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What I've learned so far about design advising and angel investing

What I've learned so far about design advising and angel investing

July 18, 2021

Last year I began writing small angel checks in early stage startups and advising founders on product design. I probably know 1% of what there is to know about either of these topics. But: in the same year since I've started investing and advising, I've had dozens of conversations with other designers who have also taken their first step down this path, or wanted to start but weren't sure how.

While it's too early to say if I'm particularly good at any of this, it seems worthwhile to share what I've learned so far to help anyone who is just a step behind me. In the future, this will be a nice artifact to calibrate against. Grain of salt, etc.

Please shoot me a direct message on Twitter or fill out the feedback form below if anything here is incorrect or needs clarification.

Design advising

The term "design advising" is too nebulous, and I've had to explain myself to many early stage founders who were unsure about what I would bring to the table. My flavor of design advising is: providing tactical product and design feedback through structured critique, helping with hiring (not recruiting), and making strategic introductions.

When to start advising

Before we dive in, it's good to consider ahead of time why advising is interesting at all in the first place. For me, it's about scratching an itch that I can't scratch anywhere else in my life. It's about working at the super early stage on undesigned solutions with people who dared to go all-in on some vision in their head. I find it inspiring, and it keeps me grounded in my day job.

Ways to be helpful

  • Hiring — help create processes and structure so that the startup can hire great design talent. I've written job descriptions, reviewed portfolios, helped structure a design interview loop, and helped founders clarify what kind of designer they actually need.
  • Recruiting — get great designers in the door to join the startup. I don't do this, but it's probably the number one area where non-design founders need help. I initially thought I had the capacity for this, but quickly realized that promising any kind of recruiting help would set expectations too high or conflict with my day job where I also help recruit and hire designers.
  • Introductions — introducing founders to investors, other specifically-skilled advisors, customers, or users. My observation is that most startups right now have too much money being thrown at them, so they are looking for strategic capital from highly-skilled angels with unique skills or knowledge. This makes the intros harder to make, but more meaningful when they do work out.
  • Critique — getting into the weeds to look at upcoming features or product ideas and critiquing everything from the strategy down to the pixels. Being meaningfully engaged on strategy conversations takes a lot longer to ramp up and gather enough context on the business, but it's been easy enough to point out low-hanging UI and UX wins to founders.
  • Be a user — using the company's products is one the most underrated ways to be helpful as an advisor. It won't always be possible or make sense, but when it does happen, it's very special to be able to send actual day-to-day product feedback after having been a real customer and early adopter. This is one important layer I apply to any startup I'm considering working with: would I use this product and be able to give meaningful feedback from my experience using it?
  • Mentorship — coaching early designer hires. My first tech job was as a solo designer at an early stage startup, so I'm all too familiar with the craving for mentorship, critique, or other design input on my work. One way I like to help startups is to be a rubber duck designer for any of their early hires. It's fun to work through tactical design problems or talk about career growth.

Finding startups and founders

The easiest and most obvious way to get started as a design advisor is to have inbound requests from founders. This only happens when you have the skills and reputation in the industry that lead people to seek out your advice. Or, of course, it's very common to collaborate with former colleagues as they leave a job to start something new. Leaning on an existing network of trust and goodwill is probably the best way to dip your toes, learn, and figure out if design advising feels good to you.

The second easiest way is to advertise that you are an advisor and investor. Put it in your Twitter bio, on your website, or write a blog post about it. I've seen other advisors be successful by putting up a mini pitch about how they like to work with startups (see @mxstbr's page on angel investing) or get listed on public directories of angels and advisors (see devtools-angels and Design Angels).

One thing I didn't realize early on in my time as an advisor was that I should also be going outbound and cold messaging founders. This quickly becomes a sales-y type of interaction where I'm trying to prove to someone I haven't met that my advice is worth their time and equity. Outbound is undoubtedly harder without a track record or public reputation for being useful to startup founders, but I keep a thread running in the back of my head when I see an exciting product or company launch: I wonder if I could convince that founder to let me help out?

The pitch

When I first started meeting founders, I wanted to help with anything and everything. Unfortunately, that's neither realistic or possible. For example, I have many responsibilities at my day job that must come first. Over time, I have honed in my pitch to be explicit about how I can and can't help. See the notes above about ways to be helpful, and find your own unique combination of value to bring to the table.

The contract

There are many good ways to figure out the right working relationship with a founder, but my general principle is to keep it as simple as possible. My contract typically looks like this:

  • We agree to meet ~X hours per quarter/half/year
  • Multiply by Y contracting rate
  • Y ⨉ X = some dollar amount Z
  • Divide Z by the startup's latest price per share to arrive at a number of advisor shares to grant

I like to set up a working relationship in 3, 6, or 12 month chunks, meeting weekly or every other week.

In some cases, founders don't actually need a rigorous schedule of feedback or critique time, and what they really want is my phone number on-hand for any design-related situation they may come across in the future. In these cases, it can make sense to hand-wave that I've written an imaginary angel check into their company, convert that into shares, and then collaborate as needed.

I'm sure there are many other ways to set up a working agreement with founders, but my guiding rule is to be as founder-friendly as possible. I've been on the other side of the cap table where I know how much work it can be to manage expectations and relationships with lots of equity holders. I want to be the advisor that is low stress + high value.

Other tips

  • Be explicit about what founders actually need from a design advisor. Sometimes founders don't know, and that's okay! Just make sure that their expectations and needs come first, and be explicit about what they're hoping to get out of the engagement.
  • Be founder-friendly! It's a big deal and a lot of paperwork to get a smaller check or advisor on the cap table (unless they already have a lot of operational infrastructure in place) – this usually means being relaxed about the commitment paperwork or helping out pro-bono for the first few hours while they work through the logistics.
  • Finding founders you work well with can be a numbers game; you won't be sure what you like doing until you've met a handful of founders, done several advisory meetings, and poked at different types of problems. It's okay to dip your toe and warm up to the process before committing a lot of time and energy to this. I started slow, and have been steadily sharpening my own intuition about what kinds of products and founders get me excited, and where I can add unique value.
Angel investing

Disclaimer: angel investing is very popular right now. This means there are competitive pressures, FOMO, and other highly-variable factors at play in the market. While angel investing should become more accessible to more people over time, it is wildly risky and most people would be much better off getting rich slowly.

I'm too early to know if I'm good at angel investing or not. But, I have learned some things! Here's the short list:

  • You can get started with less than what you think. For a hungry startup looking for a particular type of advisor and investor, it's not uncommon to see people writing $1-5k checks. Sure, it's a lot of money, but I was always under the impression that I needed to be writing $25k+ checks to become an angel. Nope!
  • Checks under $25k are mostly symbolic. Especially in this startup climate, capital is plentiful and cheap, and founders don't seem interested in scratching together a round of $5k and $10k checks. The dollars invested are all about values alignment and getting your skin in the game.
  • Angel investing is a numbers game. Read Power Laws in Venture Portfolio Construction. The problem with this is that the more checks you write, the less time you'll have to be hands-on with any given founder. Decide if you want to try and maximize your earning potential, or if you want to be deeply involved on the ground with fewer companies. Tradeoffs!
  • Only invest what you can lose or won't need in the next 5-7 years. Most angel investments won't return (or fold) for 5-7 years.
  • Brush up on the basics. A great place to start is by reading Design Angels (5 minutes). Some countries have specific rules about who is allowed to angel invest, although laws are steadily changing to make private market investments much more accessible to the general public.
  • You can set yourself apart as an angel very easily: literally do anything to help the founder early on. I've been surprised at how many founders told me I was more helpful than many of their larger-check investors after making a single introduction, or having an hour or two of dedicated design feedback time. It seems to me that a meaningful percentage of angels get their money into the deal and move on (or wait on the sidelines for the founders to reach out).

Advising and investing has been a lot of fun for me, but I'm still learning. If you're reading this and you're further ahead, I'd love to hear your tips or corrections about anything I've written above.

If you're a startup founder or early stage designer and want to chat about working together, please reach out!