How I Went from Ice Hockey Referee to Angel Investor

Matthew Wilson

Canada
Startups
Long-Term Investor

Who are you and what’s your story?

My name is Matthew Wilson, originally from Ottawa, Canada, now living in Calgary next to the beautiful Rocky Mountains on Canada’s West Coast.

I spent my 20’s in Toronto, where I began my career working in various sales and marketing roles at several Fortune 500’s, including Nestle and Coca-Cola. I also spent several years in the agency world at one of Canada’s largest media and publishing companies. However, it wasn’t my intention to get into the marketing world. In fact, I somewhat stumbled into it as a day job while I pursued a career in sport.

After completing my undergraduate law & psychology degree in Ottawa, I moved to Toronto to pursue a career as a professional ice hockey referee. Arguably the most significant learning experience of my life, I spent 15-years in the hockey world working at the semi-professional level, officiating a National Championship, and was invited to join the NHL prospects program.

It was an incredible experience, spending my evenings and weekends taking to the ice in front of thousands of fans alongside superstars like P.K. Subban, John Tavares, and Taylor Hall.

As for investing, I caught the entrepreneurial bug early, starting a snow shovelling business at age 11. By age 13, I employed half of the kids in the neighbourhood while financing a snowblower to expand the business. Around this same time, my grandmother introduced me to the stock market, and by age 15, I was investing my snow removal profits through my father’s brokerage account. 

I’ve always enjoyed looking for ways to combine my passions for entrepreneurship and investing, from learning HTML and designing websites in high school to eventually co-founding a CPG startup following my years at Nestle and Coke.

After growing and scaling our CPG company for several years, my co-founder and I had an opportunity to exit the business in 2012. It was also at this same time my (now) wife received an incredible job offer in Calgary, so I packed my skis and followed her west.

When I arrived in Calgary, I wanted a way to stay connected with the startup ecosystem, and I discovered Angel Investing as a way to combine my passions for entrepreneurship and investing.

Unfortunately, as Canada’s energy capital, there weren’t many tech startups or venture capital activities happening in Calgary at the time –– everyone was focused on oil and gas. So I chose to take my investing education outside of my local region and joined every possible angel network and VC fund I could find.

I looked to established tech ecosystems, like Silicon Valley, Vancouver, New York and Toronto. Furthermore, to de-risk my portfolio, I built a thesis around mid and later-stage companies, focusing my first few investments on companies at the Series B and C stage.

I figured this later-stage strategy would allow me to get some skin in the game while learning the business of early-stage investing, and hopefully, reduce my time to exit, giving me profits to reinvest into earlier seed-stage companies as my knowledge and experience grew.

This strategy worked well, with my first investment being into Pinterest’s Series B, followed by Lyft. 

At the time, I was very unfamiliar with Pinterest’s platform, having never used it myself. Still, their traction was impressive, and my wife highlighted the millions of brides around the world who used it to plan their wedding day –– talk about a large TAM!

As for Lyft (like Pepsi and Coke), I knew there was always room for a second-place competitor in each market, and Uber was taking the world by storm. 

As I continued writing cheques and learning by doing, I decided to craft somewhat of a VC apprenticeship. For instance, deal flow is the holy grail of the VC industry, so I started meeting with founders and writing deal memos, then sending the deal memos to various VCs and syndicate leads with whom I was an LP. I figured no VC would turn down free deal flow, and I’ll get some great feedback on my deal memos in the process. It was an incredible learning experience and gave me an insider’s view into what some of the best investors look for when assessing a deal. 

I continued honing my craft, writing memos and building my deal flow for several years, while also consulting and advising with startups on their sales and marketing strategies. 

Later, in 2018, when I decided I wanted a more formal role in the industry, everyone I spoke with said I would need two things for a career in VC: 1) an exit and 2) an MBA.

Having already exited my CPG startup and with several unicorn investments under my belt, I chose to return to business school and get my MBA, graduating at the top of my class.

Unexpectedly, my MBA thesis project was where I developed the business plan for an early-stage angel syndicate based in Western Canada. The premise was to help diversify our economy away from oil and gas by promoting outside investments into local technology startups; while simultaneously providing local investors greater access to diversified deal flow from established VC markets (details can be viewed on our website https://www.allied.vc/about).

As I was about to graduate from business school in June 2020, negative oil prices had decimated our local economy, coupled with Covid-19 and the global pandemic. I applied to work at various VC funds, startup accelerators, and government organizations but was turned down since nobody was hiring. So, I decided to dive in headfirst and put my MBA thesis project to work, launching our angel syndicate Allied Venture Partnershttps://www.allied.vc.

Anchored by my interest and passion for early-stage tech, and working with my MBA professor who previously sold a startup to Microsoft for $450M, the investment thesis for AlliedVP is an amalgamation of the best lessons and practices I learned as a private angel investor and VC scout since 2012.

At a high level, we invest in early-stage (i.e. Seed-to-Series A) software/technology companies with strong founding teams and deep domain expertise. We look for post-product/revenue companies, and our typical cheque size is between $100k to $250k USD. Our complete thesis can be viewed at https://www.allied.vc/thesis.

Since officially launching in October 2020, Allied has quickly grown to more than 400 investors, and we’ve deployed more than half a million dollars into early-stage startups, targeting 4-6 venture-scale investments per year. 

Walk us through your process of identifying and executing on investment opportunities?

Growing up playing hockey, my father would always enroll me in summer camps with kids that were one age group older. He told me it was best to play with faster and more skilled players, forcing me to elevate my game. I maintained this philosophy into my adult life and it has worked incredibly well, both during my officiating career and into investing. 

My philosophy when investing is to try and surround myself with experts in their fields, then listen and absorb as much information as I can. This strategy is especially relevant in the startup world since there is often very little data to go on, with investment decisions relying heavily on the experience and knowledge of the founding team. As a result, my job is to identify incredibly talented individuals who understand their ideal customer and target market better than anyone, then support them with my network and access to capital.

Once I’ve identified a great team with deep domain expertise, I’ll begin to look more closely at the product/service, how far they’ve bootstrapped the company, and whether the target market is large enough. Ideally, I’m looking for companies exhibiting accelerated growth within a rapidly expanding and large target market, where adding more capital will simply increase the velocity at which the company can expand.

In terms of specific metrics and KPIs, it varies depending on the type of business (e.g. consumer vs. enterprise), but ideally, we like to see companies exhibiting at least 15% month-over-month revenue/customer growth, where the company is on pace to triple revenue year-over-year during each of the first three years.

We also like to see feedback from initial customers, including reviews on the app store or websites like Capterra. Ultimately, we want to see that the company is solving a large enough pain point for an initial set of high-value customers, with the potential of expanding into adjacent segments.

Several additional examples of key metrics/items we assess during the diligence process include:

  • How much does it cost to acquire a new customer (i.e. CAC)?
  • Is the current LTV:CAC ratio at least 3:1?
  • Is LTV:CAC steadily improving month-over-month?
  • How long is a typical sales cycle and subsequent payback period?
  • What’s the hiring plan/roadmap following the fundraise over the ensuing 6-12 months?
  • Based on the current net burn, will the company have at least 14-months of runway post-raise?
  • Is all IP assigned to the company instead of individual founders or creators?
  • Do the company’s bank statements align with their income reports?
  • What are customer reviews like? (i.e. Google, Facebook, App Store, Yelp, TrustPilot, etc.)
  • Can we try the product/service?
  • What is the overall quality of customers? Are they strong brand names capable of paying their invoices or small organizations with a high likelihood of default?

Ultimately, we’re about to enter into a relationship that could last longer than the average marriage (i.e. 5-10 years or more), so we have to ensure it’s an excellent fit for both the founder and us. 

In terms of skills and abilities that make for a better investor, I believe it all comes down to experience and time in the market. 

For example, we’ve seen a wave of new money come into the market over the past 12-months, much of which has flowed from stimulus checks, reduced spending (and subsequent increases in disposable income), and large gains in crypto assets. 

As a result, somewhat of a bubble is forming in the angel/VC world as many new investors succumb to FOMO, chasing hot trends and hyped-up valuations. We are witnessing capital flowing into a handful of hot sectors while certain industries are largely ignored. It’s Investor Psychology 101, with behavioural biases such as recency bias, herd mentality, and overconfidence (among others). But for those that were not invested during the dot-com bubble or global financial crisis, they cannot recognize something they haven’t yet experienced. Therefore, based on my experience having been invested during each of these major correction events, pattern recognition and the ability to maintain emotional discipline are the most critical elements for long-term investing success.

It may feel exhilarating jumping into a hot deal within a headline-grabbing industry, but as the adage goes, once an investment makes headlines, the opportunity is likely long past and the smart money has already made the bulk of the gains. 

Since you first started, what have you learned that has had the biggest impact on your success and the growth of your portfolio?

The best investing lesson I ever learned was losing $35,000 as a kid in high school.

It was the time of the dot-com bubble, and I had been investing the profits from my snow removal company into the stock market. When the bubble burst and the market crashed, I saw my portfolio get wiped out. I panicked, thought the world was ending and sold what little value was left at the bottom of the crash.

I was devastated, having lost everything I earned and saved since starting the business at age 11. I fell victim to the aforementioned behavioural biases –– recency bias, herd mentality, and overconfidence. However, in hindsight, it was the best investing lesson I would ever learn, and I now refer to this moment as my tuition to the “Real World School of Personal Finance and Investing.”

I was very fortunate to have this loss occur early in my investing career, and I firmly believe that experiencing a significant loss provides the necessary scar tissue on the journey to becoming a consistent and genuinely successful long-term investor.

Following this incident, I made it my mission to study the ways of our greatest generational investors, like Warren Buffet and Ray Dalio, and when the 2008 financial crisis hit, I’m happy to report my portfolio didn’t lose a dime.

Furthermore, I credit my time in the officiating world for giving me a unique edge in my investing. For instance, as officials, we are trained to maintain composure and emotional discipline for the purpose of making rational and objective decisions within an incredibly fast-paced and high-pressure environment.

Think about having to make the correct decision within the blink of an eye, in an arena filled with thousands of screaming fans, two teams of professional athletes, and a dozen different slow-motion TV angles, all while skating up and down the ice for sixty minutes. Having spent 15-years in this environment, I feel I have a unique edge in my ability to emotionally disconnect from an investment, thus maintaining objectivity, composure and logic in my decision-making processes.

Once again, I believe success comes down to experience and time in the market, which subsequently builds the muscles of pattern recognition and emotional discipline. While investing is a life-long practice, by continuously building these muscles, we develop the certitude to stay the course and follow our thesis, even when it seems as though the world is collapsing around us.

What books, platforms or resources have you found useful?

First and foremost, it’s so easy to get distracted and pulled in a million different directions these days yet make no meaningful progress in any of them.

To help stay focused on the essential items that will move the needle, one of my most recommended books is Essentialism by Greg McKeown, and I re-read it each year.

Particularly for entrepreneurs and investors, this book will help you cut through the noise and focus on the select few items that will drive meaningful growth and success. The graphic below is from the book and is an excellent depiction of how many of us live our lives versus those who make significant progress. Focus is the key to success.

Image Source

With a focused approach, some of the best books on angel investing include Angel by Jason Calacanis and Venture Deals by Brad Feld and Jason Mendelson. Calacanis also has a great podcast (called Angel). Some other great podcasts include The Full Ratchet by Nick Moran, Capital Allocators by Ted Seides, The Pitch by Gimlet Media, and Acquired by Ben Gilbert and David Rosenthal.

 

For founders, I must give a shoutout to my teacher and mentor, Jack Welch. I was incredibly fortunate to have learned from him during my time at business school, and his books are full of great leadership advice. I also put Guy Kawasaki on the list –– so many great nuggets of information in each of his books. 

In terms of platforms, we run our syndicate on AngelList, and I encourage any new angel to get on the platform and start writing small cheques. It’s a fantastic resource to see quality deal flow led by experienced VCs, and over time, you’ll learn the key signals and pattern recognition of an excellent startup investment. For anyone wishing to get started on AngelList, send me a message and I’ll happily share my top recommended syndicates for consistent high-quality deal flow. 

Lastly, I always enjoy getting my morning news briefings from Crunchbase, BetaKit and Techcrunch –– each a great resource to stay up to date on everything happening in the startup and tech ecosystems.

What advice would you give to someone who’s just starting?

The most frequent advice I give to new angels (and one of the most common misconceptions around angel investing) is thinking you have to write massive cheques worth hundreds of thousands of dollars. This was true back in the 1990s, but thankfully it’s no longer the case. 

Instead, new angels can join a handful of syndicates on a site like AngelList and begin building a portfolio with cheques as small as $1,000. 

For example, if someone were to allocate $100k of their portfolio towards angel investing, I would advise against going out and writing four cheques worth $25k each. The odds are each of these investments will go to zero, and the investor will walk away thinking angel investing is a waste of money, resulting in a negative ripple effect throughout the startup ecosystem and less overall capital for early-stage companies. 

Instead, I recommend new investors write 20 cheques worth $2,500 at a pace of three cheques per quarter, saving $50k for follow-on rounds. Over time, the investor will begin to see which companies start to break out (typically 12-18 months after the initial investment), and they will develop the pattern recognition abilities to identify a strong early-stage investment. Once these skills are in place, simply scale up the cheque size as you get more comfortable. 

Furthermore, it’s critical to develop a core investment thesis (and stick to it) while investing the same initial dollar amount into each deal.

For example, I only like to invest in Seed-to-Series A, post-product/revenue companies focusing on software, including SaaS, AI or ML. The opportunity must include pro-rata rights, and I want (at minimum) quarterly updates from the founder.

By outlining and maintaining an investment thesis, it’s far easier to weed out the noise and focus your time on the best opportunities with the highest probability of an outsized return. Personally, if an early-stage opportunity does not include pro-rata, it’s an easy pass, and I can move on. 

Lastly, remember there will always be another deal. This is one of the biggest mistakes I see when new investors are evaluating opportunities. 

For instance, charismatic founders are excellent at communicating their vision and persuading investors to join the ride –– just look at what happened with Theranos. As a result, it’s easy to get emotionally caught up in a deal and feel the anxiety of missing out. You’ll hear things like “closing soon” or “investor deadline” as founders try to create a sense of urgency and competition. 

Unless the founder is the real deal and it’s genuinely an attractive opportunity, I’ve seen new angels fall for these sales tactics far too often. Once again, the adverse ripple effect extends throughout the entire startup ecosystem, and many of the great founders who should have received funding (yet may not be as charismatic in their pitch) fail to get the necessary financing to grow their business.

New investors should focus less on the popular deals everyone is talking about and instead look for high-potential opportunities where people have yet to pay attention –– this is usually where the best opportunities reside. 

For example, we recently invested in a fantastic company out of Virginia called RoundlyX. The company has been growing exponentially and adding thousands of new customers each month. Yet since the company is not based in the Valley, they flew largely under the radar, as many investors got wrapped up in hype-filled bidding wars over the latest batch of Y-Combinator hopefuls. In contrast, RoundlyX has 10x the traction of many YC companies with an incredible team grounded in reality, and will undoubtedly be on the radar of top-tier Valley VCs very soon. 

What investment opportunities are you excited about at the moment?

I’m particularly excited about the dramatic acceleration we’ve witnessed over the past year in remote learning. For example, the antiquated business model of brick-and-mortar post-secondary schools works fine for undergraduate students in their 20s. However, for those in their 30s, 40s and 50s, working full-time and with family obligations, living on campus for two years is simply not feasible. Instead, providing education in a more accessible and realistic way that is flexible with student schedules is critical.

Concurrently, I’m excited for the continued emergence of ISAs (income share agreements) in an effort to combat the growing student debt crisis while making education more accessible to people around the globe. Particularly in developing nations, I believe we can improve many of the issues regarding wealth inequality, poverty, disease and crime through higher education, therefore empowering greater cognitive and cultural diversity throughout all aspects of society.

Additionally, I’m grateful to finally see growing awareness for the many historic inequalities within the VC industry and the subsequent shift to further support underrepresented founders. As a kid, I was very fortunate to have travelled quite often, thanks to my mother’s career in the airline industry. Coupled with my family that is part Indigenous Canadian and later marrying into an East Indian family, I’ve been very fortunate to have been surrounded by diverse perspectives my entire life. There are so many incredible underrepresented founders who understand enormous (yet underserved) market opportunities, and I’m glad the VC industry is finally noticing.

Lastly, I’m excited for the continued growth of DeFi (decentralized finance). The big banks and financial institutions have been taking advantage of people for far too long, and it’s great to see power shifting back into the hands of consumers. 

Can you share a story about an investment opportunity that you passed on and went on to grow beyond your expectations?

By far, the biggest name in my anti-portfolio is passing on the opportunity to invest in Spotify.

At the time, Apple Music was coming into the market, and Jay Z had recently launched his streaming platform, Tidal. Spotify had a first-mover advantage and showed strong initial traction, but I didn’t want to compete with Apple’s deep pockets nor the clout and popularity of Jay Z and his all-star team of artists. Moreover, Spotify had yet to be released in Canada, so I wasn’t able to try the platform. 

Instead, I chose to hold off investing in Spotify and, well, we all know where it is now. Ironically, I’ve since become a Spotify power user and cannot speak highly enough of the incredible product Daniel, Martin and their team have built.

What do you wish I had asked you and how would you have answered this question?

As Bitcoin and digital assets continue to capture headlines, I’ve had many people ask about my thoughts on the current state of markets and whether I think this trend is a bubble.

If there are two things I’ve learned after twenty years of investing:

1) Don’t be resistant to innovation and change.

2) Don’t fight what the market is telling you. 

First, in 2019, I adapted my worldview to recognize digital assets as a legitimate and fundamental piece of a balanced and diversified portfolio, weighing 1%-3%. 

Second, when looking at traditional stores of value, there is little fundamental difference between gold and digital assets. For instance, both are merely social contracts where market participants agree on the underlying asset’s value. Ultimately, the only justification for gold having value is we all agree that it does. In reality, other than certain technological components, gold has few practical uses beyond the fact it is hard to find, shiny, and we enjoy looking at it. 

As the market continues to affirm the value of digital assets, it’s far easier to embrace this change than fight it, as the asymmetric risk/reward ratio shifts substantially in favour of owning digital assets versus the potential downside (i.e. it’s worth the defined risk of owning digital assets in relation to the opportunity cost of sitting on the sidelines).

While I certainly believe there is much volatility and consolidation yet to come, as an increasing number of corporations and institutional investors adopt digital assets onto their balance sheets, I believe this trend of legitimization and widespread adoption will continue.

Where can readers go to learn more about you?

Connect with me on LinkedIn https://www.linkedin.com/in/mattwilsonyyc and learn more about Allied Venture Partners on our website at https://www.allied.vc

Investors can join the syndicate and gain access to our deal flow by visiting https://www.allied.vc/join, and founders wishing to apply for funding can visit https://www.allied.vc/founders.

Thanks to
Matthew Wilson

 for doing this interview.

If you have any questions or comments, leave a reply below.

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