Updated: Jun 7, 2020
Introducing Patrick Markey, BANSEA member as well as a director on the BANSEA Board shares about how he got started in the startup industry, how he approaches startup investment opportunities and his advice to new angel investors.
Meet the BANSEA Angels is a series that features the angel investors in the BANSEA network which aims to provide a comprehensive overview for early-stage investing for angel investors, sharing their investment thesis and advice for new angel investors.
In addition to the video above, we are also hosting this series as a podcast, you can check it out here: https://www.podbean.com/ew/pb-m2rep-d74531
Here is a summary of the interview above and key takeaways:
Patrick Markey has been in the commodity market for over 30 years and has been working in United States, Europe and also in Asia. During that time, he had his first foray into startups in 2002 in London and he started/incubated his second startup in 2007 and now started his third startup with Sierra Vista Resources.
Patrick Markey is an active BANSEA member and also a director on the BANSEA Board. He has also been active in the BANSEA 2 Fund and BANSEA 1 Fund as an investor.
What has been your thematic approach to startup investments?
1. Have a unique value proposition
What problems are they solving and is it truly unique? Is it truly a disruptor in its particular market? More importantly, it has to resonate with me and is something that I am interested in because if I had interest in something, I wouldn't hesitate to invest in it.
2. Have a good team
It is also very important to dig deeper into that particular company to find out whether or not they have a good team. From top to bottom, from the founders to the different sets of skills they have in particular. It is important that they can cover different aspects in the business.
3. Have a realistic prospect
It's one thing to be a startup founder who has a great idea and great ambition but if it's not directed in the right way, it could be fatal. That goes into things like strategies and execution of the business model as well as the valuation. A brand new startup may think they are a hundred million dollars in valuation and that's something that really catches my eyes but I want to make sure that they have the realistic idea of what their company is valued at and have some financials or forms of forecasts that can back it up.
4. Have revenue
It is not absolutely a need but if I get a good feeling about the potential revenue; that’s perfectly fine as long as it is resonated with me and that they ticked all the boxes. Their forecast may not always be realistic, but at least we have an idea to the revenue they are making.
How do you find the right founders? Are there any traits to look out for?
As any angel investor, the team needs to look good. To me, that's always the founders - the people that manages the business. Are they capable? Are they active? Are they passive? What sorts of contribution are they making?
When I am angel investing in businesses, I would prefer to be more active because I just don't want my money to be passively invested into businesses. I’d prefer to help the startups, hopefully, become profitable, become successful in whatever they are doing, and to the extent that I can. Even though I may not have base knowledge of that particular ecosystem, I still try to assist those businesses. I’ll do the marketing, or the strategies or with even fundraising and any other aspects as well. Where I take even the more active role, I sit in the director at some businesses.
What do you do as an advisor on the board of directors in a startup?
One of the important things is support, support and support… As an advisor, you are there to help the startups in any way possible. If they need help with fundraising, I’ll connect with people that I think might have interested. If they want to get connected with the angel ecosystem, obviously I’ll try to connect to the BANSEA group as well as with other potential organisations (if I think it’s necessary) or other trade unions, businesses or groups that are in their sector. I have a fairly decent size network, I might try to bring in the help of other people who have deeper knowledge of the ecosystem to advise them; but we really need to listen to the founders and try to understand what their needs are.
What an advisor can do to help the startup:
1. Be honest about what you (as an Angel Investor) can do:
You, as an advisor, can’t purport to know everything. You need to be honest with the startup about what you can do to help them and where those limits are and vice versa, they need to be honest with you regards what their needs are. When you build that level of trust, I think it works a lot better.
2. Try to be as positive as possible and be emphatic
They are going to go through a monstrous time. The business that I joined in 2002 was haemorrhaging, very much a loss-making business where you were very uncertain whether or not it’ll survive through a year. Thankfully, that business is about 18 years old and it’s still going. Having experienced dealing with what these founders are going through, have a bit more empathy because I know how tough it can be.
3. Don't run the business
You really try to make sure that the founders are spending their time and money wisely. So when we see them doing things that we think we need to advise them about or help them with or provide guidance, we do that but we are not there to get into their dedicated routine or dedicated business.
It's up to them to decide how they want to run the business. It’s important that they run their own business and that the advisors don't run the business. We are, strictly speaking, there to advice, or there to ensure that they are still governancing their businesses, or that they are following all the rules and regulations.. And obviously the directors must ensure that, because we signed a lot of documentation, that they get all the required documentation on time, for regulatory compliance and tax. There are a lot of different aspects but you know, it’s pretty simple: Don’t be too involved into it, but provide them any support that you possibly can to help them out.
Are there any negative treat or any negative practice of the past founders that you are not in favour of?
I think one of the big things is the answering factor. If the founders are hiding things from the Board or from the angel investors, it doesn’t work. As an angel investor, we are putting money to a highly risky investment, our expectation is for the founders and the teams to be honest with us about the challenges and problems. Don't try to sweep all those problems under a rug, forget about it and then it appears later and eventually having to clean it up.
Sometimes the founder believes they can fix the problem but my advice for them is to reach out to your advisors and to your angel investor and at least you can inform them and ask for help. It’s ok to ask for help. It’s not a sign of weakness, it’s actually the sign of strength; especially things that require substantial amount of money. By that way you (as an angel investor) feel like in the startup that you have invested in, the money is being used wisely.
Any advice for new Angel Investors or newly investing into a business?
1. Do your homework, meet people and invest wisely
Do your own work; make sure that you can have the opportunity to meet the people, the founders, the team face to face… even when you have to have interviews with them. Even though the investment is in small sums, don’t go putting all your money all on black... in the gambling sense to play with luck. That’s not the way the game should be played. You are growing the portfolio so it’s important that you invest sequentially in small amounts and small quantities in a variety of startups. Therefore, if two, three or four of them go bad, hopefully one or two of that looks good and we all know the hit rate of startups, with angel investing, it is one in ten if you are lucky. So you know we are all not looking for unicorn, though we are looking at returns. We realise it’s risky but higher risk hopefully brings higher return.
2. Seek advice from other Angel Investors
Seek advice from other angels about what has worked for them - meaning what lesson have they learnt. Don’t be the person that doesn't want to have a conversation because you think you know it all, you don’t. “You don’t know what you don’t know” is the key phrase.
3. Get active in the Angel Ecosystem.
In the angel ecosystem, how you do that? You can join a group like BANSEA, which is a truly volunteer organization and we are here to help serve the needs, the startups, the angels and also the ecosystem in the world about promoting, growing and investing together. We bring people together at BANSEA through our own network through BANSEA Academy, through social, functions, through conferences that are held.
I don’t know everything and I meet different people within the BANSEA group that have different expertises. From investment bankers to full-time entrepreneurs, venture capitalists; people who are managers of a lot of businesses. For me, that’s a great experience on that, and I think because I can network with peers that have similar interests in angel investing but they are not exactly like me, and that’s why I really appreciate about the group.