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February 5 - February 17, 2022
Ten one-hour meetings a week is a good target for a professional angel. Half that if you’re doing this part-time.
Why has this founder chosen this business?
How committed is this founder? What are this founder’s chances of succeeding in this business—and in life? What does winning look like in terms of revenue and my return?
You want to ask concise questions that take no more than a couple of seconds and then listen deeply to the answers, considering them with every fiber of your consciousness as you write your notes on paper—just like Columbo.
If people believe they are being deeply listened to, they will talk more.
you’re a great listener, you will be a great investor, as well as a great friend, a great parent, and a great human being.
The big problem with “founders” who build a feature that a market leader will inevitably get to—and I use quotes here for a reason—is that they lack vision. The act of selecting a feature as their life’s work, as opposed to a full-blown product or a mission, disqualifies them from being a true founder.
Lisa belden
It’s okay to start small, but it’s not okay to be a small thinker.
“What makes you uniquely qualified to pursue this business?
What you probably won’t know are the tactical details of how they plan on executing on their vision, including their go-to-market strategy, what kind of team they have, the competitive landscape, and the nuances of their business model.
We also don’t know the founder’s backstory. There’s another set of high-level, deeply personal questions I like to ask so I know what type of person I’m really dealing with.
(I would later research who they were, how they made their money, and why they were a massive inefficiency in the marketplace.)
First, I get points for being considerate. Second, I get to hear how well they can explain things. And third, I get smarter.
When I meet with founders, they are frequently awed by my knowledge of their business, and over time I’ve gone from being viewed as an outsider to one of the most considered and knowledgeable strategists in the business.
Goals
Tell me about the competition. How do you make money? How much do you charge customers? How much does your average customer spend?
Tell me the top three reasons why this business might fail.
Being the leader sucks because you’re ultimately responsible not only for your performance but also for the performance of your entire team, the market, your investors, your competitors, and even your customers.
The number one reason a startup shuts down is not actually running out of money, which is what most people believe. The number one reason a startup fails is that the founder gives up.
The founders who want to go to Coachella, TED, TEDx, or to other conferences before their company is profitable are not the ones you want to invest in.
These founders, who are not concise in their communications, are probably not going to do well in the long term. They are probably playing the role of founder.
It’s the quiet, focused students who move on to become black belts.
Furthermore because of your limited time, I recommend that you not meet with anyone who doesn’t have a product in the market.
Those are the startups you need to focus on with these first thirty angel investments. You want the people who are doing it, not the people talking about maybe doing it after you fund them.
Pro rata is the ability for you to maintain your percentage position in a company by investing in future rounds.
Pro rata rights are a must and you should never do a deal without them.
“Hey, I’m taking a real chance on you, so I’m hoping you will let me keep rooting for you in future rounds by writing more checks. I’m not asking for free equity, just the ability to write you even larger checks as you grow!” This typically works because, well, it’s reasonable.
In fact, the main reason I’ve chosen to not join (or start) a venture capital firm is that the idea of debating my investments with a partnership is my own personal version of purgatory—it would be my Groundhog
In his deal memo, Botha included the following sections: Introduction, Deal, Competition, Hiring Plan, Key Risks, and a Recommendation.
First, it lets the person I’m meeting with feel respected because their startup is worthy of notation by what they typically perceive as a wise, old check-writing angel. When Jeff Bezos took notes in his meeting with me and my Weblogs, Inc., partner,
Second, when I write in a journal, I notice my focus and memory increase, as does my metacognition, which is a fancy way to say “my thinking about my thinking.”
Instead of saying no, investors string along founders by saying things like “Let’s keep the dialogue open” and “Let me check with my partners.”
Each of the precious snowflakes now feels special and unique—even in the blizzard of startups that Y Combinator has become.
haha
Life is one giant test, and interacting with investors is one of those tests. Seeing a person execute on their plan over time is the best way to decide if you should invest.
A savvy angel investor understands that you have to drill down into the numbers because people will, intentionally or unintentionally, come up with their own definitions of reality. I call these alternate metrics.
you have to deal with the founder’s delusions that users are customers or that consulting work is sustainable revenue.
So you have one signed deal and you expect 100 percent of the three hundred deals in your pipeline to close?
HAha
Oral contracts mean nothing, we all know that. So to claim them as clients before they signed is fraudulent.
it was a sure thing, it would be called a “bond” or “treasury” and the returns would be measured in single-digit percentages.
There is a reason that financial regulators created a lot of restrictions around taking investment money from the public.
All relationships that start with lies will end in tears.
investigation, which I live by to this day: the appearance of impropriety is impropriety. If you can’t manage the relationship with your existing investors, you’re doing it wrong.
Failure to observe standards of honesty
don’t want to be in business with a person who leaves a lot of bad feelings all around them.
You should double-check that you have pro rata (see chapter 21). If it’s not in there, simply ask the founder to add it for you. They will almost universally do this without much fuss.
allocate just twenty minutes so founders don’t feel it’s overbearing. You can extend the meetings if you want.
try to get a copy of the cap table if they’re willing to give it, as this gives you a very clear picture of who was involved in the round and how many shares each person owns.
you’re going to know what actually matters most: your ability to build a product or service that a large group of people find delightful—and indispensable.
Mark Cuban,
Just read his book omg
Lucky people surround themselves with the most successful people in the world and take chances. It isn’t hard or impossible. It just takes work. Do the work. Trust me, just do the work.
