Tom McInerney — TGM Ventures

Wednesday, May 25, 2022

Tom McInerney is a full-time angel investor with 120 angel investments.  He shares how he gets into rounds like Clubhouse, Tala, Segment, his view of investing during Covid, and why he spends time hanging out in Clubhouse.


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Tom McInerney is one of the most prolific angels in L.A. with something like a hundred and twenty angel investments. Tom is an investor in Notion, Segment, Bird, Tala, and recently in a very hot Clubhouse round.  Before doing angel investing full time, Tom was an engineer at Apple and then at Sony. Tom, David, thank you both so much for joining us. Thank you. It’s great to be here.

So, Tom, did I.

Was that a fair characterization of your background and of your angel investing? And do you want to share a little bit more? Sure. So I moved to L.A. about 12 years ago. 

I’d come from the Bay Area. And I invest both in the Bay Area and in Los Angeles and occasionally in other markets, but really try to concentrate on those two. But it’s been kind of amazing to see the evolution of of LA tech. Very cool. And there was a thread on I guess there’s a Twitter thread that said like name. Who’s a really who’s the best angel investor in L.A.?

And everyone said, Tom McInerney is so glad to have you on here.

Tell us more about the the the investing that you’re doing. How are you usually coming in into seed rounds?

Is it pre-seed, will you do later stage?

It’s often the first money, maybe not the first check, though, sometimes the first check. But, you know, in the first rounds that that come together for subsequent rounds, they occasionally will invest in the A’s and B’s, but generally try to come in early and and develop a relationship with the founders in the beginning.

And just to be clear, this is your money. This isn’t a fund of some sort. Correct? Yep, my money.

I tried to, you know, take risks and make early bets. It’s typically 50 or 100 thousand. Sometimes twenty five. And. Yes. How did you get started on this path?

I’ve been an entrepreneur and it was pretty exhausting. And I wanted to be engaged and involved. And so I just started doing it. I just started meeting people and and taking pitches.

I think, David, I shared with you and Minnie as well. The second angel deal I saw was airBnB. And I thought, well, I should probably look at a bunch of these before I pull the trigger, which is a big regret for me. But yeah, it’s just you just kind of wade into it. What were your first couple? Let’s see, Segment was relatively early, cause it was I remember it was right when Y Combinator hit.

Was this the early days of Y Combinator? And I remember going to YC and so different now, by the way, you go in there. Last time I went to Y C, I just I didn’t even get in the building. The line was so long, I gave up. There were just I think felt like thousands of people, but obviously pre Koven. But back in the day, Y Y Combinator was six cement metal folding chairs, maybe 30 metal folding chairs, and Paul Graham and his wife, Jessica.

And, you know, I’d say like, OK, everybody settle down, sit down. And then the entrepreneurs would get started.

I happened to catch Segment and they were doing something totally different and they ended up going through two pivots. They were doing something back in the day called Class Metric, where in class students could have their laptops open and if they didn’t understand something during a lecture, they would push a button.

And the professor then would become alerted to the fact that, you know, like 20 out of the 30 people in the class weren’t weren’t understanding what was going on. And he could even have or she could even have a graph of the understanding over time in the lecture and things like that. And it turns out when they gave her laptops in class and spent time on Facebook and had them work, and then they pivoted and tried to make a they pivoted and tried to make an analytics tool.

But in order to make the analytics tool, they created Segment to make it so it was easy to implement the the analytics tool that everyone’s like, we don’t want your tool. We want we want segment. We want the ability to store data and use lots of different tools. This is kind of funny how things evolve.

Yeah. So many great companies, infinite. It’s a long way from doing a couple angel investments and in those early days it yrc to becoming a full time angel investor. And it is your full time job, right?

It is. Yes, it is. And how long you’ve been doing it sort of at that level?

I think about eleven years. I mean, from when I got started and this is one of these things where it really is, there’s an expression that’s the get get rich slow business.

Do you think you’ve gotten better at it? I mean, hopefully you’ve gotten better at it. And can you share some of the things you maybe used to look for, used to do that, you know, you’ve learned from?

That’s a great question, I’ve asked myself that question, I me any better at this than I was standing because it’s it’s full of surprises.

And we’ve talked about this. You know, it’s full of surprises. As soon as you think there’s a rule or a or a, you know, kind of a perspective or something, you get surprised. And for example, with clubhouse, you mentioned that one, I, I very nearly didn’t do that. We covered had just begun. And and then the team there were focused on consumer and social and, you know, looking from the outside, it definitely had a lot of headwinds.

It then a whole lot going for it. And I almost said no, but I was so impressed with Paul Davison. He was the person I interacted with most. And I decide to invest because he is clearly super sharp.

But I think your gut gets a little more fine tuned over time and you’re probably maybe better at coming up with quick nose or or or maybe estimating a market size. 

Can you tell me more about clubhouse? So I’m curious. So, number one, I still don’t have my invitation. And I know David hangs out. Thank you. David hangs out there.

What makes it so special? For the most of our listeners who are not yet on clubhouse, what do you think is a secret there? Yeah, yeah. I think in the end, they have pretty good timing with Koven where people weren’t able to go out and socialize. So it’s a pretty social place. You go into a clubhouse to start the app and you can either join a room or start a room. And then within the room you have the kind of the microphone when you start a room and you can invite people up to speak and then you have an audience and they can raise their hand if they want to, if they have something to add.

But it’s incredibly simple. It’s only audio. And we just talked about that at the beginning in this call. The video adds an extra kind of cognitive load. So it’s audio. So you can be a, you know, in your bathrobe or your underwear. And just having a conversation or in bed or something with someone. And there are people that join from lots of different time zones, for example. And it’s dead simple to use and it allows people to connect.

And I think they also did a nice job with the initial community that they’ve curated. So, you know, it’s it’s there been some kind of knocks on it for being invitation only or whatever. But I think what that’s allowed them to do is control the community so that they just have a good energy to start in. That kind of sets the tempo for the for any kind of social network. I think your initial community kind of sets the feeling and the vibe, and that’s important.

I’ve been I’ve been various very curious about how it’s going to scale from here me too.

That’s the that’s really I mean, it’s the first minute of the first quarter for this business. It’s it’s really the hard work in terms of scaling it and making it work. Well, I’ve heard Paul say that, you know, they’re really super focused on making it so speakers or people that are talking have a secure environment and a good experience so that if they attract good speakers, they feel like the audiences will follow. And I think that’s probably true.

OK, I’m going to work on my invite there. And so so clubhouse was a hot round, as I understand. I wasn’t part of it. But, you know, multiple VCs wanted to lead that.

How did you get involved? Like, does an entrepreneur seek you out to use names, say, oh, this is a company I really want to be a part of? Well, this one, I got lucky I was involved before it got hot, and then incredibly a month later it got hot, which is and it was like a, you know, a 10 X on paper in like might might be one of my best hours ever. But the way I do it. The way I get involved in cool companies is just to have a network of people that are close that I check in with.

And oftentimes, you know, the things come through that. And so I think having a network of good founders and it was another founder that made the introduction originally. It’s kind of an interesting company of our time, too, as you said, like it probably benefited from the fact that we are all locked in our houses right now.

You know, what do you think about the current times we’re in and how that will affect your investing?

I had a thesis going into Covid and now a different pretty significantly different thesis. You know, in the past, you know, months later, the initial thesis was like, oh, my goodness, this is like the Lehman Brothers shock. Or then, you know, the the 2009 financial crisis or or the Great Depression. I was very pessimistic. Singh thought people would be locked in their homes and businesses would be shot. And the federal government has done a good job, I think, with stimulus.

And and then I I sort of modified my thesis when tech stocks start going up and sort of we saw that instead of instead of a withdrawal from markets, there was more of a shifting and the shifting went from airlines and casinos and commercial real estate and industrial companies and probably minerals and other other things into tech companies, things like Docusign and Twilio and DataDog. And so they’re there. In the end, there wasn’t necessarily an outflow in the markets, but rather a shift into tech.

And so my new thesis is this is the this is the comment that killed the dinosaurs. And it is accelerating a lot of the secular trends that were already happening. For example, you know, watching movies at home and streaming and remote work, you know, things like DocuSign, where you just do electronic signatures instead of go in and see a notary and sign sign a bunch of paper. So more and more, my feeling is that this is going to accelerate things that were already happening.

And so it’s it’s made me. Initially, I was very conservative, but but now I’m actually more and more bullish on tech. So it’s it’s probably going to accelerate my angel investing. Yes. I think we’re generally with you, like there’s a lot of. As slow moving industries that are all of a sudden having to be faster moving in. Mm hmm. Exactly. That’s right. And and don’t. And it’s forcing them, you know, they were able to sort of kick the can down the road on digital, take a company like Disney.

They make a lot of money from movie releases. They make a lot of money from theme parks. They make a lot of money from selling toys. But when all that stuff goes away, it makes them really concentrate on Disney plus and digital and digital initiatives. So I think I think, yes, that that this actually forces a lot of companies to accelerate the move to the shift to pure digital. How do you think it affects our lives? So that’s a good perspective from what you might invest in.

But if we’re now doing a lot more digital and we’re we’re not going into the office nine to five, five days a week.

You know, how do we how do our lives change? 

We are inherently social and I think we need to be social. I think one thing I’ve noticed with a lot of friends is this, myself included. There’s kind of a reconnection with nature as well and an appreciation of nature. 

As we talked about a bit of an environmentalist and. But I mean, I think some of the challenges are for people whose jobs were lost or lost in.

This has been very hard on a number of different industries. And I think it can potentially accelerate the gap in income inequality in a number of other issues.

And I’d like to see Tech addressed that if we can. And yeah, I was overall initially pretty impressed with how people came together.

And then in the end, there was sort of there were sort of, you know, the riots and. And then, you know, there was also I think I think Kovik kind of pressurized society.

I mean, let’s let’s talk some about Black Lives Matter, because I’d love to know, you know, some about the conversations that you’re having.

I think a lot of these things that were happening and not being recorded, a police brutality and so forth are now being recorded such that, you know, that that’s a good thing. Right. We want we citizens are being abused by officials, then that needs to be stopped. And that needs first we need to know it’s even happening. And so, you know, you take something that would have been a he said she said and then also and you have it on video and it’s clear as day but happened then that does change the game.

So it’s a it’s a democratizing factor. Yes. You said something, you said tech can help, and I think you were talking some more about the situation with kov IT and unemployment. But I’d be curious to dieser on where you see the tech help beyond just the fact we all have have cameras on our cell phones.

Yeah, it’s it’s I like this idea of distributed work. I like this idea. Imagine, you know, in the future, some period in time you wake up and you just kind of morphed into the future and you have you know, you could walk up to a vending machine by a cell phone and you didn’t know anyone but you you know, with that cell phone, you could start doing work, whether it’s classification stuff for artificial intelligence or image classification or, you know, different Mechanical Turk stuff or or gig economy work.

I like the idea of the of the phone empowering, you know, distributed work. And you asked me a question or e-mail about a gig work. And I’m a fan of gig work because I I think ultimately it provides a lot of flexibility. And I’ve spoken to gig workers. So I think there it can make for an a more elastic employment situation where it can maybe democratize opportunity if it’s done well.

Yeah, I mean, I think I saw that you posted something about eighty five, the the California’s push for gay workers to be felt to be classified as full time employees.

How do you I mean, it’s a it’s a tricky one, right? Because I agree with you. Good work can be very empowering. But how do you still protect workers to make sure that they, you know, aren’t working 40, 50 hours a week and still not able to support themselves? Right. And I guess one simple answer is, if they if there was a better job, they’d be choosing that other job. So if your gig working, like it or not, your alternative is unemployment.

Right. The better job would be the one they’d be doing otherwise. And the worst and the worst thing down from that could be unemployment. So I’d say it’s better than unemployment. And my my concern would be that if you if I mean, I’ve Binish Uber shareholder, I ended up I’m no longer an Uber shareholder. But if they’re losing money, so I don’t see that they necessarily can start to afford to pay benefits and things like that. 

There is a devil’s advocate argument that, you know, that if everybody is subject to the same regulation, then then maybe those companies can charge more. And yes, consumers can decide whether they can still afford it and pay more or not.

And I would agree with you on that. I think that consumers could pay more and and perhaps those companies have been too obsessed with gross, for example. So perhaps they modulate their growth. They charge more and they pay workers more fairly. Yeah, I’m open to that as an alternative. 

So I don’t want to get too into the political stuff. I just I was kind of hung up on this, like, future whereby I’m walking like I wake up in the morning and I just like walk over to a vending machine and it like it dispenses my job for the day. 

For sure. Yeah. You can go to the App Store and choose what you want and what you like. And that would be something I’d love to see tech enable.

Maybe choosing sort of other things that you commonly invest in. I know you’ve done a lot in in AI/ML recently.

Yeah. Yeah. There’s actually one that just very similar to what we talked about. It was kind of an example. I use a machine learning classification system that’s an X, a space X team, former space X team that is building a system where people can do image classification. That’s that’s basically training for training for machine learning and classily classification to help build neural nets for A.I.. And you and you get paid to do it. And actually, I like that the founder founder is an example.

He said you you get in line at the grocery store with no money in your wallet and you start working at this. And then by the time you’re at the front of the line, you have enough money to buy a sandwich or something. That’s probably a little bit exaggerated, but I think there’s there’s some neat stuff like that. And I’ve looked at recently a company doing synthetic data, which is generating like data that is used to train neural networks.

That’s synthetic. Which is helpful because for privacy reasons, you sometimes don’t want to be using real data. And so I think there’s a lot of promise. There is still definitely early days, though. You know, it’s interesting to see which industries are really going to adopt. And again, it’s all about having their proprietary data sets that create really. It’s either having that proprietary does it or creating it, as you say.

I was going to ask you sort of back to investing. You know, you talked there are some investors who who, you know, really like I would call us this kind of investor who really look for markets that have tailwinds in them. And yet, you know, you invest in clubhouse, which you said had had big headwinds.

Yeah, I would say that. I almost don’t look for tailfins, I look for the weird stuff or things that are different in strange things that are, I don’t know, things that are out of favor. I was doing a lot of clean tech investing over the last many years. And and there were, you know, at least five years ago, I’d say clean tech was pretty out of favor. Three years ago. And it’s getting more in favor now.

But it’s hard to even get sandhill species to look at clean tech. So I tried to. It is tempting now, for example, just to continue to do SAS companies like Notion or Segment because they just work when they work, they do work really well. But I try to find the next sort of strange thing that that becomes important. I mean, I’ve had friends that were buying Bitcoin when it was it seemed very strange. And so I think you’re for me, I sort of challenge myself to think of of stuff that’s a little more off the beaten path.

Why can’t we all just invest in clean tech? Why? Just because we always care about David’s also often nature right now.

You know, an end to the problem is I care so much about it.

But where do you think the interesting opportunities to invest in clean tech or just in the environment are?

Yeah, I think I think carbon there will be eventually markets for carbon. And so I think that’s going to be one that’s ultimately big and important.

I think a lot about materials. For example, you know, it is hard to live your life without using plastic, especially now, in fact, with Cauvin, it seems to have gone up.

But, you know, the one time these plastics are frustrating to me to think, well, I just took a bottle of water and this this thing’s gonna be around for like two hundred years in a landfill or it’s going to break down into micro plastics and end up in seafood or the, you know, the water with trains and things. So I think the the consumables and the waste stream, there’s a ton of opportunity to do innovation there.

So let’s let’s sort of move into our final step, which is just like more about Tom’s section here. Tom, I’m really interested in this aspect that you are a full time angel investor. I just don’t meet many people who are doing that. When you think about your your days and your time, how do you are there are there activities that you feel like you spend too much of your time on?

And kind of the converse of that is. Are there things you don’t spend enough time on? And how do you really hold yourself accountable? That’s a great question. I, I, I feel like I spend sometimes too much time on the little things in life. During Covin, I followed those kids constantly doing dishes, three meals a day, basically. But I’d like to spend more time just thinking, just really purely thinking about ideas. And and I find when I take walks, it’s very helpful to think.

But I’d love to be having more great conversations like these over the phone. So I think. Yeah. It’s it’s I think that there’s just a certain amount of overhead to keep your life, keep all those plates spinning in your life that you you spend time on.

So. I love a little more thinking and writing time perhaps, and a little less time doing dishes.

Great. And need anything else from you or tell me anything else you think and would be really useful to cover. Now, it’s just been a real pleasure. Thank you. It’s been fun to see the evolution of ballet and and so great. Grateful to have you guys in the eco system. And thanks for having me on the show. Oh, great.

No, I mean, you’re doing so much for the eco system and you’ve been doing it for a long time and it’s great to get the chance to sit down with you.