I just made my first angel investment… Mega multiple returns or money down the drain?
“When you’re an investor, you can look at the quantitative and qualitative elements of an investment, but there’s a third aspect: What you feel in your gut.”
— Kevin O’Leary
Most people think that the world of angel investing isn’t for them. That it’s a doomed approach at investing and an unreachable goal where the likes of Mark Cuban and his peers sit a top the throne and wait for the next Dropbox to enter the den. Most people are right. The truth is — roughly 80% of startups fail and only 10% of investments return over 2x. This means the odds are stacked against you…considerably. (stats come from CrunchBase and Andrew Chen’s article)
So why is there so much money in early-stage investing?
One thing I’ve picked up from my economics degree that applies here is the law of large numbers. The law of large numbers is a principle of probability according to which the frequencies of events with the same likelihood of occurrence even out, given enough trials or instances. Essentially, the more you bet… the more likely you are to win. Winning in this case, is betting on that one Slack or Uber. Early stage investors can be split into two segments, angel investing and venture capital. The models of each are slightly different, but the underlying investment thesis is the same.
Angel Investment thesis: Angel investors are looking to only invest in the early stages of the companies with small ticket sizes. This likely means most angel investments don’t follow on into subsequent rounds.
Venture Capital Investment thesis: Venture firms typically invest larger ticket sizes and will follow on into further rounds of investments in order to maintain the same level of shares in a company. VC firms also owe it to their LP’s (Limited Partners) to do a lot more due diligence around an investment as this is considered institutional money.
At the end of it… both investments are looking to maximise returns and invest in what the industry calls ‘Unicorns’. Statistically and unsurprisingly, those that have made more investments have managed to find more unicorns to invest in. The reality is, you only need one unicorn. One fantastic investment equals a return on your money which is likely to be a hell of a lot more than what you put in.
“The biggest secret in venture capital is that the best investment in a successful fund equals or outperforms the entire rest of the fund combined.”
— Peter Thiel
What did I invest in?
With the struggle for brands to identify successful ways to generate leads and customers. One approach that is generating higher customer acquisition rates is through personalisation. Brands and marketers struggle to get their message across and retain the attention span of a customer through online ads. People have simply started ignoring these ads.
I recently invested in Scribeless following a 400k raise. (Check out the card they sent me at the bottom!)
Scribeless has developed a software that can learn anyone’s handwriting and robotics that re-create the idiosyncrasies and nuances of human writing.
Overview of The Problem & The Market Opportunity:
With a huge struggle to appear authentic when marketing your brand, personalisation goes a long way, just take a look at the man who built a £1bn business off writing handwritten letters! Scribeless have brought back what so many people have missed out on as one of the best communication tools around. With 95%+ open rates, 35%+ engagement rates and a huge element of personalisation. Scribeless is making it accessible for brands, bankers and business owners to access a unique customisation tool at a scalable level. £4.4bn is currently spent on advertising and business direct mail annually and currently over £10bn is spent on greeting cards annually.
A unique opportunity for marketers has emerged at a low cost, creating higher levels of engagement and effective marketing as well as higher levels of personalisation.
“We genuinely backed Scribeless because the team is superb. The team has proven itself whilst previously running a business and Rob and Alex (Co-Founders) both have complimentary personalities that will improve their efficiencies and decision making. The product is great! I couldn’t tell the difference between something I’d written and the copy, not to mention the market opportunity is huge with the likes of Barclays and Panasonic already having used the unique software”
— Reece Chowdhry Founder of RLC Ventures
Investment Thesis
The founding team at Scribeless has vast experience having started their own previous company and worked at the likes of JP Morgan. The characters of the founders complement each other well and their background of studying together suggests that they will have few hurdles in terms of personality and ego clashes. The market opportunity is huge.
What RLC Ventures likes most:
- AI productivity gains — Scribeless are putting a proposal together for US companies which currently employe people who physically handwrite notes to clients — crazy that this happens all over world let alone the USA.
- Client base — is so wide and hence the market is large, but we love application to areas of real estate — agents sourcing deals via letters & banking CEO’s having to send apology letters & political campaigns.
- Business to Business sales — strategy creates a more defensible business and ensures capital is not wasted on B2C marketing $$$.
- Scale — Given that Scribeless have moved to provide software behind the handwriting engines to allow people to use their own or use others, they can scale rapidly without having people or printers or robots.
Competitive Advantages:
- Scalable software — that creates handwriting letters at least 15x faster and 50% cheaper than both humans and robots can.
- High defensibility — as the company has already built a large handwriting database with all the AI technology built in house.
- Low cost structure — as the core team is strategically based in Bristol
Overall, we were impressed by a strong founding team, their focus on data-based decision making, operational rigour, and a persistent focus on customer delight, backed by a large market opportunity in the marketing and personalisation space. RLC is “very thrilled to work with their team in building a great household name together.” They currently operate in Bristol and you will soon see their letters everywhere but it’s likely you wont know it!
This is the card I received from RLC Ventures produced by Scribeless!
