EdTech Angels: Double down on your origin story - Andy Ayim (Angel Investing School)
Andy Ayim MBE - Founder Angel Investing School
Andy is an entrepreneur, investor and expert angel being the founder of the Angel Investing School. He is coaching founders to help them achieve product market fit and is a leading voice for integrating diversity and inclusion into portfolios of investors. He has invested in over 17 startups and also received the Order of the British Empire for his work in this field. He is based in London, UK.
We’re now in season 3 of the EdTech Founders podcast and this is the 20th episode overall. We are continuing to hearing stories from both founders and business angels in this new season. Happy listening!
The full transcript of the podcast can be found below for those who prefer reading rather than listening. The podcast is hosted by Frank Albert Coates.
Do you want to become a business angel? Join the Angel Investing School and get 10% off with the discount code EdTech10.
Episode summary
With Andy we discuss why investing in EdTech; he focuses on unlocking potential through education as EdTech allows lifelong learning beyond traditional schools.
As an angel investor, he looks for startups solving real problems through founders' lived experiences. He emphasizes understanding customers and their problems over flashy technologies.
He provides capital, knowledge, and networks to support founders.
In today's investment climate, founders need stories of traction and monetization to appeal to risk-averse investors.
Andy encourages anchoring pitches in origin stories and customer problems over buzzwords.
FA: You are a well-known angel investor and you have an angel investing school. So why, do you invest specifically in EdTech?
AA: That's a great question. So for me, at the core of everything that I do the kind of golden strand is that I'm an investor in people. You know, as a parent, as a person in my community, as someone who backs EdTech founders, the real thing at my core is that I'm trying to invest in people and unlock their potential.
And EdTech has this incredible ability to go beyond the four walls of what we traditionally know as a school, to educate people and take them on a lifelong journey. Of getting them to transform and get to what they wanna achieve in life. And I think that's really incredible. And in this company that I even run today with the Angel Investing School, that's a transformation journey we're taking people on as well.
Often people that have limited beliefs, like people like me, don't invest, people like me, can't afford to invest. And investing is out of reach to people like myself. And we come to completely reframe their mental models and their mindset, to let them know that they can start where they are. You can invest a little at a time, and you can learn how to start investing into privately held companies, also known as startups.
So I love that opportunity that EdTech presents in unlocking potential across the world and democratizing access to education.
FA: And, and on that just thinking about investment first, do you think that has changed over the last couple of years so it's be become easier to invest as an angel and obviously with smaller amounts than before?
AA: Yes. I think with the advancement of technology, we've seen platforms such as Angel List. Val Bend that's been acquired by Carter, Odin, Bunch and a number of others come into play, which have allowed us to basically invest smaller amounts of money together as investors, but making it easier for founders on the administration side because they only have, let's say, one line on their cap table, one organization that's investing, but has collectively summed up a lot of small, small amounts of tickets. So, for example, I could be investing 1000 pounds into a startup alongside nine others, investing 1000, and that startup receives 10,000 from Andy Syndicate.
The other thing that's been easier is that there's been an introduction of equity crowdfunding platforms. In the US is, there's one called Republic, for example. In the UK there's Cedars and Crowdcube, and this allows people to invest as little as a 50 pounds or a hundred pounds into startups. The challenge with this is that often there's an education gap, so even though it's easy to invest, it can be seen as gambling or investing. And in something you're not educated and aware of the risks in doing so.
So there's a recent exit from an equity crowdfunding platform with Citi Mapper, which got acquired by a company called Voi. And City Mapper is a transport logistics company that helps you basically travel from A to B in major cities across Europe. And the challenge of this exit is that, you know, if I invested 500 pounds into City Mapper during the equity crowdfunding campaign, at the point of exit, I would've received 300 pounds back.
So even though they exited, I would receive less money. And the problem was that the valuation on that equity crowdfunding platform was a lot higher than the valuation at exit point. And these are the kind of educational nuances that are really important to understand before putting your money at risk and investing into a startup, which is why I'm so passionate about educating people through the Angel investing school.
FA: Yeah. And that's why we need to send a few future angel investors your way. Definitely. It's become much more, let's say, democratic with the help of all these technologies as well. If we go specifically to EdTech? What are areas that you look at or have invested in and tell us a bit more about that and your investment thesis around it?
AA: Yeah, sure. So I think about a lot about the future of work and life. Okay. So when I talk about the future of work there are startups such as Patch that I've invested in, which is a work near home solution that builds coworker spaces in commuter built towns. So, off the back of Covid, there's been a major shift in a lot of people's lifestyles, and some people prefer to be able to, for example, take their kids to school, work near home, alongside other businesses in their local community, and be able to pick their kids back up from school and go home. And basically really use that productivity time instead of traveling to and from the major cities that they live around.
Another one that I've invested in is Unplugged and they're all about digital detox retreats. So they have cabins in remote locations across the UK at the moment, soon, hopefully across Europe, where you book three days away, you lock away your phone. Have no access to technology. You have a map, you have a radio and a gps, and you just explore and spend time in nature just to unplug from technology because so many of us are so plugged into technology day in and day out.
And then when I look at the future of education that I've been invested in, this platforms such as Tutor Block, which is all about democratizing access to tutoring. And they've actually pivoted slightly recently to actually go beyond just tutoring to say, how do we democratize access to knowledge workers? So right now, there's so many niche skills that we can all learn wherever you wanna learn how to be, you know, a beautician from a beauty influencer, right? Or angel investing from someone like me. There's all these nuggets and gems of knowledge that we can now learn that doesn't neatly fit into, for example, a four year course at a university, and is a massive long tail opportunity for educating the majority of the world with these micro courses, cohort based courses and the like.
FA: Next question is probably documented in your course, but when you do invest, how much do you look at sort of the business impact, I guess, versus the, if it's the educational impact or the impact overall? How do you balance that? Although both should go together, sometimes there might be, you know, your heart investing more than let's say the business side.
AA: We talk a lot about investment with your heart and your head, and I love that you use that phrase just now, because often when we're very passionate about an idea or passionate about someone that we've met, we get really excited. It's our heart that's really like going leaps and bounds to feel like, I really love this person, I love this idea. But often we need to think about our head and the logic behind the impact behind the ideas that we're investing in.
So AI is one of those interesting areas at the moment where on the one hand people are getting really excited about ChatGPT and its potential. On the other hand, there's some people that are really scared about the potential of AI. And the gap in between the two is that actually the average person in society has no clue what AI is or how it works. And there's a corner for governments to really regulate and come in and maybe even put taxes in place to really put the right boundaries around AI so that we're developing it in the right way for the best of humanity.
Because China's interests are gonna be different to Britain's interests are gonna be different to Russia's interests. They're gonna be different to US' interests. So what happens at scale when we think about Ukraine and Russia's war? When AI is involved, when AI can control nukes, when AI, you know. And it is a scary world that can be painted.
So that's where I think a lot around actually ethical investing and impact investing. Right? So what's the impact of these investments and how does the future of the world look like if these investments really succeed at scale?
FA: From an investor standpoint and then later from a startup standpoint how do you see that?
It's like, okay, I have to go. I have to be in on it. Where do you set the boundaries and how?
AA: That's a great question. So as an investor, I see my value add in three fold. The first is providing capital, which is highly commoditized in many ways, because you can get money from anywhere. Even though I have empathy for founders, I know it's difficult to fundraise.
The second areas actually filling in knowledge gaps, and this is where we talk about actually understanding the founder. Understanding where their gaps are. Hopefully the founder has that self-awareness into what their knowns are and their unknowns are so that you can help them fill those knowledge gaps.
And if I can't fill those knowledge gaps, I go to my third value add, which is my network. How can I plug them into the right people in my network? My AI experts, the people that have the knowledge to help and support this startup so they have a higher probability of succeeding.
So capital, knowledge and networks are the three ways that I try and add value around founders to support them along their journeys if they're coachable, open and willing to take that support and advice. Cause I'm not an armchair investor. I don't wanna just invest and leave it to the rest. I wanna be hands-on and support my portfolio to help 'em succeed and transform their life and hopefully the lives of the customers that they're impacting.
FA: Yeah, I like that. The capital, the knowledge and the network. And I guess many investors they sort of either forget or they're not really conscious of where they can actually bring most value.
AA: I think the problem for most investors actually is when they grow a big portfolio they start to focus and optimize on just the winners. Who are those doing well in my portfolio? When I would argue the revers. Actually those whose self-esteem is getting impacted the most. Those who are mentally probably finding the most challenging are those that are probably underperforming and questioning their ego question, what they're doing, question what their career or their entrepreneurial journey looks like ahead.
If they feel like start up, and that's where I feel like I can be of most value. I can be that person to listen to coach, to support founders through those difficult times.
FA: And on your investor type, will you be a lead investor or do you invest through a syndicate as you mentioned or what are your cheque sizes? And maybe you can say some of that for the angel investing piece in general as well.
AA: Absolutely. So I'm in a really privileged position in that. I not only can invest my own capital, but I can also invest out of a Atomico Angel program that I'm a part of. And Atomico is a European VC. They have an 800 million dollar fund. They were founded by Niklas Zennström, who's also the founder of Skype.
Okay, so that means that I've got access to capital outside of my own capital, which means that I can actually be more experimental with the check sizes that I write. So with my personal investments, I usually invest around 10 to 15 K, and I do this through syndicates such as the Green Angel Syndicate dedicated to fighting against climate change. Then there's Hulk Club, which is a syndicate dedicated to investing into African startups, or Hermesa and Angel Academy, which are syndicates dedicated to supporting female founders.
Because of the impact in the world that I'm interested in having, those are intentional syndicates that I try and do deals with. I also do direct investments because when I'm mentoring on an accelerator program or supporting entrepreneurs through events, I get access to great deal flows.
It gives me an opportunity to form direct relationships with founders that I can back. And then finally, in being part of the Atomico Angel program, I get access to the deal flow from the network there. So what are the deals that they're seeing that they're saying no to, that they're saying yes to, and how can I jump into some of those great deals that are coming through the network as well?
And with those deals, I can afford to invest more if I want, and I usually invest around 20 to 25 K through that network as well. But it allows me to experiment and broaden my thesis because I can leverage their capital alongside my own.
FA: And so obviously today you are very well set up to diversify your portfolio through your network.
So what's your advice to the investors who when they are looking for syndicates or trying to get into it? Like where should they look first and how do they get access to these syndicates and find them?
AA: I think the step one is really understanding your why in terms of why do you want to invest. What is the impact you wanna have on the world? What are you interested in and why?
It might be that I've worked in marketing for the last 15 years, and therefore ad tech is a really interesting area of mine. Or it could be, I've worked in marketing for 15 years, so I know the value I can add to a startup regardless of the sector or industry that a startup is in.
So it starts with why. Some people call this when you thresh it out a little bit more, your investment thesis. What are the things that you're gonna invest in and why are you gonna invest in them? And equally important, what are the boundaries around that? So you know exactly what your knows are, what you are not gonna invest in and why.
For example, I never invest into blockchain or crypto cause I don't really understand it and I actually don't wanna spend time going deeper into understanding use cases in the real world. So for me, that's outside of my sphere of influence. I do not invest in those areas. And it's great signaling for founders so they know who they can self select and filter who should be speaking to me and who shouldn't be speaking to me based on those criteria. I think next after that, it's really about setting yourself a realistic budget. See, if I had 10,000 to invest over the next 12 months, I wouldn't put that 10,000 into one startup.
I would diversify and build a portfolio to spread the risk and say, I put 1000 pounds into 10 different startups. The reason for this is because portfolio theory dictates that, you know, at least 60 to 70% of the startups are gonna fail, or fail to make a return. So therefore, like three of the startups may end up doing really well.
So what you wanna do even is go further and say, okay, next year you're gonna have another 10,000 to invest. I wanna consider which startups I'm gonna double down on in case I wanna follow one on any of those startups. If I can't afford to follow one, that's fine. Let me continue to diversify again and maybe this time invest 2000 into five startups. And I'll have that kind of mentality in that I'm investing into a portfolio and not just a single startup. One of the biggest mistakes I see from New Angels is that they invest a lot of their heart and get really excited with the first, second, or third founders that they meet.
And they end up investing more than they can afford to lose. Cause they were so excited about getting started along this journey, when really, this is a long game. It takes 10 to 15 years sometimes for a startup to exit. So you have to have a long-term mindset and horizon in even building your portfolio and investing these startups and supporting them along that journey too.
FA: And when you look at from the startup side, when they're looking for an investor. And then sort of for you what do you say to them to attract them, you know, why should they pick you versus other investors?
AA: So, first I wanna answer a slightly different question around, what should the startup founders be looking for in an investor? And then I'll say, why pick me if that helps.
So in terms of what a founder should be looking for, firstly, the founder should understand their story. What is your origin story? Why are you well suited to solve this problem? Who are the customers that you serve? Can you share stories about your customers and how you alleviate a pain point with the problems that you're solving for them?
What are the existing alternatives to your products, and why are customers switching from those alternatives to use your products? And what is your traction story? Which is not a single number in time, but rather a trend of the growth that you've had over the last six to 12 months. These are the kind of things that help to start telling a story to get people to buy into why you.
The reason I'm focusing so much on the founder, the problem and the customer is because at the Angel stage, at that early stage, you have a lack of data. You've only been running for 12 or 15 months. Or maybe even at the idea stage. So we can't go off historical data to make this decision. We really invest in the founder and backing this founding team.
So a lot of the emphasis is on that connection with this angel investor and this founding team. Now with the startups hat on, when you're looking for angels, you also need to do some research and some homework. So rather than sending a blanket email or DM on LinkedIn to a hundred angels, rather strategically, think about the 20 angels you wanna target and why?
The reason I wanna target Andy, is because I see that he's invested in these two or three startups. I heard him say this on this on a podcast. I read this article about him that said this. So I'm gonna tailor a really personal message to Andy. Maybe send it as a video, maybe as an audio. And I'm gonna reference these things that I've heard him say and heard him talk about. And I'm gonna share in that way so that I can hopefully get an initial conversation with him. That's gonna give you a higher conversion rate to get to conversations with Angels than to send them blanket emails or blanket messages without doing your own homework.
Because the investment works both ways. The same way the angels doing due diligence on you and referencing you, you should be doing due diligence on your angels and referencing them because this is a long-term partnership and relationship you're about to form. So it's such an important relationship.
It's worth putting the time upfront to make sure that it's a partner you want along the side of your journey. In terms of why me? I've mentioned three or four of the reasons already, right? So beyond the capital, I wanna be hands-on in my portfolio to support them with filling their knowledge gaps and supporting them with plugging them into my network.
And I can range an expertise from me leaning on my product management expertise, which is what my job was in the tech industry before I started angel investing more full-time. It could be because I could help with their fundraising. Like helping them close rounds. Cause I have great relationships with other angels, networks of angels and VCs.
It could be international expansion because I've worked internationally and I've helped startups grow from the UK to the US. So all of these things are things that are my value add. And because I have this angel investing school, which is a network, but also an asset, I'm able to close rounds a lot faster.
So even if I'm not leading around, I could bring in six or seven other angels to bring in 150 K or 200 K to close rounds. And I think this is particularly helpful to, you know, founders that exist outside of the network who didn't go to Goldman Sachs, didn't go to Stanford, didn't study at Oxbridge, who maybe had a working class background.
We are helping to close rounds for these founders. I think that gives us an edge and a value add. I always try and position myself as that core and that person to speak to when the metrics aren't looking as good, when the things aren't trending upwards, when you need to have honest conversations where you wanna sense check stuff before talking to the rest of the investors.
And I think that positions me well in terms of building a really strong, honest and safe space with founders when supporting them on their journey.
FA: And let's dive into one of your big areas. So, helping these let's say underserved founders. And this is something I've seen also in the EdTech space where, you know, many of the founders are very passionate about the areas that they want to drive.
And they might have experience from education and might not be at all let's say a serial founder or have any business experience whatsoever. But they're extremely passionate about what they do.
Tell us a bit more about how you work in the diversity and inclusion space, but also how you might see that around education projects in particular.
AA: I think what's most fascinating is that, when we think about those that are experiencing certain problems in society, they're often people that are not from the typical founder backgrounds, right? So if I'm a parent and I have three or four children who've all gone through the nursery system, I'm actually really well positioned with my lived experience to solve problems for young children in early years education because of my lived experience. And we often discount that lived experience based on our job experience, which is the wrong way round. Cause our job is a part of our life, not our life being a part of our job. And therefore I think we overlook too many underrepresented founders because we discount their lived experience.
So if I look at one of the skincare brands that I supported in my portfolio, it's called Avery Estelle. It's started by a gentleman called Yao. And his wife suffer from eczema, a skin issue. And he developed these products to help solve for that skin issue. And after solving it for his wife, he started offering out to others and he noticed that actually it was having a real impact in a positive way and high efficacy in terms of helping them with their skin issues.
So he started taking before and after pictures. To show the impact of his skincare products. And before he knew it, he started growing from 2 million to 8 million to almost 15 million in revenue this year. And the reason that it's grown so much, I believe, is because he's solving a true, real pain point.
And he's based not off his lived experience, which shows why he's well positioned to solve this problem. He personally had this experience with his wife before solving it for others. And I think sometimes when founders get bogged down is when they try and study the patterns and stories of successful entrepreneurs who are often outliers like Peter Phil at PayPal or Mark Zuckerberg at Facebook.
But this represents less than 0,01% of entrepreneurs that do well in life. So we need to stop benchmarking, comparing to these outlier examples and really tap into our lived experience our stories and use that to shape our confidence of what we're building.
There's something else you mentioned around things like in K-12 you've got complex sales and long sales cycles. There is an educational aspect that's really important to understand as an entrepreneur. You don't have to have the lived experience necessarily in that field, but you have to have an aptitude to learn quick. Like, can I understand the complexity quickly of who am I selling to? Who the buyer is in an organization? How long the sales cycles are with these large organizations? Can I get smaller organizations that have a shorter sales cycle? These are the things that a great entrepreneur's able to learn quickly, because if you are able to learn it quickly, you can fill in those gaps and grow exponentially in your learning, which allows you to then really reduce the risk of failure due to these gaps that you had at the beginning of your journey.
FA: Just a bit back to you mentioned the outreach from founders. Any great or memorable examples of founders who have reached out to you.
AA: Yeah. So, the first one that came to mind was a few months ago I recorded a podcast episode and the host put a clip onto Instagram. And the clip was all about audacity and how a lot of us have lost the audacity to dare or to do, to think big. And we often think very small.
So this founder DM me and was saying how much they love that clip and said, you know, like, I know you haven't got capacity, Andy, I know it's probably a no, but I want to be audacious here and ask you for half an hour of your time. And because she was the only entrepreneur to reach out and say that, we had a coffee catchup.
Cause I thought it was really smart, very direct, very honest. We ended up having a really beautiful conversation off the back of that. So that was a really good example. And she didn't send me a pitch deck. She didn't say she's fundraising. She wasn't even planning to fundraise for now. But she's formed a connection, and this is what I think people need to understand, is that you don't wait to transact to inform a relationship.
No. You invest in forming a relationship and maybe down the line you transact. But even if you don't, you should value forming the relationship with these people.
If I think about nightmares scenarios, every week on LinkedIn, I receive a DM from someone saying, Hey, we are the latest, the biggest, the Uber for X in this category. And it's a 65 billion dollar category. And this is what we've done so far and this is why we should have a call. Here's my Calendly link. I'm so important you should even book time with me so that we can have this conversation about this round. Sometimes they don't even put my name. Sometimes they put the wrong name when they're addressing it to me. But, those generic ones are the ones that are easy to filter out, especially when I haven't got capacity to take coffee meetings with everyone.
FA: Any tips you might want to give to founders around the current investment climate, which I guess is particular since a year, year and a half?
AA: Right now what's been most challenging in this environment is twofold or threefold actually. The first is that we've seen valuations resetting. So what that means is that over the last 12 months, valuations have dropped for the majority of startups. We first saw this drop in the public market with publicly listed companies such as Klarna, PayPal, with their valuations dropping and it fed through into the private market with tech companies valuations dropping.
This is not necessarily a bad thing, and I called it a reset because often valuations are overinflated and too high. So actually to come back to normality is not necessarily a bad thing. The second thing is because of that reset, a lot of limited partners who are the investors who invest into VC funds, which are also known as general partners, a lot of the LPs are putting pressure on their GPs around writeoffs across their portfolio.
I don't know where the exits are in your portfolio anymore. I don't know the value of your portfolio anymore. Therefore I'm putting pressure on you cause I don't know if I can make a return from the investment that I've made in your fund. Because of that pressure that the VCs are receiving, they're now setting the bar even higher and doing even more due diligence before making an investment, which means you're going often through a more trickier and lengthier cycle with VCs before achieving an investment. 12 months ago, you could have a consumer startup showing a great traction story in terms of all of the downloads that they've had in order the engagement on their app. Today, that's not good enough, and you need to tell the story about monetization and how you're monetizing on that audience.
And the reason is the VCs and the investors are trying to protect their downside risk. They're trying to de-risk their investment. They're trying to look for investments that are under path to profitability or can show a path to profitability. So the landscape has changed in terms of what they're looking for.
Therefore, the story that you tell needs to change adequately because of that. You need to tell a story that fits into that mold, not divorcing from your truth and yourself and your performance, but telling the story in the way that it needs to be told in order to really resonate with these investors that you're aiming at.
The final thing I would say is that there's all often actually an opportunity now as well. Because with a lot of big tech companies from Amazon to Google to Meta slashing their staff, that means there's some great talent available in the market. They're not always gonna be the cheapest, but if you can attract them with a mixture of, you know, vested equity, equity that maybe you pay over a number of years alongside the right package and inspiring them to join you on a journey, there's some great talent to be grabbed right now in the marketplace.
So it's not all doom and gloom. And I'll say that if you are fundraising, think about fundraising for the next 15 to 24 months. Think about at last in this period, so we can get us back to sunnier days, right? So you don't wanna be fundraising numerous times across the next two months, two years. You're gonna try and do once and done so you have enough cash reserves to really go through growing your business.
And if you haven't already, think about slashing some costs so you can preserve your runway and last longer in this market. I've showed a number of things there. I know I've used a lot of terminology, but hopefully founders understand and can digest and apply it to their scenario.
FA: Anything else that you want to share with founders? We're getting near the end of our podcast.
AA: The final thing that I would say is that when we often hear about new technologies like NFT and Web 3.0 and AI, it often sounds very tempting to use these words in the pitch decks and in the stories that we're telling.
But like I said before, the most important thing is actually your origin story and why you're well suited to solve this problem. What problem are you solving and who are you solving it for? So it's like the fundamentals of product management here, but actually these are the things that you wanna anchor yourself on. These are the fundamentals behind pitch yourself and position yourself well when pitching for investment or fundraising. So I'd really encourage founders to double down on that origin story. The problems they're solving and the customers that they're solving it for. And that's where the unique insight's gonna come in. That's where it's gonna be an opportunity to really connect to investors that buy into that story.
