Angel Investors – An Interview with Brianna McDonald, Keiretsu Forum

[00:00:00] Betty Collins
So, today, I want to talk about angel investing, and hopefully, you can learn how to be an angel investor or even use one. Hopefully, this will intrigue your attention. I have an amazing guest who is a top female investor, and offers a way to get started in angel investing, and diversify that portfolio. What a great thing to do. You should always be doing that, but this is a way you can also help women. So, startups and entrepreneurs struggle, not because of they have an idea or a passion, but it’s because they lack capital a lot of the times.

[00:00:38] Betty Collins
And there is that they have, maybe, a lack of sense of how to run a business, but they have this passionate idea that they really want to get out there. And so, capital is a huge issue, and you’ve got to get the right capital, though. I’ve heard plenty of people start businesses with credit cards, do not do that. You will never win, you will never get ahead. Or they get too much capital, or they don’t have enough, and they run out quickly. It’s all over the place. So, that’s why I like the angel investing, because they can help and guide you in a different way that maybe a bank can’t, or a private equity.

[00:01:14] Betty Collins
But you can get that right capital, and then diversify your portfolio by being an angel investor. So, startups and entrepreneurs, they struggle, but not because of a great idea or passion, but really it’s the lack of capital most of the time, and maybe some entrepreneurship skills. So, you got to get the right capital, and then you’ve got to get partners with you who can help you know how to navigate through your times. So, you could also be the capital, and get the capital, be the capital. And if you if you get to do that, you could diversify your portfolio.

[00:01:49] Betty Collins
So, what is it? Well, the dictionary says, an angel investor; it’s a private investor, maybe a seed investor, maybe that high-net worth person who’s providing financial backing. Sometimes we think of them as family and friends that come in, you always want to do that, for sure. But the funds that those angel investors provide is probably a one-time investment to help that business get off the ground, depends on how it goes. Or maybe it’s an injection to support and carry the company through it’s difficult, early stages. Or maybe you’re five, and you’re going to go to the next level, and it’s going to be some tough doing.

[00:02:30] Betty Collins
So, you know me if you’ve listen to my podcast, I’m passionate about the marketplace and its success, especially for women. Women are dominating the marketplace, but they don’t go as far faster. They have a longer uphill battle, sometimes. And I see women in business all the time struggle. It holds them back, and it slows down their progress when they don’t have that capital, or their frustration, and they can’t give any more, mentally and everything. I hate seeing that. And angel investing can be a way to solve that, whether starting up or investing, you can play a role in it. My guest today is Brianna McDonald.

[00:03:09] Betty Collins
She’s coming with this amazing experience, with an amazing company, and she has an amazing role in it. Their mission is very simple, I’m going to let her talk about what some of that is, but it’s to fund companies, and provide excellent investment opportunities for their members. And she’s going to talk a little bit about overview of investing, what it means to be an angel investor, or her experience as a woman investor in a very male-dominated industry. And then she’s going to drill down the seven tips. That’s something the accountants love, the steps, the numbers, seven tips.

[00:03:45] Betty Collins
So, I’m going to let her talk a little bit about her company, and introduce herself in that way. And then I want her just to really talk a little bit about her, not necessarily what we do. So, welcome, Brianna, to my podcast. Tell us about what you do, and your company.

[00:04:02] Brianna McDonald
Well, thank you so much, Betty, for having me on today to talk a little bit more about this topic. I’m super passionate about it. I’m currently the president for Keiretsu Forum, Northwestern Rockies region. I have been in this role now, four years, but I’ve been a part of the organization for 15 years. So, I participated a lot as an investor, as a member, learning, doing that for many years prior to stepping into the role that I’m in today. But where I really come from is a long line of entrepreneurs. My father had his own business, his father had his own business.

[00:04:41] Brianna McDonald
And I didn’t really realize that at the time, because in the ’90s you just didn’t talk a lot about entrepreneurship. It just wasn’t a word you heard very often. And I went into business for myself, I began selling real estate after I finished college, and worked with executive relocation, with Microsoft and all their Aqua hires that they were bringing on, and had a very successful business doing that, and thoroughly enjoyed it. I love to work hard and play hard. And my husband started Keiretsu Forum in Seattle in 2005.

[00:05:18] Brianna McDonald
And, essentially, when he started it here, we were the eighth chapter, we are, so we have the Northwest and the Rockies region. There’s over, now, 55 chapters globally, on four continents, and over 3000 investors in our network, which is really amazing, the work that everybody does. But when he started it here, we were number eight, and he said, “Come, come to a meeting.” And I was like, “Why would I go to this meeting? I’m busy. I’m busy doing other stuff.” And he’s like, “No, no, no, you’d be great. Come come to the meeting, come sit down.” And I was like, “Alright, fine.”

[00:05:52] Brianna McDonald
So, I wanted to be a supportive partner, and so, I went to the meeting, and I was 26 years old, and I sat at the table with a bunch of gray-haired men. And I listened to the company’s speech, and I thought, “What on earth am I doing here?” And I was trying to figure it out, and so, I am nice and friendly, I’m n the real estate business, I can just start- I’m personable, and can talk to people. And the first company goes, and I’m like, “What is this product, and what is this market, and what is your price point, and how do you make money? And I’m like, “Gosh, I don’t belong here.”

[00:06:34] Brianna McDonald
This is my internal thought process going on. All of us women, we have this internal critic that goes, “You don’t belong here. Why are you here?” So, I’m writing these questions down, but then these men started going, “Well, how do you make money, and what is your product, and what do you do?” And I’m like, “Oh, well, maybe I might be on to something.” And then the next company went, the next company went, and I sat and I listened, and it was really fascinating being part of it. And so, when the next meeting came up, I was like, “Hey, can I come to that meeting again? Can I come? That was interesting. I learned some things, and there were some cool people there, and I liked it.”

[00:07:15] Brianna McDonald
And Ethan was like, “Sure come along.” And it took me about a year. So, I sat and actually observed for a year, and I didn’t ask a single question in the room. Just being so young, and being the only woman at the table, I didn’t really feel like I fit. And one day, I finally mustered up the courage to ask a question. And the adrenaline was rushing, I was nervous, and it was just this tiny, little question, I don’t even know what it was. But what I do remember is, one of our investor members, who is still a member today, after I asked the question, leaned over to me and said, “That was a good question.”

[00:07:54] Brianna McDonald
And that was all the reinforcement that I needed to know, I was in the right place. I actually deserved to sit at this table, and I had something of value to bring. And over the course of my many years of being in this industry, and really being one of few women who participate, and really working to bring more women in, is that women are highly beneficial here. They understand markets, they understand pricing, we do most of the shopping. There is a lot of things that come into play with women, and how businesses get up and off the ground, how you pick your target market, how you pick your customers.

[00:08:34] Brianna McDonald
All of this is really important. We just think differently about it than men do. And it’s that togetherness that makes it really work. So, it took me over a year, and I wrote my first check in a company. I did receive a return, I can talk about that later, but I had some lessons I learned along the way of engagement and things. And so, even though I’ve been in this industry 15 years, the thing I love about it is, I’m still learning. You don’t know everything. And being able to be in an organization like Keiretsu Forum, we lean on each other. We don’t have to be experts in everything. We work together, the men and the women. But we need more women coming in.

[00:09:15] Betty Collins
And I think if there were more women coming in, there would be- it’s just a different perspective at the table. I know in Brady Ware, when I came there, there was about between 22 and 25 partners. And I came in, there were two of us there. And the discussion is different in the room, now that we have seven there. And it’s not because we’re maybe smarter, maybe we are, or it’s not because we’re better, maybe we are, we just think differently. And as women dominate starting businesses and getting them up, I know you see this every day, they get to a point, and men are going right past them because they have different skill sets, maybe, I don’t know.

[00:09:58] Betty Collins
Some of it is the type of businesses women go in, it’s hard to get lending. It’s hard to get that capital from a traditional bank, even private equity. So, I love your passion behind it because that’s what’s got to be there. And the marketplace is crucial in this country. If we don’t have the marketplace, it means employers don’t pay employees, and employees are families, and households, and communities. And when the US doesn’t work, the world doesn’t work. So, entrepreneurship has to work.

[00:10:31] Betty Collins
And this is just a way I wish more women who have had their success, they don’t have to have multimillion-dollar success, but when they have their success, they become that angel investor, and say, “I’m going to give someone a chance, because I’ve been there, I’ve done that.” So, obviously, you talked about your ‘why’, behind the passion behind that. Do you find yourself more attracted to the women-owned businesses that you’re hearing, or does it matter? It’s entrepreneurship, and business is business. Is there a difference for you?

[00:11:05] Brianna McDonald
So, every investor has their own investment thesis, and it’s really developed over time. It’s what moves you. And so, if any woman is thinking about getting into this space, I really encourage them to listen, to learn and to figure out what that is for them. For me, it’s team. And I need a good team. Now, team does not necessarily mean, for me, in my investment thesis, that it needs to be a female CEO, but the team better be diverse. I want to see diversity, and not just between men and women.

[00:11:38] Brianna McDonald
I want to see diversity across the board, across ethnicity, because that is going to be where the differences are made in terms of thoughts and opinions, and how they come together, and how that team culture works. Because at the end of the day, you can have the greatest product in the world with the best market, and if you have a team that fails to execute, the investment still goes to zero. That said, I’ve invested in some amazing women that lead teams, but I didn’t invest in them because they were a woman, I invested in them because they were awesome.

[00:12:12] Betty Collins
And as much as I am pro-business, pro-entrepreneurship, pro-woman for sure, it’s got to be the right mix. Everything, from the product to the execution. It can’t just be this passion idea, it has to all work together. Let me just follow up with one last question with what we’re discussing, and that is, would you commit as an angel investor, and you come in at 10 percent, or you come in at 50 percent depends on how much money you give, it depends on once you’re there. What generally happens? Is it more, you write the check and you wait and see, or is it, “No, we’re really hearing, we’re there, we’re on the ground, and we get to play a role.”? Because I think people think, “I’m writing a check and I’m done.”

[00:13:04] Brianna McDonald
So, I think that is something that is a big misconception about- if you want to be a passive investor, and you want to invest in early- stage companies, I would really recommend a fund vehicle, if that’s the direction you want to go. Because you’ll be able to diversify, and you’ll be able to take that passive role in what you’re doing. For me, what I love is, I love being engaged. I’m advisors to the businesses I invest in. I call them up, I text them, I ask them how things are going. And I usually ask them what challenges they’re having, because if I ask them how things are going, they’ll always tell me it’s great.

[00:13:40] Brianna McDonald
So, I’m like, “Hey, what challenges have you had the last month, and what can I do to support you in those challenges?” If you stop hearing from companies, that’s typically when things have gone south, and when the communication stops, and that’s when you need to reach out. And so, that was one of the big lessons I learned early on, was that the more you communicate, the more you understand, with what’s going on with your private investments, the better and safer you’re going to be. Lines of communication are super important, and I feel like, especially over the last five years, culturally, through the busyness, through all of the things that have gone on in our world, we just don’t communicate like we used to.

[00:14:18] Brianna McDonald
And we really should, we’re here to help and support one another. And when you get a private investor’s money, you also get their expertise. We’re here to help you figure out those problems. We’re alongside of you, we’re bought into you, we believe in you, let’s do this together. Let’s push forward innovation, and make the world a better place.

[00:14:43] Betty Collins
And I like how you talk about the advisory role. Because when I talk about small businesses having that hard time or they need capital, and they think everything’s about capital and lack of it, sometimes it’s just really, you’ve had bad advisors or lack of advising. So, when you, maybe, tap into an angel investor, or you become the angel investor, you have a role to play in that; of advising, and not controlling, but advising. Those are two different things.

[00:15:19] Brianna McDonald
Yeah, definitely not- it’s up to the CEO to make decisions. But knowing that you care, and that you’re engaged is good. It’s, definitely, also- through the due diligence process, we can get into that too, here, but through the due diligence process, prior to writing a check, you really get to know who that person is, how they operate, how they respond. And through that process, you’ll begin to understand what the rules of engagement are for you, as you go forward with that investment, if you choose to make that investment choice.

[00:15:54] Betty Collins
And I definitely want to get into the- let’s get to the seven tips, because now I have my steps, I have my tips, I love all that. I just went on a sales call with a company who just went through a purchase. And, boy, I wish they would have had advisors helping them get through the whole thing. And so, I took one of my senior people with me, and they said, “What are we going to do today?” I said, “We’re going to listen, we’re going to ask them who they are, and how many kids you have, and where do you like to travel, and we’re going to learn why they wanted to buy the business.” That’s a huge factor, I don’t think you can underestimate, especially when you’ve been in the marketplace and entrepreneurs for 20, 30 years, you have a lot to give to someone. But let’s get to the seven tips, let’s talk about that.

[00:16:43] Brianna McDonald
Well, so the first tip I have, tip number one, is getting started. So, the first thing you need to do is really think like, “Hey, is this something I really want to do?” And you have to start. If you don’t ever start, and take that first step, and that first leap, you’re not going to do anything with it. So, it is just something you’re interested in exploring, there’s lots of different investment groups. I would really encourage any woman who was thinking about doing this, to get involved in a group, so you don’t have to go into alone.

[00:17:15] Brianna McDonald
You can really lean on other people in the group, and the groups in your region all have different investment theses. So, it gives you some time to do some research, and as you sit in, and usually, if you just want to come sit in on a meeting or two, they’ll let you do that. They’ll let you come in, and try it on, and see. One thing, I just got off of a call today with a woman who was interested in becoming a member of my organization, and she’s like, “Well, I need to go fill out the accreditation form for the SEC.”

[00:17:46] Brianna McDonald
There is no accreditation application for the SEC. It is just, these are guidelines that are put in place by the Securities Exchange to make sure that you are qualified to lose money, because this is risky business and and that could happen. So, typically, you make more than $250,000 per year salary if you’re single, $300,000 if you’re married, or you have more than a million in assets. Last year, they expanded that out a bit to be able to include different areas of study. So, if you got your degree in biology, and you want to go invest in a biology company, you should know enough, that if you make a decision there, if you’re gonna lose your money or not.

[00:18:34] Brianna McDonald
So, they did expand that out a bit, so if you’re interested in looking into that, there is some information there. But go online, look at your regional groups, your local groups, they tend to invest locally. My organization’s a little bit different, we invested a little bit later- stage companies, not super-early. There’s more due diligence, and we are global. And so, wework together. So, we have our regional deal flow in our regions we work in, but we also work collectively with the other chapters, especially in North America, but across the world as well.

[00:19:07] Brianna McDonald
So, do your research, is the first step. The next one is tip number two, is find female support. Super, super important. Even reach out on LinkedIn, I have women reach out to me on LinkedIn, and they’re like, “Hey, I see we have similar backgrounds. Can we just have a call?” I love that. I will take those calls. I don’t usually take a lot of cool things off of LinkedIn, but if there’s women out there looking to get into angel investing, they want to chat with me, I’m always more than happy to do so. So, for any of the women who are listening in right now, and please don’t all bombard me at once, but reach out, I’m happy to.

[00:19:50] Brianna McDonald
Or find someone in your area, and they’ll share their experiences with you, and the things that they’ve learned, and how they got into it. But having a seat at this table is important, because we are driving forward innovation, and when things are cloudy and uncertain, that is the time when you actually have the greatest ability to make a lot of money, because you’re betting on the uncertainty. So, not everything- certainly, it’s a little uncomfortable for us ladies, sometimes. We like to be very pragmatic in our approach, and be very thoughtful about how we do things, which is also why I like investing in women entrepreneurs.

[00:20:31] Brianna McDonald
So, once you target those groups, reach out to them, talk to them, do some diligence on those groups, talk to some of the members, sit in on the meetings to see how they ask the questions. Are they nice? Are they kind? Are they mean? Is this a group that you want to be a part of? Do you find them engaging? And even online, it’s really opened up a whole new world of us being able to sit in on lots of different types of meetings. So, that’s been one silver lining of COVID. We had to pivot our entire business from in-person to to virtual, which was difficult last year, but I feel like we did it pretty well, and we’re able to- and we’ve created different programs to allow people to be heard.

[00:21:17] Betty Collins
Talk about- I had more people reach out to me this year to be on my podcast, because we don’t think about, “I got to go somewhere in Columbus. I could have a West Coast interview or an East Coast.” It’s been an amazing thing. And this is a great- I’m glad to hear you say that. It didn’t sound like it was maybe a hard pivot, you just had to pivot. You just had to do it, right?

[00:21:42] Brianna McDonald
Well, and we had to make sure it worked, because we are very professional organization, and the things that we do, and the steps, and the process. So, trying to recreate that was not easy, but anything that is worthwhile in this life shouldn’t be easy. But I feel like we’ve done a really good job keeping the professionalism, keeping it running on time, respecting people’s time, and respecting our processes, and how they all work. So, as you sit in on the meetings, my fourth tip is, to really pick the brains of the experts.

[00:22:18] Brianna McDonald
So, even if you’re on Zoom on a meeting, and you hear someone ask a really thoughtful question, message them say, “Hey, I really like that question, what’s your background? And I’m thinking about getting into angel investing, and I’d love to know a little bit more. Maybe we can have a quick call.” There’s so much we can learn from other people’s backgrounds and experiences. We do not need to be the experts in everything. And I firmly believe that in a collective-working together, and this is why a group is so important, being able to do that. Our members throughout Keiretsu Forum in our meetings message each other all the time, throughout the meetings, and they have private chats going, and things like that.

[00:23:01] Brianna McDonald
It’s our way to connect with one another, and talk about the deals that we’re seeing. My big one is, find something that’s interesting to you. And this comes back to the investment thesis that I mentioned earlier; what really perks your interest? I firmly believe in being able to diversify your portfolio. I do not believe in putting all of your eggs in one basket. So, at Keiretsu Forum, we look at a wide array of opportunities. We look at biotech, we look at technology, we look at medtech and medical devices. We look at consumer goods.

[00:23:35] Brianna McDonald
We even look at real estate, and being able to have a wide range of items in your portfolio is really important, because they offset the others in terms of the risk profile, and when you’re going to be able to see that return. Now, what works for you? And, really, figuring that out. And it’s not something you’re going to have the answers to overnight. It’s going to just take time, and sitting and learning.
Six, we already covered this, Betty, is staying active. So, if you do run through the diligence and choose to invest, staying active with that investment. Communicating with the CEO, even if you reach out every couple of months, just say, “Hey, how’s it going? What challenges do you have today?”

[00:24:19] Brianna McDonald
That should be a tip that we take, that’s a good question to start with; “What challenges do they have this month?” Because they will always tell you everything’s great, and when you approach it that way, it’s a little bit disarming. And then the final one is to be able to reach your financial goals. And there’s a lot of opportunity here. If you do the research right, if you mix up with the right groups that are good fit for you, and are thoughtful about how you go about diversifying, and even taking off, carving off 10 percent of your portfolio to these higher-risk investments, you can really do a lot of well and good, at the same time.

[00:25:03] Betty Collins
I like that. [CROSSTALK]. Well and good at the same time, I love that, because there’s nothing wrong with, “Here’s $100,000, and I want it back, and I’d like to get, actually, more than $100,000 back.” At the same time, probably, you’re injecting some energy in someone that needs it. And it’s all good. I was fortunate to be on a Shark Tank type of thing, I was a judge. And it was five young women who- and they had criteria to be there, so they weren’t completely startups. I was never so energized to do it. It was the fun, it was great. Now it’s an annual event, and I love doing it so. But I’d love for you to tell us a success story. End with a success story, and maybe then, we’ll talk about one take-away, because I would love to hear just where [INAUDIBLE] went so well.

[00:25:54] Brianna McDonald
Well, so, I will tell you, we’ve had a lot of success in life sciences. And life sciences is something that has been, it’s not easy to understand, and definitely having some good experts in the room for you to learn from is good. My first due diligence medtech device, I’ll never forget calling up one of my members who runs a medical device, he builds medical devices. And I was like, “Okay, they’re contract manufacturing in China, what are the 10 questions I need to ask, and what are the answers that I need to receive, if this is a good deal or not. So, being able to look at that, and see, and looking at the FDA process, it’s complicated, and it’s high risk, but it’s super rewarding.

[00:26:41] Brianna McDonald
We invested in the company Immunotherapeutics, and they worked on a vaccine for red cedar allergy in Japan. So, I guess the US went there during World War II, and they planted a whole bunch of red cedar trees, and it turns out Japanese are very allergic to red cedar, and it’s debilitating allergy. But they’ve also been able to work as a drug platforms, so they’ve been able to work in the multiple different allergies. And after a couple of years, they received $500 million purchase order. And we received our first return from that. And they didn’t divest us, they just gave us the return from that purchase order.

[00:27:25] Brianna McDonald
And then we kept our stock, and we got a second exit again last year, if we wanted it. There are opportunities, even with my first company, with my first investment, that I was able to get a 2X return out of, which isn’t awesome. It was a food company, and I probably would be more cautious investing in a food company again, lessons learned along the way. Because I do include some of the things that I have learned to be just as much success as the capital I received back. So, looking at food deals is hard; there’s a lot of competition, there’s a lot of things that go into the space.

[00:28:05] Brianna McDonald
I also thought it was going to be the most amazing thing in the world, and I put my my money in, and walked away, like what you talked about the beginning, Betty, and didn’t stay in touch. And they had an opportunity to exit in 2010, and if they would have done that, it would have been great. But they didn’t. And so, Idid receive a return later, that I was able to roll up into another investment that I’m super excited about. But there was lots of really good lessons along the way. And just as long as I’m not losing money, I consider it a win. And then my final company is the company, it’s called Vita Inclinata.

[00:28:43] Brianna McDonald
I’m an advisor, I’ve been an advisor for over three years now to this company. I invested at $8 million, they’re just closing $150 million-dollar round right now. And so, being able to be a part of that effort as they continue to grow, as they deal with their challenges, have a really good relationship with the CEO, it’s been so great to watch their success. You got Forbes 30 under 30 two years ago. It’s been so fun to watch them create this device that it just didn’t follow a formula for me, and that’s what made it exciting. It’s a system for helicopters, it’s a load stabilization system for helicopters.

[00:29:28] Brianna McDonald
I know diddly-squat about that, but I do know a lot about people, and about safety, and about our markets, and selling into that. So, pulling that expertise out, I know go-to market strategy has been really helpful. But they’ve been able to close some big military contracts, and really accelerate growth. So, I have a wide range of things that I invest in, but it’s exciting to be a part of. And then my last, my takeaway would be, if you are interested in learning, one, you can always come, reach out to me on LinkedIn, or you can go to my website, k4northwest.com.

[00:30:07] Brianna McDonald
You’re always welcome to come in, and sit in as a guest at one of my forum meetings. I do six per month, and you can see what goes on there. But if you are interested in learning more about angel investing, just go sit and learn. Just go join a group and learn for a year. We spend lots and lots of money on education, and it’s okay to spend this on your financial education, and be able to do that, and learn from others. And if it’s something that suits you after a year, then maybe think about writing a check. But there’s so much to learn.

[00:30:39] Betty Collins
And as you said from the beginning, tip one is, just get started. Just get going, do something, especially if it intrigued you. So, I would tell my audience today, if you want to get into angel investing, you’ve got your person. Or if you want to be, “Hey, I need an angel investor,” you probably got your person. So, I so appreciate you being here today. You just have been- I could talk to you for another hour, honestly. But I know your time is valuable, and, of course, you’re on the West Coast, and I’m in the Midwest, and I’ve never been, actually, to Oregon or Seattle, or let’s see, you’re in Idaho as well?

[00:31:20] Brianna McDonald
I’m in Seattle, yes, though I’m based in Seattle. Our region is Vancouver, B.C., Washington State, Oregon, Idaho, Montana, Utah, Colorado and New Mexico.

[00:31:33] Betty Collins
I’ve been to Montana, and I’ve done the whole California thing. I just needed to expand a little bit more, but it was great just having you on today. So, audience, if you want to be an angel investor, or you need an angel investor, don’t rule it out. Challenge yourself, and maybe get out there and get started, like we talked about today.

[00:31:53] Betty Collins
So, I’m Betty Collins, and so glad you joined me. Inspiring women, it’s what I do. And I’m going to leave you with this; being strong speaks of strength, but being courageous speaks to having a will to do more and overcome.

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