0:00:00 - (Peter Bodenheimer): And I used to say this all the time to companies. If what you're doing is 10x better, but it costs a nickel a unit more, you're sunk. But the economics have to match what the industry can can absorb or they'll never see the light of day. But you have to be willing to accept that you're going to lose money doing this as well. Our Vice Chair gives a presentation to all of our new members on the J Curve in angel investing.

0:00:29 - (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 Peter Bodenheimer, Executive director of New York Angels 150 plus member Angel Group. With $180 million invested across more than 350 startups with 67 exits.

0:00:55 - (Andrew Kazlow): Peter came to this role from the food tech world and previously served as US Venture Partner at Peakbridge and head of SOSV's Food X accelerator. In this episode, we discuss why Food Tech's unit economics so often sink great products. How his team at New York Angels goes about narrowing 160 plus deals a month down to just 12. And a hidden term that turned what seemed like a no brainer deal into an instantaneous no.

0:01:25 - (Andrew Kazlow): I hope you enjoy learning from Peter as much as I did. Peter, thank you for being with me today.

0:01:38 - (Peter Bodenheimer): Thanks for having me. Glad to be here with the Diligent Observer.

0:01:42 - (Andrew Kazlow): Okay, so I got to start a little bit different from where I usually do because your background is so fascinating. So I saw you, you started a business totally focused on fungal science research. And I wonder if you could just tell me what that means and why that's important to the point that you started a company around it.

0:02:03 - (Peter Bodenheimer): So you're referencing Super Kingdom, I assume, since there's only one that I've done in that space and that was a project that spun out of a venture builder that I was consulting with that ultimately never quite got off the ground. But the concepts that we were ideating there were really interesting. And one of them really stuck with me and two of the other members of the team. And we ended up working with a group called Convergent Research, which was a spin out of Schmidt Futures, the Eric Schmidt's family office.

0:02:37 - (Peter Bodenheimer): And the idea of Convergent Research was this new concept or newly rethought concept of what they call an fro, or a focused research organization. And the idea was that there are things that should exist that require the kind of funding that venture backable companies require, but don't necessarily produce the same kind of venture returns in the timeframe that a traditional VC investment or angel investment for that case would. And so the idea was raise enough capital to go out and build the largest open data set around the kingdom of fungi.

0:03:22 - (Peter Bodenheimer): Because it's a very understudied or under understood as a way of saying it area, but it holds massive promise in my, in my estimation whether to cross food tech, which was sort of the background I brought into it, but also textiles, pharma, building materials, bioremediation. There are just so many different things that we don't know. There is a type of fungus that eats petroleum, right. So that just decomposes oil.

0:03:58 - (Peter Bodenheimer): So imagine what that could do if you were to study that. And the idea for Super Kingdom was that we would create an AI ready data set around that. So we raised the money from Schmidt Futures via Convergent research, wrote a white paper, started working on the process. We had partnered with Kew Gardens in London which held the largest dried samples of fungi in the world. And we got to a point where unfortunately I think anyone that started a company might know this, where we were about here, Utility for our potential customer base started about here and the gap was about two and a half million dollars.

0:04:43 - (Peter Bodenheimer): And we were in a position where we were starting to think about fundraising for that. And my co founder got an offer he simply couldn't turn down from OpenAI. And it seemed like a fair time to say, all right, we've hit our wall for now and I still believe in the idea. I know he still believes in the idea, but now we're off doing different things and maybe we'll return to it someday, but you know, we'll see.

0:05:16 - (Andrew Kazlow): So I think it's fascinating your conception of these different things that require venture backed funding and deliver venture scale returns, but aren't as directly profit generating. Say more about what are the other kind of major examples of opportunities for this fro concept?

0:05:36 - (Peter Bodenheimer): Yeah, a lot of it is in sort of deep science and data and it's sort of anything that elevates our base level of understanding that companies could then be built on top of. So ideally with Super Kingdom, the idea was that we might have Super Kingdom Food that was then licensing what we uncovered through this massive data set into developing products in the food world, the same in textiles or biology.

0:06:11 - (Peter Bodenheimer): So I think there are a lot of companies, there's one, I'm forgetting the name offhand, that is mapping the brain and that's Obviously something that is massively valuable if you can do it appropriately, but is going to take a long time and a lot of money. And there's not necessarily a direct commercial pathway that is going to return somebody that capital in 6, 8, 10 years. So that's where the fro model kind of, it's what would have traditionally lived in a research institute, which is more academically minded, but they wanted to put a more commercial startup driven face on it. So that while you still have that longer timeline that you see for a research institute, deep studies, clinical trials, things like that, but try and bring that startup ethos of we're always thinking about commercialization and how this actually gets out into the world, as opposed to just being a really nice study that sits, you know, in a university library and somebody refers to it but never kind of commercializes it.

0:07:26 - (Andrew Kazlow): Sure. Okay. Well, fro, that's new to me and look forward to seeing more of these spin out in the next few years. Let's talk about food tech, because that is where you got your, or at least where you've been focused the last decade or so. I'd love to hear more about what, what is food tech? How is that different from consumer? What are some of the main things that you feel like people don't understand about the food tech space?

0:07:53 - (Peter Bodenheimer): Well, it's funny, food tech is such a broad term that it often comes up of like, well, what do you mean by food tech? Is that beyond meat? Well, it is. Is it the branded part of that world? Not as much as it is the technologies that fundamentally underlie how we produce food for a global audience. Right. So for, you know, soon to be, or just now, 8 billion people on the planet, a lot of what I was working on in the last several years were B2B companies that were using sciences like, you know, using more deep tech to produce either new ingredients or produce ingredients in novel ways that were either better for the environment, more cost effective, and in many cases produce things that you can't actually produce at any sort of scale in nature today.

0:08:54 - (Andrew Kazlow): Can you give an example?

0:08:55 - (Peter Bodenheimer): That's.

0:08:57 - (Andrew Kazlow): Can you give an example?

0:08:58 - (Peter Bodenheimer): Well, I think, you know, a good example would be I can give a couple of different versions of it. So a good example of the type of company that is producing something in a novel way, and these are not companies that have been great investments are the cultivated meat companies. So cultivated meat is where you're taking stem cells from an animal, replicating those, actually growing them on a scaffold, which allows you to create structure around it and in fact creating meat products that are the animal, they are the meat cells, the tissue cells, the fat cells, and trying to do that at scale. The problem there, of course, is all of that technology has come up out of the pharma world.

0:09:46 - (Peter Bodenheimer): And in pharma, if you can cure cancer, you can charge effectively whatever you want. If you're selling a steak or a hamburger, there's only so much you can charge. You know, the biggest challenge in food tech overall, in the food, I would say in food innovation, is that food is a very low margin, high volume business and it's really hard to sink tens or hundreds of millions of dollars into building a company that is doing something new and novel.

0:10:18 - (Peter Bodenheimer): And I used to say this all the time to companies, if what you're doing is 10x better, but it costs a nickel a unit more, you're sunk. And it's unfortunate, but that's just the way the business works. So it's a tough space in the sense that there's a lot of opportunity for people to build really interesting, amazing things. But the economics have to match what the industry can absorb or they'll never see the light of day.

0:10:52 - (Andrew Kazlow): So let's say a food tech deal hits your desk through your network, whatever, some new way of producing some core ingredient. What are the first three questions you're going to ask that are unique to that industry versus just is it a good team and is there a market all that?

0:11:10 - (Peter Bodenheimer): Well, I mean, my first question is where are you in your life cycle? If you are in the lab or this is still research at a university, or you're commercializing research, it's a really tough place to play because it's so far away. The industry cares about things that are either already at scale or they can see a path to scale. The second question I ask is what do the unit economics look like? So can you produce this at or below what you're replacing?

0:11:48 - (Peter Bodenheimer): And often the answer is no. And that may not be a killer, but it's something you have to consider. And then I look at the team and you'll hear this as we talk about, you know, things all the time, is I'm a big believer that you invest in people, especially in the early stages. You know, it's a different story when you're a growth equity investor and you're writing a check of 100 million or 200 million, then it's more of a spreadsheet and there are other five factors to consider.

0:12:17 - (Peter Bodenheimer): But in the early stages, why is this the team to be Doing it. Do they have the experience? Do they have the knowledge? Do they have the network? What are the things? And I still go back to one of the first times I ever asked a professional investor when I was younger. And not to say I'm savvy now, but less savvy than I am now. Um, I said, what do you look for in a deal above all else? And they didn't bat an eye. They just said, unfair advantage. Why do you win and the other person doesn't?

0:12:53 - (Peter Bodenheimer): And to me, that just rang very true with all of my own personal experiences trying to build businesses. And so that is why I always focus on team is what do they have? What advantage do they have that they're able to leverage that's gonna help them break through? When you know that you're gonna see if it's a big enough market, you're going to see a half a dozen, a dozen, a hundred different companies trying to do the same or similar things.

0:13:21 - (Andrew Kazlow): Food is such a fascinating space because it's something we all touch and feel every day. But as I was preparing for this conversation, I realized I actually have no idea how any of this gets to my table each day. And so I'm curious, as you've worked in the space over the last decade or so, and then we'll come back to New York Angels in just a second.

0:13:42 - (Peter Bodenheimer): But sure.

0:13:43 - (Andrew Kazlow): Thinking about this food tech experience, like, what are some of the biggest surprises or things that has stood out to you that you feel like most people don't realize about how the, like, the food kind of ecosystem actually works?

0:13:55 - (Peter Bodenheimer): Well, I think we learned publicly during the pandemic just how fragile these global supply chains are. So much of what goes into your food, even if 90% of it comes from. With 100 within 100 miles of where you're living, there's often something that's coming from across the globe. And so that's a tricky proposition because the externalities, the reliances, are important. And as soon as one of them breaks, you start to see problems.

0:14:32 - (Peter Bodenheimer): And so I think that was something that I didn't necessarily understand. The other thing I think was looking back on it, it seems fairly obvious, but of course, it wasn't when I first started doing this, which is, you see these companies that are doing truly deep technology, they are building something novel and new. They are using biology, they're using different techniques like fermentation or cell cultivation.

0:15:04 - (Peter Bodenheimer): Then they're trying to bring it to market as a consumer brand. And at the end of the day, those are two Entirely different businesses. And so you've seen companies, you know, there's a company called Meaty that raised $450 million and last year their assets sold for about $4 million. And it wasn't that what they were doing was. Didn't make sense that they didn't create good products. But trying to do really novel innovation and then at the same time build a consumer brand.

0:15:41 - (Peter Bodenheimer): You can just burn so much capital in so much time. And when you get into just pure branded cpg, the difficulty is you can get it out there a lot faster. You can get a product into people's hands. Scaling is really hard. The world of co manufacturers and co packers is very opaque. It's very old school in a lot of ways. There are people trying to change that, but it's difficult and you may create something great, realize there's a market for it and then somebody with a lot deeper pockets comes along and just takes that market from you. So it's, it's a difficult space to invest in.

0:16:25 - (Peter Bodenheimer): I think that it got propped up early by things like the Beyond Meat ipo which performed exceptionally well in the early days. There was also the exit of RX Bar which was like a $650 million exit. In a very short period of time you probably will see a similar crop of people doing the same thing as Groons because Groons just exited for over a billion dollars after three and years. And so people will copycat that.

0:16:59 - (Peter Bodenheimer): But the truth is it's very different than scaling a technology business. It's moving atoms versus moving bits. If you have a tech product, you find your market fit and all of a sudden your demand goes through the roof. Well, you just crank up your AWS or your Google cloud or your Azure credits and go to town. If you are a food company doing that, you better have your supply chains, your distribution, your manufacturing.

0:17:30 - (Peter Bodenheimer): Everything needs to be in place. Because if suddenly everybody wants your product and you can't produce it, they're going to move on to the next thing and you're never going to get their attention again.

0:17:39 - (Andrew Kazlow): Which is exciting to me if I'm looking for a remote. Right. And so depending on how savvy I am about this market, that could or could not be a really interesting feature. We've had similar conversations around prop tech and other physical assets, industrial sustainability conversations on the show. Very, very similar kind of realities. And it's fascinating to see the distinction in a lot of angels in particular of where they gravitate.

0:18:04 - (Peter Bodenheimer): The time frames and the multiples are just a little different across different industries. And food is no different. And so I think the advice I give to food entrepreneurs is find investors that understand the space to the extent that you can. You got to get money where you can sometimes and that understand that this is a different kind of growth trajectory. It's not the hockey stick of great. We found product market fit and we went from a million dollars a year to $80 million a year overnight. It's more like a million dollars a year to 4 or 5 million dollars a year to 12 to 15 million. And then you try and get up to that 80 or 100 where you start to get real interest from the big food companies.

0:18:51 - (Peter Bodenheimer): And I think that's one last thing I'd say is that one challenge in food is you have a. There's been consolidation in the food industry. And so there are only so many companies that can acquire you for a certain, above a certain amount. And so when you're raising capital, especially when you're raising early capital, if you're raising at too high a valuation, all of a sudden your threshold for exit gets much, much higher. If you raise a few rounds after that and then you've got six or eight companies that are your only potential acquirers and that really limits your opportunities, your optionality at the end.

0:19:31 - (Andrew Kazlow): That's a great point. Okay, ten more questions for you, but I'll table those. What I will ask is thought exercise. Looking at the next, let's say, five years of food tech widely, what are one to three Peter's predictions, things that he thinks are coming or that are going to happen in the years ahead?

0:19:52 - (Peter Bodenheimer): Well, I think the gut microbiome space, which has come a long way with probiotics, prebiotics and now postbiotics or synbiotics is all of them together. I think that will continue to grow. I think people understand that fiber is getting its moment right now.

0:20:13 - (Andrew Kazlow): Fiber maxing?

0:20:14 - (Peter Bodenheimer): Yep, fiber maxing. Protein maxing. So I think that will continue. I think that people will start to be able to do interesting things with the technologies as the. One of the challenges in the food tech space the last few years has been the infrastructure wasn't necessarily there for bringing all of these new ways of producing things into the food world. So you were taking technologies designed for pharma, like I said, which are much more expensive and care less about the margins and you don't need that same grade of there's pharma grade and there's food grade and food grade is less expensive and it is more appropriate for scale versus kind of Pharma grade, you're starting to see the infrastructure get built.

0:21:10 - (Peter Bodenheimer): I know investors have very limited appetites at this point for capex expenditures, but you're seeing companies pop up. There's a company called Liberation Labs that's building fermentation capacity that people can lease out. There are companies like that that are popping up that are starting to make it so that you can build these companies without having to go out and raise $30 million in capital and build your own lab space and build your own facility.

0:21:43 - (Peter Bodenheimer): So I think you'll start to see some of these ingredients get to market. They'll start probably more in beauty than in food, but there's a huge overlap there because the margins and beauty are better. But once they start to get to scale, then they can start to bring those costs down and it starts to fit more in the food space. So I think, you know, some of these novel ingredients that have added benefits and functionality, whether that is gut health, whether that is, you know, reducing blood sugar. I also think we haven't talked at all about this, but the GLP one, you know, shockwave that has really changed how people consume a lot of products will be designed for people on those products. And you're already starting to see that. And I think that will just continue to grow.

0:22:33 - (Peter Bodenheimer): And then the last one, which I'll just say, which is very much in my wheelhouse as well, is food is medicine. And when I say that, I mean this intersection between food and nutrition and healthcare. And especially when you're starting to think about a data component in there as well, with trackables and Apple watches and everything that we can measure. I think you're starting to see and this transitions across different political ideologies as well. Because you're seeing with Maha and as well as people on non Maha, that this idea of what we eat is so important to how we live and the quality of life that we have and treating chronic disease in particular.

0:23:19 - (Peter Bodenheimer): And you're seeing companies come around that are servicing that. And I just think you're going to see more and more of that. I also think the reason for that is, at least in part that insurers are now willing to pay for it because they see what it does for their bottom line. So it also starts to open up because it touches all these industries. So you start to see the money flow a lot more easily because of that.

0:23:43 - (Andrew Kazlow): Fascinating. Okay, well, thank you for the predictions. We will write all of those down and in five years we can come back and say, look, Peter called it

0:23:50 - (Peter Bodenheimer): how wrong I am.

0:23:51 - (Andrew Kazlow): That's right. That's right. 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 a whole lot more. The kinds of things that either aren't getting done or shouldn't be done by busy community leaders.

0:24:15 - (Andrew Kazlow): If that sounds interesting to you, send me a note. Now back to it. Okay, so you've been doing that for a little while, but recently you have made a transition that is pretty excited and I would love to hear more about. You've been an investor and operator, but recently came on board as the leader executive director, I think executive director for New York Angels, which I just saw. It literally just came out.

0:24:37 - (Andrew Kazlow): The annual Angel Capital Association Angel Funder Report has New York Angels listed as the number three most active angel group in its reporting group of over 60 investor networks. That's incredible. An amazing organization, I think. Let me check my notes here. 180 million plus invested across 350 startups and 67 exits.

0:25:03 - (Peter Bodenheimer): Wow. Tell me the story responsibility for all those exits. I've only been here four months, but

0:25:09 - (Andrew Kazlow): what you can is take responsibility for stepping into a really exciting legacy of a group that's very well known across New York and just globally. So tell me what that's been like, how did you get here? And even curious about this transition from very focused in the food tech world to more generalist at New York Angels. So that was a big question. Walk me through the last six months of your life.

0:25:34 - (Peter Bodenheimer): So the way I came to New York Angels is I had been familiar with New York Angels for a number of years. In fact, in my time when I before I moved to New York, I was based in New Orleans and my business partners and I had started an accelerator called Launchpad Ignition that was one of the original techstars network accelerators that then became the Global Accelerator Network. And we used to do a roadshow with companies from the southeast U.S. that we were investing in and bring them to New York and to California. And we always had a great turnout from New York Angels members when we did our demo days at the SoftBank offices back back in the early 2000 and tens.

0:26:18 - (Peter Bodenheimer): So that was my original kind of touch point with them. And then when I was running, when I moved to New York to work for a firm called SOSV as a partner there to run Food X, which was their food tech and kind of consumer packaged goods accelerator, I Reconnected with some people at the the group and realized, why are we not doing a preview day and getting involved with these investors? This is a perfect set of investors for the types of companies we have the stage of company.

0:26:51 - (Peter Bodenheimer): And so I started, we hosted a number of different preview days where we would bring our companies a few weeks before the demo day and do a private presentation with members of New York Angels. Through that, I became friendly with several of the Angels. And after I left SOSV and was working on some other things, I'll just kind of skip ahead and say that I got reached out to by one of the board members who said Liz Lindsey, who had been the executive director for 10 years and with the organization for about 12 years, was preparing to step down and move into a retirement phase of life.

0:27:33 - (Peter Bodenheimer): And they were starting to think about what their next leader looked like. And it just kind of looked pretty interesting because as my time has been across, I had done some angel investing. And I really, in fact, I would say I enjoy angel investing more than I enjoy venture investing because it's your money, your decisions, your timeline. And I think the landscape has changed so dramatically over the last 10 years that it was an interesting opportunity. And when you look at a group like New York Angels, which now has over 150 members, an incredible group of people with these incredible networks, incredible experience that they bring to the table, it just became more and more attractive to me.

0:28:23 - (Peter Bodenheimer): And the question for me was, well, do you want somebody who's just kind of running the organization as it has been and it's been very successful doing that, or are you looking for somebody to kind of say, what does New York Angels look like four or five years down the road or longer? And the answers I got pointed more in that direction of, hey, we know we do what we do well, but we want to be prepared for the future and we want to be leading the way into the future. And that's what really attracted me.

0:28:54 - (Peter Bodenheimer): So I joined in the beginning of April, right before, I think we met at the ACA Summit. And it's been incredible. I mean, it's really. I joke that it's like joining a VC firm with 150 general partners. They all bring their own networks, they all bring a ton of experience and frankly, a lot of opinions as well. Right.

0:29:17 - (Andrew Kazlow): Well, I'm glad to hear the fungal science guy seems to be slotting in, well, six months. In other observations, I mean, what's it like going sort of generalist after a season of pretty focused thought?

0:29:30 - (Peter Bodenheimer): Well, it's been good because as I mentioned, the food tech space has been pretty beat up the last few years. Raising rounds was really difficult. Working for Peak Bridge, the firm out of Europe that I was the US Venture partner for, we really could pick and choose almost any round and it, that's not a great, it's a great place to be as an investor in some ways, but it's also means it's a really difficult environment.

0:30:01 - (Peter Bodenheimer): There were not exits happening. Rounds were, there were a lot of down rounds happening. There were a lot of flat rounds happening. So to step into New York Angels, where you're seeing, you know, we've already seen a handful of exits since I've been at New York Angels in the four months. So it's been great in that regard. It's also been a reminder that I think there are a lot of things that overlap that while it's important to be a specialist and understand an industry, and I think that's the value of angel groups, is that you always have somebody in the group that has deep knowledge of a space and can bring that to bear.

0:30:39 - (Peter Bodenheimer): But there are certain things that are the same across every sector. And that comes back to what I said earlier about the people involved. Is this a team working on something meaningful? Are they the right people to do it? Do they, Are they approaching the problem in an intelligent way? How do they respond to the challenges that will inevitably creep up? So I think it's been nice because I get to remind myself a little bit that investing is still a very much a relationship and a people driven business.

0:31:16 - (Peter Bodenheimer): And even though we're trying to bring a lot of technology into what we do, there is still an element that you're never going to replace with tech. And I'm sure there are people out there that are working on quantitative investing, you know, models that will tell me I'm wrong and maybe I am. But in my, my belief system is that when you get to know the people building these companies, the people supporting these companies, that's where you find these real aha moments that lead to companies going from, you know, we're trying to figure something out to we figured it out and now we're ready to scale and go out and raise real money to do so.

0:31:56 - (Andrew Kazlow): Well, I think you're touching on what makes angel investing and investing as part of an angel network distinct from solo investing or being an LP in a fund. Right. These investors have paid or you know, have some kind of compensation that they're contributing to to be a part of a community that is doing this, and we've actually done primary analysis showing that the number one most valuable component of an angel network membership is actually the community and social experience above the value in the deal.

0:32:24 - (Andrew Kazlow): Quality and volume, those are important. That's the reason that the group exists. But I think there's something so special about the community for each of these angel groups. And so I love that you're hitting on that, because I think that's the essence of what makes an angel group an angel group. Say more about what, in your opinion, makes the New York Angels so special. Why has it grown so much over the years? Obviously, Liz and her team have done an incredible job getting the organization to where it is. But, I mean, you guys are doing in a month what many investor networks do over a year or more than a year. I saw your latest July newsletter. It was like over a million dollars just in that month, three months in a row. I mean, crazy.

0:33:10 - (Andrew Kazlow): Why do you think New York Angels is so active today and then we can go into the future?

0:33:15 - (Peter Bodenheimer): Well, I think it's simple. It's the membership. I suspected that it would be an 8020 rule when I came in that there'd be 20% of the members that do 80% of the heavy lifting. And it's more like, you know, 40, 60, 50, 50 even. You know, there's so many of the members that are engaged on a regular basis that are building things that we're going to use or are spending hours and hours developing models of diligence or going out and finding companies in a specific area of interest.

0:33:54 - (Peter Bodenheimer): We're doing a lot more in medical device recently because we've had a group of members that said, we want to start doing this work. And they go out and they source those companies. They're evaluating them. They're working as a team to kind of make sure that they're evaluating the ones they think have the best bet of being of interest to the larger membership. And so as much as I think the process and the model that Liz built and that John Zykowski, who's still the associate director, has helped refine along the way, I think that is critical because that's the rails upon which all of this runs.

0:34:35 - (Peter Bodenheimer): But at the end of the day, the members are what are driving this. And they want to deploy capital, they want to get engaged with companies. They're active, they're involved. And you know what? They're really smart people that bring a lot of value outside of just a checkbook. And I think that's what makes New York Angels. It's sort of. That is the secret sauce. And it's not all that secret.

0:34:59 - (Andrew Kazlow): Just get great people in a room, put some deals in front of them and magic happens.

0:35:03 - (Peter Bodenheimer): Well, and that's, that's, that is where the process comes in.

0:35:07 - (Andrew Kazlow): Right?

0:35:07 - (Peter Bodenheimer): Because as I mentioned, I think before the call, we have on average, I think the last few months we've had about 160 companies per month that are looking for funding. And so we whittle that number down from 160 to between 40 or 50 that we. And that's done through our pre screening committee and some tools that we're building to help whittle that down to about 40 to 50 that then go out to the full membership for what we call rate and review so that they can, everyone can share their thoughts. And typically it's not every single member reviewing every company. It's people that have some experience or expertise that they can bring to bear in their evaluation and then others that will look at that and say, okay, I know that, you know, Doug really knows this space. So if Doug thinks this is interesting, then I'm willing to take a look at it.

0:36:02 - (Peter Bodenheimer): And I think that is what makes it all work. But that whole process has to be smooth so that we can get down to those. I'd say on average we look at about 12 companies a month, eight that are in our screening and then four that come through our forum meeting, which are typically either follow on rounds or rounds being brought in by an angel where maybe they're an investor but outside of the group. And it means we probably leave some pretty good deals on the table, which we're starting to think about. How do we avoid that?

0:36:37 - (Peter Bodenheimer): But at the end of the day, you can't invest in everything, so you find the very best. I love. I think it was Warren Buffett or Charlie Munger that said investing isn't that hard. You find the best companies you can and buy as much of them as you can. Certainly an oversimplification, but I think there's a little bit of that mentality there.

0:36:59 - (Andrew Kazlow): Okay, so you're not here just to push paper and run things the way they are. You pitched the board on. We're going to make some growth here, paint the picture for the future. What does New York Angels in three, four, five years look like that you can share publicly?

0:37:14 - (Peter Bodenheimer): Yeah, well, I think it's less about. I'd be kidding myself if I said four months in. I have this grand vision of where it's going already, but I think it's more about looking at the landscape. You didn't have mega firms that will write a hundred thousand dollars check just so they can write a $10 million check down the road, like Andreeze and, or Sequoia with their scout programs and Speedrun and things like that.

0:37:44 - (Peter Bodenheimer): So the competitive landscape is very different. You also have, at the earliest stages, you've got. Crowdfunding has become much more of a viable option now, and you have a lot more pre seed and seed funds than you did 10, 12, 15 years ago, especially on the East coast versus the West Coast. I do think they're very different things that happened on each coast and in the middle of the country. So it's more about where do we think that landscape is going and how do we position New York Angels to be the first call for founders. That, and I say the first call, you know, that's a little schmaltzy, but it's, it's more about, we want to be on everybody's radar. Every sophisticated founder that says, all right, I need to go out and I need to raise X amount of dollars in a seed or even a series A round, pre seed, seed, series A and say, all right, well here are the big VCs that I want to go to.

0:38:48 - (Peter Bodenheimer): But New York Angels is absolutely going to be in that list. And I think there are a number of angel groups and I do think we have to think about the public perception that exists about angel groups sometimes, that they can be a lot of work for very little capital, where somebody says, oh, I spent six months going through a process with this group, they beat me down on valuation and ultimately they wrote a $200,000 check and they want all the rights of somebody who wrote a $2 million check.

0:39:21 - (Peter Bodenheimer): I think there's some truth to that at times and I also understand the perspective of the investor. It is a two sided transaction. But I want us to be seen as thinking fairly about the entrepreneur, giving valuable feedback even when we pass. Having a diligence process that isn't about, you know, giving them a six month run around like they're going for a full, you know, battery of medical tests. And instead it's about like figuring out what every company at the early stage has flaws.

0:40:05 - (Peter Bodenheimer): Are those flaws fixable with capital, with expertise, with the right people in the right place, the right connections? Or are they fundamental to the company and the faster we can get to a yes or a no, I think helps founders retain their most valuable asset, which is their time. And if we do that, then I think we can stand out from the crowd and be that first call that people want to make.

0:40:31 - (Andrew Kazlow): So talk more about this reputational challenge I think that many investor groups face. You talk about the long slow process with little or no check at the end of the day. We've also seen a trend where many investor networks have tended to kind of rebrand as name ventures or kind of evolve towards more of a fund model where they ultimately end up looking more like a traditional VC that's providing co investment opportunity for their members.

0:40:58 - (Andrew Kazlow): Just react to that. I'm curious how you're thinking about things just a few months in and as you look towards the future of New

0:41:03 - (Peter Bodenheimer): York angels, it's interesting. I think people have gone later in a lot of ways and that was true in the food tech work I was doing. And I think it's, it's true in angel investing a little bit too is you want a little bit more, you're willing to pay a little bit more for a little more certainty or a little less risk. But ultimately. I think that it's about operating professionally at the end of the day.

0:41:37 - (Peter Bodenheimer): And we are not trying to be a venture firm. And I can't speak for other groups, but as far as I know the conversations I've had, nobody's trying to say we want to ultimately just be a fund manager. I think people get into angel investing for very different reasons than people become LPs or fund managers. They want to be involved. In many cases they're at the, you know, end of their career or their career has actually ended and now they want to stay engaged in ways that are really value add.

0:42:10 - (Peter Bodenheimer): So it's to me, it continues to come back to do you run an operation that treats people with respect where they can say I have expectations, those expectations are realistic and we can deliver on those expectations. And again, I'm not going to pretend that we're going to fund everyone that comes to us or even more than a couple of percent of those who come to us. But what I can say is we're going to endeavor to give every company that comes to us valuable feedback along the way and get to a yes or a no as quickly as possible and respect that they're doing the hard work, you know, writing checks.

0:42:58 - (Peter Bodenheimer): Listen, it's hard because you earn that money and you're parting from it with an assumption that there may be an exit someday and maybe you'll come back with it. But you have to be willing to accept that you're going to lose money doing this as well. Our vice chair gives a presentation to all of our new members on the J curve in angel investing and how to create a portfolio approach, how to think about the timelines that you're going to need to engage.

0:43:25 - (Peter Bodenheimer): So I think it sets people with the right expectations and if we can do that and we can deliver where we invest, we actually engage with those companies and create value for them afterwards. I can think of some offhand where there are introductions that get made that cut a sales cycle from nine months to two months. I mean that's very material value, especially when you're in that stage between, let's call it a seed round or a seed extension and a series A.

0:44:04 - (Peter Bodenheimer): And you know that you're going to be judged on what does that pipeline and what does that revenue number look like. And so if you've got a group that's helping you build that pipeline and convert that pipeline into revenue faster, all of a sudden that's a more valuable company to more de risked company. And so I think that's a lot of what I think about when I think about what does New York Angels look like in the future is a very smooth process that provides real value and if we're not going to invest, we get there really quickly so we don't waste your time and spin your wheels or ours.

0:44:43 - (Andrew Kazlow): Simple, not easy. Everything you just described. So I appreciate that. Peter, any final thoughts you would leave our audience with, with or that I have not covered?

0:44:54 - (Peter Bodenheimer): Well, I think it's, it's funny because we, I've, I've lived through several eras of startup launching and investment and I think we're in a really interesting time right now where the lines have blurred between the different round sizes, the types of investors and it's kind of, there's a lot that's in flux and I think if you're interested in angel investing, so many people do it in a one off way. You know, they, they have a network, they find a company, they make an investment.

0:45:32 - (Peter Bodenheimer): This is how I started it. And I made so many dumb mistakes that had I been a part of a group where somebody could say hold on, we're going to do this, we've got a process, we have a framework for how we evaluate this. We're not going to do, I've seen a deal in the last year where everything looked great about the deal until somebody said we need to look at this one part of the agreement and realize there was a 7x liquidation preference for a very early investor that they wouldn't give up. And it went from being like almost a no brainer. Deal to an immediate no go deal.

0:46:18 - (Peter Bodenheimer): And so I think that is the kind of value that, that the angel groups and networks bring. And you don't have to stay forever, right? Like you learn what you learn and then you go on and if you're not getting value out of it, you go move on. But I just think having come from doing my own independent angel investments to then working in institutional investing in VC now into an angel group, it kind of brings the best of both worlds. Not to imply that there aren't pain points and personalities and all that kind of stuff, but it just brings so much more value than the downside that I think anyone interested in investing in startups should be looking at their area and saying, hey, is there a group here that I can learn from, that I can be a part of, get my deal sourcing going, manage my portfolio in a way that isn't just me with a bunch of paperwork.

0:47:17 - (Peter Bodenheimer): I just think there's a lot of value there and it positions you well as this sort of landscape changes for investing in general, angel and otherwise. That was a lot there though.

0:47:30 - (Andrew Kazlow): Well, we will pin it right there. That's a perfect place to end. Peter, thank you for joining me today. Congrats on the new seat and we look forward to staying in touch over the years ahead.

0:47:40 - (Peter Bodenheimer): Thanks so much.

0:47:43 - (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.