Lessons - What Investors Look For In Companies | Howard Lindzon, Managing Partner at Social Leverage

Hi, it's Scott here. On these lessons, episodes of my podcast, I'll be selecting my favorite lessons from various guests and episodes of success story. Today my guest is Howard Linsen, managing partner and a super angel investor at Social Leverage. He's a Canadian author, financial analyst, technical analyst, as well as super angel investor. He manages a hedge fund, serves as a managing partner of the holding company Social Leverage. He's a limited partner at Knightsbridge Capital Partners and he's the co-founder of Stock Twits. Today, he's going to teach you what investors look for when they're going to invest in a company. He's speaking from personal experience, basically, what does he look for? So investors, listen because you're going to get some tips from a tenured investor, founders also listen because now you know what investors are going to be looking for so you can optimize your pitch to fit exactly what they want to see. Yeah, I'd say it's founder-centric. I don't think I'm smart enough. I don't have the tech skills to be platform or geek-centric. I'm founder-centric, domain experience, a lot of us are endipitous, but people find me through my blog and through, you know, no one's going to pitch me a biotech field because if they do, they'd be dumb, what added value am I? I mean, people do, but I don't have, you know, it makes it easy not to respond. So by putting myself out there, I'm curating, I'm just, it's like dating, it's no different than what would be before the internet, and you're dating. If you put on Cologne and you go to a bar, you're going to attract something. By writing every day and telling people what's interest me, then other people with those same interests, to me, pitch me thing. And that's, that's generally how you found, like, the companies you're working with now. Well, that's my edge, right? Yeah. I'm not going to be on a plane showing up at these events, looking for the hot, sweaty new company and paying market prices. I'm telling people what I'm looking for and showing people what I'm an expert in, and then the other experts in the field look to me. So it's kind of like you fake it till you make it because you're passionate about a subject, and then all of a sudden, after 20 years, you're an expert. One thing that I really liked that sort of stood out for me, it's a tagline on your website, investing for profit and joy. So I know a lot of people invest for profit. What does that mean to you or what that actually means? Well, I mean, it means, and the stock twitch too is like, there's no quick way, like, I just went through 20 years of how I became an expert overnight. There's no quick way to do it. I think with stock twitch twitter, whatever it is that the apps that we're using, you can maybe increase certain industries, you can become a success overnight, truly. I mean, that's, you know, unfair, but it happens, it's just not normal. But there's no such thing as an overnight success, but these products speed everything up. So that's the fun part. I was, I was 30 and depressed, what a horrible waste of time that would be sadly, right? But, you know, because this is the greatest time, luckily in America to be alive in a matter almost what your zip code is, but, you know, you have to, you have to kind of find mentors, be a mentor and really stick to your passion, right? And the, and it's happening earlier and earlier for kids, which is great. You know, I kind of wandered in the desert until I was 40. And so, you know, the, so for me, it's founder and their domain experience and trying to trick them and convince them that it's, you know, being a founder is not that fun. Like, most of the time, I'm trying to talk to people out of their business. And that's, you know, because I know with Stocktwitz, you know, it's been in grind 12 years with Wallstrip. It was a miracle. Stocktwitz is a better idea than Wallstrip and, you know, you make more money off Wallstrip than they do it. So there's no predicting this. So with founders, I'm trying to explain to them the good, the bad, the ugly. Everybody's so excited. They got their idea and they're so passionate and they understand the whole in the market that they got a penetrate, but I'm generally probing and saying, are you sure you want to do this for 12 years? Look where I am. And so you're trying to like see if these people are really up for 10 to 12 years. Yeah, because if not, I think that's what it takes. That's what it takes. Even if your company is great, Robin Hood, seven years already. Sounds like an overnight success, but for the founders, it's probably a grind at this point. No, they're wealthy, but I'm saying, you know, Etoro's 10 years, you know, it's rarely that like three years you're going to be successful. And I don't think the amount of energy invested or the amount of energy required, excuse me, is really is really apparent to people that are first time founders or CEOs. I think they have, like you said, they have an idea and they have no idea how many hours invested, how much energy it'll take. The stress that it will probably cause regardless of whether or not it's successful. So I think that as, you know, you do, you do a lot of these deals. I think that that's probably the best way to approach it. Because if not, you're going to, regardless of whether or not the company's successful, you, you know, you really want people to align with you who, who are happy that they've aligned with you. Like you want that value to, to come from both sides, right? So you have to go along. And so the difference of investing today is the same versus past as before, 10 years ago, I didn't necessarily need to meet the CEO, right? It was just such a, you know, such a kind of an explosion moment of, you know, and this is what, where people are going to make massive mistakes right now is, you know, forgetting Uber because that was 2009, 2010, but 2005, 6, 7, 8, no matter what you touched, if they were connected to YouTube, LinkedIn, Twitter, Facebook, you're going to get rich because the arbitrage of getting a customer versus the value of a customer was just so in line with being a founder or an investor. Today that everybody's smarter and prices are more, you know, elevated and markets are more efficient for all this social and media and messaging. That's much harder. So I caught this Cambrian way, where you can write a 25 to check, hearing a pitch over at internet, over an email and make money, I don't think people are going to be as lucky today. So, you know, luckily for us, we're a bigger fund. We don't write checks on the whim. We spend a lot of time, you know, they say if you have a great idea, you know, get drunk and see if that idea is as good tomorrow. I think the same thing with investing in startups. You got to spend a lot of time with the founders before you write the check and we're just up front now. We're like, we're not writing 100K drunk and checked. It's like, here's how we work, here's what we do. We move pretty fast relative to the other midwits in our industry or for geniuses. And so we're very upfront about how we do things in our process, but, you know, we're all for quick nose and quick yeses, but they're within reason.