A few days ago Claire Bahn, CEO of Stratus Branding, was able to sit down with serial Angel Investor, Jonathan Hung, for a quick 10 part Q&A on his take of the current state of the angel investing landscape and how startups should navigate the post-COVID-19 financial landscape.
What follows is Part 2 of the two-part Q&A where Claire interviews Jonathan about the most pressing issues for Startups working through this economic turmoil.
Here is a little background on Jonathan Hung:
Jonathan Hung is a transformative Los Angeles angel investor and venture capital partner who believes in a bright future for businesses seeking to broaden their horizons in North America and Asia. One of the most active angel investors in Southern California, his mission is to drive value creation within each portfolio company. In support of this mission, he serves as Co-Managing Partner at – Unicorn Venture Partners – providing a hands-on approach to supporting companies by offering strategic expertise in operations management, finance, business development, multinational business strategy, entrepreneurship, networking, data analysis, and leadership.
Jonathan and his team target investments in US companies that have global market potential with a focus on long-term growth expansion to East Asian markets.
Here is Part 2 of the interview:
Part 2 of the transcript of that interview: [Edited for brevity and continuity]
Claire Bahn: So you have a large number of companies in your portfolio for Unicorn Venture Partners, so what have you told your portfolio companies to do in this unprecedented situation? I mean, I guess it’s probably changing weekly and daily, but what’s your advice for them?
Jonathan Hung: I think really it’s just to get on the phone and talk to people. It’s funny, a lot of times because you know, we have 3 general partners in the firm and you got to make sure that you can talk to everybody regularly int eh portfolio.
I can talk to 50 portfolio companies, which is great. But you’re going to get stretched thin. Because we have three partners at Unicorn Venture Partners, we can divide up and reach out to the portfolio companies so we can listen and help our CEOs to focus on their team.
We’re good because we come together and work as a team to deal with our portfolio companies. We leverage our different backgrounds and expertise so we can get on the phone and help our portfolio CEOs.
The worst case scenario is when I haven’t heard anything from some of our portfolio companies. I don’t want to get that phone call from them and they say “okay, yeah we’re out of money.”
So what do we do? I’d rather you get on the phone with me talk about your current situation
and see how we can go from there. Because listen, It was great to be eager to get our trust so that we wrote a check, but now it’s time to help get more than just money from us.
It could be because maybe we can find people to help you raise more money or help you decide if you need to switch to more part-time people or outsourcing a part of your business. Maybe we know the right people to help you find what’s best for your company right now and reduce the burn and offset costs
Claire Bahn: I know your focus is mostly in a few major cities and especially Los Angeles, but here is a technical question for you. If local angel investment dries up, should startups use video-based pitches to try and gain the attention of angel investors nationwide?
Jonathan Hung: I definitely think that video is the way to go. It’s something that we’re doing more and more rather than just receive a pitch deck and a conference call. It’s all about seeing the other persona and getting as sense of them and what they believe, it’s the non-verbal ques that are very telling.
Because it’s easy to spout out numbers and say everything’s great. But you have to have that personal one-on-one connection so you can explain why your situation is more unique than someone else’s. Definitely it’s a big improvement to do pitches through video.
Claire Bahn: But do you see, obviously it’s very unknown right now, but do you see things moving more towards instead of investing locally people will look at other places around the world to invest in and the video pitch is the best way to get there. Do you see that changing?
Jonathan Hung: I see that now with a bunch of accelerators and really, you know, you see all these school-based pitch events as well. I think it’s the idea is to get your product or your idea and business plan in front of as many people as possible.
Just as if you were interviewing [for a job] you’re going to send your resume out to everywhere to get in front of more people. That’s all this is. Using technology to reach more people in a very effective and authentic way. You can’t just rely on one market right now or one customer right now, you know, especially if you’re trying to grow your sales and grow your revenue. The same is true for investing. While we might have some locations we concentrate more on, I believe that in the near future we will be open to making investments outside of the areas we currently operate on and Video pitches will go a long way to making that a reality.
Claire Bahn: I wonder if there is an upside to this for startups? I mean there is going to be a lot of disruption which means good and talented people suddenly on the market again. Is it a good time for startups to start searching for talent/new hires?
Jonathan Hung: I had a professor once she was a Yale entrepreneurship professor.
Now. She’s a Harvard Professor.
I don’t know if that’s better. Yyou know in the rankings that came out.
We’re [Yale] still higher than Harvard, you know, you know Harvard went to number six I think so, but that’s Just US News talking. Anyway, she always said “hire slow and fire fast” and I thought that’s a great little phrase.
She has a new book out, Dr. Laura Wang. Where she says yes, you should definitely always look to be hiring the right person constantly. She always wants you to look to find the right person to be part of your team to help you grow.
But if that person is not right, you have to get rid of them as soon as you can because they’re only, you know a burden on you financially
Claire Bahn: “They are dead weight”
Jonathan Hung: Yes, that way if you know, so you have to always look for the best talent possible and sometimes you might have to overpay for that talent but it works out better for you in the long run because it helps your company grow and gets you to where you need faster.
Claire Bahn: So if a start-up is dealing with a kind of a limited Runway and they know that they need this new hire. Do you think that’s a good risk to take if they know that they needed to get to the next level to maybe get funding and is it a good risk to do to take on hiring now, or should they wait?
Jonathan Hung: As I said, it always just depends. However, if your first hire is your lead sales guy or your CTO, those are probably, beside you being the CEO, absolutely critical. So having a CFO or COO, your salesperson and your Tech are the most important roles you need on your team.
Because even if you think of a Fortune 500 company, salespeople do not get fired first. They’re the last to go because you have to generate revenue, you know, and if you have a product you better make sure you have the right team, especially for a tech company.
If you’re a tech company, you must have the right CTO to make sure that your code is better today, but then also better in the future as you go forward. Because the World is constantly changing and you need to find the right hire, right talent to move things forward. That’s why you see Google, Facebook, Microsoft and Amazon hiring always no matter what the economic situation is because they know that the right talent will payoff in the end.
Hence, if very good people are getting let go for whatever reason then it would be in the best interest of any startup to hire the very best person they can find for their team if they believe that persona will propel them forward.
Claire Bahn: Thank you, Jonathan, I really appreciate your time and feedback on these important questions. Finally, do you have any further thoughts on what you would advise startups during this time?
Jonathan Hung: No, I think first and foremost advice I can give is that you can’t just hunker down.
When I had to move back from Shanghai at the time I was working for Cummins, I had to take over the family business. My father always taught me a really important rule, especially when you’re the boss and the entrepreneur, you have to watch out for your blind spot. No one else is going to help you figure that out.
I mean It’s like in football where you have a left tackle or a right tackle protecting the quarterback when it’s just you then you have to always be aware of the business situation.
You can’t focus on one thing. You have to look at everything across the whole board to make sure what I can be doing better daily. So I would say always watch out for your Blindside don’t just react don’t be more proactive than reactive.
Claire Bahn: Awesome, and I guess it goes back to what we talked about earlier to be prepared.
Jonathan Hung: Right! Instead of just buying all the toilet paper and Lysol sprays and water I would say let’s look at the best opportunities to make our companies better you know because “scared money doesn’t make money”. I heard that many times.
You can’t just be scared right now and do nothing. You have to say like Warren Buffet there are a lot of great buying opportunities right now. If you believe a company was great before all of this took place then you can be buying or investing in a great company sometimes at ½ price.
The same is true of startups and entrepreneurs. If you believe in your company before all of this then keep believing in it and try to move forward. You have to believe in your product and company.
Claire Bahn: Yes, that is always the key right there. I’ve heard that and I think you told me this too, venture capitalists and angel investors don’t invest in the company, they invest in the founders. So the founder has to show that they are confident.
Jonathan Hung: Yeah, it’s all about having true grit and having a relentless attitude. Because it would be easier to just quit and find a regular job. No doubt about that.
You have to ask yourself, “Would you rather do something else?” Really this is the time where you have to believe in yourself and take a risk.
Take a chance! Anybody who’s successful will tell you that half of it is being prepared. The other half is just being lucky. You will find your luck if you work hard.
Claire Bahn: Awesome. Thanks so much, Jonathan for taking the time to answer my questions and the viewers’