How I Got Into Angel Investing

What's up, everyone.This is Alex Lieberman, Co-Founder and Executive Chairman of Morning Brew. Welcome back to Founder's Journal, my personal audio diary where I give you, the business builder, the tools you need to think better in order to build better, whether that's building a business, a team, or a new product. Today, I'm talking about how I became an angel investor. Let's hop into it. Since 2020, I have been angel investing in a range of startups at different stages of the startup life cycle. On this episode, I want to share with you how I got into the game and how I decided to make my first three investments.

Before my first investment, I had very little exposure to the space. I knew that angel investors were individuals that invested professionally in early stage companies part or full-time. I knew the angels that had invested in the Morning Brew when we had raised our, I guess, what would be considered a pre-seed round in late 2016, early 2017. I had a few friends in the New York startup ecosystem that had been investing as angels for a while and seemed to be really enjoying it. And I followed a few angel investing legends on Twitter: people like Chris Saka, Eli Gill and Jason Calacanis. But beyond that, I knew nothing about angel investing, how to do it, and I had never done it myself.

My First Investment: Something Navy

So in November of 2020, a friend approached me about a startup, and that's what got my angel career off the ground. My friend explained to me that he was raising a syndicate to invest in a new lifestyle brand, and he asked me if I wanted to be a part of it. If you have no idea what a syndicate is, that is totally fine. I had zero idea at the time. I ended up putting $10,000 into the business. There was no rhyme or reason for that specific check size. Other than that I didn't want to lose a ton if it failed, but I wanted it to be enough such that I felt a fire under my ass to feel confident in my investing decision. The money had to feel real, which is why, while the dollar amount was relatively arbitrary, my thought process in the investment was a bit more calculated.

I wanted to make my first investment in something that I understood. And I knew that media, marketing, and community building had become my sweet spot through running Morning Brew. This first business that I invested in is called Something Navy and it was built around it's founder, Arielle Charnas. Ariel started Something Navy as a fashion blogger that evolved into an Instagram account with more than 1 million followers. But more than the followers, Ariel had a built-in obsessive audience, a majority of which is female, and they followed her every move and decision from her way of being a mother of three, to her fashion sense, to where she vacationed.

And when I decided to invest, Something Navy was at an inflection point in their business. The reason they had been raising $10 million was to realize Arielle's vision of transitioning Something Navy from a media brand to a lifestyle brand where the business wouldn't just be content monetized through advertising deals, it would also be an audience that was monetized through clothing and commerce. Something Navy had actually tested a line of clothing with Nordstroms, which absolutely knocked it out of the park, and now they were ready to own and operate their own fashion line themselves. Bringing it back to Morning Brew, I knew how powerful having a trusted audience is, and I was confident that Arielle's following would pay with their wallets for her clothing in the same way that they had been paying with their time, engaging with her content for years.

And this isn't the first time that content eCommerce has been done. There's precedent for this. You've seen it with Gwyneth Paltrow's brand Goop. You've seen it with Barstool Sports, selling millions of dollars of merch, you've seen it with the food media brand Food52, that sells lines of pots and pans. So this was my first check, and this is how I got started as an angel investor just over a year ago. As you can probably tell the first investment was a lot of firing from the hip and a little bit of a rationale about the business itself. And if I'm being honest, that continued for a little while. 

My Second Investment: Soul Savvy

After my first check in Something Navy, a few months later, I was introduced to another founder - this time introduced through Twitter. He was building a paid community for sneakerheads. The business was called Soul Savvy. And basically it was a destination where people who were building sneaker collections could talk shop and obsess over their hobby together. 

There's a few reasons that I love Soul Savvy. First, community building was within my circle of competence, which was really important to me. I felt like I understood how to create a community and how to identify a vibrant one. 

Second, I am always bullish on passion audiences. There are just certain hobbies that are notorious for having rabid fan bases. Things like soccer enthusiasts, dog parents, like myself, vinyl collectors', and I mentally bucketed sneakerheads in this category of fanatics as well. Sneaker heads love their sneaker collections and even better, they spend a shit ton of money on this hobby. 

The third and probably most important thing that I loved about Soul Savvy is that the founder is his audience. This guy has been a sneakerhead for decades. He knows how his customer thinks, and he knows the biggest pain points in the space because he is his customer. I thought that this was a massive advantage when I decided to invest. These three things gave me a ton of conviction in the business, and the company also had strong traction with thousands of paying customers when I was introduced to him, so I decided to invest a bit more than I had with my first investment in Something Navy.

My Third Investment: Bark Social

Now there's one more check that I wrote after Soul Savvy in what I would call the first chapter of me being an angel investor, where I didn't know a whole lot, I didn't really have a strategy for angel investing, ah, and I was more just thinking about things on a deal by deal basis. And that third check was another investment in a passion audience, similar to Soul Savvy, but instead of sneakerheads, the audience was pet parents. As a new dog dad, Rambo, shoutout eight month old Bernedoodle, I can confirm that pet parents are out of their minds, or at least I'm out of my mind. We will do anything for our pets. We will buy anything for our pets and our pets become members of our family.

This is why he got so excited when I met the team at Bark Social. I was introduced to them through another active angel investor, and one of the co-founders was actually a University of Michigan grad like myself. Their whole thesis was that humans like experiencing their lives with their dogs by their side, and dogs deserve spaces to play that are safe and clean. And so what barks social has pioneered is this new type of social space that marries dog park with a coffee shop / bar environment for pet owners to work or hang with friends while their dogs play. This concept felt so perfect.

Not just because pet parents are crazy about their pets, but also because as a pet parent, myself, I have experienced all of the things that Bark Social is working to solve. One: dog parks tend to be dirty or feel unsafe with aggressive or unvaccinated dogs. Two: there aren't that many places where you can bring your dog and do work. Three: my girlfriend and I constantly feel guilty around leaving our dog home for hours while we go hang with family and friends. I was living the problem Bark Social was solving, which is why I felt so much conviction. So, this is how I was introduced to the world of angel investing and how I got involved in my first three businesses as an angel.

A Few Last Points

A few last points I want to make here. First, angel investing is a very high risk asset class, like, one of the highest risk asset classes. The majority of angel investments become zero's and that's because most of these businesses haven't proved their product or the revenue model. Yet. I only invest what I am willing to lose. The second is if you are aware and thoughtful about the risk, the cool part about angel investing is that it's no longer just opened to the ultra high net worth. Crowdfunding platforms like Seed Invest, Republic, Kickstarter, and StartEngine are making new businesses available to all retail investors and new regulations in the US like Reg A and Reg CF are allowing startups and small businesses to raise from all retail investors, not just wealthy accredited investors.

I Want to Hear From You

With that, if you have any questions about angel investing, please feel free to shoot me a note. And the next episode, I'm going to do a follow up to this one about the most important principles that I've learned while angel investing as my strategy has gotten more thoughtful over recent months. Send an email to alex@morningbrew.com or DM me on Twitter @BusinessBarista. Also, if you want Founder's Journal content in your inbox, go to the FoundersJournal.MorningBrew.com and put your email address in, and you will start getting content from us, not just in podcast form, but in email form as well. The original Morning Brew bread and butter. Thanks so much for listening to Founder's Journal. If you enjoyed it, please let others know who you think would enjoy the show as well.

Thanks again. And we'll catch you next episode.