LEE EINBINDER ‒ NYA MEMBER SPOTLIGHT

Lee Einbinder spent his career as an investment banker working closely with many of the worlds largest financial institutions, providing strategic advice on mergers and acquisitions and capital raising. Read this exclusive interview to learn about what makes NYA the best angel investment organization in the country, why startups should not fundraise immediately, and how he started the Lehman Brothers FinTech group.

How did you become an angel investor?

I have been interested in venture capital for as long as I can remember, probably since college. I was always drawn to technology and venture capital, but ended up spending  much of my career focused on large corporations. During the late 1990s, the first dot-com boom, I started getting more involved in early-stage tech companies. When I left a large investment bank in 2019, I again became more active with early-stage businesses as a principal, raising over $500 million to invest in FinTech companies to take public through special purpose acquisition vehicles, and through direct angel investing on my own.

Why did you decide to join New York Angels?

I had known several members from various parts of my life, including school and work. What makes New York Angels different is that, for an angel group, it is really a well-oiled machine. The process is strong and very well established.

The group is also very diverse. You might expect a New York-based angel group to be made up mostly of former Wall Street people like myself, but it is much more diverse than that. You have health care professionals, marketing executives, technologists, former CEOs, and people from many different backgrounds. In angel investing, you need that diversity of experience, and I think that is what makes NYA so special.

I have been involved with other angel groups before New York Angels, and really believe New York Angels is the best angel group in the country.

What has been your most memorable experience as a New York Angel?

I have only been a member for about a year, so I do not know if I have one single standout moment. What has been memorable to me is that New York Angels really feels like a special community. There is a strong sense of collaboration, and the marketing around the organization helps foster that sense of community and success that we have had. Whether it is a fall gathering, educational events for members, or a session like the recent panel with David Rose and Dave Berkus, who are two of the pioneers of angel investing, those experiences have all been memorable.

I have also seen the group come together around specific portfolio situations. In one of the new investments I was involved with, there were some challenging aspects of exiting the investment, and NYA members collaborated in a really impressive way to find a reasonable solution. That kind of community and support is what stands out to me.

What do you look for when you are investing in a company?

With angel investing, it’s pretty simple in some respects. It’s all about the people. I tend to form impressions quickly, and within the first five minutes I usually have a sense of whether it is a company I like, often based on the founder who is presenting. You are not always right, of course, but there is a first smell test that matters.

With early stage investing, people are the most important factor, not only because of the small teams,  but most successful early-stage companies will need to pivot at some point. A company can have the best business plan in the world, but if it does not have the right people behind it, that plan will not be enough. And sometimes the founder ultimately leaves, which is not uncommon, so I like to see a good team behind the founder as well, including advisors and board members. The business plan, TAM, product-market fit, and go-to-market strategy all matter, but the people matter most.

I also like to see founders with substantive prior experience related to the business they are building. A personal connection to the problem can be valuable, but I especially like founders who have relevant domain expertise. And if a founder has had successful exits in the past, that is meaningful. The data tends to show that success in prior exits improves the odds of having a successful investment, even if it was in an unrelated business.

What do founders appreciate most about working with you?

I spent my career advising mostly large companies, and some small and mid-sized businesses as well. I think that experience and intellectual capital are worth something. I have been on boards, advised boards, and worked extensively in financial services and FinTech, although I have worked across other industries as well. There are sectors, like healthcare, where I may be less qualified to give specific advice, but I can still offer good corporate guidance on strategy, financing, and maximizing the potential for a successful exit.  I think founders value my prior experience and advice, which often times is very additive to the skills of a founder who is focused on building their business.

What is the difference between companies you see at Screening versus those who make it to Due Diligence?

The companies that are better prepared tend to move forward. They have a strong presentation, a clear message, and can communicate what they do effectively. On any given screening day, we might see eight companies, and inevitably there will be several where people leave scratching their heads, unsure of what the company actually does or why it matters. The companies that advance usually have a well-thought-out thesis: why the company will succeed, why the market is attractive, and why the opportunity is compelling.

From the NYA investor side, people are generally investing because they believe they can make at least 10x their money.  A lot of these companies will not make it, so you have to adopt a portfolio approach and feel excited about the upside in every company you invest in . You need to believe there is a path to significant value creation, whether that means growing from a $10 -$20 million valuation into a $100-$200 million exit, or even into a unicorn company. That sense of excitement is often the difference between a company at screening and one that makes it through due diligence.

What advice would you give founders starting to fundraise?

My first piece of advice is: don’t fundraise as your first step if you don’t have to. Too many founders assume they need to go raise capital right away. If you can get by with friends and family funding, or your own money, do that. The longer you can prove out your thesis and build traction, the better chance you have of raising outside money (and at better terms). Traction is a big deal. Companies without revenue or a real pipeline have a much harder time getting through screening. There are exceptions, like medtech companies that need FDA approval, but in general investors want to see some evidence that the business is working.  Investors also want to see that founders have skin in the game. Sometimes you look at a founder who clearly has the means to support the business to some extent, and you wonder why they are not doing so.

The second piece of advice is almost the opposite: when you do raise, raise more than you think you may need. Too often, founders raise a round and then come back three or four months later needing more money. That is frustrating. Founders understandably do not like dilution, so there is a tendency to raise as little as possible. But there is an old saying: raise money when you can, not when you need it.

Founders can also be too aggressive when they make projections.  Even if it means a lower valuation, it is smart to build in a cushion. Most founders are too aggressive in their projections and too optimistic. You need some conservatism baked in and enough cash to allow for different scenarios.

What advice would you give investors who might be interested in joining New York Angels?

I think the ideal member is someone who can invest the time. I’m basically retired now, but angel investing is a bit of a hobby that can also feel almost like a job. There are a lot of great people at New York Angels, and one thing many of them have in common is that they invest the time. Angel investing requires a real time commitment. The strongest members are active in diligence, active in leading deals, and active in the overall organization of the group.

That is part of what makes New York Angels successful. You are not outsourcing diligence to someone else. It falls on our shoulders. So my advice is not to take it lightly. It is a commitment, and if you do not have the time to commit, you should think carefully about whether it is the right group for you at that point in your career.

When you look at your past investments, what is most critical for founders to deliver a successful exit?

More often than not, if a company is going to be successful, the logical exit is a sale. I was just on a call with a company where the founder was suggesting they never wanted to sell, with an IPO being the most logical outcome.

On one hand, I like backing founders who want to build the next Amazon or Google. I respect that ambition. I’m also less interested in a founder who is simply building a company for a quick flip. The right answer is usually somewhere in between. You want to build something real and grow it meaningfully, but you also want to exit properly and at the right time.  That timing varies by situation, but as a rule of thumb I would say three to five years down the road is often a relevant window. To maximize value, founders always need to be thinking about the right time for a strategic exit.

What has contributed to your success in your career?

I think it goes back to my long-standing interest in early-stage investing and technology. I worked on Wall Street with big corporations, but I was always interested in tech. In my first year as an Analyst in banking  I was actually writing code because Excel and a lot of the software tools we take for granted today did not exist. We were raising equity and debt for alternative energy projects and needed a program to model the returns, so I just wrote wrote it in code, and all the partners ending up using my program to provide advice to clients.

By the mid-to-late 1990s, it was clear that the internet was changing everything, and I saw a huge opportunity. At Lehman Brothers, I started a group called the Internet Financial Services Group, which today would be called FinTech. I was traveling to the West Coast and meeting founders like Elon Musk and Peter Thiel when they were building X.com, which was the precursor to PayPal.  A lot of those early companies did not make it, but some did. Throughout my career, I have always tried to stay intellectually curious, and that has helped me a great deal.

What motivates you?

 It is really that same intellectual curiosity. I do not want to be left behind. One of the great things about going into the office every day and being part of a large organization is that you are constantly exchanging ideas, meeting people, and learning new things. I have always wanted to keep learning and stay engaged.

Today, nearly every company we see has some sort of AI orientation. That makes it even more important to keep learning, to stay curious, and to understand where the future is going. That is what keeps me going.