Today's Guest

Hall T. Martin launched the TEN Capital angel investor network in 2009. Today, the firm has over 14,000 investors in its network and has helped startups raise over $900M and counting. Hall serves as an Adjunct Professor at the University of Texas, leading the Idea to IP program, which fosters startups from the engineering program. Hall gives us the insights he’s learned along his angel investing journey and the common pitfalls to avoid.

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Episode Summary

We originally launched in 2009 under the name Texas Investors Network, however as we grew and began receiving interest from people outside of Texas, we decided to change our name to TEN Capital Network. Today we’ve helped startups raise well over $900M in capital to fund their business ideas and grow successful ventures. We’ve learned a lot along our journey but what I would tell anyone looking to invest in startups would be to spend 90% of your time getting to know the leadership team behind the business. Product market fit and industry potential are only a small part of what makes a company successful.

In early-stage funding, there is a concept called the Power Law Curve which says that the majority of returns come from the minority of investments. No matter the industry or location of the team the percentages stay about the same: 5% of deals are home runs, the next 20% are medium winners, and the bottom 75% are either just your money back or no money back. So out of 10 businesses you invest in, maybe 1 will be a true home run, 2 or 3 have a small return, 1 will be a true dud and file bankruptcy, and the rest turn into lifestyle businesses that generate a living for the entrepreneur but provide near-zero return to investors. After several deals, I learned how to quickly spot when a deal was turning sideways and into a lifestyle brand. The leadership team would come to me and say they wanted to take everyone to market-rate salaries. 

When it comes to how to select the companies you want to fund, you look for a strong leadership team that has a growth record. Then I look for the growth story. After the initial pitch, I want to see who comes back and provides an update on their growth. In my experience upwards of 90% of businesses that come in seeking funding just disappear after the initial pitch. We don’t mind it, though, because that helps us narrow our focus on the serious business owners and fund the ones that are gaining traction in the market. Forecasting a growth story isn’t good enough. You have to show a growth story in your actual results.

InvestorConnect is a podcast and a 501(c)(3) that I started in 2013 based on a need I heard while talking with other angel investors. One of the common complaints I heard was they wish they had more institutional knowledge before they started investing. The way angel groups typically work is someone new comes in and makes a lot of mistakes the first couple years, then the next few years that make fewer mistakes, and then they get to 5, 6, or 7 years in and they start doing well in their deals. By this time though their interests might have changed or they’re looking to retire and then here comes the next group of investors behind them that repeat the cycle. So we put together resources and interviews to share the wisdom of those that have been there before you so that you can shorten your learning curve. 

Resources Shared

• TEN Capital Network
• InvestorConnect Podcast
• Thryv
  

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