Interview with Hall Martin, Founder and CEO of TEN Capital Network

Hall Martin became an angel investor after a company he was with went public. He turned his interest in angel investing into regional networks of angel investors and later a national network of angel and venture investors that he helps entrepreneurs gain access to.

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Guest - Hall Martin
Host - Carl Grant
Producer - Seth Grant

Transcript

Carl Grant: 0:12

Welcome to Rainmakers. I'm here with Hall. Martin, founder and CEO of 10. Capital network. Welcome home. Well, thanks for having me. Good to catch up with you. So you and I met because you had invited me on to, to do a podcast of yours. And, and so I am reciprocating and having you back on realizing that you are. You are a connector yourself, right? You do a podcast about raising venture capital. It's geared towards nerds and venture capitalists, right.

Hall Martin: 0:47

That's right. It's called investor Connect. And that's what we do. We connect startups and investors for funding in the podcast educates investors and startups about the funding process.

Carl Grant: 0:57

And I was looking back through your career. I looks like you're from Texas. Did you grow up here?

Hall Martin: 1:04

Yes, I was raised in Dallas, went to undergrad at Baylor and waco and then came to Austin for graduate school, went to UT Austin for an MBA. And then when I got out of that, I started working in a company here in town called National Instruments. And when they went public in 95, I started doing angel investing. And so that's how I got into the early stage world of venture capital.

Carl Grant: 1:26

And then you started to organize Angel groups. And, and then you You now have a business where you do a lot of connecting, have entrepreneurs talk about how your that that activity evolved over time?

Hall Martin: 1:41

Sure, so when I went to National Instruments, I was employee number 93. About 15 years later, they went public and started doing angel investing. And we had an angel group at the time, called a capital network here in Austin, and it ran from 95 to about 2002. They were kind of tied up to the.com world. And when that went away, they went away with it. So we didn't have an angel network in Austin for a couple of years. And so in 2006, the city did a restart. And they called it the central Texas Angel network. And I was the first member to sign up for it. And I wanted to invest with other people, because I found that it was just very challenging to invest on your own, you know, the amount of deals you have to go through and the diligence was just overwhelming. So I wanted to be with a group. And so when they started see cannon said, Hey, I want to be a part of that. But when you're the first member in a group, you're automatically on the board in charge of membership. It's a great honor. No, there's no pay, but is a great honor. And then about a couple of months into it, we lost our director. So I became the director and I ran it for the first two years and we established it we had about 50 members, we got about 5 million invested in 20 deals. And we ultimately got a 40x return out of that. Out of those investments. We had two that were just fantastic. homeruns. And with that my undergrad, Baylor, they came to me and I said well, they'll Petey of the venture Finance Department said we have some alumni that want to start an angel network, can you help us. And so we started an angel group out of the Baylor University Alumni Association. And we gave the we recruited students to do the actual analysis of the deals that you're 2025 hours of work on each one. So they got really great experience. And then they got great jobs afterwards. And so we kept growing that program. And then Williamson County came to me and said they want an angel network. And so I got a group of people together mostly Sun City retirees out of Georgetown, and we were doing deal flow out of the teravista Golf ranch for about five, six years. And we call it the Wilco Angel network. And then in 2009 night, I saw that, you know, I saw the challenge that starts had in raising funding. Now their documents weren't prepared, and they didn't know how to pitch and nobody followed up. And so I decided to start what was called Texas entrepreneurs network. And we were basically helping startups and investors connect with funding over the years. And we actually got all the way around Texas with funding forums all the way out to El Paso, and all the way around the state many times and then in about 2010 to 15. I said, Well, I really need more than just angels. I need venture capital. So I started flying to the Bay Area in New York. And that's that's where the VCs were at that time today. They're everywhere. And we have plenty in Texas now. But back then we didn't. And then about 20 1617 I had a whole bunch of family offices come into my network wanting to look at deals directly didn't want to go through funds anymore. And in 2017, I started getting calls from outside of Texas from startups saying I want access to your investors, but I'm not in Texas. How do we do this? So we changed the name to 10 capital. That's what 10 stands for, and then started doing deal flow around the country as opposed to just here in Texas as well. And today, you know, over the last 12 years, we've helped entrepreneurs raise over $900 million. We have 12,000 investors in the network at this point and are continuing to grow the program and the process to help raise funding COVID had the impact of putting everything online and we were already online and distributed in our company. So we were well harridan real well positioned for what's now the next generation of fundraising, which is syndication and online networks. And so that's, that's how we got to where we are today.

Carl Grant: 5:09

And are you going to expand that investor network, the individual investor network beyond Texas, you're gonna keep it local.

Hall Martin: 5:18

So we actually have quite a few investors outside for many years, we ran off the angel groups in Texas, but we needed venture capital, and we needed family offices and those came from across the country. I will say the venture capital still is a little bit heavy on West Coast, East Coast and the family offices come from all the major cities around the US. But we went national, and this is a coaching I have for startups from day one, you need to have a national perspective on your fundraise, yes, you need support from your local community, but you'll find that it can be hard to get all your money in one city or one geography, you're really going to have to expand further, my rule is you'll get a third to a half of your fundraiser from your local area. And then after that, you're going to have to look further afield. And so that's why we position ourselves on a national scale is to help people do that, helping many communities where they want to support their local entrepreneurs, and they'll put in 250 500, but then it runs out. And then they come to me, and I'm taking him to the rest of the country is how that works. So you just have to keep drawing the circle wider. And we have a network to help put you in front of other ambassadors.

Carl Grant: 6:25

So all I know how hard it is to develop relationships in that world. And because I've, I've done that over the years, starting with the venture capitalists, and then I've worked down to angels. You know, getting getting wealthy individuals or anybody to part with their money for a speculative deal is hard. Talk about how you've managed to get the trust of these individuals and cultivate those relationships over time.

Hall Martin: 6:50

Sure. So in running the angel networks, I met many Angel groups, I used to go to the angel capital Association summit meetings around the country for many years, met and have now over 200 angel groups in my network that I met and worked with and talked about. And then we also have high net worth individuals that come in that we run an education program, where people come out to learn how to invest in funding, one of the programs I have is what's called a startup funding espresso was a two minute podcasts very short on one topic about startup funding in investing that you can either read or listen to, and it comes on your inbox every day, Monday through Friday. And so an educational tools like that are always helpful as well. And then we did a series of funding forums around the country for a couple of years before COVID hit where we were actually going into New York and LA and all these other places and meeting with investors, bringing them out having pitch sessions with startups and building that relationship as well. One relationship we have is we help many VC funds raise their fun from limited partners, such as our family offices. So we need a lot of our investors from the fact that they want help raising their fund for doing the deal flow. And then that relationship carries over into funding startups that want to go through the funds.

Carl Grant: 8:06

Well, as I'm talking to you, Hall, I'm realizing I need to get to know you better, because your your world dovetails with mine so much, because we do fund formation work here at Cooley. And, and I'm getting hit up all the time for you know, helping raise venture funds. And that's not really something that I do nor, you know, nor am I very good at, I'm good at finding them deal flow. And and I have a big entrepreneur network. But if you've got those LP relationships, that that can be huge. So we're gonna You and I are going to talk again, when we're not being recorded, and figure out how you do all of that and and what your business model is because I could be a good referral business for you. As I imagine, as I imagine a lot of your podcast guests are and how in the world did you ever find me? That's, that's the big mystery here is like, you know, you're very well connected. How did I end up on your radar?

Hall Martin: 9:01

Well, most of our podcast, interviews come from referrals. When we interview ambassadors, we say who else should we be talking to? And people give us a list. And so we go out and we follow up. So some investor put your name on the list saying, here's an interesting guy you got to go talk to and so we go do it. And we love interviewing investors, the vast majority of our interviews are that, and we originally started this as a nonprofit at investor Connect, which was, I wanted to I used to meet a lot of investors who said I invest in real estate or oil and gas, but I don't invest in startups because I don't understand them. I don't know how to do that. And so we started a group of about seven years ago, under a nonprofit to educate investors on how to invest in startups. And we kicked it off in Austin with a lunch and learn we do once a month and we meet at various places around the round town and have 4050 people come out and they we would have experienced investors talking about how to invest in startups. The problem with that model was it didn't scale since I went outside. of Austin to Dallas, Houston, it didn't really play well. So I decided I really need something that's online from the get go. That's how I came up with the idea of investor connect.org is it was basically a online mechanism for interviewing people about how they invest in funding, so other people can log on and listen and learn from that. As a, as an angel, myself, one of the best places I ever learned about angel investing was from the Frank Frank Peter show podcast. Frank Peters was a tech coast Angel out of Southern California who did over 54 and 50, interviews with investors on how they invested. And I found those very, very illuminating, I listened to them all the time, and decided, well, that is a great educational tool. So I moved my program from the lunch to podcast format, in order to help people learn more about how to how to invest in startups, or how to raise money for a fund anything related to the investor side is what we focused on.

Carl Grant: 10:58

Well, it sounds like you've happened into a lot of these things that you're doing you you made some money. From the IPO, you invested as an angel, you teamed with others, and then you liked the group thing. And so you started to replicate the group thing. And it's kind of evolved, do you have a vision of where you want to take this in the future,

Hall Martin: 11:18

I just want to continue expanding it upwards and outwards where we engage more people and startup funding. So I have this big fan of the crowdfunding movement, I think it's a great way to democratize funding and get it out to more people get more people coming in on these deals there, there does require some education and diligence to make a successful investment. And I think crowdfunding world is still starting to come to grips with that part of it. But I was there when angels came into being in the they came actually, they started in the 80s. But they really took off in the early 2000s. Because when I was at the capital network group, we would have companies come out and stand up. And they would literally ask for $5 million to start a web business. And that's what it costs to start a web business back,

Carl Grant: 12:05

I remember those days, you could raise 5 million$5 million to you can't do that anymore.

Hall Martin: 12:11

That's right, you know, because they were building their own server farm, and they were paying American wages for everything, and they had a buyer at the end, he couldn't rent anything, you know, fast forward 10 years. And now in the 2000s, the cost of doing business, those same guys who are now asking for 500k, to go raise funding for their startup. And that moved it from the VC world into the angel world very quickly. And so the angel group, you know, expressed dramatically, well, it's continuing to devolve downward. Now, in the crowdfunding world, people put in $500, because you're aggregating a large number of people in one organ as one fundraise using reg CF, or a reggae structure. And so that's that's where it goes is that it goes down and out more people are involved, but the checks are getting smaller and smaller, but there's many, many more people that you can go for. So now you need access to large numbers of people. So when we started, the angel groups in the 2000s, they were under the dinner club model, we all go downtown to meet in one place, and we would look at deals and share the diligence and that was great. But when you're doing three or four deals, that's fine. When you're doing 30, or 40 deals, that's no longer fine, because now I have people coming in saying I got 100k, I want to build out my stock portfolio. But I need diversification. So I gotta spread this 100k over at least 10 deals better 20. So instead of coming in the room, like an angel used to do with 100k check saying, okay, you get it. Now they come in with 100k check, and they say okay, five for you, five for you, Tim for you, five for you, and they just spread it across more deals, looking for a hit, that requires online access, you really have to get to that much deal flow, you have to be online with portals and syndicate platforms and those type of things. So I think that's where it goes, I think it just goes online, like everything else is going online. And that we're going to see a lot of sharing of information between syndicates and trying to you know, shop deals from one group to the next. And we'll see lots of groups form. And I thought the university was a great place to do this, because you have a real affinity for by the investor back to their university. And one thing I noticed about the group at Baylor is there the Y is about students education and experience. And so the turnover rates very low there other groups where it's just about the financial transaction and just about the return the turnover rates very high, they would come into the room into those groups with you know, 370 5k checks, bang, bang, bang, now what, I'll just go hang out the wine bar to see see how these turned out. Well takes five, seven years to figure out how it's going to turn out right, that's a long time hanging out with the wine bar. That's just kind of where it goes is is forming into syndicates. It's going back to groups that are more than just about funding. There's some affinity beyond that. I think social impact is going to be a big driver people Collecting groups because they want to help solve a certain problem, they'll collect with university because of their association with them. And so it's going to be something plus money. And so that could be social impact, or it could be support, or something else. And, and it'd be online in, in most cases, and there'll be a hybrid model, there'll be physical meetings, but most everything else, as far as the diligence and the screening and investment, that's all gonna be done online is word.

Carl Grant: 15:27

So while you may have lost a large portion of my audience, because it's a business development podcast, and they're not necessarily steeped in, you know, investor finance stuff, but, but I am and and I'm insanely interested in talking about and I'm realizing that you and I need to go spend some quality time together, because to match my network up with your network could be pretty powerful. And when you talk about so this is true business development, when you talk about wanting to expand your, your, you know, little Empire or network outward, I think about where my team is, and, and, and literally, we are outward. I mean we have, we're hiring a person in Chicago right now business development person, so they're going to be plugged into the venture ecosystem in Chicago, I have two people in Boston, I have one in New York, two in DC, I have all up and down the coast of California of business development, people that are just ensconced in that whole world of angel investing accelerators, venture funds, etc. So I think we need to put our heads together and figure out how to do this. And I need to have you as a guest on one of our business development team calls to to start develop those relationships, if you're up for it.

Hall Martin: 16:40

Sure, glad to talk to investors into people we help investors raise funds for their deal. And we help startups figure out how to go raise funds for their, their companies, so glad to meet anybody you think is a good contact and share more information. Because I think we went we went through a transition over COVID because in a especially Angel groups, people realize you can transact a lot of this online, which was my thesis. 10 years ago, when I put my program online, I was sitting in the angel group room looking around saying, Well, you know, half of what we were doing here screening deals and diligence, seeing them and so forth, that can be done online. Why are we doing this in a room. And sure enough, that time has now come people realize the efficiency of it, and they're not going back, they're going to go forward. The relationship is still there, you still need to have the social and there's still that that aspect of it. But one advantage I saw online is you have so many more tools available for you data analytic packages, drives the Google Drive to go search and see look up competition and other facts and you can make decisions as the pitches going on. And I think that's that's where it goes is making investors more effective with these tools.

Carl Grant: 17:54

Well, we've come to the end of our allotted time here. It goes quick. It's hard to have a beer together online. So I'd like to like to sit down with you and get to know you better in person if you if you'll still do an in person meeting. But in the meantime, I want to thank Paul Martin, founder and CEO of 10 Capital network for being a guest on our show today. If you like what you heard today, please subscribe. Please share the podcast with your friends and read it. Thank you so much.