ago, the big deal software companies. It's, it's at an alarming rate to me.

0:33:34 - (Andrew Kazlow): That's probably concerning Articulate one click more on that because you, you've been through a couple of cycles, right? You met, you went through.com articulate for me why that's concerning or what's the.

0:33:46 - (Rick Timmins): Because I, I, I, I think it's concerning because there's, there's too many, there's too much money going into too few companies. The anthropics and open the various AI companies that are, that are starting up, that are getting billion dollar valuations, billion dollars of investments. I just don't see the likelihood of success and all of those companies happening. So I think it's going to be a very, very disappointing series of events happening in the three to five year horizon in that space that is going to disappoint and frustrate many, many investors, including VC firms and potentially angel investors.

0:34:27 - (Rick Timmins): It's just a sad, sad thing to me that is occurring that I suspect is going to lead to a lot of disappointment down the road.

0:34:35 - (Andrew Kazlow): So last question. What's something you're really excited about? Looking forward? Some concerns. But what are some things that you are hopeful or energized around as you look towards the next, let's just say the next generation of startups?

0:34:47 - (Rick Timmins): You know, I'm still very, very impressed with the entrepreneurial spirit that I see primarily in young people, that's. That's a gene I do not have in my DNA. But the fact that we still have a significant amount of individuals who want to start up businesses, and I put even individuals who are doing that in what I call lifestyle businesses, real estate, restaurants, all of that type of thing, it's still impressive, but also so much in this startup world that we've been talking about here.

0:35:20 - (Rick Timmins): I see it in our educational institutions, the University of Texas, that I'm very much affiliated with the entrepreneurship programs across universities. It's so impressive to me that it's, it's happening. And not only happening, but growing. So I'm so impressed that entrepreneurial business, entrepreneurial activity here in the United States and in pockets all over the country is still happening and growing.

0:35:48 - (Rick Timmins): You know, there was a study done by UC Berkeley and Stanford in the mid 2000, 2011 through 2016, where they looked at thousands and thousands of startup companies, accumulated database. 91% of those companies that they were in that database fail. But the entrepreneur activity is still increasing and growing. In Austin alone, Austin, Texas, we have 3,500 startup companies. Startup companies. 3,500 of them. We have 29 accelerators and incubators working with these startup companies.

0:36:32 - (Rick Timmins): That's unbelievable. When I first moved to Austin in 2010, we had two. Now we have 29. It's amazing to me. We have 54 VC firms with a presence the city of Austin.

0:36:45 - (Andrew Kazlow): Worth the trade off for traffic.

0:36:47 - (Rick Timmins): Yes, no, yes and no. Ask my wife. No, no. Ask me. Yes. So it's different.

0:36:55 - (Andrew Kazlow): Amazing. Well, Rick, thank you for taking a few minutes out of your CA experience.

0:36:59 - (Rick Timmins): Enjoyed very much.

0:36:59 - (Andrew Kazlow): It's a pleasure.

0:37:00 - (Rick Timmins): Enjoyed sharing with you and the audience.

0:37:02 - (Andrew Kazlow): Well, I look forward very much to our next conversation.

0:37:05 - (Rick Timmins): All right, thank you.

0:37:08 - (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@thediligentobserver.com.