One Woman’s Unique Approach of Breaking into Venture Capital World

Harry Duran interviews Tatyana Gray

Hey everybody! Today, I have a different type of episode for you. I’m the guest being interviewed on my podcast. I’ve got my podcast producer, Harry Duran — who runs his own podcast called Podcast Junkies, check it out — asking me questions. I told you a little bit about the launch of my new invest and learn syndicate program on the last episode.

Well, Harry is going to ask me some in-depth questions about it today, and of course we get side-tracked for a few minutes talking about my amazing experience trying out virtual reality for the first time. I have been getting lots of questions about the whole invest and learn program which you’ll hear during the interview, but I also got a few observations that really help me open my eyes on the importance of this program that I didn’t expect. I’m sure you’ve heard a lot over the last year or so about the problem of the lack of diversity in venture capital, and honestly, angel investing as well.

When I was looking at how to take my personal angel investing to the next level, quite a few of the investor friends suggested that I start a VC firm and raise a venture fund. I love the idea but, this time in my life, I’m not ready to raise a full-blown venture fund. So out of sight, out of mind, right? Well since everything I’ve been working on lately is related to the syndicate and the educational program, and newer, and younger startup investors — the two little words, venture capital, were not part of my daily conversation. However, I was pointed out that even without using the words, venture capital, I am entering the VC world with my unique invest and learn syndicate model. I hope that my journey inspires more people and brings more diversity into the VC world that we so badly need. Now, let’s jump in and listen to all the details.

Tatyana, thank you so much for having me on the podcast.

Hey Harry, it’s great to have our roles reversed a little bit. I’m very excited about our chat today.

I’ve been following what you’ve been doing with the episodes and now you’re getting ready to start your own syndicate. There were a couple of questions that came to mind and I think the audience probably have those same questions as well so we can just jump right into it.

Totally, yes.

Well the things you always like to do in the beginning is ask your guest about their path into the world of startup investing so I was wondering if you could take a few minutes to share yours?

Of course yes. I guess my story started a while back when I was still in Russia. People wonder about my accent; I was born and raised in Russia. I lived through the Soviet Union collapse and got emotional scars to prove that, so I always want to come to America and pursue the American dream.That’s been the driving force in my youth, and I’m still actively pursuing that. I spent two years from 16 years old to 18 years old writing letters to different organizations and people in the United States asking them to sponsor me to come to America because my parents had no money to send me to college in America. I was fortunate enough; after two years of trying, I found a family who helped me come to Brigham Young University in Provo, Utah.

So my American story began almost 20 years ago now, which is totally crazy. I studied computer science, started working as an intern for Novell in Provo, Utah. I did some programming and then that dot-com bubble burst, so I decided to go to law school. I went to law school as well at the Brigham Young University. My goal, actually, was to go to law school and maybe get into real estate and there is a funny saying that A students become professors, B students become partners, and C students become rich.

So, unfortunately for me, I was an A student and I went the route of the big law firms. I spent the summer with Baker & McKenzie in Moscow, Russia, and spent another summer with Davis Polk & Wardwell in Silicon Valley. I really fell in love with the startup culture there. Then I decided to stay in Utah and practice law for a while. After a while, I got done with big law firms and opened my own firm. I wanted to try the whole entrepreneurial journey for myself, and during that time met my husband who convinced me to move to Sun Valley, Idaho where I had to reinvent myself. Basically, I reinvented myself into a startup investor and that’s how I ended up in this amazing world of startups.

That’s a fantastic journey, and there’s a lot there I think I might dig in for a little bit. I think a lot of times as a podcast host you try to put the focus on your guests, and you don’t get to really tell your own story so this is a unique opportunity for the reader to learn a little bit more about Tatyana, the story behind the host of the podcast. What was is it about you or in terms of your mindset that made you — at 16 years old — get into it to write letters? What was driving you at that point to make you want to have that change in your life?

I think it starts with my love of reading. As long as I remember, I started reading young but then I was reading books that were way above my age when I was a child, and just filling my head with all these stories. Back then in the Soviet Union, we didn’t know much about the United States. Reading books, a lot of them were historical novels, and having the dreams and comparing that to kind of the drudgery of life in the Soviet Union, I just had that desire to escape. When the Soviet Union collapsed, it was really tough living through hyperinflation and there were some big conflicts, basically poverty. There were days when we went hungry and sometimes I make fun of Gary Vaynerchuk that he’s saying he comes from a poor family where they would buy 2-ply toilet paper and separate it into 1-ply to use it. Well, we didn’t have money to buy toilet paper. We used newspaper so that’s an indicator of where I come from, we were that poor.

It’s a story that so many people you hear talk about; where they come from, adversity, and their strong drive to overcome. When I was 16, I actually met Mormon missionaries. The Soviet Union had collapsed, the country was opened up to foreigners, and they were the first Americans that I’d ever met. A few of them said, “Write to this organization, write to this organization, or write to my dad, or write to my uncle,” and so that’s what I did for two years. I would just get there and collect information from the missionaries and write. Write to different organizations and it took two years for a family to actually take a chance on me and be willing to help me out.

I imagine you’re eternally grateful to the family for taking that chance on you, right?

Absolutely. They’re a wonderful family, the Ivy family. The father was a professor of computer science at BYU at that time, and both of my parents are civil engineers and, actually, I really fought against being an engineer or having a science degree. I wanted to be an architect but I quickly realized that my mind doesn’t work that way so I’m so glad that through Evan Ivy and being around him, I did go into computer science. So that was a perfect degree for me at that time.Getting back into startup world, I felt that being lawyer almost abandoned that. Now, being back in the startup world, I love investing in companies that are software companies, kind of tech companies, or even interacting with entrepreneurs that are from that space. I feel like I’ve resurrected some of that knowledge that I’ve gained. So it’s definitely been a great ride.

So you’ve been investing in startups as an individual for a while now right?

A few years, yes.

But how many investments to date that you’ve said you made?

To date, I have eight startups in my portfolio.

Is it a mix of different companies?

Yes, it’s a mix. My husband is also involved. He’s more on the silent side but he definitely brings his perspective. We try to build our portfolio together and so I am the hi-tech, software person, and he really likes what he calls manly manufacturing companies. So we definitely have a mix of about 6. I think 6 are software companies and 4 are the manly manufacturing type of companies.

It sounds like one of the bits of advice you would give is to invest in industries that you know and you’re familiar with, right?

Definitely. I think especially to start, and I still consider myself a relatively newbie in the startup investing world, investing in what you know is a great place to start. For me, it’s software or anything law related. Actually two of the investments that I made are both software companies in the legal space like lien law. So that was a perfect fit.

My husband is a hands-on guy. He really likes investing or gear and gadgets. So, for him, it’s natural to really enjoy the manly manufacturing gadget type of startups. It’s a good start for everybody, but I think, as you get more experience, it’s really good to expand into new areas. For example, one of my great friends is really heavy into virtual reality and I love talking to him to let him educate me about that. I have a very little experience with virtual reality, but I think it’s going to be a huge opportunity to invest so I’m trying to expand myself and push myself to learn something new and I think all of the investors definitely have to do that over time.

Virtual reality sounds extremely hot. It’s almost like the new buzz word. It’s maybe what dot-com was back in the early 2000s. I think they’re maybe a good opportunity for anyone that’s doing anything virtual reality related to get some interest.

Yes, and I think you have to have somebody like my friend Marcus who is a game developer. Now he’s switching to develop games for virtual reality. That’s his life right now. I went to his house and he has a space set up for his virtual reality and I put a headset on and he had several different demonstrations and games that I could try out. It blew my mind, but I think with anything new, you really have to have a friend on board that lives in that world, where you can ask for advice. If I run into a startup that’s virtual reality, I’m going to Marcus first to ask what he thinks about it. In anything, you need expertise so I think it’s great to extend yourself to those new areas, but I think it’s important to have friends and mentors who live and breathe in that environment.

Tim Ferriss was recently talking about his experience as well. He said his mind was blown and the sense of time was lost there, as well, because he was in there for what felt like 5 or 6 minutes but it was really 20 or 30 minutes that had gone by. What’s interesting is it can be applied to almost any industries. You mentioned you’re in real estate, that’s very applicable to real estate walk throughs and, like you said, the medical profession, to have someone feel like they’re in the operating room. So I think only the imagination’s the limit at this point.

Exactly. My friend Marcus and I talked about real estate and there’s a great company from Idaho that is called a Vacasa and they’re not totally similar to Airbnb, but similar in that they help people rent out their apartments or houses. We were talking about how cool it would be if you were trying to rent a place though Vacasa or Airbnb and you could check it out in your virtual reality with a more hands-on experience. I think eventually we’ll get there.

One of the things that Marcus and I were talking about that is the motion. When you’re talking about walk throughs, it’s not going to be this fluid motion like you are there in person, because VR sickness is a real deal, and so many of the developers are working around it how to solve that, and one of the ways is what’s called blink teleportation. It probably makes no sense; when Marcus was telling me in the car on the way to test out virtual reality, I was kind of like, “What the hell? Do I blink? What happens? What is blink teleportation?” But when you get into the headset, you understand what it is, and that eliminates the sickness, that blink teleportation trick. So, anybody reading, if you have a chance to check out virtual reality, definitely do it. We’re getting kind of sidetracked. I’m pretty excited about virtual reality right now.

You’ve been experienced in investing in startups for a while and now you’ve decided to take the next step to launch a new program for invest and learn syndicates. Can you talk about a bit about what that is and what led to the creation of that?

Sure. It started with complaints, if you will, that I’ve heard a lot especially being in Idaho where we’re a fly-over state that there is a lack of capital. There are actually 9 million people in the United States who are accredited investors by the SCC definition, which basically means they’re sophisticated enough and have enough income or wealth to invest in startups. But only 300,000 — less than 3% — are investing in startups. There is this huge disconnect and I was trying to figure out why there is this disconnect. Our entrepreneurs need the capital, especially if we’re talking about here on the angel investing level, not the VC level. You hear a lot about the VC. Maybe there’s a bubble, maybe they’re over invested.

But, on the angel level, I still hear a lot about this lack of capital, not enough investors. So I was trying to figure out why are there people who can, but they’re not investing in startups. I think one of the problems is if you’re talking about a direct investment into a startup, the minimum requirements are often quite steep. There are very few that you can get in at 10,000 individually. More common is 25,000 or even 50,000 or more. If you go to the coast or the hot spots like New York and Boston, you’re probably looking at 50,000 or 100,000 minimum requirement and for a lot of the people, that’s not an option. If you’re talking about building a portfolio, a diversified portfolio of a couple dozen startups, that gets astronomical very quickly.

I love the syndicate model because you can pool money in smaller amounts from a number of investors and through this pool, you can satisfy that minimum requirement and then the syndicate makes the direct investment into the startup. So I thought that that would be very cool; there are a lot of people who are doing these syndicates. I thought that I would love to do that but how can I be different — and not just for the sake of the difference — but how can I be different in a way where I can make a difference?

Another portion that I think is lacking is the educational portion. Now, people who are interested in startup investing, they can join angel groups and some angel groups are better than others, about the mentoring process. So I wanted to have an educational piece and that’s where I came up with this invest and learn model. With the program that I’m launching and the syndicates that I’m going to do, people not only get a chance to pull their resources and invest as little as $2,000 into the syndicate — and then the syndicate would invest into the actual startup — but they’ll actually get the learning experience and I’ve tried to come up with that and figure out a way to structure that.

For now, I think it would be great to have three live webinars, so for the first syndicate that I’m working on, we’re going to have the founder of the startup that the syndicate is going to invest in. The founder is going to do a live pitch through the webinar and then the syndicate members can ask questions just like you see on Shark Tank or just like you would imagine. Investors get to ask questions and get the answers from the founder, and then we’ll have a little portion towards the end where the founder will leave and we’ll have investor only discussion which is pretty typical. It happens at the angel group that I’m a member of. So we’ll have that that will be the first learning experience.

The second learning experience will come from the due diligence. Due diligence is such a huge topic and I’ve been through some training programs where you talk about it in a hypothetical way, but it’s so hard when you talk about it hypothetically, and it’s a pretty dry subject too. I don’t think a lot of the learning or information really sticks so I wanted this to be practical. What I envision and what I’m doing with the first syndicate is having an established lead investor in the angel group who has gone through the process and done due diligence and prepared the report. The second educational webinar on the due diligence report is going to deal with the startup and their due diligence report. It’s not hypothetical. There is a practical application and we’ll have one of the people who was on due diligence committee guide us through the due diligence report, explain which areas are important. Again, answer questions from the syndicate members who are trying to learn. So I think that that practical component is very important and will be very useful.

Finally, the third webinar will be on the term sheet. Again, the angel group has negotiated the term sheet with this startup, and we’ll have one of the people from the angel group lead that webinar, go over the term sheet, tell our members which parts of it are important, answer questions. Again, it’s not just theory. You’re actually going to apply that theory to a real startup situation. I’m going to take as much feedback as I can from my syndicate members because I want to improve this program, but that’s the gist of it.

Sounds like you’re going to be doing a lot of hand-holding along the way. So even for people for whom this is brand new, because of what you’re doing with the webinars, it seems that they can learn a lot as they go to the process.

That’s the goal. All of my syndicates will be open to experienced investors as well, and if people decide to skip the educational part they can, but really what I’m making my mission is to find newer people. Many of them are younger people that want to get into this world. It’s a pretty hot space to be in right now, and to be investing in startups, but sometimes people just don’t know how or where to start.

That is my main goal: to provide the opportunity to start small and also to do a lot of hand-holding because startup investing has not been taught in colleges at least . Maybe it is now but for a long time it wasn’t, so I think many of the people who are of the age where they do get the income level high enough, probably never learned it in college. Where did they learn it? I think that’s where the hand-holding is important, and like I said, I’m planning to adjust, I’m planning to do more hand-holding or less hand-holding as my syndicate members indicate.

Does the program have a particular investment philosophy?

That’s a great question. I do get this question a lot because I’m a woman and I’m trying to break into this VC world a non-traditional way. I’m not doing a fund, just the syndicates. But I do get asked if I’m looking for women only investors or if I’m going to invest in women-led startups only, and both answers to those questions are no. With my podcast, most of my listeners are men and I don’t want to exclude my male listeners and followers. I’m pretty excited about being able to have both women and men. So, that is not going to be the thesis or the focus. I want investors of both genders and I definitely want to invest in startup founders of both genders but I’m looking into investing more in startups that have the ability to really change our lives for the better or, as cliche as it is, to change the world for the better.

I am cautious to call it impact investing because if you Google ‘impact investing’, pretty specific areas comes up. Clean energy or clean tech is one of the areas; the first startup that I’m helping with the syndicate is a clean tech startup. So it fits that, but again I don’t want to label it as a social impact because it’s a little narrow. Basically, I’m hoping to find startups and invest in startups that do carry that mission of changing our worlds for the better, changing the lives for the better, but not necessarily so narrow as to keep it within clean tech. I hope that answers your question.

Are you going to be using a platform like AngelList?

I thought very long and hard. I considered AngelList and I’ve decided to at least start by using my own lawyers and my own accountants. I’d really like the team that I have, we have Tonkon Torp in Portland, Oregon, which is a law firm I’m using and Perkins & Co. also in Portland, Oregon that are my accountants that are going to help out on the accounting side.

So at least to start, that’s what I’m doing. It’s going to be an independent offline syndicate. I want to have a little bit more control because this is not your typical angel list syndicate because of the whole educational portion. I want to retain more of the control and flexibility over that part because I think it’s the most important part. Eventually, AngelList is still in my mind as an option so possibly. But, for now, it is an independent offline syndicate.

It sounds really exciting and I’m sure you’re really excited about what’s coming up. In terms of the short-term and next steps and dates, what are some of the key information that readers should be aware of?

I would like everybody that’s interested to contact me directly. My email is graytat@gmail.com. I’m considering doing a webinar myself just to explain the process if people want to understand the process better. Anybody can email me and we can either start the discussion one-on-one or if there is enough interest in having a webinar, I’m certainly open to doing a group webinar where everybody who has questions about the process can get their answers.

One of the first steps would be to fill out a questionnaire that states that you are an accredited investor. It’s pretty typical standard practice if you were to join an angel group or if you were to invest in the startup directly. You would be asked to fill out this questionnaire where you self-certify that you’re an accredited investor, and basically to review that, right now, you have to have income — annual income of over $200,000 if you’re an individual or over $300,000 if you’re a couple, or have a net worth over $1,000,000 excluding your house. So that’s in very general terms but anybody interested can email me, I’ll send you the questionnaire, that’s the first step.

Once I know that you’re an accredited investor, I can tell you more because of the SCC rules, and it is a private fund raise for the startup. I cannot, on this public form, talk a lot about the specifics. We need to keep that private. But once I know that any of the people are accredited investors, we can certainly move into further along into the process and there will be a little bit more paperwork and the startup will get ready for the pitch webinar. After the pitch webinar, you will get more information, the due diligence report, the term sheets so we can go into the subsequent webinars. So that’s the process.

Great. If you think about yourself when you were getting started, I’m sure a resource or something like this would have been very, very helpful for you. If you put yourself in those shoes, is there anything that you can think of, or questions you would be asking if you were just getting started in this process?

Sure. When I was getting started, of course, I went on Google, and I Googled it and I could not find any good programs so I hope that there is definitely a need. That was my first step. I found some guy selling a DVD course but I wasn’t interested in just getting some DVD course.

I think joining a local angel group is a great way to start. Like I said, some of them are better than others at welcoming and mentoring new members, but finding an individual that can become a mentor, I think, is invaluable and definitely, trying to get educated. Startup investing is risky that is why it’s highly regulated by the SCC. So definitely understanding the risks and having that appropriate mind frame and learning about diversifying your portfolio and really building important portfolio, I think that’s all important. My podcast is, I hope, a great resource for anybody that is getting into this area. We had some amazing guests and I try to steer them towards talking more on the angel investing 101 or basics level to our listeners.

Hopefully, everyone’s got enough information to make the next step and, as a bonus, they also learned a little bit more about you as the host of the show. I have encouraged folks to not only listen to the podcast but to see what they can do about taking the next step in working with you.

Yes, definitely, and thank you so much, Harry. This has been a great conversation. I’m so glad we could chat.

Yes, definitely. Thanks and I wish you the best. Take care.

Thanks again, Harry, for a great interview. Harry and his company fullcast.co have made the whole podcast producing experience so much easier for me. I would not have been able to deliver such high quality product to you guys without Harry and his help. If you’re thinking about launching a podcast or need help with an existing podcast, check is out.

I hope you’ve enjoyed learning a little bit about me and where I come from, I’m super excited to have you join me on the Invest and Learn syndicate and program. Like I mentioned, just send me an email to graytat@gmail.com and we’ll figure out a date and time to talk one-on-one about the process and the details.

But wait…there’s more!

This post has been adapted from the Angel Investing with Tatyana Gray podcast.Listen to this recent episode for more great information from TATYANA GRAY!

Subscribe to Angel Investing with Tatyana Gray via iTunes.

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About Tatyana
When Tatyana learned that out of almost 9 million accredited investors in the United states only 300,000 (about 3%) were active angel investors, she made it her mission to attract, educate, and inspire the next wave of angel investors in this country.
As a new angel investor herself, Tatyana loves to learn the craft of investing in startups from experienced angel investors. It was only natural to share this process with a broader audience via her Angel Investing podcast.

Follow Tatyana on Twitter at @tatgrayid. We welcome your comments.