Out of all the buzzwords out there, the one that speaks to me is “democratizing” — I love when any startup or movement democratizes anything.
As part of my series about “5 Things I Need To See Before Making A VC Investment” I had the pleasure of interviewing Igor Belagorudsky. Igor is a technical, hands-on professional with over 20 years of experience. He’s a serial entrepreneur having most recently scaled Erecruit from a team of 3 to over 120, through several rounds of investments and to a successful sale for $62.8M. He’s active in the Boston startup scene as a founder, advisor, pitch competition judge and angel investor. He’s a confident full stack enterprise architect in several technology ecosystems and a trusted leader and mentor of professional services and R&D teams in multiple timezones and industries. Igor is a big believer in smart and transparent teams, open communication across the entire organization and leadership by example. Outside of work, he’s an avid skier, slow runner, decent hiker and dad to Stella and Avi.
Thank you so much for joining us! What is your “backstory”?
Briefly, I was born in Kiev, Ukraine, encouraged to get into software by my father when I was 9, emigrated to America when I was 10, earned my first paycheck doing software development when I was 12, had several startups throughout high school and college, moved to San Francisco after college and had a couple more startups and did some consulting, moved back to Boston, and found Erecruit — my most successful startup to date. Since then, I’ve been giving back to the startup community with FastCTO, angel investments and being an overall resource to startups in Boston and elsewhere.
Can you share a story of your most successful Angel or VC investment? What was its lesson?
So far, I am batting 1000 in my portfolio (knock on wood). That’s not to say that I’ve had any major exits, but all of my investments are still live. On paper, I have a couple of companies that are 4–5x over the last year or so, but also a couple that are absolutely flat and have been for 3 years (but still in business).
Since I make angel investments, I treat them as an expensive hobby. If I get my money back, that’s a win; if I get 7%, that’s even better; if I can outpace a typical VC fund’s 12% that’s a bonus — anything more than that basically goes back into angel investments.
So with that said, maybe not the most successful investment I’ve made but arguably the most interesting one was a small $20k investment in a convertible note with a founder that responded quickly and appropriately to the writing on the wall and sold the assets about a year later when the company wasn’t going anywhere. He came to me with a check for the original $20k + 5% interest, disappointed at his “failure”. It took some work to explain to him just how far ahead of the curve he was and I try to share this anecdote with as many people as I can when they ask me what angel investment is like.
Despite that small “win”, one could argue that the opportunity cost of investing that money better were much higher — it’s probably true. From that investment, I learned that being a solo angel investor is a bad idea and I joined an angel group in Boston (Beacon Angels) that can add a little more reason to my decisions.
Can you share a story of an Angel or VC funding failure of yours? What was its lesson?
So that’s the other side of the coin — as of right now, all of my investments that are technically “up” have been with an angel group that was able to provide a more in depth due diligence and a livelier discussion of opportunities than I could alone. The side of my portfolio that’s flat are investments I made on my own and something I’m likely never going to do again. There is more to evaluating investment risk than just the specific expertise that I have.
Is there a company that you turned down, but now regret? Can you share the story? What lesson did you learn?
I’ll start with the lesson — you can’t dwell on things you pass up because there’s opportunity literally everywhere. If I dwelled on things, I’d be a very sad person.
I have two examples — one investment and one not — when I came back from San Francisco, I had the opportunity to join two companies — Erecruit as a first employee or a marketing automation company as employee 5 or 6 (I don’t quite remember). Both seemed interesting but I just didn’t know too much about marketing automation so I joined Erecruit. I’m very happy with what we were able to accomplish with Erecruit, but the other company ended up being Hubspot… so you can imagine my regret, if I let myself have that. It’s not a “you live, you learn” type of lesson because you just never know and you can’t let that eat away at you.
On the investment side, I pass up opportunities all the time if I don’t understand the value or don’t have depth in the industry. A lot of those end up being 10x+ and I’m OK with it because I’d rather make 3x on an educated guess than 10x on the roulette table.
How have you used your success to bring goodness to the world?
That’s all FastCTO is — our mission is to bring extremely experienced CTOS ($600,$700,$800/hour type people) to the startup community in a way that an early stage company can actually engage them. We do that by having the core tenet of not profiting from startups so we basically bring the CTOs to startups at cost without attempting to make any money (and we if we accidentally make money, we invest it back into the startup community). There’s a lot more that goes into it but it’s my way of giving back to the startup community. Because of what we do, a lot of organizations appreciate our business model and like working with us and we end up working with a lot of social good startups and founders from all walks of life. I love feeling that I am helping the next generation of entrepreneurs.
What are your “5 things I need to see before making a VC investment” and why. Please share a story or example for each.
I actually mentor a Founder Institute class on this very topic (https://medium.com/fastcto/equity-and-funding-if-when-and-how-145139da9dcc) and I sum it up like this (I know it’s more than 5 things but it’s only one sentence):
- A well-defined and provable problem
- That addresses a sufficiently large population
- That your company/product(s) can solve to some reasonable degree
- With a team that can prove that they can execute and grow the company
- And make money doing it
- In a reasonable amount of time (3–5 years)
- With an exit strategy that can make investors money
- Where only the funding you’re asking for stands in the way
When I am looking at a deck or talking with founders or executing due diligence, all the questions really come back to this, hopefully self-explanatory, list.
You are a person of great influence. If you could inspire a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger. 🙂
I believe that’s exactly what we’re doing through our FastCTO Crowdfunding Score. Out of all the buzzwords out there, the one that speaks to me is “democratizing” — I love when any startup or movement democratizes anything. What REG CF is doing is democratizing private company investments — that’s great and we’re all for it but it only solves half the problem — it lets a regular person invest in a company but it doesn’t do enough to support the founders in their fundraising efforts — so what you have at the end is that roughly 30% of companies meet their goals. At the same time, you have accredited investors looking at this, now stable, space and willing to write bigger checks if presented with the resources they’re used to when evaluating investments — namely, a due diligence. The FastCTO Score is an easily digestible mini due diligence for companies going crowdfunding which will enable them to attract more and bigger investments. We think that this could be an absolute game changer for the crowdfunding space and therefore, for the next wave of entrepreneurs. We want to remove any impediment to innovation and invite more people to this space, responsibly, and hopefully change the world for the better through what these startups are offering.
Some of the biggest names in Business, VC funding, Sports, and Entertainment read this column. Is there a person in the world, or in the US whom you would love to have a private breakfast or lunch with, and why? He or she might see this. 🙂
There are so many people doing amazing things out there and I’ve learned over time that the best connections often turn out to be with people you didn’t expect to find common ground with. Still, if I were to throw out a couple names in the categories provided — Bill and Melinda Gates for all the incredible work they’re doing with their foundation, Mark Cuban for his complete transparency and no BS approach to investments, and Ellen DeGeneres because she’s just amazing in every respect and being on Ellen is absolutely a bucket list item for me (and my friends know this).
This was really meaningful! Thank you so much for your time.