Innovation Double Play: How the New York Angels Helped this Entrepreneur Launch Two Successful Companies

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When David Steinberger decided to start a creator-friendly comics brand, he hoped to partner with angel investors who could help. On this special New York Angels edition of the Angel Nest, you’ll learn how that initial partnership spawned not one successful company, but two. Welcome back, I’m David Hemmingway.

I’m a five-time founder and a member of the New York Angels, where we fund and mentor great young companies. Today we meet Dytslry and its founder David Steinberger, whose independent next-generation comic book publishing company has found early success by partnering with A-list creators and creating unique digital innovations and is turning that into a digital retail powerhouse for all comics. New York Angel Kit McQuiston led the seed round for Dytslry, but it wasn’t their first collaboration.

Now, a little later in this episode, we’ll speak with NYA member Ed Levine and Helgi Seitsen about a partnership they forged between the New York Angels and Tandem Launch, a group in Canada that backs high-tech startups with big opportunities, but often lower valuations that we see here in New York. But first, we meet David Steinberger, CEO and founder of Dytslry, and New York Angel member Kit McQuiston. Both are joining us today in our Midtown Studios, and we appreciate it very much.

Thanks, gentlemen. Good to be here. It’s great being here.

Now, Kit, you and the New York Angels backed a previous company that David had started, Comixology, back in 2007, and you had a successful exit there. Tell us how that came to be and how the relationship has evolved over the years. Certainly.

Well, like any good comic book, there’s an origin story here, and it goes back quite some time, maybe 17, 16, 17, 18 years now? Yeah, something like that, 2006. A while ago. We’ll just leave it at that.

And I met David through a business plan competition at New York University. They had this annual business plan competition, and David was just finishing his MBA. And I saw David and his team pitch, and I was very impressed.

So, of course, they won the competition. And after that, I met up and eventually became involved. I think the way I’d put it is that we were at the award ceremony, and directly afterward, you walked right up to me and said, you guys probably need 50 grand to keep the lights on while you raise the money, right, and get some traction here.

And we were like, yes, please. So, tell us about this comic business. It seems like a huge industry.

Oh, yeah. I mean, really interesting. In 2006, when we started doing the research for the business plan competition, it was estimated about $650 million, English language, U.S., mostly North American.

It’s now, last measure I saw, about $2.1 billion. And, of course, it’s not worldwide. Worldwide is much bigger than that.

Japan alone is probably a $6 billion, $7 billion market, which is now more than 50 percent, like way over 50 percent digital. So, tell us about Dytslry. Dytslry itself was born out of the experience we had over the past 15 years, both at Comixology and then through our exit at Amazon, where we felt like there was maybe a better way for creators to connect to a publisher.

What we were seeing is lots of stories about creators that made these characters for Marvel or DC and then didn’t really get any of the benefit when they became billion-dollar movies. Lots of complaints out there. I think they do a lot better at this point, but there’s been a lot of pressure on them to do that.

But we thought, okay, if you started from scratch, what would we do? And so, Chip and I had both left Amazon at that point. This is your co-founder. Yeah, sorry, Chip Mosher, yeah, my co-founder.

And we thought, okay, if we started from scratch, what would that look like? And there were a few things we wanted to do. One is that we made creators actual shareholders. So we did three-year deals with many of the A-list creators in Comix to do three years of content and to earn equity over time.

And over the three years, adding up all the revenue they generated to give away more of the company based on revenue generation. So not only were we saying to them, hey, if you have a huge hit and if you have the walking dead of Dytslry, you’ll be a bigger shareholder. You’ll get more of the upside if it becomes huge rather than just getting a royalty check for whatever you did for us.

So over the course of the past 10 months, we’ve brought on all the biggest publishers of comic books into a new digital platform based on distilleries experimentation in the collectibles to make a new leading edge kind of trailblazing version of a retailer and reader of comic books. So that ended up being a huge opportunity for you. Yeah, it’s a different brand.

We call it Neon Ichiban, which is a fun thing to say. Well, it’s not really a store. It’s really a marketplace because you can do all sorts of cool things, which is very different than Comixology or prior companies.

That’s true, right. So again, what are the things you can do if you’re starting from scratch and you don’t have this legacy digital rights management or we don’t have a platform where we’ve aggregated content and people, and so there’s no reason for us not to innovate. So we have three big differentiators there.

The first is that you can actually resell books. So you can buy limited edition versions of the comic books, and then you can actually put them on sale in the marketplace. The second is that we can take the Comic-Con and bring it home or bring it to the Comic-Con because you can actually get comic book creators to sketch or draw on your covers of your comics.

On these digital comic books. On the digital comics, right. Either live at a convention, you show a little QR code to prove your ownership, they scan it on an iPad and sign it, and two seconds later it’s your cover.

So now you’ve got a one-of-one, totally unique and verified creator signed and sketched digital item. And then we allow for publishers to opt into doing downloadable. Right.

It really checks all the boxes. If you are a collector, you can buy it, you can sell it, it’s unique. It can show providence of what you’ve purchased.

All those things that gives you pride in your collection and then if you want to improve upon it, sell it. Yeah. I do want to circle back to the New York Angels and Kit, though.

Particularly because we had to kind of, for lack of a better term, spring fully formed. We’re not going to challenge Amazon or Apple or Barnes and Noble in their digital books without having a lot of features. And like I said, we have over 90% of the publishers in the English language already on the platform.

That took us, we never quite got there, in fact, at Comixology. We have two publishers that we never got at Comixology already at Nihon Ichiban. And the fact that Kit joined back up has given us great advice, opened up the doors to New York Angels again.

I should go back in time and mention that David Rose was actually part of the business plan competition and was our presentation coach. And I don’t, I frankly don’t think we would have, we didn’t know enough about investors and what they wanted. We were just interested in making a company.

And I really feel like without David Rose, we would have pitched in such a dumb way. Well, this is great. Going back all the way to that business plan competition, that set up my introduction to New York Angels.

And so David Rose and Brian Cohen were early investors and involved, and I remember going to brainstorming sessions. And I really got to know those two guys and talk about a dynamic duo. I mean, what an introduction to New York Angels.

Well, that’s the thing I wanted to ask you about. So how has the relationship been between you and the Angel investors? And, you know, how would you tell current founders to utilize the skills and expertise that are available to you? Yeah, what’s great about New York Angels, in my experience there initially and continues to be, is this level of expertise. You know, you did, I did have connection to David Rose for the presentations and how to talk about the business, how to think about how Angel investors think.

Brian Cohen became an advisor as well and helped us out on hiring and marketing. So tell us about the traction you have with Dytslry and what the next year looks like. Yeah, Dytslry has been super interesting.

We put out, we put out maybe 40 single issues and three or four hardcovers at this point. The thesis of the creators bringing their best work because they’re owners in the company has worked very nicely. We were the first publisher ever to win what’s called an Eisner Award for best… It’s like an Oscar for… Yeah, the Oscar for comics.

For best, best new comic, new series, best new series for a book called Somna. That was the first time that ever happened. They’ve been doing it since 1988.

So that was pretty great to be, to be the first publisher to that. We got another Eisner this year for a comic called Blood Brothers Mother for best painted comic. So in terms of the quality, the recognition, it’s been great.

It’s been great. And forthcoming, you know, we just keep continuing to work on books. And like I said, it’s become the test bed for all the innovations we want to do on Neon Ichiban.

David Steinberger, CEO and founder of Dytslry, and Kit McQuiston, his New York angel, original investor. Thanks for joining today. Had a lot of fun.

Thanks for having us. Thank you for having us. Appreciate it.

In addition to being one of the most prominent angel investor groups in New York, N.Y.A. also provides its members with opportunities beyond New York and now even beyond the U.S. borders. Here to tell us about one of these initiatives is N.Y.A. member Ed Levine. Ed has spearheaded a partnership with Tandem Launch Venture Studio and VC Fund.

We welcome Helga Seitsen, the managing partner and CEO of Tandem Launch, who joins us today from Montreal, while Ed’s here with us in New York. Thank you, gentlemen, so much for joining us today. My pleasure to be here.

Helga, you were an entrepreneur before you became an investor, and you have a really fascinating operating model. Please tell us about it. I, as you just mentioned, I started my career as a technology entrepreneur.

I very at a very young age, I ended up spinning out a company during my undergrad from the University of British Columbia up in Vancouver and Canada. And I realized very early on that while I was a technologist and, you know, co-inventor and co-founder of a technology that we were developing, there were many, many more brilliant people on campus who had wonderful ideas, but no either capability or desire to commercialize them. And so in that first startup, we ended up partnering with and ultimately in licensing from a dozen plus university deep intellectual property that was related to our business.

And, you know, we were quite successful as a company. We had some very nice economic outcomes, including for our angel investors. In fact, I set up Tandem Launch to, in a way, industrialize this process of taking brilliant concepts out of academia that do not have their own organic entrepreneurial support behind them.

And so the way that works is that Tandem Launch works with industry partners from all over the globe to identify problems, you know, big strategic things that are worth solving. We then turn around to academic institutions again globally. We’ve worked with hundreds of universities to find inventions that might address those problems.

We partner with those universities and then assemble a team around those ventures that have the mix of technical, entrepreneurial and seasoned commercial executive leadership to turn these into companies. Once we do that, we then finance those emerging companies and, of course, turn to our good friends at the New York Angel Group to see if they might want to co-invest with us into the future journey. You know, Ed, it’s funny.

When I started at Angel Investing, I remember people telling me that most of their investments were within a drive of New York. And now so much of that has changed that, of course, a lot of opportunities have opened up since COVID, I feel like, with Zoom, right? And New York Angels seems to have found a great formula here with Tandem Launch. I would say that’s true.

I think the membership just immediately caught on to the idea that Tandem Launch is assembling companies using great IP that they scour throughout the world and then try to bring in the right team to make it happen. That type of a model made a lot of sense to us. And then to put icing on the cake, they invest a lot of money into the company.

And so they have a vested interest in this succeeding with us. So we see that as an ideal partnership. And there are a lot of opportunities here for non-dilutive funding also, right? Yes, that’s true.

I mean, one of the, I guess, cross-border advantages from the viewpoint of the New York Angels, if I can be so bold, is that Canada’s startup ecosystem is fundamentally cheaper than the American ecosystem. First of all, obviously, your American dollar goes a lot further in Canada. Second, the general compensation levels are lower, the cost of living.

Certainly from New York to Montreal, there’s a massive drop in those kinds of costs. And then lastly, as you just mentioned, the Canadian government has been incredibly supportive in many ways and for many decades of especially research and technology heavy startups, which is exactly the kind of ventures we build. If you’re in Montreal, if you’re in Quebec, if you’re in Canada, and you hire an engineer, you spend $100,000 to pay that engineer payroll.

At the end of the year, the government will give you back $82,000, so 82% of your expenses. And this is not a credit against future profits or future taxes. This is literally just a check.

In fact, the check is so reliable that the government will underwrite loans for banks to lend you money at prime plus one against that refund, which is an incredible force multiplier for your dollar. Yeah, absolutely. So, Ed, do you feel that the valuations are advantageous in Canada and some of what you’ve seen from tandem launch has really made sense from that standpoint? By and large, that’s definitely true.

In fact, one of the concerns that people on this side of the border have is that we cannot get QSBS tax advantages investing in a Canadian company. But to offset that, we’ve just found the valuations are so compelling that it’s worth looking into the company for that reason alone, as well as many of the others that we’ve discussed. Yeah.

Helga, are there advantages to having U.S. investors on board in addition to whatever capital we bring? Yes, in many ways. So I’m not sure if it’s specific to having U.S. investors, but it’s specific in my mind to having more partners. I always find that when you build these kind of early companies, the more people you have around the table that are supportive, that are providing their viewpoint, maybe their assistance, maybe some introductions, or maybe just showing up when the company needs to raise another round.

All those things are extremely helpful. And I find over the years, we’ve worked with hundreds of angels across our portfolio. And angels do these things as a community better than anybody.

I’ve had plenty of cases where we’ve worked with VCs who have basically walked away from their investment when it didn’t look like it was going to make it. And we had angels step up. And five years later, it turns out to be a great opportunity, great company, but it had this dip where who was left on the boat and rowing mattered.

So I love working with angel groups for that reason alone. And I’m curious, Helga, if there’s a situation where you think the kind of relationships that we’re talking about here have fostered a better result than might have otherwise happened? Absolutely. I think we have had a long relationship, especially with the New York Angels, of course, and many other angel groups that really have become part of our ecosystem.

And right now, for example, we’re in the middle of wrapping up an example that I think had quite a lot of relationship power in both directions. We had a portfolio company called Edgehawk that the New York Angels and a number of angel groups invested into that basically hit the wall. They ran out of money.

They wound down the business. The company was closed out, and everybody sort of dissolved their position in it. But as you mentioned, we are all operators and we have a deep desire to not see a good opportunity fail.

So at the time of launch level, we had another crack at it. We tried to figure out what else we could do with this technology. And ultimately, we found a group out of the New Jersey area called the Conti Group that was working on a solar cell technology that was very complementary with the original Edgehawk work.

And after some discussion with them, figured out a way to essentially restart the business as a merged collaboration between their work and the old Edgehawk technology, created a new company called Ankara that is actually led by a CEO that is a former partner to the New York Angels many years ago, as it happens. And when this restart came around, our first thought was that we cannot abandon our friends and partners. So we reached out to the New York Angels and the other Angels and offered them to restore their ownership in the new entity for free, basically just to bring them back on board in recognition of the support they had given to us.

And that obviously goes both ways because the New York Angels have many times stepped up to help our companies when the need was there. And I believe that’s how you build successful long-term collaborations and successful companies. Yeah.

In fact, I’d like to reinforce a point you just made there, Helga, and that is that technically Tandem Launch did not have to give the New York Angels this opportunity in this new partnership with the Conti Group because we already sold our shares back Tandem Launch at a nominal price. However, we were given the opportunity to be full partners. And this is something that a number of investors from the New York Angels brought to my attention, that they were really appreciative of the fact that Tandem Launch did what they did.

And this goes a long way just to emphasize the type of relationship we have and that we, I think, that both sides expect from one another. And it will be that way going forward. Yeah, that’s great.

I think that spells partnership a lot better than anything I could have said. Indeed. Helga Seitzen, Managing Partner and CEO of Tandem Launch, thank you so much.

And Ed Levine, my frequent New York Angel partner, appreciate you joining us today. Thank you. Thank you.

Thank you for having us. You can learn more about joining our group or applying for funding for your startup at newyorkangels.com. And you can find contact information for our guests today or reach me with any comments or questions you might have at theangelnest.com. A reminder that we don’t make or recommend investments at The Angel Nest and this program is for informational purposes only. We produce The Angel Nest with help from Rob Higley and Charles DeMontebello.

He’s at the controls of CDM Studios here at the famous Art Deco Film Center building just west of Times Square in New York. I’m David Hemingway. Thanks for listening and so long until next time.