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Julian Shapiro’s Framework to Angel Investing

Julian Shapiro’s Framework to Angel Investing

Insights from the founder and CEO of Demand Curve.


Julian Shapiro has helped 45k+ startups launch and scale their customer acquisition channels.

He’s now applying what he’s learned to identify startups to invest in for his new Rolling Fund

“As a growth marketer, I’ve seen which value propositions the market finds compelling,” said Julian, founder and CEO of the growth marketing platform Demand Curve. “I use that to pattern match promising early-stage companies.”

Through this approach, Julian’s invested in companies like ClassDojo, Republic, and Synthesis. Julian shared with us his framework for identifying investment opportunities by thinking like a growth marketer.

Identifying Great Companies

While Julian is sector agnostic, he has a particular interest in companies with product-led growth (PLG). 

PLG means existing users drive the growth of the company. Slack, PayPal, and Zoom are PLG companies because users have to invite others for them both to receive value from the product. Companies can also achieve PLG when their product creates a public advertisement (e.g., wearing Airpods) or through user-generated content.

At Demand Curve, Julian found many of the most successful companies achieved PLG.

“PLG scales, it’s defensible, it has network effects, and it can build moats. It's the holy grail of growth,” Julian said. 

Getting Into Deals (Overcoming Adverse Selection)

Julian seeks allocations via “relentless outbound.” By doing so, he says he can overcome adverse selection—only seeing deals that are within his network.

“The enemy of returns in venture is adverse selection,” said Julian. “You want to try picking from the best of everything, not just what you see. By doing outbound, I get to see deals that would never have come my way.”

One way Julian finds deals is by setting up alerts on Tweetdeck for when founders announce they’re raising on Twitter. He also regularly filters through AngelList and Crunchbase for new deals. 

In his outreach to founders, he shares how he’s helped companies build growth teams and identify viable growth channels. 

If the founder is receptive, Julian schedules a call.

“My aim when we speak is to show them how I can reverse engineer their customer acquisition goals and pattern-match ways to overcome whatever challenges they face,” Julian said. 

Making the Investment Decision

Julian places a lot of stock in “founder formidability.” He defines a “formidable” founder as someone who’s biased towards action, resourceful and ambitious, and insightful. 

  • Biased towards action. The founder doesn’t defer when the correct answer is clear. They premeditate decisions and come strategically prepared to gather information. When determining whether a founder is formidable, Julian probes their decision-making process on past decisions.
  • Resourceful and ambitious. A founder whose career trajectory shows proactive hustle. A resourceful and ambitious founder has a history that substantiates why they want to pursue this particular mission.
  • Insightful. The founder is a clear communicator, strategic decision maker, objective thinker, good brainstorming partner, and can shut out the noise and politics around them. To gauge founder insightfulness, Julian asks for prior investor updates to assess how the founder communicates critical information and prioritizes thoughts. 

He also considers the company’s customer acquisition strategy, perceived customer demand, and market size. If the startup and market are compelling, and if the founder is formidable, Julian then evaluates the business against a handful of optional “conviction boosting” factors:

  • Are they a second-time founder?
  • Is there embedded optionality (the product can wedge its way into new markets in the future)? For example, fintech companies often have embedded optionality because of their AUM, which allows them to expand into new markets like loans, credit cards, and banking.
  • Do customers evangelize the product to others (i.e., word of mouth marketing)?
  • Is the idea only recently possible (i.e., “disruptive” tech)?
  • Does the company have traction (i.e., users, revenue)?
  • Are there a limited amount of hurdles to overcome?
  • Is the company building a platform?
  • Does the company generate recurring revenue?
  • Does the company iterate quickly?

If the answer is “yes” to some of these questions, Julian is more likely to invest.

The size of his check corresponds to how the deal compares to his other deals (based on the customer acquisition strategy, perceived customer demand, and market size). If it ranks near the top on these criteria, Julian will write a large check. If it ranks near the bottom, he may write a small check or not invest at all.

In Summation

Julian’s process for startup investing:

  • Use go-to-market pattern-matching to assess startups and markets
  • Proactive outbound
  • Evaluate startup by customer acquisition strategy, customer demand, market size, and founder formidability
  • Evaluate startup for optional conviction boosting factors
  • Size check accordingly

To learn more about Julian Shapiro, visit his blog or Twitter. To invest with Julian, click here.

Disclaimer

This document and the information contained herein is provided for informational and discussion purposes only. The views and opinions expressed in this post are those of the interviewee and may not reflect the views of AngelList or any of its affiliates. This post is not intended to be a recommendation for any investment or other advice of any kind, and shall not constitute or imply any offer to purchase, sell or hold any security or to enter into or engage in any type of transaction. Past performance is not indicative of future results. All examples of past investments included in this presentation are purely for illustrative purposes and may not reflect the complete list of investments made. There is no guarantee that any fund will achieve the same exposure to or quality of portfolio companies held by any existing syndicate or fund. An investment in venture funds involves a high degree of risk and is suitable only for sophisticated and qualified accredited investors. Quotes included in these materials related to AngelList's services and should not be construed in any way as an endorsement of AngelList's advice, analysis or other service rendered to its clients.
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