Connecting Investors With Startups
Hall Martin is the Founder and CEO of TEN Capital and the host of Investor Connect podcast program. He launched the firm as the Texas Entrepreneur Networks in 2009. In 2021, TEN Capital has over 12,000 investors in its network and has helped startups raise over $900 million. Mr. Martin serves as the Vice-Chair of the Baylor Angel Network and he previously led the Central Texas Angel Network as its first Executive Director.
Martin is also the host of the Investor Connect podcast and the Founder and Director of Investor Connect, which is a 501(c)(3) nonprofit dedicated to the education of startup investors. Hall is also a Founder and initial Managing Director of SKU, which is an incubation station and a consumer products good accelerator based in Austin, Texas. He also is the Adjunct Professor for the University of Texas, leading the Idea to IP program, which fosters startups.
As we were saying, having moved here to Austin is exciting to get to speak to someone who’s been here for so long and made such an impact in the city and in the community. I know that you got your MBA here at the University of Texas. Before that, you were a Major in Computer Science. I remember those days in the ‘80s where it was all on cards, and you had to have punch cards and make them spit out. If you had one hole in the wrong place, it didn’t work. I would love to hear your own personal story. You can start anywhere you want. You can talk about childhood or when you started college. How did you get interested in the world of startups?
I went to undergraduate at Baylor from ‘80 to ‘84. That’s when the PC came out. I looked at the PC, and I said, “That’s going to be big.” Indeed, it was. I switched my career from being a Journalism major to being a Computer Science major because I wanted to be a part of that world. I always had an affinity for emerging technologies. I was always looking at the next thing, not the last thing. That’s the way I worked. When I graduated, I came to Austin to go to UT graduate school. I got an MBA there. I thought that was a great time to do it because the market wasn’t so hot just yet and I decided I’d get that done. That’s how I got to Austin back 30 plus years ago. I graduated and didn’t quite have a job yet, so I went backpacking in Europe for a month. I got a call from my family saying some company in Austin found your resume in a book and they want to hire you.
When I got back, I went and talk to them. They were a small company that was growing fast. It was entrepreneurial, and so I said, “This is what I want to be a part of.” I signed up, I joined them, and I was there for 25 years. It was a tech company that later went IPO in 1995. It had a big blowout and it’s great, and I kept working with that. Because the company went IPO and I was employee number 93, I started doing angel investing after that.
We had an angel group in Austin called the Capital Network that ran from ‘95 to 2002. They were tied to the dot-com world. When that went away, they went away with it. I made one investment through the group, I lost all my money and started to realize that startup investing is not as easy as it looks, but I was still interested in it. I started doing some angel investing on my own around Austin at that time. About 2006, the city did a restart and they called it the Central Texas Angel Network. I was the first member to sign up for it.
When you’re the first member to sign up for an angel network, you are automatically on the board in charge of membership. It’s a great honor. There’s no pay, but it’s great. I did that for two years. Two months into that, our director left, and so I stepped in and became the director of the group for the first two years that we ran it. We put in the processes, got it going, had a great time, got a 40X return for the investors. It was a lot of fun.
My undergrad at Baylor called me up saying, “We want an angel network out of our Alumni Association, can you help?” I said, “Okay, I’ll do that.” I stepped out of the CTAN role, and I went to help my alma mater help put their program up and running. I showed them how you do the membership, recruiting, and how you build the deal flow and all the usual things that go with an angel group. I got that up and going, and it became part of the Alumni Association where it’s about the student experience and about job placement.
That’s one thing I learned in working with universities. It’s not about the money. I remember when I started CTAN, I went to the University of Texas to talk to the alumni director and said, “We ought to start an angel network here.” They were interested in that. Stanford and Notre Dame had one, but they didn’t have one. In the end, they had too many other things going on, but the big mistake I made was I walked in alone. You never walk in alone.
You walk in with a business school professor that’s going to be your sponsor. He’s going to own this thing. He’s going to keep you on the straight and narrow. You also walk in with five check writing alumni. If you bring those things, you can then build it. I learned the hard way that didn’t work. When we went to Baylor, that’s what we did. We got five check writing alumni and a business school professor, and we’re able to kick it off. Now, there are several 100 angel groups at universities around the country because there’s a real affinity between an investor and their alma mater.
What you’ll find is the why is not about making money, the why is about providing a give back to the university. You’ll find that people stay in those groups for a long time compared to the others. I started a third one in Williamson County, North of Austin. We were holding a deal flow in Round Rock, and it was a lot of fun as well. I saw the challenge that startups had in raising funding. What I saw was people coming in and they didn’t have the documents ready. They didn’t know how to pitch, and almost nobody followed up. Some did but the vast majority did not.
I started a company called Texas Entrepreneurs Network. After 25 years, I was ready to move on to my next career. I retired from my day job, and I started Texas Entrepreneurs Network. We were helping those startups raise money from Texas Angel Networks. We were helping them pitch, get their docs ready, and coach them. We did a funding forum series around the state. We got all the way out to Lubbock to El Paso and all the way around the state.
I had a theory that for every 10,000 people in the city, there was one angel investor. Lubbock had 100,000 people. There were ten angels, voila, there you go. We got out to the second-tier cities to do that process. There was one problem. It’s a big state and we’re driving everywhere. We decided to put everything online in the form of a funding portal because crowdfunding was starting to come into its own.
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We did a portal style for a while and learned how that worked as well. We had an interstate license and did a whole bunch of breweries and wineries. That was a lot of fun to work with those guys because breweries have a real community flavor to it. We helped a group in Georgetown raise funding. They had almost 2,000 people come out to the opening, and I asked this guy, “Why are there 2,000 people at a microbrewery opening in Georgetown, Texas?” He said, “This is a German community. In 100 years, there’ll be two things left standing, the brewery and the bank. I want to be a part of the brewery because I want to leave a legacy here.” That was a neat vibe that went with crowdfunding breweries and so forth. We did a bunch of others as well.
After a while, we realized that crowdfunding didn’t help the tech companies and the healthcare companies. We wanted to get back into that. We hung up the portal, went back to working with the credit investors. About that time, we started getting calls from outside of Texas. I was getting calls from Seattle, Chicago, and the Bay Area saying, “I’ve talked to everybody in my area. I need more investors. I want access to investors. How do we do this?” We then changed the name to TEN capital and started running our program around the country instead of just around taxes. It kept growing ever since. Now, we have 12,000 investors. We’ve helped companies that went on to raise over $900 million over the years that we’ve been doing this, and we continue to grow and expand.
That’s quite a story. I love it. What I find interesting about what you’re doing with TEN Capital Network is you offer people the ability to figure out which program works best for them. You’re typically working with people who have some revenue, I would say, and have some experience. The biggest problem that I have seen and I tested this a little bit. I’m curious to see if you find this. Investors typically fund about 1% of the pitches they hear. They hear about 2,500 in a year and fund maybe 25, 24 of those 25 are from warm introductions typically.
The biggest challenge is that the founders are in the wrong room. They’re pitching to people who don’t fund what their industry is, or they don’t have the warm intros. They then have a bad pitch. I remember talking to one investor, and she said, “We listened to this doctor go on and on for twenty minutes, and we still didn’t know what he did. Finally, I asked him some questions, and I said, ‘You fix holes in people’s hearts. Is that what you’re saying?’” “Yes.” “Okay.”
That need to be clear and concise is so important in a pitch. Few people know how to do it. In order to get in that 1% Club, you have to get the right pitch in the right room and then be able to answer some questions, as you said, the paperwork, and have everything ready to go to get the next meeting. You alluded to one of the mistakes you see people making, which is not following up. Having a sales background, that blows my mind, that they would not be organized enough to check back in or give you an update on what they’re doing and things like that. Let’s zoom out a little bit and start with, what do you look for when you hear a pitch?
The first thing I look for is, do they have a real market for it? Are we solving a real problem? The old painkiller versus vitamin test, are we solving something that we’re going to put money down for? It’s hard to get people to pay for it. They have to be needing that. The next thing is, like you said, I try to figure out exactly what they’re doing. I always coach them, “In five words or less, tell me what you do,” and I’ll state that at the beginning of your presentation.
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