Introducing Yi Luo: startup builder (1 exit), prolific angel investor (35+ companies), mother (of 2) and founder in stealth (mic drop!)
Not only has Outward had the privilege of working with Yi on a shared portfolio company, we got to spend some time understanding her journey into angel investing, the benefit of coming at it from a founder’s perspective and how to get more women on cap tables. More below – not to be missed!
How did you get into angel investing?
It all started with learning. My early career was in the art world, and tech was not on my radar. However, my dad was an engineer and an entrepreneur who provided me a healthy dose of encouragement to build things when I was little. I then spent some time in a VC based in Beijing before I had my first child. During my time off, I took on a research project focusing on the UK fintech scene. I started to meet people I could learn from, and many of them were entrepreneurs. I began to put tiny tickets into a couple of angel investments – those with inspirational founders, whose journey I wanted to play a small part in. Later, not only did I invest capital but I also joined as an early employee in the startup FreeUp as its Chief Strategy Officer. After its successful exit, I was lucky to recycle the proceeds into more investments and build a larger portfolio.
Is there a common theme across your investments?
Whilst I am industry-agnostic, my previous investments were mainly in Fintech, Future of Work and Deeptech. Lately, I’ve been very interested in fundamental challenges brought by the pandemic such as supply chain management and other macro issues like Climate Change. Our urgent responsibility to address Climate Change creates ample opportunities for those who are willing to innovate and I believe this is something we should all care about.
When investing, what are the things you never compromise on?
People often talk about product-market-fit. In my experience, I have never seen a business achieve this on day one. In most cases, even for a second-time entrepreneur, one must make a few iterations to learn and adjust. Therefore, what I focus on most is the market itself: it’s key to be in a growing market with significant potential, in which a sizable audience has a critical need for a better product or service. I also never compromise on the ‘founder profile’, meaning someone who has ambition, a long-term vision, and the ability to convince others.
How do you support your founders post-investment?
European entrepreneurs need operating angels who bring practical advice and valuable networks in addition to capital. If I don’t have the expertise for a business (which is often the case), then I endeavour to be a friendly, hassle-free, and on-demand resource. In the past, it has led me to support founders with anything from helping them secure the first employee, introducing advisors, to strategising a second round.
My philosophy is to let founders lead the relationship – they are the drivers of the business and know where the gaps exist.
If you had a magic wand, what is the one thing you would change about the start-up ecosystem?
Even though there is a lot of liquidity in the market, we still see many polarised deals. Hot deals are 10x oversubscribed, with a lot of hype, yet 90% of start-ups are struggling to raise even a small amount of capital. We know the reason behind it. There is not much information to be analysed in early-stage start-ups, therefore people tend to employ herd mentality – viewing other people’s commitment as a ‘signal’ for their own decision. If I had a magic wand, more investors would be independent thinkers making decisions based on a framework. The playing field should also be more levelled and transparent.
What is the best way for founders to access angels?
It’s not easy for great founders to find the right angels (a classic match making problem). Despite being great product builders, accessing angels is hard for those who aren’t repeat founders, didn’t come from VC-backed start-ups, or don’t have an established network.
No secret from my experience: the warmest introductions are always best. Maximise your network and pitch to everyone you know – colleagues, friends, and family. Lead gen is good. Being systematic is good. But remember those that truly back you will recommend you to everyone they know, commission-free. You need them in the early days.
How can we get more female angels into the ecosystem?
There are many great networks such as Alma Angels and Angel Academy that are making strides to promote the role of female investors in start-ups. However, the fact is, there is not enough women on company cap tables right now. I also strongly disagree with the notion that women tend not to invest in high-risk assets. In reality, the more women that receive capital support = the more successful women entrepreneurs = the more women who become angel investors. It’s an issue with the system that we need to change, not an issue with women ourselves.
A balance between being an angel investor and being a founder yourself?
It’s no secret that being a founder or working in a start-up consumes 100% waking time (and I always dream about work too!). Being on both sides offer a unique perspective. As an investor, I am focused on long-term issues. As an operator, I am in the nitty gritty. If you want to angel invest and have some capital to spare (£10k a year is a good start), then start early, and you will find it is surprisingly compatible with the start-up role.