The Art of Getting to Conviction: Strategies for Successful Investing

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Episode Summary:

In the latest instalment of our podcast series, Cheryl Mack and Maxine Minter delve into the intricate world of early-stage investing, shedding light on the varied approaches to gaining investment conviction. This episode serves as a guide for both novice and experienced investors who aim to refine their decision-making strategies when backing new ventures.

As Cheryl and Maxine unravel the decision-making fabric of early-stage investing, listeners are taken on a journey through the critical thought processes that investors employ. From angel investing intuition to fund management rigour, the diverse strategies and considerations are laid bare. Key topics such as founder assessment, market sizing, and investment criteria are explored in detail, offering a valuable distilled wisdom that promises to enhance the listener’s own perspective on startup investment.

Key Takeaways:

  • Every investor has a unique process for achieving conviction in startup investments, which can evolve over time through experience and iterative learning.
  • The consideration of factors like founder qualities, market potential, and existing competition varies between individual investors and forms the basis of their investment decisions.
  • Portfolio construction and risk assessment play significant roles in an investor’s decision to back a company, mainly when operating within a fund structure.
  • Intuition and instinct also influence investment choices, sometimes siding with conviction even when faced with incomplete or ambiguous information.
  • The balance between personal investment ethos and the structured approach required by funds highlights the complexity and art form of early-stage investing.

Notable Quotes:

  • “It’s a process…an invitation to iterate your way to a successful process and continue to measure yourself.” – Maxine Minter
  • “The nature of especially early stage investing is that it’s risky.” – Maxine Minter
  • “For me, it’s founder… I need to feel like this is the right founder for the…market problem space.” – Cheryl Mack
  • “It’s really rare, if ever, that you get to a…definitely yes…always no questions.” – Maxine Minter
  • “The spectrum of yes to hell yes…there are so many different ways of doing it and so many different timescales to be considering on.” – Maxine Minter


This transcript has been A.I. generated.

Cheryl Mack: Three, two, one. Hey, I’m Cheryl.

Maxine Minter: I’m Maxine.

Cheryl Mack: This is First Check, part of Day One, the network dedicated to founders, operators, and investors.

Maxine Minter: If you want to be a better early stage investor, this is the show for you.

Cheryl Mack: So TLDR, if you don’t want to suck at investing, listen up.

So one of the things that I think is so interesting and that I’ve spent a lot of time thinking about recently is the process of like getting to conviction and how different investors go from the like, Hey, this is, you know, something cool too. Yes. I actually really want to invest in this. Here’s my money.

And I feel like that is different for everyone, but there are some things that like we can share and similarities and for anyone who is thinking about their own getting to conviction process, this could be a really interesting

topic. A hundred percent. Yeah. It’s actually like when you lift the lid on this topic, it’s pretty phenomenal.

The variety of ways that people get to conviction and how that is different. If you’re an angel investor versus a fund. The similarities there, the differences. So super excited to dive into this one on one on getting to conviction. Yes. So tell me about the first way that you ever got to conviction. What was your process if you had one?

Oh man, it was super loose. Yeah. I mean, process is probably a very loose term there. Um, it, uh, it was very much like, Hey, I, Oh, there’s an opportunity to invest. I’ve worked with you. Yeah, I’m in like, it was. There was not a lot of thought process there. And not to say that, like, that is a bad way of investing, but now that I’ve had a lot of other opportunities to get to conviction, um, it’s not my preferred way.



What about you? What was your first?


Maxine Minter: Mine had absolutely no process at all. I’d never really even thought about the, like, concept of getting to conviction and not an investment. I had just started my angel investing journey. I met this incredible person building this incredible, like what I thought could be really big.

I was an operator at the time, and so I was like really thinking hard about like what would actually be involved to pull that off, but at the end of the day, my conviction was just like, I think she’s amazing. I think the space is amazing. I think it’s a really clever idea. And so I’m in. There was no diligence really, like it wasn’t a very robust process at all.

I think I’ve, I’ve heard you use

Cheryl Mack: the term

Maxine Minter: reckless. Yeah. Oh, it was reckless. It was financially reckless. It was personally reckless. There was like absolutely nothing.

Cheryl Mack: No seatbelt whatsoever.

Maxine Minter: No seatbelt, no seatbelt at all. But I learned a lot and I think definitely have spent a lot more time since then thinking about the process of getting to conviction.

Obviously the like process of maturing as an angel investor and then like building a fund. Um, that really is a pause for thought as you’re thinking about kind of how you get to a yes. Um, and what the criteria are for a yes, which I think one of the things that stood out for me was the big difference between angels.

And the way that they get to conviction and what they need to kind of see to get to a yes. Um, and for a fund. Yeah. What do you get to see at Aussie Angels? Like the difference between those processes?

Cheryl Mack: Well, it’s funny because actually most of the like investors that are on Aussie Angels are kind of halfway in the middle.

So like we have syndicate leads and syndicates run this. You know, process of they decide to invest in the sense they’re angels, right, because they’re investing their own money, but in another sense, they’re kind of in this like VC bucket because often, you know, even though they’re not managing other people’s money, but often when they invest, a whole bunch of people follow alongside them.

And so they’re kind of in that middle ground of like, Okay. Not quite angel, but not quite BC. And even for my own personal, like I run my own syndicate on as angels. And I remember that moment where I said, Hey, I’m investing in this. And a whole bunch of other people to the tune of 151, 000 also decided to invest alongside me.

And I, I remember thinking like, wow, what if. You know, these people followed me into this deal, like, what if I didn’t do enough, DeeDee? What if I didn’t do enough, like, talking to the founder or research on that market piece? Um, and, like, great company, excited and glad that one, uh, went well. But I think I definitely, on the second, third, and subsequent deals, have been much more conscious about that.

And we do see that once people go from that step of, like, I’m only personally investing my own money, To actually now I want to run a process because if somebody ever asks me and, you know, I want to talk about this, I want to feel comfortable that I’ve done enough. And so I feel like that is a pretty big jump when you start, when you move from just your own personal money to other people’s money in any way, shape, or form.

What do you see?

Maxine Minter: Yeah, I think that’s exactly right. I think from what I’ve seen from the angel stage, Like the ways that people get to conviction is so varied, right? I like spoke to someone earlier this week where their way of getting to conviction was just like, I like the founder. Great. And that’s the extent of the evaluation.

And you know, like as an angel investor, that’s all the, like, that’s the extent of the evaluation you might need to go to. Where I know other angels that have a really robust process, you know, they have, yeah, like 40 hours of DD is required. I’ve heard that. Right. Yeah. Yeah. And they have these kinds of like, uh, mental models on how much research they need to do.

And actually, I think that can be quite challenging because they have a kind of minimum amount of information they feel like they need to collect to get to a yes. And very often as angel investors, you get like one to three. conversations with the founder and then maybe access to their data room. And so, you know, you run the risk with a more robust diligence process of actually missing out on some great opportunities because you’re not able to move fast or you have a kind of too rigid process.

And I think so within the angel kind of trajectory or the spectrum of angels, there’s actually just like in that group of really wide process. I have seen angels with a more robust process than like many funds. And then I’ve seen angels that have like absolutely no process at all.

Cheryl Mack: Have you seen any funds with no process at all?

Uh, no,

Maxine Minter: thankfully not, thankfully, yeah, thankfully not. I’m sure they exist to be clear. I’m sure they exist, but I, I haven’t come across them in, in my travels, but I think double clicking on this idea of getting to conviction, uh, it is the moment at which you feel like you have collected enough information to get to a somewhere on the spectrum of yes to hell.

Yes. Yes. Right. And to writing the check, to writing the check, but I think what’s really important, especially for those folks who are listening, who are kind of early to investing or, um, you know, haven’t maybe written their first check yet. It’s really rare if ever that you get to a. You know, definitely yes, always no questions.

I’m like all a hundred percent sure that I should write this check. The nature of especially early stage investing is that it’s risky. You’re getting compensated for risk. There’s always risks. And so something I hear from a lot of early stage investors. You know, angels and people that are early to the investing journey is also just like, how do I know when it’s enough to get to conviction?

So how do you think about what’s enough for you to get to a yes?

Cheryl Mack: Yeah, I get that question all the time. Like, how do I know? How do I know it’s a yes? And it’s not a simple answer. Like you kind of have to figure out what your Your bar is and, and then work out a process of like, where does, where’s my bar and what do I need to get to the bar?

And then an interesting thread, uh, that you mentioned as well as like check size versus, um, versus time that you’re spending with the founder. Cause often when you’re writing early stage checks, yeah, you, you like reasonably get one, the three meetings with the founder and maybe a data room. Um, so yeah, if I had to answer your question, like how, how do I know?

I know because I have thought about what are the key questions that I need yeses to in order to feel confident to make that decision. And for me, it’s founder. So like, do I feel that this is the right founder for the, for the right market problem, um, space? And also, do I feel like this is the founder that, this is a founder who could in the future, um, lead a, lead a huge company?

I don’t need to feel like the founder in their current form, Could lead a huge company. Cause often that’s just, no, like there’s very few, I don’t know, maybe you’ve run into them Maxim, but I, I don’t meet a lot of founders at that very early stage where I’m like, yeah, if I popped you into a 150 person company tomorrow, you’d be solid.

Um, but I need to feel like they could get there. and that they’d be open to coaching and that they are like self reflective and, um, like have a desire to learn enough to get there. Um, so that’s one is the founder. Um, the other one is the, like, the problem space and how painful is this? I need to feel like it’s a genuine problem for a community.

A group of customers that are going to be willing to pay for that problem to be solved. So, for me that actually excludes some things. Like, I would never have invested in TikTok or Instagram. Because, like, is the problem of seeing photos? scrolled through endlessly, really a painful problem? No. Um, that’s entertainment.

And I’m, I guess maybe I’m more of like a utility oriented person. Cause to me, I like, I probably would never have seen that and been like, yeah, that’s a, that’s a painful problem. Um, and maybe that means I miss out on those things. And then the last one is market size. I need to believe that this could be a huge market.

Um, They could be solving like a small portion of it right now, but I need to believe that there is huge market opportunity. Often that means global, um, but it doesn’t have to. Like, if every single person in Australia experienced the problem, then, like, I could still get to conviction that way. Um, so for me, like, those three things are, if I get, if I can get to a yes on all three things, then it’s probably pretty likely to be a yes for investment for me.

Yeah. What does yours look like? What do you think? Actually give me feedback first.

Maxine Minter: Well, no, I think, I think this, what is really interesting about it. And I think like relevant for this, for our audience is like, it’s a process.

Cheryl Mack: Yeah.

Maxine Minter: I’m, I would put money on the fact that that wasn’t actually, yes, I would put money on because you just told me that that wasn’t your process when you wrote your first check, right?

Like it’s just kind of a little bit more intuition based, a little bit more like, I think it’s a good idea. I’m going to write this check, but over time you kind of like end up iterating more what I see a lot. Especially for angels is you end up iterating towards a like set of criteria that for you, that have correlated to success in the past.

And I think what’s really interesting about angel investing is it’s not, there’s not like one set of criteria, right? It’s not like we all find our way to these same check boxes. And once those check boxes are, yes, like we write that check, as you just said, right? Like tick tock. You would have passed on TikTok a precede because you’re like, I don’t get it.

Why do you need to be sucked into something for on average 48 hours per month? You know, like what’s the problem here? Do you need that? And the answer was probably no, but do you want it? Yes. And so. I think what’s really interesting is the like, we iterate our way to a really, like our set of criteria that we write checks on.

It’s actually at the risk of a small soapbox moment, which is like, is why it’s so important that there is a really deep ecosystem of angel investors and early investors. Because when it is at this like theoretical stage and this idea stage, if you only have a very homogenous or a very narrow group of people investing, the likelihood that they will like.

Conglomerate around some key sets of criteria for success is highly likely. And then, ta da, you have an ecosystem that only funds like B2B HR tech that has like a certain kind of go to market emotion. And then like TikTok doesn’t get funded. And like, I just think it’s a net negative for the entire Australian ecosystem if we have that, um, narrowness of ecosystem, but also shallowness of ecosystem.

And so actually going through that process to like develop where you think you see opportunity, develop your individual thesis is really important.

Cheryl Mack: I would already say just on that point, Maxine, I would already say that like Australia is, is not as broad as it could and should and hopefully will be in the future.

Like already we are probably too concentrated on like B2B

Maxine Minter: SaaS.

Cheryl Mack: 100%. And that type of like go to market motion. And we do, if you’re, if you’re in an angel thinking about or an investor thinking about like what my potential conviction process is, like, don’t be afraid to use your own background because it’s likely that you have a different background from what we currently have.

And you don’t have to conform to what we currently have.

Maxine Minter: Oh, a hundred percent. Actually, the outsized returns are, you know, for those folks that don’t conform to what we currently have. True. I think one of the challenges. that I see in the Australian ecosystem and that like exists in any smaller ecosystem is like, you need follow up for a lot of these companies.

You need follow on funding for this company to be successful. So you might be non consensus at that earlier stage, but you know, if you don’t have follow on funding, that can be a real challenge. Having said that, like for us, for our fund, we actually do a fair amount of consumer investing because we do cross border.

So the U S is much better at funding consumer businesses in the Australian ecosystem. So we can actually, you know, find really interesting companies in the consumer space and accelerate them to the U S and so we don’t have that follow on funding risk. But I didn’t know that when I first started angel investing, um, and it took like iteration at the time.

A thread that we, we could have left hanging there that I want to come back to is how this differs from fund investing. And a good friend of mine actually this week was describing this dynamic to me, which I think, you know, to shout him out. Dustin Duggan of 43 has some really eloquent thinking on. You know, the difference between funding and like getting to conviction as an angel investor versus getting to conviction as a fund, um, and is a fund, most funds kind of can be categorized in two different buckets.

You’ve got conviction funds, and then you’ve got consensus funds, meaning the way that the partners of that fund make a decision. So obviously if it’s a solo GP fund like us, this is not relevant. Because I just make my decision in the way that I make my decision. I don’t have to seek consensus from myself.

Well, maybe in some ways I do, but like, Oh, you do though. And I’d love to go

Cheryl Mack: into that a bit more.

Maxine Minter: Right. But like, so as at the fun level, they’re able to have, um, you know, different, uh, ways of making decisions. So if you’re a founder interfacing with that. Fund it’s worthwhile working out. Like, are they a conviction based investor or a consensus based investor?

Because what happens is once you have convinced one of the investors, one of the partners, they then have to be your kind of spokesperson internally and get to get everyone else to a yes, if they’re consensus based investor, or, you know, at least one other person to get to conviction based investor.

Cheryl Mack: Wait, yeah.

Can you clarify, so there are, so funds. generally either make decisions one of two ways. They either have everybody has to agree or two people have to agree. Is that, that’s the conviction versus consensus?

Maxine Minter: Yeah, so it’s a continuum. It’s not a dichotomy. So the continuum, the conviction would be like the extreme end of conviction is just like one person has to make a decision regardless of fund size.

That’s pretty rare. You know, you then usually lose the benefit of having other investors around the table. But like. Um, floodgate would be an example of that.

Cheryl Mack: So just one partner has to.

Maxine Minter: Yep. Can make a decision and yeah. Then on the other end would be a consensus based decision. I, a lot of later stage funds are like some degree of everyone.

Um, The earlier stage funds don’t usually require that. And there’s a really interesting piece of research from Harvard, um, that looks at the kind of success of funds that require consensus versus conviction and find that for the earlier stage stuff, if you force consensus of some degree on decision making in early stage, you actually underperform because by very nature, they are like, non consensus bets.

That’s where you see the opportunity. So if you force consensus across the partnership, you won’t make those bets. You won’t make it. You won’t make the bets. Um, but the consensus then can be like anything from no detractors, like no vetoes. Through to like, you know, everyone has to get to a decision and then there’s all kinds of variations in between.

There are like one hell yes and one like I’m with you. It’s all of the partners at a yes and at least one hell yes. It’s you know, two of the partners at a yes, no vetoes. There’s all kinds of different models on how that group of people come together to make this collective decision. Um, and then once they’ve made the decision, there’s all kinds of models on like how behind the company are we.

IE, like if one of the partners makes an investment and it’s a conviction based investment, if that partner then retires or moves on, which has actually happened like at a pretty high degree, what at an immature ecosystem, that company is then kind of orphaned within that fund. So they don’t have an advocate that companies then coming up for.

Um, you know, their next stage of funding, for example, like the, the spokesperson within the organization is gone or disinterested. And then it’s kind of hard to get that access. Whereas in a consensus based model, if we’ve all got to a hell yes. And so it can be kind of anywhere on that, on that spectrum.

And the kind of ways that those groups get to conviction. Is much more kind of like internal politics is involved, a lot more kind of documentation and kind of aligning everyone behind it to make that decision. So it really, like it’s. It’s kind of wild how wide the decision making process can be from an investing perspective.

Cheryl Mack: At every level.

Maxine Minter: At every level.

Cheryl Mack: Yeah. Like angels, but also funds. I’m so curious though, like, so what is your process look like now?

Maxine Minter: Right. So as I mentioned, mine started at like a negative process. It was nothing. My process now has a couple of buckets. Uh, it’s still me making the decision, but kind of seek input from various parties to kind of round out my decision making.

Um, my first kind of set of buckets is all around like founder market fit, um, dynamics of the market, you know, similar to you, do I believe that this market is one where a huge business can be built. Um, you’re like a very. Probably overly trite example of this would be like, it doesn’t, it probably wouldn’t work for me to invest in like a DTC lipstick company where they specialize in shades of purple.

It’s just too, in Australia, right? Like it’s too niche a business. I can’t get the conviction. You can build, you know, billions of dollars of enterprise value in that, in that vertical, whereas, you know, investing in, you know, to be very zeitgeisty about it, but like AI tooling. Yeah. Right? Like it’s pretty likely that that market is going to continue to grow from today until 10 years from today, which is the fund, you know, the life cycle of my fund, and so, um, that has some pretty significant tailwinds behind it.

And so I can believe that there’s a huge business to be built in, in that category. And so do I think that the founder is a perfect fit for this? Do I think that there’s dynamics in this market that can make for a really, like a huge company? I actually, I think something I would say. on those huge markets, competition really matters here as well.

So like a very established, huge market with very fragmented players. I would think of that differently and like my assessment on how likely a company is to get to huge scale in that market is very different than like a small but really rapidly growing market where there’s like one person or like a handful of people that are just starting to establish themselves, you know, the probability that you could build a Huge business in that market is very different.

Cheryl Mack: You think it’s more probable?

Maxine Minter: I think it’s more probable. Yeah. A very established market with like known demand, um, known kind of buyer behavior that is like extremely fragmented. The reason I would spend a lot of time thinking about like, why would this company come and eat all of those smaller companies?

And or like, why is the company, is the market today very, very different? Uh, fragmented. Similar thing if it was like, it’s similar like an analysis for markets where there’s like three big giants in there, right? In Australia, the obvious one would be like banking or grocery. Yeah, like, it’s really hard to build a new grocery as we all found out was milk run, um, in, in a, like, a very consolidated market.

Cheryl Mack: Yeah, that’s, I mean, that’s what I was going to ask is like, what about those situations where they’re like old incumbents and clearly opportunity for innovation, but also seems very hard as we saw with Milgren?

Maxine Minter: Right. Yeah. Um, it’s definitely, they, I’m not like definitely knows that just the nature of my consideration is like, what do I have to believe?

for, for you to build a big enough business in this space. Right. And you’re going to have to go toe to toe and compete with some of the like best funded companies. Uh, but maybe you have like an incredible insight or like structural advantage that allows you to run really fast and an opportunity that they’re not going to be able to run at.

Like a core tenant in early stage innovation, the thing that we win at as early stage companies that the big incumbents don’t is speed. So if there is a kind of an upcoming trend, something that is, you know, really exciting to catch, there’s a really wonderful opportunity for a startup to be the one to catch it.

Catch it and kind of ride that wave the whole way up. And so, yes, that’s my first set of considerations, right? Like market dynamics, founder dynamics. And there’s a whole other bucket.

Cheryl Mack: There’s

Maxine Minter: a whole other bucket.

Cheryl Mack: Of course you have a whole other bucket.

Maxine Minter: My second set of considerations. And actually like those, that first bucket is my threshold question.

But my second bucket is my conviction question, which is the founders themselves. And what I have to believe about those founders is that they are just learning machines. Right. That they are incredibly gritty. They’re capable of pushing through, you know, truly superhuman hurdles to get to an outcome that they, uh, growth, they have a strong growth mindset that they learn really, really rapidly.

And that’s based on kind of how they have approached the world today and that they are totally obsessed with this problem or a problem in this space, you know, I’m not as interested in working for founders who. Uh, kind of mercenaries chasing an opportunity in the market that is like cool and will be interesting for a while, but like take it or leave it if it’s the problem that they want to solve.

I’m really interested in the ones that are like either intellectually or personally fascinated and like deeply committed to the problem that they’re chasing, because the combination of those things is you point someone who is high rate learner, really, really hardworking and really obsessed with the problem into a really big market.

And it, for me, has the high. Probability ingredients are kind of unlocking something really interesting in that market. Very far from a certainty to just to underline that, but that if I can get to, if I can get to a yes on both of those buckets, I’ll get to conviction. And then the last bit, which is different than an angel investor is there’s portfolio construction and selection criteria that come as part of a fund.

So, you know, I might see 10 really interesting like e comm enablement. It’s not the right thing on behalf of the investors that invested in me, my LPs, to give them a portfolio of 30 companies of which 50 percent of them are e com enablement, right? Like, it’s just like a structural exposure that’s not my job.

Cheryl Mack: So if you already found two, you just can’t, can’t, even if it’s a hell yes on every other bucket, just no.

Maxine Minter: You can’t. Yeah. Yeah. Right. So actually one of my most wise friends, a woman called Cass Mao, um, Um, which is like, I have to get the conviction that this, the founder building that company is the best person I could find to Building in this space in the next five to seven years, which the timescale thing like changes my evaluation.

Cheryl Mack: Right. But your deployment period is three years. So it should be the best person you can find in the next three years.

Maxine Minter: No, five to seven. Why? Because even if the founder doesn’t materialize in those three years, if a better person materializes in five years, they’re going to build a company that will outcompete the company that I’ve invested in.

Cheryl Mack: Man. I like, I feel like if you add that question to my repertoire, I feel like Like, it’s too close to just gonna be like a, a no, because I just don’t meet everyone. Like. Yes. And then you just don’t make the bet.

Maxine Minter: I mean, I think you just have to believe in what’s possible. Right?

Cheryl Mack: Yeah. I don’t like that question for the record.

Maxine Minter: I’m not adding that one. Let the record show. Yeah. I am not adding that one in. Yeah. I know. I mean, I think my job is to see everyone.

Cheryl Mack: True. As a fund.

Maxine Minter: Yeah. My job is to, as a fund, my job is to look at every company. So if I, if my answer to that question is, Oh, I just don’t see everyone, then like I’m not doing my job.

Cheryl Mack: Yeah.

Maxine Minter: Whereas as an angel investor, you know, for the purposes of thinking about conviction, like you don’t see everyone. You see a subset of the market.

Cheryl Mack: Yeah. And I can never, and I know that I can’t. I think one of the interesting questions that you, that you said there, um, that you’re like, you know, could I, if I’m going to go to work for this person

Maxine Minter: and

Cheryl Mack: it kind of, it reminds me of what we were just talking about with Bacco and he was like, we ask our mentors to ask the question, like, would you work for this person?

So is that a question that you ask yourself as part of

Maxine Minter: your, your process to get to conviction? Uh, it’s not a formal part of my process, but it’s definitely a question that pops up in my mind. I learned that from, and actually I wonder if it’s a, it’s a Blackbird thing, but I learned that from Sam Wong. It probably is a Blackbird thing then.

Yeah. She mentioned it to me a couple of years back and for me, I was like, Oh, that is such a great filter. I do think that there is, I think it’s a great question to ask yourself. I don’t know if it’s like programmatic. Yes, for me, because there are some founders that I wouldn’t want to work for because I like working in a certain way and that they’re not a good fit for how I would like to work, but they’re a great fit for their strategy and their business.

And they will build a really productive. Business behind it

Cheryl Mack: for the fund. Like it’s gotta be a good investment.

Maxine Minter: Yeah, exactly.

Cheryl Mack: Yeah.

Maxine Minter: Whereas like as an angel investor, a hundred percent, I could apply that filter. Yeah. I

Cheryl Mack: like that question.

Maxine Minter: Yeah. It’s a wonderful question.

Cheryl Mack: I will add that one to my repertoire.

You know, what’s interesting though, is I feel like. Uh, I, and I’ll preface this by saying that I, I know that you and I are similar in our investing styles, but a lot of the ways that you approach that, like getting to conviction resonate with me in, in different ways. I’m like, yeah, we both talked about how do we feel about the founder?

We both talked about market size, but in different ways, like your approach to, to market size was a little bit different from mine, but there are broad categories that I feel like we, we still address together and similarly. And if anything, I, Have expanded some of the ways, even just in this conversation, like, yeah, that’s, maybe I should think about that as well.

I like your buckets. I’m curious though, like, um, in addition to those buckets of things, actually, maybe it might be interesting to just dive into a little bit, like, what are some of the things that you do to answer those questions for yourself? Like, you know, I spend a lot of time researching my thoughts on like the market size, which I can’t just decide that.

Right. So I spend a lot of time researching that. And then. Having my own kind of internal battle as to like, whether I think that research supports or disproves the founders view and whether I agree with it or not. What about you?

Maxine Minter: Like, what kind of information do I collect to? Yeah. Yeah, I think there’s, I mean, obviously I rely very heavily on the founders to educate me on the space that they’re chasing.

Um, what I’m really looking for is they have a like, Unique insight into the market that they’ve got something that they’re, like the rest of the market doesn’t already know. Um, I think I can say that the market has like already worked out that you can prompt and produce like written text. That’s not an insight , you know, but maybe like 10 years ago, like the people that knew that that technology existed, like that would’ve been a real insight.

I kind of look for, um, that there is like a unique insight, but so I heavily rely on the founder kind of like educate me about their space and their unique insight. I then spend time researching if I, in my, in my like market evaluation, market dynamic evaluation, like spend time researching the space that they’re in, you know, who are the other competitors again, because we focus on kind of cross border.

I spend a lot of time thinking about like the expansion market that they’re going into, like who’s, Operating in that place.

Cheryl Mack: Who are they going up against?

Maxine Minter: Yeah. Which is really, I think, uh, what’s really valuable is I have quite a, you know, wonderful network of folks in the U S. A lot of companies have kind of like built We’ll start it to build in the space and then like moved on.

It’s also one of the benefits of being in market for a while. Now I’ve seen a lot of companies kind of like start in one place and like iterate to a new place. And so the benefit there is I can kind of tap my network and be like, Hey, has anyone seen something similar to this in this space? Like what, one of the dynamics that you’ve seen play out, like where are the bodies buried essentially is the question I’m asking.

Um, and so we’ll do a lot of that. And then also when I get to the kind of founder. Evaluation piece. And I’m asking those like more personal questions. I do reference checks and like off book reference checks because for all of the good intentions in the world, asking someone to self narrate how hard they’re willing to work, self narrate how gritty and growth oriented they are probably doesn’t drive high quality data on whether that’s true.

Right? Like I’m asking the question whether they meet my bar, not whether they meet their own bar. And so. I ask them to self correct, but I also spend time, you know, talking to other people that have, if I can, talking to other people that have worked alongside them. There are definitely some founders that are completely out of network for me.

Meaning like, I don’t know anyone who’s worked alongside them. I don’t know anyone who knows them or don’t know them well enough to be able to do that off book reference. And so it’s not a criteria of mine. And I actually thought a lot about this because, you know, for angel investing, it was, I was like, I want to validate this is that they are the caliber that I would expect.

Yeah. And then I realized that inherently was saying that I would only invest in people who were like one to two degrees removed from me. And I don’t think that that’s where the best opportunity comes from. So I’ve kind of relaxed my bar there.

Cheryl Mack: Do you do on book references then? Like, do you ask, like, if you don’t know anyone, do you ask them?

Like, can you provide any reference? No. So then you just, do you ask different questions then? For the on book references? No, like if you can’t do any references at all, do you ask the founder different questions? To try to get a better sense of their own self narration is up to your bar or no?

Maxine Minter: No, I didn’t ask them.

I, they asked them all the same questions on those like more personal focused ones.

Cheryl Mack: Yeah.

Maxine Minter: For me, the like questions get the data, which is like what they, where they think they score on those things. And like their narratives on what hard looks like their narratives on what like, um, you know, some of the hardest stuff they’ve done.

I asked them questions about that, but it doesn’t. you know, that information is going to be the same.

In fact, meet my bar or not. It’s a question of like where they meet their bar and where their boss is relative to mine.

Cheryl Mack: Yeah. What about previous investors? Like I, again, I, because I’m an angel, I tend to invest in people who are only a degree or two or separation. So I, I have the privilege of being able to do that, but like, do you call up, uh, people on the cap table already?

Or I guess you, you’re always first check in. So what, like, what are your thoughts on that?

Maxine Minter: Ah, I think it’s worthwhile, right? I think like, again, my filter for this is you’re collecting data, and you have to form your own opinion from the data. I think it’s really, You have to be very careful to just consume someone else’s opinion and then build opinion on opinion.

But if you can talk to the founders, sorry, talk to the previous investors and like collect data from them, right? Like what did they say they were going to do? What did they actually deliver? Why didn’t they deliver? If there’s a Delta, what did they learn from that? Like how close were you to that journey?

Those kinds of questions, then I think it’s like really valuable. And I have lots of investors that do that to me when they’re looking at investing in companies. That I’ve already invested in.

Cheryl Mack: Well, yeah. If you’re a first check in, that would make sense. They’re calling you up being like, Hey, what are your thoughts on this?


Maxine Minter: right.

Cheryl Mack: Yeah.

Maxine Minter: And the ones that I’m most impressed by it, like they grill me. They like just go absolutely ham. It’s actually like borderline uncomfortable, but I think it’s the right way to do it.

Cheryl Mack: Interesting. Interesting. Are there any other actions that you do, uh, as

Maxine Minter: part of that getting to conviction process?

No, that those are my, and then there’s my decision diary, which like, you’re probably sick of hearing about at this point, but

Cheryl Mack: we’ll do a whole episode on that one day.

Maxine Minter: Yeah. Uh, that then, then there’s my decision diary. So kind of putting the data all into a format that like pushes me to make sure I’m like checking my biases and like checking my blind spots that I’m not just like heuristic investing.

And then, yeah, I get to conviction. And then I do the, probably the most painful part is like getting to conviction and being like, and I’m still not going to invest because you are my fifth e com enablement business.

Cheryl Mack: Oh, why would you even do all of that then if you couldn’t?

Maxine Minter: Uh, I mean, it’s kind of like done in parallel, right?

Like they are, sometimes I will like screen them out at the beginning, but very often I like, don’t know that they’re going to be Like a potential conflict until I like, I’ve really spent time and been like, yeah, I actually, I mean, yes, on this company, but a no on this. Opportunity. Interesting. Interesting.

Cheryl Mack: How much does your gut play into it? Huge. Like, do you ever get to the end and can’t, like, get to conviction on paper but, like, your gut just tells you yes and you YOLO it anyway? Like, I, I hear that there are some investors that we may or may not have had on this podcast who often just YOLO it.

Maxine Minter: Yeah.

There is one fund that has a whole YOLO fund. Yes. Uh, although, I think this is a constant discovery for me. Okay. Thank you. Um, in that I, I think you need to be doing this like 20 to 30 years to get the right to be able to just listen to your gut. And so I, in my decision diary, I track my emotional sentiment in relation to the decision.

Because what I’m trying to learn for myself over time is like how right is my gut or not. As an angel investor, there have been multiple companies where as an angel investor, I a hundred percent would have made the investment. Even if I couldn’t get there on the like, rationality part of it, there’s like a significant amount of intuition, but I haven’t done out of the fund because.

That’s not the way that it works, but yeah, there are some that like, I think it would be naive to pretend that gut has nothing to do with early stage investing. Uh, a huge amount of it is intuition. And so I would say it influences every single stage along there. What about for you? Do you feel like it pops up for you?

Cheryl Mack: Oh, absolutely. I never really lost that. Like the first couple of investments we did. Did was like, yep, I, I like the idea. Like the founder, you son of a bitch, I’m in like, but I, I definitely have not lost that and there have been times where I have taken a look at something and I’m like on paper, like, I’m not sure this makes sense, but my gut is that like, this is the right founder and it’s usually when market size isn’t big enough,

Maxine Minter: but

Cheryl Mack: I just have a sense that like, they’ll figure it out.

Like, I just believe that this founder is the kind of person I can’t get there on the numbers of market size, but I think if they figure it out that they’ll figure out another market, um, or open up something else or the market will change. Like who the hell knows what’s going to happen in the next like five years, let alone like next year.

Right. Like something could happen that changes things. And I also believe that like, I’m a fairly lucky person. There’s been a lot of things in my life where I’ve just like gotten very lucky. And so I also just believe that like, There’s gotta be luck that plays into it and, uh, you know, I believe that I will get lucky.

I’m a very optimistic person, as you can tell. Right.

Maxine Minter: Yeah. Yeah. I’m very optimistic. I, I mean, I do think, especially at early stage, there’s a lot to be said for just underwriting the person. Yeah. And there’s lots of like whole funds that will just underwrite the person and it’s like less about the space, right?

You’re like underwriting a person’s ability to go and find something interesting. And actually it’s like something that I feel quite torn about frequently where there’s like an amazing person chasing a space that’s not a fit for us. I really want to back them because I believe they’re going to build something huge.

Cheryl Mack: As a fund.

Maxine Minter: But

Cheryl Mack: you can’t justify it. Right.

Maxine Minter: Yeah. As a fund, I’ve made promises about the space we’ll invest in, the kind of kind of companies we’d invest in. Whereas as an angel investor, you can get to conviction behind just the person. You don’t have to get to conviction behind the person and the company necessarily.

Yeah. And there’ve been quite a few where I haven’t backed them because they’re not a fit for the fund and they end up pivoting into something else like actually quite interesting. The end. It’s just like, I think it’s the right decision making process, but like a bummer of an outcome in that particular application.

Cheryl Mack: I think it also pulls the thread on like the idea of even as an angel, there is still portfolio construction to think about and angels have a little bit more flexibility there where like, I can look at a deal and say, well, you know, over the last year I’ve made a bunch of, like, safe investments that really fit with my, like, angel thesis.

And, you know, if I go off piste with this one and make that bet on this person, then, like, that’s okay because It’s my portfolio construction and the goal rate, the goal here is an angel or an investor is to like create a portfolio of companies that are going to create outcomes. Never do you think that like, well, this, this one in particular is definitely going to be the one you’re just, you’re trying to make informed bets that are going to create this outcome for you.

So having one or two of those in there when I’ve already made lots of. Safe, I use that as a very relative term, but aligned, we will use the word aligned. Aligned. Aligned. I’ve made, I’ve already made a lot of aligned investments this year. We can, we can go ahead and like just go with our gut on this one and that’s totally okay.

Maxine Minter: Yeah. I mean like just to validate you there, there are. Like some of the best funds in the world have EIR programs, right? They like essentially just underwrite a founder and be like, whatever it is you want to build, we want to be part of it. Then there are funds where they have like specific allocations, which are just like great people, bets.

And so they have like aligned with their LPs. We are not going to like, we have this portion of the capital that we’re going to invest behind like really awesome people, essentially for the scenario I just described where like we fall in love with the team. Interesting. We don’t, we can’t get conviction on the thing that they’re building, but we want to be part of it, whatever it is that they’re building.

Then there’s the kind of like more mature funds where a lot of investors are making investments in companies to buy options on the next company that that founder builds. Yeah. Like we are so far from that, but like, I think that there is. There is some wisdom to that, right? Yeah. Like if you back a founder early in their journey and you are a really high value ad,

Cheryl Mack: They’re going to remember that.

Maxine Minter: They’ll remember it. Yeah. And so when they go and build their next thing, they go back to the same investors and build the same like cap table again. Like then you got first look at a company that you wouldn’t otherwise have got to see. So I think it’s a long term strategy as LPs. You know, if you’re LPs, you really have to like align that you can you.

It’s okay for you to do that, but like, it does make sense.

Cheryl Mack: What if your fund was like, Hey, yeah, no, we’ve invested in this company. Totally don’t think this is the thing it’s going to be successful, but don’t worry, the next one, and like, we’re just pre buying several

Maxine Minter: companies ahead. I honestly have often wondered, I obviously have never had that conversation with my LPs, but like, if I was on the other side of the table and I was writing an LP check into a fund and they were like to me, we are going to spend your money.

To buy an option for our future fund. Yeah. And the only way that you get a benefit of that investment is then you have to invest in the next fund. I’d be a bit like, no, I have not yet decided to fund your second fund. Like, unless you’ve locked me in for multiple funds. Like, that’s not, I’m not down with that, you know?

Hmm, better not. I don’t know how to say this nicely, but like, absolutely not.

Cheryl Mack: That is a nice way of saying it, actually. You could have been like, just F off.

Maxine Minter: Yeah, that’s true. That’s true. It could have escalated it quite a lot. But I think that the point that I’m trying to make here is that like, For folks who are trying to work out how they get to conviction, to work out like how they get to a, a hell yes, the spectrum of like, yes to hell yes, for a company, there are so many different ways of doing it and so many different timescales to be considering on like the way you make that investment, who you are investing in, kind of the risk profile you’re taking at different stages of the journey.

So I think this is hopefully one of the takeaways you’re taking from this one on one is just like an invitation to iterate your way to a. Successful process. And you like, we’ll just continuing to measure yourself. Like, is this working for me? And like iterate as you continue to go.

Cheryl Mack: Yeah.

Maxine Minter: Angel investing and investing in startups is by its very definition, a long term sport.

And so like taking that mindset to it.

Cheryl Mack: Yeah. I think another point to just call out before we jump off is like, they’re. Another way of investing is like following people that you trust and so it is perfectly okay to say my conviction process is if this fund is investing, I’m in, or if this syndicate is investing, I’m in, or if my friend Charlie Brown is investing, I’m in.

Like that is also a perfectly acceptable way of saying this is how I get to conviction. I follow people that I trust. And like, that’s, that’s my process. That is a perfectly acceptable process. It doesn’t have to be any more complicated than that. Um, similarly, if your process is, I like the founder and I talked to them once and I’m in, like, that is also a perfectly acceptable process.

Uh, I think our point here is that like, we just want to share lots of ways and help you expand your way of doing it. If you’re happy with the way that you’re doing it, then carry on.

Maxine Minter: Yeah, I love that. Please carry on. Keep investing. Yes. Excellent. Thanks so much for joining. Love talking about getting to Conviction with you.

Are you at Conviction, Maxine? I’m at Conviction. I

Cheryl Mack: think I’m at Conviction on this podcast.

Yeah. Yeah.


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