Inside the Deal: Zach Coelius’ investments in Cruise and Branch Metrics

Inside the Deal is a new series where we interview the syndicate leads and entrepreneurs behind some of the most high-profile, invite-only deals on AngelList.

In this interview with Zach Coelius, we go inside his early investments in Cruise, one of the largest exits from an equity fundraising platform, and Branch Metrics, a mobile deep linking platform that just raised $35M led by Founders Fund, to learn:

• How he partnered with Gil Penchina to start investing on AngelList
• How he deployed $2M over six deals in the past year without having to raise a fund
• How he filled a $750K allocation in Branch Metrics’ Series B in 16 hours

Julie Ruvolo: Last time I saw you in San Francisco, you were running Triggit. How did you transition from entrepreneur to angel investor?

Zach Coelius: I moved to the Bay after I did a tech startup in college. I built the first online voter registration product for college students. Then I went to grad school and wrote my thesis on the role of information technology in oppressive regimes — give people communication devices and they’ll communicate, which will lead to protest and changes in the power structure. That turned out to be true.

I got excited about tech, moved here and started Triggit, an adtech startup. I ran it for 10 years and sold it last spring.

I had been involved in advising and connecting startups with investors during that time; I had an email list of investors I’d collected and I would send emails with deals. I’d been actively engaged as middleman in the process but not investing myself, just facilitating.

I had some time after I sold Triggit, so I decided to start a syndicate on AngelList. My first deal was Branch Metrics, a mobile deep linking app, which raised $15M with NEA in 2015.

It was amazing — I had a $200K allocation and was so scared of not filling it. I had no backers. I had nothing. I think we filled the allocation in 24 hours. That was for the Series A, led by NEA, and I quickly realized the power of AngelList.

I think we filled the allocation in 24 hours. That was for the Series A, led by NEA, and I quickly realized the power of AngelList.

In last 12 months I’ve done six deals and invested $2M via AngelList. I’ve learned a tremendous amount about what works and doesn’t, and the power of the platform.

Branch Metrics just closed a $35M Series B led by Founders Fund, which you participated in as well.

I put $750K in the Series B through my syndicate. We filled it in 16 hours.

So you went from your very first deal on AngelList to filling a $750K allocation in the same year? That was fast.

That’s what AngelList does, more than anything. Once you have followers, if you put high quality deals in front of them, they are hungry for them.

Prototypical AngelList investors are smart, non-Silicon Valley finance folks who are not connected to the deal flow like insiders in Silicon Valley but want to get exposure to the asset class. It’s not unusual to see six figure checks cut in an hour. It’s a super powerful platform.

How did you start investing on the platform?

When I sent out my first deal, I emailed all the folks on my list. This was before I had an official AngelList syndicate. Then I partnered with Gil Penchina on another deal on the platform.

Gil has this process of helping people bootstrap where they become part of his flight.vc group and create sub-syndicates, so I ran the Zach Coelius at flight.vc syndicate with Gil. We ended up doing three deals together.

Now I’m on my own again with my own personal syndicate. I have… how many backers do I have? [Checks his AngelList dashboard] I have 99 now.

You also invested in Cruise, which sold to GM last month for a reported $1B. You led a $100K round on AngelList as part of the $12.5M Series A led by Spark Capital last September, then Tikhon Bernstam led another round for the Series B. How did you get into the Cruise deal so early?

[Cruise founder and CEO] Kyle Vogt is an old friend. I knew him from Justin.tv and had been following what he was doing since the beginning of Cruise. But when his seed round came around, I wasn’t using AngelList.

We were having coffee when he told me the second round was coming together, so I asked if I could invest. So he shoehorned me in for a small allocation, $100K. Gil and I partnered on it — we used his backers to help fill the deal. It was another AngelList deal we literally filled in a couple of hours. The syndicate went great, and I woke up to the amazing news about the acquisition last month.

What’s your interest in investing in autonomous driving technologies?

I’m a firm believer in driverless cars. There is so much value if we can get them to work, and I’m sure they will work. Tens of thousands of people die in the US alone each year from car accidents, and the vast majority of them are caused by human error.

Tech exists for people to stop dying. I desperately hope we get that solved before it’s too late. One of my best friends was killed in a car accident a few years ago in SF. It makes me really anxious to be driving on the road with all the people doing stupid stuff. It’s terrifying.

Tech exists for people to stop dying. I desperately hope we get that solved before it’s too late.

I always assumed someone would buy Cruise because of the team, to bring the tech to a much larger platform, but didn’t assume someone as big as GM would move as fast as they did and make the bet they did. It’s a testament to how important is. It’s been a key part of my investment philosophy, to find companies doing interesting things, working on huge problems, and that have data at their core. You never know who you’ll be surprised by. Cruise turned out to be a great surprise.

You have a reputation at AngelList for getting entrepreneurs to give you big allocations. What’s your approach?

Because AngelList has grown so quickly and it has changed so much over the last couple of years, there is a tremendous amount of misinformation out there regarding the platform. Entrepreneurs have tons of questions about how the process works, how their information will be protected and who the backers are. A big part of my job is to communicate and share my experiences from syndicating my last nine deals.

More than maximizing allocation, I look at it as getting entrepreneurs excited about the value of have 20–100 qualified and excited backers who can be useful to the company in all manner of ways. Once they get excited about syndication, getting them to maximize the amount they can raise on the platform is easy.

So do you consider yourself an investor now?

Yes. I did $2M last year, which would be the equivalent of a $10M fund. I think this year I will have invested north of $5M, maybe a lot more. So I’m absolutely becoming an investor.

AngelList is a fund in a lot of ways, right? There are some limitations…. You can’t just write a check on the spot, and the deal has to be good enough for your backers to join. You live and die every day by the quality of your deals.

You live and die every day by the quality of your deals.

I had people starting to back my deals with relatively small checks, $5K checks, who are now writing $100K checks. That’s happened because they’ve learned to trust me and the quality of the deals I bring them. It’s a new model. And there is so much capital out there that is not part of a giant LP fund, or not rich enough to write a multi-million dollar check to a VC firm, but wants to get exposure to the asset class.

VCs have close relationships with their LPs. Do you know your backers personally?

For the vast majority of my backers, I’ve never talked to them on the phone. I know their names, and we’ve exchanged occasional messages.

What’s it like working with the funds on AngelList?

The funds get the first look at my deals because of the nature of platform. I write up a deal and put it on AngelList, it goes to AngelList for review, and then the funds get a notice that the deal is there and come back with a commitment.

For example, right now I have a deal Andreessen Horowitz is leading. It’s a great deal, and the funds wanted to take the whole allocation, so I had to say, “I want to leave some for my backers. So we’ll give you a piece, but not the whole thing.”

That’s kind of the whole point of the funds — they get a front row seat. But I don’t mind that. They’ve invested in almost every deal I’ve done. It’s exciting to have them as partners.

Anything else?

A lot of people still think of AngelList as a ‘Kickstarter for startups’, where a startup can list itself on the platform and raise money. Especially startups that can’t raise money elsewhere.

I’ve found it to be the total opposite. In my experience, it’s become a place where value added investors who don’t have access to capital, and aren’t full time VCs, can access capital and enable investors who are outside Silicon Valley to join these high quality deals.

It’s a symbiotic relationship between guys like me — who don’t have a fund but have access to good deals and can add value to these companies — and backers — who don’t have access to deals but have capital and can do these deals.

I see a world where AngelList just keeps moving up the food chain in terms of size of checks and deals. I look at $160M last year invested last year on the platform, and I think they’re going to double, triple, quadruple that number in the coming years.

Originally published at blog.angel.co on May 19, 2016.