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February 5 - February 17, 2022
but the truth is I’ve seen many advisors provide more help to founders than their investors did—which makes sense since they got their shares for free!
The best angels in the world have four qualities, giving them the ability to (1) write a check (money), (2) jam out with the founders over important issues (time), (3) provide meaningful customer and investor introductions (network), and (4) give actionable advice that saves the founders time and money—or keeps them from making mistakes (expertise).
If you’re not able to get along with a wide range of people or find it uncomfortable to hear people drone on and on about how they’re going to change the world and everyone else just doesn’t get it, then this is absolutely not the job for you.
Likewise, as an angel investor, you’ll have to deal with people who are passionately stubborn and insist that the world change to fit their unique vision.
because the best founders are typically inflexible and unmanageable, pursuing their visions at the expense of other people’s feelings.
The Bay Area is the center of the world—it’s not even up for discussion.
So, if you want to succeed in the angel investing world, you’re going to do it here, in the world capital of innovation.
Sv dreams
There are dozens of great angel investors in the second-tier cities, but there are more than a thousand in the Valley. If the best founders are coming here, the best angels need to be here, too.
In other words, you are never going to invest in a decacorn outside of the Bay Area.
The goal here is to be able to hit a once-in-a-decade company, and those kinds of companies almost always come out of the Bay Area these days.
Sweden is on fire right now.
If you want to build a startup? You’ve got to be in the Valley.
Your job as an angel investor is to block out the haters, doubters, and small thinkers, because if you think small you’ll be small. I’d rather see my founders fail at a big goal than succeed at a small one.
We call this sweat equity, and it should be a useful indicator to you as an angel investor because it shows that the founders are able to create value without capital.
prefer founders who are willing to pursue their visions long before an investor comes along and takes some of the pressure off of them.
invest in people who build things, not people who talk about building things.”
My approach is to be judgmental and combative, if you haven’t figured that out. I deploy this style for two reasons: (1) It’s who I am; and (2) it is effective in repelling the weak and developing deep, meaningful relationships with the strong.
“I’m currently funding the company,” I immediately want to know two things: how and why.
willing to risk your entire family’s future, you’re basically saying that everyone in the world is wrong.
with the compounding cost of repeatedly diluting their cap table.
Incubators
Essentially, your job as an angel is to monitor people coming out of these channels and pick out the best ones.
We often see founders who sold a startup to Google or Facebook quickly raise a significant seed round after simply building a basic prototype or, even crazier, just a slide deck.
If someone built and sold a company to Google or Facebook, their chances of doing it again—or going public this time—are greatly increased, because they’ve been to the rodeo before.
If a startup I invested in failed, then I must have been wrong. And I hate being wrong.
What has changed since I made my original investment?
caveat to all of this: the valuation and terms of the bridge.
“How did you arrive at that valuation?” I like to leave a long pause after that question, so the founder can speak their truth and I can understand if the shares are, in fact, worth twice as much.
Here in Silicon Valley people like to have “clean terms,” which means they shy away from devices like warrants and liquidation preferences. In fact, these are currently considered predatory by most professionals in the Valley.
the chief executive officer (CEO) is going to spend about 20 percent of their time “managing their board.”
If you’re getting into a Series A alongside a powerful VC, you either have a great relationship with the founders, who are demanding you get an allocation, or you provide massive value and the VC thinks that you owning shares in their company will increase everyone’s share value.
though I was one of their earliest supporters, well, I’m not the right investor for them—and they’re not the right founder for me. It’s disrespectful not to give angels pro rata rights. Period.
there are only two numbers that matter: how much you put in and how much you got out.
to be an angel or VC, you need to have those chips, skills, network, or knowledge to put to work.
My definition of opportunity cost is “the lost gains resulting from the misapplication of your time.”
How to allocate your finite time and energy efficiently is something you constantly have to revisit as an investor, founder, parent, and human being. The cost of not revisiting your allocation of time is great, leading to massive regret at having spent too much time on a startup, marriage, friendship, or investment that is destined to disappoint you or destroy your soul.
If just one of you becomes a billionaire, centimillionaire, or decamillionaire because of this book, it would please me to no end.
Being a board member or advisor is nice work if you can get it, but you have to be willing to put the work in over a decade in the tiny startups that need you before the bigger companies that don’t need you as much will let you join their boards.
You just don’t do it. It’s petty and it’s small and it’s dumb because all you have in this life is your reputation.
and I realized that if they were willing to throw Jay Z under the bus, they would have no problem throwing Jay C under the bus as well.
ahaha witty
I’m still fairly certain Alex will be a great CEO someday. If you’re willing to screw the greatest hip-hop artist of all time and an early advisor who you doggedly pursued, you’re probably gonna make a lot of money—at the cost of fans and friends.
Aweee good throw
advisor shares are not guaranteed, and in the private company game, there are very few rules and very many ways to screw over your partners. You only have to look at Mark Zuckerberg’s early lawsuits—and settlements—to see how ugly and often these things go down.
Having good and bad experiences as an angel or advisor helps you improve your ability to pick great founders—and avoid the bad, immature, or clueless ones.
Life is short, you should spend your time working with the good people, and if you do get screwed, look at it as a small price to pay for getting that person out of your life.
WOrdd
but because we thought poor, we stayed poor.
You’re the sucker at the table who doesn’t realize that you’re just another monthly subscription, and random ad clicker, for corporate America. It’s time for you to unplug from the Matrix and realize that you don’t need to pretend you’re rich by getting the premium channel package, and actually get rich by taking intelligent risks.
You can make your own luck in this life by putting yourself next to the people who are already winning.
There are a number of sites offering angel syndicates here in the United States including AngelList, SeedInvest, and Funders Club.
Founders love syndicates because they can leverage an established angel investor to round up dozens of smaller investors for them.
The jury is out on exactly what the levels of returns will be, but the fact remains that they are an efficient and low-risk way to get some experience in angel investing.
Angel syndicates
That’s why I advocate that new angels do ten small angel syndicates before they start doing direct investing. Beyond the very real chance of getting a positive return on your investment, if you do this hack, you will build your reputation, have a chance to prove your worth to founders, and jump-start your network—all for the bargain price of $25,000. That’s only 20 percent of the cost of an MBA and you can do it in a month!
