Alma Angels Founder: Understanding How Investing Works for Startups

Written by Tom Fairey

8 March, 2022

David Fogel on Showing Demand and How to Work With Advisors and Investors

David Fogel has a colorful background. Born in Romania, he emigrated to Israel when he was 5 and served in that country’s navy, working in missile defense. He received a bachelor’s degree in economics and business administration, and later a master’s of law for economists before earning an MBA in entrepreneurship. After a short internship, he was approached by a colleague who wanted to capitalize on his background in tech and finance, and his career was launched.

Fogel worked in sales and marketing for Aman Group, where he led a sales team and improved penetration rates in the company’s investment banking sector. He then jumped to Germany to work for Skillnet, where he executed sale side mandates for an e-commerce startup and developed a strategy plan that included the divestiture of three companies and a 150 million euro allocation. From there he jumped to London to serve as the deputy director and head of acceleration at Wayra, which is Telefónica’s early stage investment vehicle; there, Fogel invested in and managed a portfolio of 140 startups, supporting them within follow-on funding and fundraising.

Later, Fogel went on to co-found ADV, a new venture investment platform that offers access to capital, coaching, customers, and corporates. He then co-founded the Israeli Tech Parliament, a volunteer-run community in London that brings together those in the Israeli tech ecosystem in the U.K. After investing in a number of companies, including Urban, Lingumi, and Crypto Quantique, he co-founded Alma Angels, an inclusive community of angel investors who are passionate about actively investing in and supporting ambitious female founders to build companies at global scale. For the past 6 years, he has been the chief operating officer at Wefarm.

Fogel’s diverse background has gained him a wealth of experience in the startup and venture capital domains, and he has seen more than his fair share of pitches. He recently talked to me for an episode of my podcast, Back Yourself.

What Sparks Interest Among Venture Capitalists?

Working with venture capital creates a unique relationship that startups should be aware of. While there are many factors that can be attractive to venture capitalists when assessing a startup, there is one chief turn-off: No progress.

“A turn-off is when there is a lot of talk and nothing is done,” Fogel said. “It is when you have been working on something for three years but there is nothing to show for it, and you say you cannot do anything because you want investment first.”

That sort of low aspiration can manifest itself in many ways, Fogel said. Many companies pick up on marketing language and use it without actually putting any effort into their actions. For example, he said, many companies will say they “want to be the next Uber” but their marketing plan shows them making a measly $5 million in five years.

“They can talk the talk but they don’t build the plan,” he said. 

Many startups misunderstand what role VC can actually play in their growth. VC is not there to innovate, he said. VC is nothing more than a financial investor and an asset manager. VCs are investing in a company because they are managing people’s money and they need to provide those people with a return.

“What we need to do is ask if we believe this company can survive and make money,” he said.

‘VC Is the Worst Money to Take’

Venture capital is the worst money startups can take, Fogel said, because when founders take that VC money, they are selling a part of their company.

“You give away huge chunks of your company,” he said. “Ever round dilutes your company as a whole, and with each round, you give away an average of 20 percent.”

That is a lot to be giving away, and it means you should be incredibly careful about when you seek VC funding. According to Fogel, “You should raise VC money when you don’t need it.” In other words, he said, you should raise money when you have a profitable company and you need to scale, as VC money is often the best way to scale fast, and there are advantages to scaling fast: It creates a unique network effect and can get your company to rise to market prominence much faster it might do otherwise.

A Startup Is a Hypothesis

Many people misunderstand what a “startup” is exactly, Fogel said. A startup is not an SME, even if it is “starting up.” Properly, a startup is a hypothesis: You don’t know exactly what you are building, but you have an idea of what to build. A startup is a notion that there is a problem that can be solved and the solution to that problem can be scaled quickly.

“With capital, you are buying a runway to test and prove that what you are doing can bring enough value for people to pay for it,” he said. “People assume that it is a business, but what it really is is a set of assumptions, and what you do is gather data to prove the assumptions. That is the only reason to raise money.”

The Takeaway

VC can be hugely beneficial to startups if it arrives at the exact right. But before you seek the money, be cautious, because while it can enable a wide range of capabilities, it also means you are selling a huge stake in your dream.

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