The Art of Building a Network: How Rayn Ong Became the All-Seeing Eye of the Australian Startup Ecosystem

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0:23 Maxine Minter: Are you building a SaaS business and looking to achieve compliance with SOC 2 and ISO 27001 or other security and privacy frameworks?

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1:03 Rayn Ong: And for our listeners, Vanta is offering 10% off.

1:06 Maxine Minter: Just go to vanta.com/first. That's vanta.com/first.

1:14 Rayn Ong: Okay, 3, 2, 1.

1:18 Cheryl Mack: Hey, I'm Sheryl.

1:20 Rayn Ong: I'm Maxine.

1:20 Cheryl Mack: This is First Check, part of Day One, the network dedicated to founders, operators, and investors.

1:25 Rayn Ong: If you want to be a better early-stage investor, this is the show for you.

1:28 Cheryl Mack: So TL;DR, if you don't want to suck at investing, listen up. Cool, so let's get started. Maxine, I'm excited. We've got Rain Ong on our podcast today. I think that he has the most startup t-shirts out of any angel investor.

1:50 Rayn Ong: Oh, like hands down. And also like the best vintage of startup t-shirts as well. It's like amazing selection over maybe the entirety of the Australian startup ecosystem. I reckon it's kind of like a vinyl collection. You know, you can like set vintages based on the startup t-shirts he has. But I, yeah, same. I am so jazzed to have him with us. I actually, so Rain was the first person in the Australian startup ecosystem I connected with. A friend of mine connected me with him back in 2018 when I was coming back from the US. And in my prep for meeting him, had a look on Twitter and couldn't work out whether he was a joke or not. So, but it was just like so much shitcanning of the venture ecosystem. And at the time in the Bay Area, like no one was a rent of the startup ecosystem. Everyone was like, it's the best thing. And so I came into the meeting just being like, I don't know how to start this meeting. I don't know whether this is a joke or not. And either it's like the most effective joke and he has become the best investor in Australia as a result of the best executed joke, or it's just a really effective con of the Australian ecosystem. But really it's been amazing to watch. Just how many deals you've done, Rain, how many incredible startups you've been a part of. And so I'm really, really excited to dive in here and learn more about how you think about investing, how you think about, you know, building value in these companies, how you find these companies, how you just like nail depth and breadth. I'm really excited to have Rain with us today.

3:22 Cheryl Mack: Yeah, Rain was also one of the first people that I called when I decided to start angel investing. I was like, I've written a couple of checks, but I don't really know what I'm doing. Rainn, tell me everything there is to know. Go. And he was probably one of the most helpful people. And I think the other thing that I find so impressive about Rainn is that all roads lead to him. He's like this all-seeing Eye of Sauron. And that— [LAUGHTER] You're right. That initial kind of like, is he a joke? Is he not? He just has fun with it. And every time we get to chat, it is hilarious. Although, He could not be real. Like, is, is he really Rain or is his name actually Ryan?

3:58 Rayn Ong: I don't know. The biggest mystery of the Australian startup ecosystem. So, so excited to have you on, Rain slash Ryan, depending on which pseudonym you want to assume today. We are humbled to have you as one of the first guests with us on First Check. And one thing that I have always wondered, given the depth and breadth of investing that you've done, and we'll come to that later, but I really want to know what was the first investment decision you ever made?

4:25 Cheryl Mack: In any asset?

4:27 Speaker D: I can't actually remember, to be honest. It could be one of the early ASX puns, you know, on a listed stock that I had no idea about.

4:35 Rayn Ong: Of course it was.

4:36 Speaker D: I'm pretty sure I lost all my money. That's why the brain kind of protect me from remembering. Maybe it's a self-protecting mechanism, but you know, honored to be here. Thanks for inviting me. And I think you forgot to mention that I also invested in both of you. So it's really hard for me to say no to this invitation. I have never done any podcast recording before, so this may be the one and only.

5:03 Cheryl Mack: One and only. Yes.

5:05 Rayn Ong: Collector's item. You're absolutely right. Like you invest in both of us and it's so amazing to get to partner with you in that way. I mean, to honor what Cheryl mentioned in the little intro, like all roads in the Australian ecosystem lead to you. I genuinely think that you get to see every single deal that gets done in the Australian ecosystem from pre-seed to like maybe Series B, super impressive.

5:27 Speaker D: I think you have fallen victim to our marketing, you know, campaign. It may be true, maybe, you know, in the early days, like 2015 to 2018, but I don't think anyone can see everything now. It's just, —too vibrant, which is great.

5:45 Cheryl Mack: What about your first startup investment, Rain? What was that?

5:48 Speaker D: I actually look at my spreadsheets. My first money out of the trust account was actually the Blackbird Calls.

5:55 Rayn Ong: Really?

5:56 Speaker D: Yeah, and in my first year, I've done 8 investments. That was 2014. One has shut down, one I haven't heard from them for a while, and then we have Blackbird and Instaclustr in there.

6:09 Rayn Ong: Wow. And Instaclustr went amazingly well.

6:11 Speaker D: Yeah, they were acquired last year for $500 million USD.

6:15 Rayn Ong: Love that.

6:15 Speaker D: Was a pretty good outcome.

6:17 Rayn Ong: Yeah, that's a great outcome.

6:17 Speaker D: Everyone involved, yep.

6:19 Rayn Ong: Yeah, that's super cool. I thought it's really interesting that the first kind of call out of your trust account was Blackbird Fund 1. Like if I think about the development of the ecosystem, that's almost like ground zero.

6:32 Cheryl Mack: Oh, for sure.

6:33 Rayn Ong: Right, that might be like the first deal done.

6:35 Speaker D: Yeah, I think that I was at the right place, right time, meeting the right people, pretty much. So the story was, I was activated to explore angel investing, and I have no idea how to do it. So I went to this Innovation Bay event called Angel Education, Angel Ed. Funnily enough, I sat next to Nicky, and he told me about Startmate and Blackbird, and back then he was raising the first fund, I will be the last 5 people that went into the fund right before the final close. So when I paid the call, I paid 3 calls in one go. I have to do the catch. Ouch.

7:12 Rayn Ong: Yeah. Wow, that's really, that's incredible.

7:16 Speaker D: Turns out to be the best investment of my whole life, I reckon.

7:19 Cheryl Mack: Did you know that or have a sense of it at the time?

7:22 Speaker D: Well, to be honest, I have no idea how it works. There's also a funny story. When Nikki introduced me to Rick, I actually brought my resume to the office and pitched Rick who I am and asked him to take my money. And Rick actually said, this is not how it works, right? We have to pitch you so you give us your money. So that was how green I was. I would attribute this to pure luck.

7:48 Cheryl Mack: I would love to see what was on your resume at that time.

7:51 Speaker D: Yeah. Yeah, software engineer for 9 years. That's my resume.

7:56 Rayn Ong: That was your resume? It fit on an A5 piece of paper.

8:02 Speaker D: It was literally 2 pages.

8:04 Rayn Ong: I mean, kudos to you for fleshing out 9 years of software engineering into 2 pages. That's impressive. One of my observations and from our conversations in the past is that you have done an amazing job of cultivating a network that filters you the best deals and gives you early look at the best deals. I mean, I know you humbly said before you think we're victims of your marketing material and like maybe you are the marketing material I'm a victim of here, but I do, my observation is I have seen your name or Archangel's name on like incredible deals and most funds in the ecosystem. So we'd love to know from you, how did you think about from those early days, like meeting the right people, fostering the right relationships? So that your network compounds for you and sources deals for you?

8:52 Speaker D: Yeah, I think the zero to one journey was actually not easy, right? I think for, not just for investing, but for businesses in general. The lucky thing for me is I started around 2014. And as you know, back then it was pretty barren.

9:08 Cheryl Mack: Yeah.

9:09 Speaker D: There was not a lot of stuff happening, not a lot of funds actively investing. So it's actually, it was actually possible to go and say hi to everyone and build a relationship, right? So what I did back then was I was introduced to this group called Sydney Angels, and that was a very good group for my discovery and learning process because they have workshops about due diligence, how to run a deal, how to run syndicate, how to do due diligence and whatnot. You know, you can just sit there and watch how other people ask questions and run a deal and just learn from it. So that was really beneficial for me. And if you ever invest in a company and you look at the documentation, you see 3 other investors whom you have never met, it's quite easy to reach out to them, "Hey, we're in this deal together, I'd love to catch up over coffee." And if you do that for a couple of years, I reckon you would have met every active investor in town. But then what I really quickly noticed was most of the investors are older than me, and most of them have finance or legal background. So I have 9 years of software engineering experience. So that was also, I think, the point of time where I figure out what do I bring to the table and how do I make sure, you know, people look me into whichever amazing deal they're doing. So I actually started doing technical due diligence, interviewing the CTO, sourcing the CTO, and also landscape mapping of potential competitors, similar software. And, you know, as you can imagine, the finance and legal people were like, oh, this is amazing, right? We should ask Rayne to come and have a look at this. So that was kind of like my entry ticket to a lot of the deals conversation as a relatively new and unknown person. Okay. But you know, it's gonna be a little bit harder because there are way more players now. And I think there's still a chance that if you build a specialization into a certain vertical and you kind of dominate, you can still use the same principle to get into deals that way.

11:19 Rayn Ong: Absolutely. I think one thing I think a lot about is like compounding as a concept, the value of compounding in many different categories, but especially in investing. And compounding in relation to networks is as valuable for early stage investors as it is, you know, as it applies to kind of compounding value of the assets we're investing in. And so the way that you kind of consistently did the same behavior of kind of following up and meeting the right people and then compounding on those relationships by working out what the unique value proposition is to those groups and then delivering value and then meeting more companies, investing in more companies, you know, reaching out to more investors and that cycle continues for you, I think is super interesting. And it's clearly been really effective for you.

12:05 Cheryl Mack: I think you're right, Maxine, in, in the sense that like that might've been really easy for Raine to do in that particular instance back then, but it's not that you can't do that now. Like if you find your niche and continue to create the same actions in the same space, it will create compounding effects as you grow into the ecosystem. And if you're just starting out, just because the ecosystem is much, much larger than it was back when Rain started doesn't mean that you can't still create that compounding effect.

12:31 Rayn Ong: 100%. Yeah. I mean, Rain definitely had a head start by starting at the dawn of time.

12:36 Cheryl Mack: An advantage.

12:38 Maxine Minter: Yeah.

12:39 Rayn Ong: But I do, like, I think that that is still an insight and still a strategy that works. And I think all you have to do is think about the kind of more developed ecosystems like the US, like the UK, like Israel, and see that there are still new investors entering into those ecosystems, kind of getting cut through and carving out really effective niches in those ecosystems as the ecosystem continues to grow.

13:02 Cheryl Mack: Yeah.

13:02 Rayn Ong: But I think, yeah, it's super cool to hear that's kind of your ground zero and how you kind of continue to execute.

13:09 Cheryl Mack: Yeah, 100%. On the other side though, like speaking of like finding niches, one of the things that I love about what you do, Rain, is that you invest like literally across the board in terms of industries. So I'd really love to hear from you, like how do you evaluate and look at like a company like, Morse Micro, a microchip company, in the same day as like an alternative meat company like Vow? Like, how are you investing across those industries at the same time?

13:32 Rayn Ong: It's so incredible.

13:33 Speaker D: I don't think anyone can be an expert in every field. So our approach has always been who are really good in certain fields and, you know, do we trust them enough? I think in the case of Morse Micro, that was highly dependable on a guy named Neil Westie, and that, that was the guy that, that written the textbook on Wi-Fi chip pretty much. And I got the chance to work with the MOS Micro team through the Startmate program, so I got to know them relatively well. And when they pitched Neil, I think Neil not only invested in the company, but he also joined the team. So that was a pretty strong signal for me to do something there. And with VOW, you know, I would say it was mainly Alfred Low, right? And my friend, he's running Harvestbee now, and he has been working with George at Cicada Innovation on commercializing deep tech and devices. So when Alfred invested, you know, there are quite a few individual in the local ecosystem that I'll just follow blindly, and Alfred will be one of those people. But, you know, like, back to the point on how do you evaluate, I think most of the people, they spend too much time on diligence on what if I lose my money, whereas I will focus a lot more on what if this works. And I think that's crucial if you are investing in the very early stage. Yeah. The way we minimize risk is that we write a very small check at those stages, early stages, and then we try to learn and work with the team over time before we write a medium-sized check and hopefully eventually a large-sized check. And I think the concept behind that is you lose small and you win big, but you get that information over time.

15:33 Rayn Ong: Super clever. It makes me think of the AngelList team and Maiden Lane. This is a strategy that they have used really, really effectively, that kind of informational check. So you write that first check with an opportunity to learn and then kind of double down on the folks that are winning. How do you think about that double down decision? Because there's also some interesting data in the other direction that it can be really hard to make an effective decision on the double-down decision and you don't get swayed by the sunk cost fallacy, right? Where there's a company that's kind of like almost there or they were pretty good at executing but not amazing. You know, how do you make that decision on what you double down on and make sure you don't fall into that trap?

16:20 Speaker D: I think it depends on the sample size, you know? So we look at the cohort base, like say if I do 10 deals a year, And next year, if you tell me 5 of them look really good and justify a double-down follow-on investment, I don't think that is true. Like, in my personal experience, there may be 5 kind of bridging opportunities, but there will usually only be one that kind of blows everything out of the park, you know. And when it happens, it's super obvious, right? So we have Eucliptus in the portfolio. That's a, you know, over $100 million revenue company in 4 years' time. So when that happens and you look at the same cohort of other 9 companies, it's very obvious that that's the breakout company in that cohort.

17:07 Cheryl Mack: But you're not often looking at those companies all at the same time, right? Like they, they raise their follow-on rounds at different times. It's not like all 5 of them come back to you at the same time and you can compare. So like, how do you identify that's the one over the other 5?

17:21 Speaker D: I think if you kind of group them by vintages, right? Say 2023 investment, we'll do, you know, 10 of those. And then next year, probably 9 of those will come back for more money. And not at the same time, but, you know, probably across 2024, right? Because they have 1 or 1.5 year runway usually. And you can kind of go, right, which one is stronger as they start to, you know, have that conversation about the second investment round. And then, you know, we also have 9 years worth of historical data to refer to and some benchmark data on how fast can a company grow. And when you see an outlier, it's super obvious.

18:05 Cheryl Mack: Hopefully to everyone else. Yeah, I know. I'm like, you're saying it's super obvious, but—

18:09 Rayn Ong: Yeah, I was gonna say, like, for Rain, you're just so, like, you're excellent. You're really good at making those decisions and making investment calls. And so I think like super obvious for you and discoverable to the rest of the population, you know? Yeah.

18:25 Speaker D: But I'll give you a concrete example, right? Say I've done 10 deals in 2019 and one of them is the crypto game called Steppen.

18:35 Cheryl Mack: Yeah.

18:36 Speaker D: Right, and after they launched the game, they actually make $20 million USD profit in one quarter, right?

18:43 Rayn Ong: Wow.

18:43 Speaker D: That is very obvious compared, you know, like, all the other companies, they struggle to get to $1 million recurring, right? So when that happens, you can tell for sure that is a different company. So that's what I meant, like when the breakout happened.

18:57 Cheryl Mack: All right, so it's the really big outliers.

18:59 Speaker D: Yeah, yeah, it's super obvious, but you'll probably get like 5 bridging opportunity, like you said, right? Like, oh, they only need another couple hundred K to get this deal across the line, and then, it will start to look like a strong company. So we do factor that in, you know, do we pro rata, do we bridge this company? But when we— I think where we actually make a lot of money is we pay attention to the breakout and we go heavy. Like, I normally write $25K when I was into investing, but when I see a breakout, you know, I can do $250K into that same company. And it's quite counterintuitive to investor in other asset class, right? For example, if you buy like a listed stock on, on ComSec, right? Like you buy it for $1 and then 1 year later is $2. Most people will sell the holding, right? But in our case, we buy triple the amount at $2. And that's because the context of the business have changed, right? They may be doing $1 million rev and now they're doing $2 million rev with a pipeline of doing $4 million very soon. So then, is it cheap or is it expensive? You know, it's all about context. And what I love about angel investing is you actually get, you know, information from the management team and the founding team on what they're working on, what are the progress they're making, and what are the directions they're heading to, you know, versus there's this like personal kind of information access and relationship that that you could leverage versus like a listed company and you are going against, you know, a team of 60 analysts from Goldman Sachs, right? Like how can you find information asymmetry to make, you know, an informed investment decision?

20:49 Rayn Ong: I think that's a super interesting point. And especially because investing in these early stage businesses, so everything from kind of pre-seed up actually is a very different evaluation and assessment methodology than in many other asset classes. I have found having the huge privilege of kind of listening to you assess opportunities and kind of the way that you think about opportunities, I have been blown away by the breadth of analysis you are able to do kind of across different asset classes. I think in the prep for this show, Cheryl was telling me you've been long on Ginger. You own like a couple of thousand You got $3 grand in ginger, like actually the root. Ginger, not the company, the vegetable. I would be super interested to hear from you how you develop heuristics across different asset classes and kind of work out what really matters and develop the way you think about investing across those different asset classes and kind of how that informs your skills of investing in venture.

21:53 Speaker D: Yeah, good question. I think I think it's about what you mentioned earlier, the compounding effect, right? If you look at business model day in, day out for 9 years, you can start to see pattern that emerges. Occasionally you see something super special and then you get excited about it. But I think Ginger is actually, I'd rather not talk about this because I cannot get my hands on more Ginger now that it's not like a secret.

22:22 Cheryl Mack: So what was it that was special?

22:25 Speaker D: So it's a startup called Invest in Your Farmer. I think Investable invested in the last round. So we look at the company and I'm actually like a farmer at heart, right? I love gardening, I love trees, you know, I love agriculture. And when I saw that, I actually started to make some investment into some opportunity, opportunities on the platform. And, you know, it's interesting. It's actually less risky. And, you know, sometimes they yield better than venture outcomes. So for example, Ginger can yield 29%.

23:02 Rayn Ong: What?

23:03 Speaker D: Annualized, right? And if you get a good year with low supply, you can yield double that.

23:09 Rayn Ong: Wow.

23:10 Speaker D: So why not, right?

23:11 Rayn Ong: Yeah.

23:12 Speaker D: But, you know, the problem is with volume, right? Like, it's about diversification. You put a little bit, provided it's not hard to manage, right? You put a little bit of money into many different things, right? And you have like guaranteed return, you have asymmetrical return, which is angel investing, and you have very niche ginger 29%, you know, annualized return. And then you have a diversified portfolio, right? So I am sensitive to money-making opportunities. So when I see something, I'm always interested to put a little bit of money to test it out. If it works, then, you know, we'll increase the exposure.

23:53 Maxine Minter: Are you building a SaaS business and looking to achieve compliance with SOC 2 and ISO 27001 or other security and privacy frameworks?

24:01 Rayn Ong: Compliance can unlock major growth and build essential customer trust, but let's face it, it's usually time-consuming and expensive.

24:07 Maxine Minter: And like really kind of a pain. That's where Vanta comes in. Vanta automates up to 90% of customer compliance tasks, making you audit-ready fast and saving you up to 85% of the associated costs. Plus, Vanta scales with your business, offering a market-leading trust management platform to continuously monitor compliance, unify risk management, and streamline security reviews. Join 7,000 global companies, including Atlassian and Dovetail, that trust Vanta to build and improve their security in real time.

24:33 Rayn Ong: And for our listeners, Vanta is offering 10% off Just go to vanta.com/first.

24:38 Maxine Minter: That's vanta.com/first. Incredible.

24:45 Rayn Ong: So wait, how deep are you in on Ginger? Only $3,000.

24:49 Cheryl Mack: He wants more. Yeah.

24:51 Rayn Ong: Is that, is that your current exposure? It's $3,000 and you can't get more?

24:54 Speaker D: I think it's around $3,000. But you know, nowadays when the opportunities hit the platform, like when I see it, it's already sold out. So. I hope not many people install the app after this episode.

25:06 Cheryl Mack: We'll try to keep a lid on it.

25:07 Speaker D: Right. Or maybe I should share my referral code.

25:10 Cheryl Mack: Yes. Yes. What's your referral code?

25:12 Speaker D: I'll make money from the referral code.

25:15 Rayn Ong: Right. Yeah.

25:17 Cheryl Mack: Well, the other thing is when we asked, cause I told you about this episode and how we were going to talk about the Ginger and the fact that you've also invested in Propeller Aero and a few other interesting companies like Vow and Morse Micro and and we wanted to understand the mental models. And you said the common theme is anything that grows, which again, I feel like is a little bit like your, well, when you see breakout companies, it's super obvious, but we'd really like to understand like, what are the signals that tell you whether something will grow or not?

25:44 Speaker D: I think there are like critical points for each business model, right? When it's consumer-facing, you wanna understand we have a very small population in Australia. So, you know, how do you acquire customer And is there a recurring component? That's what we are, you know, we normally look at. With business-to-business solution, we look at who actually pays, you know, and then what's the return of investment? And how do you attribute success to your product, right? If you cannot answer this question clearly, it's gonna be quite difficult to sell to the customer. And then, you know, that will kind of like slow down the revenue growth. So, you know, it really depends on the business model and and what niche it's in. And because of previous experience, it's kind of like, you know, you have a leaking bathroom and the plumber comes here and then they know where to look because they have went to like 1,000 jobs before. I think there's a little bit of that in play here as well.

26:43 Rayn Ong: Yeah, I think it's a bit like the role of instinct in early, especially early stage investing where it's so kind of information light. But I actually think this is the case kind of all the way up. The kind of asset class trajectory, but I'd be super interested in how you think about how much of it is instinct and how much of it is evaluation and how you think about instinct in decision-making for specifically your startup investing.

27:09 Speaker D: I'll answer this question differently. I think we can start by profiling the investor profile in the ecosystem. I think you can loosely categorize people as good pickers, you know, really good at evaluation and picking teams. And then you have good fixer, right? Fixer normally goes in and make things happen. And then you also have the fundraiser, you know, that can get revenue in or get investment capital into the business. Sometimes we'll make an investment by just looking at, do we have something special that can make things happen faster, right? For example, right, we'll look at a deal and we have an investor in the fund that actually owns 80% of the market that this company wants to sell to, right? That's a strong power that we have. And if we have that power, that makes the investment quite low risk in a sense, right? And then because of the relationship with other bigger funds. So, you know, when I was investing $25K into early-stage startups, like, and they need to raise $500K, for example, I often was the one that worked with the founder and talked to everyone to raise the remaining $475K. And because of that exercise, I pitched to, you know, rich people, active angel, active funds, all the time. And then I hear about their objection or their excitement, right? If they're excited, they join the round. If they have objection, they raise their concern. And if you do it for 9 years, you kind of know what other people would like to see and want to see, you know, to get comfortable to join around. I think that's quite important for the fundraiser, right? So when we see a deal, we can go, yeah, this round of money can get them somewhere and if they can get there, I know I can raise the next round. That also makes the deal, you know, much lower risk in a sense. So it's about the combination of all those things, you know, for— it's not just, oh, this PDF, right? Do we do— is this a good deal or no? I think there are multi-layer consideration when you come to an investment decision.

29:27 Rayn Ong: That's wild that you went along to pitches. At that early stage? What percentage of your portfolio do you think you sat in on their early pitches?

29:36 Speaker D: I would say early days, yeah, most of the companies, like they are active and passive, right? Passive will be, yeah, Maxine is in this deal, she has done most of the work, you know, I trust Maxine, I'll put $25K in. And then there will be deals that I've originated myself. You know, I've done the coaching on the storytelling, you know, verify the numbers, and then I bring it to market and ask my friends to invest, right? And in those cases, if something goes wrong, my friends would expect me to roll up my sleeves to fix the problem.

30:09 Cheryl Mack: Yeah.

30:10 Speaker D: If you do that for a bit, you know, you kind of can understand what are the common problems that early-stage startups face, right? In the first year especially.

30:19 Maxine Minter: That's super interesting.

30:20 Rayn Ong: You essentially are getting like 90 reps.

30:22 Speaker D: Yeah, it's also interesting, right? Because founders, they raise, a round of capital and then they don't raise for another 1 year or a year and a half, right? And then it doesn't make sense to them to map the landscape, talk to everyone, build a relationship, go through the pitch and DD and IC process every time. If we can do that constantly and become a plug-and-play kind of model, so you go, we invest, but we guide you towards that, and the next round can happen pretty you know, low friction in a way. Like it's a win-win, right? You don't spend 6 months trying to do what we do every month.

31:04 Rayn Ong: 100%, yeah.

31:05 Speaker D: Yeah, that is actually a very strong proposition, right? Especially in a very competitive round that we actually pitched the founder, right? You raise the money once, I raise money almost every month. And I know the active angel for this round, I know the active funds for the next round, I know the active international funds for the round after that. And I'm constantly talking to them about different things, right? You don't have the bandwidth to do that.

31:31 Rayn Ong: No.

31:32 Speaker D: So why not let me specialize this and partner with you? So I think that's kind of a way that we position ourselves. And we are everybody's best friend, right? We are angel investors' good friend in the same round. We are bigger funds' best friend because we surface, you know, the strong companies from the cohort of 10 to them next year, right? So, you know, again, back to the point on what do you bring to the table, I think we do that one job particularly well and consistently over time.

32:03 Cheryl Mack: That's super interesting.

32:05 Rayn Ong: Yeah, it compounds for me, like so many of the threads we've been talking about here, which is the like, know where you add value, lean into that and do that really, really well. And do it consistently over time and compound on that over and over again. And you just continue to carve out a really defensible position as investors and add a lot of value to the founders. 'Cause you're exactly right. Like the number of investors I've heard, which kind of use the trope of, oh, we are repeat players. You are, you know, only doing it once every year and a half. Like we can be really high value at your funding round. And then when the rubber hits the road, they make like 3 intros and they're like, best of luck.

32:42 Maxine Minter: Yeah.

32:42 Rayn Ong: It's like not the same. Whereas, you know, what I'm hearing from you here is actually that you're probably between like 10 and 40 reps in any 12-month period of getting in and like actually helping and getting that information along the journey. Super cool.

32:58 Speaker D: I'm not saying that we have a 100% hit rate, right? Sometimes there are deals that we just cannot make happen.

33:04 Rayn Ong: Sure.

33:04 Speaker D: But we do try to set expectation upfront and we communicate with the founders that, you know, we invest a lot of small check into many companies. But you need to hit the performance hurdle so then we can help you raise the next round. Otherwise, there's no ingredient that we can put into the story, even though we have a loudspeaker that can amplify the story. It's just not a good story. So I think setting expectations upfront and letting founders know exactly what they need to deliver is quite important, especially with our model. Right. A lot of small check, but, you know, maybe half medium check. And then, you know, and then maybe half again for the big checks. So not everyone will get the same amount of love unless you are a breakout.

33:53 Cheryl Mack: Yeah. What I think is also really interesting is that that part is de-risking. Like it's not just adding value to the founders and getting you the best deal flow. You actually talk about it de-risking your investment. Like if you already have an investment where their customers could potentially be some of the other, like, a new company's investors, and that helps de-risk, or customers, and help, that helps de-risk it for you. That's something that, like, I don't know if I've ever really thought about that, Maxine, in terms of, like, using my current portfolio to think about how that de-risks a new potential investment. Have you?

34:25 Rayn Ong: I definitely thought about it. My portfolio is, isn't as extensive as, as you two. I mean, Rain, I think you're currently, like, over 100. Yeah, but I do, I mean, I, I am thinking about it for co-ventures, you know, kind of within the fund, and I think kind of standout folks that do this really well that I think of are the YC cohort.

34:45 Maxine Minter: Mm-hmm.

34:45 Rayn Ong: They actually will like actively be investing in companies where the customer or the ICP of the investment that they're making is other startups and they kind of amplify it through bookface and those kinds of things. So it can kind of de-risk that first, you know, $500 to $2 million in revenue. I also, there's a bunch of funds that do this that are like specialist funds in the US. That kind of seek to de-risk that top-line revenue or de-risk some key part of the business. And I think it's really clever in that it's excellent for founders because it helps them kind of not have to recreate the wheel on an area. Um, and it's excellent for LPs because you are, you are getting a return that is compensating you for risk, but the risk you're actually taking is, is less as a result of participation in that kind of investor. So I think it's super clever. Out of interest, how did you develop it? Like, how did you work out that this was something of value and that it would de-risk the investment? Did you kind of develop the strategy and then implement it, or was it a bit more of a kind of bottoms-up iteration?

35:46 Speaker D: Yeah, I think it's quite organic, like one step at a time, and then you discover, oh, this is actually working, right? You try everything once or twice. If it works, then you double down on that, and then eventually You figure out a model that works well and it's quite hard for other people to replicate. It's quite similar to the journey of a lot of the startups as well. I think portfolio synergy is definitely a thing. I think too many investors, they evaluate opportunities on a deal-by-deal basis. So sometimes we look at an opportunity, we go, okay, this may not return venture scale, but this is a critical piece to a lot of our other companies, right? And if combined, you know, the other companies can make, you know, $20 million revenue because of this. It doesn't matter if we lose $25K on that investment, for example, so that, you know, the company can make something valuable, you know, and boost the whole portfolio. And I think a lot of people don't make investment decision that way.

36:48 Rayn Ong: Yeah, I don't think I've heard of that. Before in the ecosystem. Have you, Cheryl?

36:52 Cheryl Mack: I mean, I'm listening to Rain and I'm wondering if Aussie Angels was that investment. Like, yeah.

37:00 Speaker D: Yeah, they're ecosystem player for sure, right? And what gives people power?

37:04 Cheryl Mack: Like we're an ecosystem player.

37:06 Speaker D: Yeah, like it's, I think it's a critical thing because, you know, it actually creates opportunities for more people to have an opportunity to have a go, right? Like otherwise, Yeah, there are lots of people that want to get involved with no means to. And I think to look at the volume, you know, you need that model to make volume happen, right? And do we want that to happen? Yes. If it happens, is it beneficial to us? Yes. Is there a potential that we make money? Yes. And that's an easy investment decision. And can we concentrate too much? Probably not yet until we start to see, you know, where, where the growth curve starts to become more obvious.

37:51 Cheryl Mack: That's okay. We're like the ginger you can't get anymore.

37:54 Rayn Ong: Yeah. Yeah. So how do you think about competition across your portfolio with that methodology, right? Like you are so prolific at this point, like between funds and direct investments and plus your work at Archangels, how do you navigate competition across your portfolio? Do you care about it?

38:13 Speaker D: Competition and conflict. So I am not actively making personal investment anymore except for ginger.

38:20 Cheryl Mack: Not potatoes though, right, Rainn? Just ginger?

38:23 Speaker D: If potato yield more than 29%, I'll definitely have a look, right? The process now is every deal goes through the fund. And if the fund pass and I really absolutely want to do it, then I can do it. Through my personal account, but it creates conflict, right? Like if I lose money, it's fine. But if I make a lot of money and my investor in the fund, they don't get the upside of that, it's really hard to explain to them, right? So I'm doing less and less direct investment nowadays. But in terms of competition, we want to align for a good founder experience. So when we look at chat to founders that are working on something similar to one of our companies, we normally disclose that upfront. And so that, you know, there's no bad feelings, like I'm trying to, you know, get proprietary information to feed it to my investee companies. And I encourage them to share as much as they want to, knowing that, you know, we have exposure in a potential competitor.

39:30 Rayn Ong: Yeah, I think that's a great strategy.

39:33 Speaker D: Yeah.

39:33 Rayn Ong: Yeah. I think especially in the ecosystem, the number of times you hear from founders, right, that they're either nervous of sharing information because they're scared of people stealing their idea, which I have a bunch of opinions on, or that, you know, they've had an experience where they felt like they shared something with someone and that information then leaked out. It's super important to be careful of the information we receive as investors for exactly that reason. Information is such a weird substance in that respect, you know, like it's impossible to know at the outset that it will be valuable to someone else necessarily.

40:05 Speaker D: Yeah, it's what you do with the information. And if anyone gets hurt, you know, I think that's usually not good and you want to avoid those kind of conflict as much as you can. Yeah, absolutely.

40:18 Rayn Ong: As you're thinking about where you are exploring next or where you want to take your kind of investing journey next, what do you get particularly excited about? At the moment, both asset classes and stages and particular trends. We'd just love to hear what you're kind of roving on next.

40:34 Speaker D: I think the natural pathway for an investor is to do a small core fund and then do a medium-sized core fund plus a big follow-on fund. I'm not sure I'm built to running a follow-on fund 'cause I'm, I'm not a late-stage person. My business partner Ben Armstrong is. So I think it's quite complimentary that he's looking after a lot of the bigger, later stage follow-on decision, even for this current fund. I think I'm well built to do the really early stage gut feeling, 0 to 1, what if this work kind of investment decision. Yeah, I think one step at a time and see how it goes from here. We need to make a good portfolio to bring it to market and raise more money down the track, right? Yeah, if that become a reality, then we'll design the marketing campaign around that, you know, and you may start to see my brainwashing activity on LinkedIn again.

41:31 Rayn Ong: Yeah. And then I will take that marketing message and swallow it whole by the sounds of it.

41:37 Cheryl Mack: So as an LP in the Archangel Fund, I can say that like Rain's YOLO portion of the portfolio probably was one of the things that like hooked a number of people. Like they were like, hey, I want to get in. They'd come up to me and be like, hey, how do I get on Rainn's YOLO portfolio? And I'm like, that's the Archangel Fund. And they're like, yeah, but like Rainn's YOLO portfolio. I'm like, yes, yes, you can get in through us. We're running a syndicate on it. Don't worry. But like, that was what they were interested in. It wasn't like they had no desire to like be part of— well, they understood like Archangel, but like that was the piece that was getting them excited. And so Rainn, when you talk about like, well, I can't really write stuff, stuff personally anymore because LPs, and again, I'm one of them, want to be in that yellow stuff that like it's gut feel for you. You've, you know, you're, you're kind of the zero to one, like instinct, write small checks and double down person. I think you've done such a great job of, of doing that so far. And, and LPs are not going to be disappointed. At least I hope we're not, because I'm one of them.

42:36 Rayn Ong: Right, right. I, when I kind of zoom out here for a moment and look at the kind of arc of your investing journey from the, kind of first listed stock all the way to now. What strikes me is the kind of entrepreneurial way that you've actually approached your investing journey.

42:53 Speaker D: Yeah.

42:53 Rayn Ong: It's very kind of like bottoms up iterative. You've taken some big swings, you've done things differently. You know, when everyone said zig, you just went zag and have shown that it really works. One of the questions that we ask all of the folks that join us here on Burst Check is what was the biggest cojones moment for you? What was a moment that you feel like you did something really brave and you're super proud of it?

43:18 Speaker D: As in the investment, what, along the investment journey?

43:22 Rayn Ong: Yeah, along the investment journey or on your kind of the way that you think about investing, if that's what jumps to mind, or you can go off-piste if you like. And if there's other categories.

43:30 Cheryl Mack: Anything in life, Rain.

43:32 Rayn Ong: Yeah, I would love to hear about it.

43:33 Speaker D: Yeah, I think very recently, I personally bridged, like a relatively bridge round because no one, like most people don't believe in the potential that the bridge may work. That was quite uncomfortably big kind of bridge as a single person. But so far it's looking good, but it was quite stressful for me when I did that.

44:01 Rayn Ong: Dang, you personally bridged an entire investment round.

44:04 Speaker D: Wow. Yeah, 'cause one thing that I love to do is to tell people, I told you so, right? 10 years down the road.

44:12 Cheryl Mack: How many times have you gotten to say that, Rainn?

44:14 Speaker D: The funny thing is I don't think many people actually are aware that I tried to raise a fund back in 2018. I couldn't get a fund up.

44:24 Cheryl Mack: Yeah, and you couldn't get more than $10 mil, right?

44:26 Speaker D: I got to like $8 million and not a single cent more after that, right? So in hindsight, that was probably a good thing because I failed to realize how much of a back office admin and operations work are required to run the side that you don't see, the not fun side.

44:46 Cheryl Mack: The side that I see a lot.

44:47 Speaker D: Yeah, I'm actually glad that, you know, we have a team to run that part, you know, very professionally. But then some of those investors that say no to me, they join the 22, RKU22 fund, right? And one of them actually screenshotted my pitch deck from 2018, right? There was one slide that I list out all my investment and he actually highlighted all the big outcomes, you know, from that slide. But back then it was not obvious, but it's obvious now. And I say, I told you so.

45:23 Cheryl Mack: I told you so.

45:25 Speaker D: Yeah.

45:25 Rayn Ong: That must have felt so good. So good. I love it. Well, Rain, thank you so much for joining us. That was— It's just the best. True to form, I feel like every time I have a conversation with you, I learn something new and you performed right against that today. You did not disappoint. So thank you so much.

45:44 Speaker D: Thanks for having me. Great to hang out with you guys.

45:46 Cheryl Mack: And here's to all the future "I told you so"s you get to say, Rainn.