Adam Torres and Jonathan Hung discuss angel investing.
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Show Notes:
What does it take to become a successful angel investor? In this episode, Adam Torres and Jonathan Hung, Managing Partner at Entrepreneur Ventures, explore angel investing and entrepreneurship.
About Jonathan Hung
Jonathan Hung is a transformative venture capital partner who believes in a bright future for businesses seeking to broaden their horizons. 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 Managing Partner for Entrepreneur Ventures and Partner at Trousdale Ventures.
In addition to providing venture capital funding and advisory support, he also provides business mentorship based on his experience running U.S. and China offices as the President of United Overseas Textile Corporation. Jonathan was also a Managing Member for his family office fund, J Heart Ventures, which made investments in start-up companies such as Gyft, ChowNow, Miso Robotics, Clover Health, Bitmain, etc. He also leverages various degrees from the University of Southern California, London School of Economics, Massachusetts Institute of Technology, and The Wharton School at the University of Pennsylvania.
Jonathan believes that every start-up/portfolio company regardless of industry and size can take full advantage of his genuine approach to mentorship. Jonathan specializes in early-stage investing and the formation of strategic business partnerships. He invites connections with any professional who shares his passion for the technology and consumer market sector, entrepreneurship, and venture capital.
About Entrepreneur Ventures
Entrepreneur Ventures is an independent venture capital firm committed to investing in and supporting entrepreneurs.
They devote energy to engaging with and nurturing entrepreneurs in the earliest stages of company building.
Their operating partners, team, and network of advisors collaborate to provide comprehensive support to startups right from the beginning. EV also assists startups in connecting with Entrepreneur’s network, offering exclusive access to our extensive reach, which includes 20 million unique website visitors, 3.6 million readers, and 16 million social followers, to support early traction and growth.
Entrepreneurship is part of their DNA, and they recognize that a vital part of a startup’s journey often involves securing capital. However, it also demands the right mindset, assembling the right team, developing the right product, and selecting the right partners.
Although obtaining capital has become more accessible, the venture aspect of VC remains challenging. Establishing a high-growth company that endures through generations and fosters widespread, equitable change is insanely hard.
“We hope your relationship with us is one of the best parts of the whole journey.”
Full Unedited Transcript
Hey, I’d like to welcome you to another episode of Mission Matters. My name is Adam Torres, and if you’d like to apply to be a guest on the show, just head on over to missionmatters. com and click on Be Our Guest to Apply. All right, so today’s guest is Jonathan Hung, and he’s Managing Partner over at Entrepreneur Ventures.
Jonathan, welcome to the show. Thank you, Adam, for having me. All right, Jonathan. So, Hey, we got a hot topic today. So we’re going to talk about angel investing how to become an angel investor, what it takes, how to be successful, your background as well and investing in otherwise. So we got a lot to talk about and just to get us kicked off here.
We’ll start this episode, the way that we start them with our mission matters minute. So Jonathan at Mission Matters, our aim and our goal is to amplify stories for entrepreneurs, executives, and experts. So that’s what we do. Jonathan, what mission matters to you? My goal in life now, what I think I’m meant to do is to help really help entrepreneurs get their startup grudge off the ground.
I think the best entrepreneurs are the ones that have a chip on their shoulder, right? These are the ones who don’t want to work nine to five, right? I mean, when you look at early stage investing, it’s not about the numbers because there are no numbers. It’s not quantifiable, at all. I mean people think they’re like, oh how much revenue you got going?
Like no, it’s really like when I do angel investing or pre scene investing for entrepreneur I care about the founder, but do you have grit? Are you somebody who I can trust not with the money but trust that you’re not going to give up or you’re not going to just At the slightest, like, , oh my obstacle, that you’d be
It’s like you see a lot about that. Like, if this is not for the faint of heart, it’s absolutely not. What I mean? I see myself as a high school counselor. My mission is that, look, I’m here to get you to your series A. That’s the next best investor, , gets you to college. The growth stage, right?
Mm-Hmm. because really you don’t have product market fit yet. You’re trying to get there. I think everyone thinks like, oh, five years down the line is gonna be great. Like, let’s just get through the year. Hmm. How’d you get into this? How’d you get into wanting to work with and help entrepreneurs? Like where, where’d that start for you?
Yeah. I came back home to take over my family business. Back in 2012, we had a contract manufacturing business and unfortunately my father got sick and I had to take over, , and I was just a lowly project manager working at Cummins and Shanghai for less than nine months, came home and right away was groomed to be, , the president.
At the same time, , that was my dad’s baby and I wanted something else. , I had a background in being a financial advisor, working at Morgan Stanley UBS, heard about Silicon beach, I’m based here in Los Angeles and I’m like, Oh, let me listen and get to know what that means. , what is angel investing?
What is venture capital? What is startups? And got my first taste of it doing that, , as an angel writing small checks here and there. And. Developed it into becoming a VC in 2018 because starting in 2012, but running the same time, my family business being an entrepreneur. What, what do you think draws you to working with entrepreneurs?
Cause that, and I’ll speak for myself, entrepreneurs, I’m, you’re not putting these words in your mouth, I’m putting them out there that we can be a pain, man, especially if founders are, we’re passionate, we got ideas, we work hard, we’re going, going, going, but like not there’s, there’s a easier things to do.
Sometimes what, what, what keeps you in the game working with entrepreneurs and like, so attracted to that? Cause it’s the excitement, , I think when you’re a really good investor, early stage, you gotta be a gambler. You like the thrill, , like why do people go to the casino? Right. Is it just about making as much money as possible?
Sure. That matters to most people. Right. But it’s the winning part. It’s like that satisfaction of like, Oh my God, we did this week. We scaled from nothing to, to making 10, 000 a month. And now we’re going to try to 10 X that to be a hundred thousand, , a month. And it’s that thrill that it’s not one direction, , it’s not like a straight line.
And I think this is so true. The lie of academia is, and people think it’s so important, like, look, I have all the degrees on the planet, , went to all the best schools. It doesn’t matter. In real life, you’re not given A and B and solve for C. Like, it’s a clean board. Like, I always tell people, going to all these universities or colleges I did, it was just to show that I could do something and finish.
And that I’m dependable. At the end of the day, you still have to have the ability to really pivot all the time and think off your feet. And that’s what’s exciting, right? Like, I don’t want to do a boring 9 to 5 job. That doesn’t excite me. Mm hmm. What kind of industries are you looking at?
Like, in general, like, I know, I know you mentioned founders, like your founder, I believe, founder, founder led and you’re definitely attracted to that. But what industries do you do you look at? I, , just from my background, look, I’m not gonna lie and say, Oh, I know everything about AI. I need to get better at it.
Right. But I really feel I don’t like people who say they’re generalists because you can’t be great at everything in the beginning. So what I really consider my core is that I’m a good understanding. Consumer tech and then C. P. G. And then a little bit into the enterprise tech, right? It’s sad businesses, right?
It’s a totally different business model. , when you’re trying to sell just a pure product versus like, , you’re trying to have great STR selling a product that has an average order value of 30, 000 to a big enterprise company. Right. You see it, but there’s things, similar things, right? I think the biggest hires you do in the beginning, obviously is the founder itself, the CEO, president, whatever, but you either have to find a CTO or you are that CTO, or you have a business person who’s great at BD and sales, or you’re that person.
That’s it. That’s the team. No one does this by themselves. So let’s go further into what you’re looking for. And as a founder or in founders, you mentioned that , grit’s important, but, but what else, like, what else are you looking at? Cause a lot of people, I mean, how can you tell, like you, you talk to somebody, they’re excited, they’re into it.
And then , how do that they’re going to stay into it? Right. If they actually follow up like, , I I got to this point where like I think people don’t get it Like in the beginning I was so wow eyes wide open thinking so great Oh my god, everything’s going to be wonderful only like a pollyanna and you get a little jaded becoming a venture capitalist You absolutely do because you think people match your energy, on a phone call and I always tell people like look You could be a great actor , but can you do this 24 7 365 days, , even Daniel Day Lewis can’t act and stay in character for that long like Who you really are comes out and I think the most important trait in an entrepreneur Is that you have to not over promise and under deliver Like if you’re gonna say something in a meeting like I expect you to do it It’s not my job to think, Oh, you’re going to be the next unicorn.
I mean, you have to do as much work as me, because that’s the thing. Like I’m not spending 24 hours on the, on the project that you’re doing. I’m just not, I’m for, at least for entrepreneur, I’m trying to find the best 150 to 200 companies, every fund I raised, and my number one goal is to return capital as my LPs.
My number two goal is to find the best entrepreneurs who I want to spend the time, the most time. Because that’s what’s equal for all of us. We have the same amount of time every day. It doesn’t matter if you’re the President of the United States, or the richest man in the world, or just somebody who works a nine to five job.
It’s the same amount of time. How do you spend your seconds and minutes? So if you lie to me, , and you can’t follow through, then how do you actually think you’re going to be that executive founder? Yeah. Yeah. Just shifting focus slightly here. The partnership with entrepreneur media.
How’d that come about? Oh, it’s, it’s so funny. , I got that opportunity because of one of my investments, , unfortunately it didn’t work out, but luckily for me that, , they also invested and we could share the war story of how that I don’t want to name that company that failed, but what?
We got to get to know each other through that CEO who introduced us and they. We’re looking for an opportunity to branch out of just reporting, right? And writing about entrepreneurship. How about also investing in entrepreneurs as well? , not just your money, but also giving the right media attention, right?
Introducing to the right partners, right? That’s what’s really important. I always tell people we don’t write the biggest checks. , we write 25, 50, 000 initially. But it’s The time we spend with you and how much marketing the time, how much our channel partners can help. And that’s a big bucket that I look at.
Like, I don’t think I can help you. I don’t think we’re the right fit because like, if you’re trying to do cancer research, what can entrepreneur do for you? We’re not PhD doctors here. Good, good, good point there. What is the like, how do you normally find your deal flow? Like, where does that come from?
Like, how are you finding , these opportunities? , you gotta go out all the time. Like, I go out all the time. , I have a 10 week baby. Right now, but I still go out, , congratulations. Wait a minute, 10 weeks and you made time for me. Come on. Thank you. I’m honored.
That’s amazing. Congrats. Of course. No, thank you. Cause like I said, I don’t have a nine to five job, right? Like, it’s not like, oh, I can unplug or right there when the clock strikes five. It really is just also experience and networking too. Like that’s how I became. venture capitalist, like as an angel, I had to develop all these relationships.
And honestly, I’m a better investor now than I was in the beginning, because I didn’t have enough relationships, enough contacts to bounce ideas off of. Now, if I see something that’s interesting, I’m going to go to my network. And I, what do you think? What am I missing? And then that’s the best way of doing it.
And also like I’ve been investors since 2012, like I’ve lost a lot of money. I’ve made a lot of money. , you have to make multiple bets. I think the biggest facade some people do when they’re doing crowdfunding or raising money is like, Oh my God, we’re going to find that. Like all our companies are going to be successful, , like that better.
To an LP or an angel investor, you better have the ability to accept loss, , we are not hitting like, , batting 800 here, , or, or hitting 90 percent on the mark, right? This isn’t like three sigmas we’re doing here in terms of confidence. It is very rare that somebody has a such a like batting 300.
If we had to use that baseball analogy, it’s hard early stage investing. So you have to accept that you have to take multiple shots on goal that you have to have enough bullets to fire at the target and be able to identify companies that you can’t at any given moment in that time period. Right? Because it might be a great idea.
But, . But it might not be the right time. Like I always tell people like without the iPhone, do you think Uber? Or DoorDash will be as popular as they are. Yeah. Yeah. Right. You have to have the right timing is everything. You mentioned something earlier and I want to go a little bit further into that and also the reason I asked you this question too, is because there’ll be some entrepreneurs that are listening to this, that are thinking about like how they should be looking at, or should they accept money from an angel investor or and what that looks like.
So the question is. You mentioned channel partners and support, like go further into that concept and why, , when somebody does choose to accept money from a VC or an angel investor, excuse me or either that, that, that can be so important. Like why is that important? Because like, I see this fun as dating.
Like, would you get married to somebody after the first date? Like, you gotta get to know somebody really well, right? I mean, not all money is good money. I learned that through one of my professors at the school, and it’s absolutely true. Like, just because someone has money doesn’t mean that they’re the right partner for you.
So, it’s, times are tough. Like, I always have this joke where, like, if I were to write an autobiography or something about Adventure Capital, like, I would call, I would title it, In Case of Emergency. It’s like you think about you’re going to a doctor, right? Who’s your emergency contact? Yeah. Yeah. Who’s your ride or die person to help you?
I’ve had my dad. John. Hey, John, we’re in this together, man. You wrote us a check. I need your help. I’m looking for A, B, C, X, Y, Z. What can you do? Yeah, exactly. , like that’s the kind of person you want in the beginning, right? Like, hey, late stage, totally different. All right, you’re not gonna get like, Mark Andreessen on the call every day.
I mean, like, it ain’t gonna happen. But initially with me Hey, Mark, by the way, I need you to send the No, go ahead. Right? Yeah, right. I mean, it’s, it’s, it’s just funny. I mean, cause like, that’s like, like, we’ve given you money. When I do early stage here, it’s like, no, we are, it’s a true partnership. It is a marriage.
It’s going to last a long time. Like the funny thing I think about is like, , some of my investments, it takes 10, 15 years. The very big one to see success. Like if you think like my biggest, Not regret, but I think like the biggest thing that got me when I became an angel investor is like my first investment ever.
We exited in 10 months. That, oh, that’s like, that’s like, yeah, that’s like, hold on. So you must I’ve never heard that. I’ve never heard that story. So you were feeling real good on yourself on that one, right. ? Yeah. , that’s amazing. Right? People get shocked by that, that like, what, when people talk about the Midas list or talk about how great they are, the venture as a VC, like it’s kind of one or two companies.
You’re like one for one. I’m done. One in done. I’m done. This is too easy. I mean, like you actually think you’re going to spend the same amount of time with each of your portfolios after a certain amount of time. And people like to challenge you, like, well, how are you going to like take care of all those companies?
You’ve been investing 150 to 200 in each batch of your each fund. And I’m like, well, it’s called natural selection for whatever reason, 18 to 24 months from now, 80 percent of these companies will not make it. These will not make it for whatever reason. And I will be spending the time on the 20 percent that do.
And that’s what I’m going to identify because I tell my LPs I’m here to help us have better data. Yeah, , I mean, that’s the most important thing because look, once you have more data, you can make better decisions. Like I really, I had a professor, he had a greatest lesson. He taught me was getting six sigma or getting to like 90 percent confidence takes a lot of time and money.
Like when we do venture capital investing, we are not going to have like anything close to that 99. 9999 percent confidence accuracy. So if I can get one sigma confidence on an investment, you can go to Vegas right away. If I have 70 percent like good feeling about it, let’s do it. It’s from going to 70 to 80 percent is even more time and money that you just don’t have in the beginning.
So if I have confidence, I make that bet every time. Yeah. Oh, my gosh. That what a great first story for that first investment. I got to share with you. I don’t even know if I’ve ever shared this in the podcast, but it cracks me up. So when I started, I’ve been in finance in over eight years. I’ve been full time in media doing this.
But when I started about 15 or 14 years, excuse me, in that business. And I remember when I first started out 16 years old, and this was 19 off the top of my head, 1998. So prior to the tech rack and my introduction to just a little 16 year old, right? A kid to the stock market was think about that bubble that was building right there.
Oh, the stock market is easy. You just invest in anything that has. com at the end of it. And it goes up like as a young 16 year old. Obviously, I wasn’t handling clients money. I wasn’t licensed. I was working in the IRA department doing something that was legal. I couldn’t, can’t invest for clients at that age.
But my little 16 year old mind was like, Oh, stock market’s easy. I don’t know what they’re talking about. That was my perception of like finance in the beginning. You just invest in anything that has com after it, and it goes up and you make money. Stock market’s easy. So, so for you, That was my introduction.
Obviously I learned otherwise and I went on to a long career and that’s fine. But, but for you, yeah, I just pick a company and and I exit in 10 months. It’s easy being an angel. That’s great. It was pretty adventure capital too. Not even like a publicly traded company, right? Something, ? I know.
That’s ridiculous. That’s an amazing story though. That’s great. . Yeah. It’s like the golf shot that you get that one good golf shot and then you gotta keep going because you did that or that one good hole. And it, and it’s because I didn’t want short term capital gains. I reinvested that money right away.
And that company, that second, that company I invested in to this day, it’s doing well. But it still hasn’t actually . Yeah. , 12 years later or 11 years later. Yeah. They’re still doing good. They’re still alive. Man, well, I’m glad, I’m glad about that piece for sure. That’s awesome. , let’s talk to the maybe potential or future angel investors for a moment or two out there that are listening.
For people that are listening that maybe they’re thinking about going down that route, what kind of things would you tell them now? Benefit of hindsight. What kind of like advice? Get on the high horse for a moment or two. Yeah. Yeah. I was actually talking to a 29 year old kid yesterday. And I say he’s a kid cause I’m 41 now, but like, that’s when I started, I was around 28, 29 when I got into angel investing and I said, don’t be a psycho like me.
All right. I’m a psycho because like I did so many deals, do as I say, not as I do. Okay, go ahead. Go ahead. I, I, I would say like, even to this day, I’m like 80, 90%
not in the beginning, right? But I gradually I got point. I’m like, look, do not invest what you can’t lose. , that’s the number, right? Because this is gonna be locked up for a very long time. So I tell angel investors, like, look, you think, like, we’re gonna exit right away. It’s going to take a while.
And so please, please, please don’t like, that’s too much money, , and at the same time, please don’t just write 1, 000 check and think you’re going to be a millionaire, , like temper expectations a little bit, right? Like, to me, I tell people it’s not the first check. That makes money. It’s the follow on capital, because if you look like the difference of most funds and my fun is this, I don’t have any follow on capital.
When I say I’m going to invest the entire 5 to 10 million that I raised, it’s done. First check. That’s it. Like, and then the benefit what I do for my LPs or angel investors in my network, then you write the next check, but not on all the 100, like, , 100 percent companies I invested on the 20 percent that survived.
That’s it. Because it’s better data. Now you can make a better bet because you have more information. Like, this is the only game where insider information is okay. Yeah, i’m not going to jail if I know the ceo intimately what’s going on with the sales what’s going on with his hiring All that it’s totally perfectly legal because it’s privately held Like that’s what you do, right?
If you had that opportunity in the public market, you’d take it but you go to jail in this It’s like it’s totally fine. And so I as an angel of us, I tell people do not check everything at once, right? Like save enough bullets for later because that’s what’s going to make up for all the losses you had in the beginning You That’s it.
Yeah. Well, Jonathan, this has been a lot of fun getting to know you, getting to know about the early days and where you’re at now. If, if somebody’s listening to this and they want to connect or follow up or continue the conversation, like how do people follow you? Yeah, please. LinkedIn is a great source, right?
Just put my name in there and connect and just say something, right? Don’t please don’t just like. Add me and then you think I’m going to accept you. I got like over 500 people. I haven’t added, I gotta like, you gotta tell me something. All right. Like, I don’t know. You might be a boss, but , I don’t, I’m not here for clout.
, I’m here to have like, what can I tell people? Like, Oh, why am I because of this reason? , it could be one little story, one little thing. Also you could go to our website, entrepreneur. vc. , I had to pay a good amount of money for that. Oh yeah, you did. Oh yeah. Yeah, thank God Austria paid me back, , that’s a great resource there to pitch us ideas.
And also I have my own personal website, jonathanhung. com. So, , when that GoDaddy message came up, I was like, yeah, I probably should buy my own domain. Yeah, yeah, yeah, agreed. Fantastic. And for everybody listening, just so you know, we’ll put the links in the show notes so you can just click on them and head right on over.
And speaking of the audience, if this is your first time with Mission Matters and you haven’t hit the subscribe or follow button yet, I highly encourage you hit that button because this is a daily show. Each and every day, we’re bringing you new content, new stories, new entrepreneurs, and hopefully new inspiration that can help you along the way in your journey as well.
So again, hit that subscribe or follow button and you will get the notification tomorrow cause you will get a new episode. And Jonathan, again, thank you so much for making some time for us. And again, congrats so much on the 10 months old baby over there. So congrats, man. I’m really, really happy for you.
Thank you so much. That was a pleasure. I’m glad we did this. Thank you.