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Things I wish someone had told me before I started angel investing

blog.rongarret.info

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Re: Things I wish someone had told me before I started angel investing

#71

Post by sidlls »

logicallee wrote: post #36

The investor names only "one way" to succeed (though alluding to a second one that this investor does not name): >To make a product that fills a heretofore unmet market need, and to do it better, faster, and cheaper than the competition. This is an insane sentence. Let's make it only slightly more insane to throw it into starker relief: >To make a product that fills a heretofore unmet market need that nobody has expr…

It's not only a bit silly (I wouldn't say "insane"), it's trite even if it were true. It's the tech wold equivalent of "folksy wisdom" about working hard. There's sort of a truism about it, but it's not useful in the sense that anyone can use it meaningfully.

Re: Things I wish someone had told me before I started angel investing

#72

Post by joshjje »

Top19 wrote: post #52
TheBlerch wrote: post #10

The author makes good points here. While it's true that YC and other venture investors invest in many companies to increase the chances of large returns on the best of their portfolio companies, there is another significant advantage to YC having a bunch of companies in each batch - the teams that are not doing so well are a source of talent for the teams that are doing well. At some point YC can and has encouraged t…

This is a really interesting point about YC. I've heard before that in markets some companies need to fail, their talent and assets act as "fertilizer" for helping the other companies grow.

That's how STARS are born!

Re: Things I wish someone had told me before I started angel investing

#73

Post by stevenj »

lisper wrote: post #57
stevenj wrote: post #50

Earlier quoted context omitted.

Are most angel investors focused on finding the 1000x companies (i.e. the NBT) that VCs are? I guess my question is what's a practical, good outcome for an angel investor when a company exits? Or what rate of return do the most successful angel investors have?

I was in denial about this for a long time, but the fact of the matter is that your overall outcome is almost entirely determined by your outliers. If you take all of the investments I've ever made, including going to work as an early hire at Google, the I've won. If I leave out Google, then I've lost. If I leave out my single biggest loss, then I've won again. If I leave out my next biggest win, then I've broken eve…

Very interesting, thanks for responding.

Re: Things I wish someone had told me before I started angel investing

#74

Post by ScottBurson »

edoceo wrote: post #24
seibelj wrote: post #3

My 2 cents - As an investor or potential employee when analyzing a startup, pay close attention to how scrappy and capital efficient they are. Do they have excessively nice office space? Are the founders making too much in salary? Does it seem like the executives are working like animals, or do they have the big company mindset where they take it easy? Startups are nothing like established, revenue-generating compani…

Lean, not stingy. It's about reducing waste. I'm on my third company, stingy would kill us, waste would kill us. But, gotta buy the things you gotta buy, when you gotta buy them. Critical difference between Lean and stingy. Maybe frugal is the right word.

> gotta buy the things you gotta buy, when you gotta buy them

I would add, I think it's usually best to wait until the need is crystal clear. "We think we're going to need this in a few months" is not generally a good reason to spend money now, even if the case seems airtight. Circumstances can change. Of course the exception is when the purchase is needed to start a chain of events that you need to initiate, even though it won't come to fruition for a while.

Re: Things I wish someone had told me before I started angel investing

#75

Post by GreenPlastic »

seibelj wrote: post #3

My 2 cents - As an investor or potential employee when analyzing a startup, pay close attention to how scrappy and capital efficient they are. Do they have excessively nice office space? Are the founders making too much in salary? Does it seem like the executives are working like animals, or do they have the big company mindset where they take it easy? Startups are nothing like established, revenue-generating compani…

I was part of a startup where the founders were older and the team was older. The technical competence and the competence of the team were amazing but I wouldn't characterize the team as "working like animals." However, the founders were pretty loaded and put in the initial 1-2M. We had a pretty good exit after less than 2 years.

Re: Things I wish someone had told me before I started angel investing

#76

Post by danieltillett »

While the points Ron raises are really good, there is another source of investing error which is "generals fighting the last war" effect. As an Angel investor you are drawn towards founders and companies that resemble you and your experiences. This is almost certainly going to lead you astray as conditions will have changed and everyone's experiences are so limited.

Re: Things I wish someone had told me before I started angel investing

#77

Post by dbcurtis »

seibelj wrote: post #26
TheAceOfHearts wrote: post #23

Earlier quoted context omitted.

Surely you can succeed without working like an animal? You probably can't take it easy like with a larger established company, but it doesn't mean you have to run yourself to into the ground in order to be successful.

Normal employees should work hard but not ridiculous amounts. Executives, whose compensation is highly tied to stock value, should be animals, at least in the early pre-revenue stages. That is my opinion.

Well, it's a marathon, not a sprint. A CEO that isn't taking care of him/herself isn't taking the long view. Sacrificing your health and not making time for thinking big thoughts is a bad way to lead a company.

Re: Things I wish someone had told me before I started angel investing

#78

Post by rficcaglia »

edoceo wrote: post #24
seibelj wrote: post #3

My 2 cents - As an investor or potential employee when analyzing a startup, pay close attention to how scrappy and capital efficient they are. Do they have excessively nice office space? Are the founders making too much in salary? Does it seem like the executives are working like animals, or do they have the big company mindset where they take it easy? Startups are nothing like established, revenue-generating compani…

Lean, not stingy. It's about reducing waste. I'm on my third company, stingy would kill us, waste would kill us. But, gotta buy the things you gotta buy, when you gotta buy them. Critical difference between Lean and stingy. Maybe frugal is the right word.

i have been lucky - multiple exits, 1 unicorn (and more importantly half a dozen fails)...and in that experience stingy always wins in hindsight. if it doesn't feel painfully stingy, be more stingy. the future You will thank you every single time, regardless of outcome.

Re: Things I wish someone had told me before I started angel investing

#79

Post by lisper »

danieltillett wrote: post #76

While the points Ron raises are really good, there is another source of investing error which is "generals fighting the last war" effect. As an Angel investor you are drawn towards founders and companies that resemble you and your experiences. This is almost certainly going to lead you astray as conditions will have changed and everyone's experiences are so limited.

I was actually thinking of mentioning this, but there is a very strong counter-example: Google. One of the reasons Google went unnoticed for as long as it did (both Excite and Yahoo passed on opportunities to buy it for In fact, I think this is one of the reasons so many people are trying to re-invent Facebook. If Google could re-invent Excite and Facebook could re-invent MySpace (and Reddit could re-invent Digg) then why can't someone re-invent Facebook? And maybe someone can. (I sure hope so!)

Re: Things I wish someone had told me before I started angel investing

#80

Post by logicallee »

sidlls wrote: post #71
logicallee wrote: post #36

The investor names only "one way" to succeed (though alluding to a second one that this investor does not name): >To make a product that fills a heretofore unmet market need, and to do it better, faster, and cheaper than the competition. This is an insane sentence. Let's make it only slightly more insane to throw it into starker relief: >To make a product that fills a heretofore unmet market need that nobody has expr…

It's not only a bit silly (I wouldn't say "insane"), it's trite even if it were true. It's the tech wold equivalent of "folksy wisdom" about working hard. There's sort of a truism about it, but it's not useful in the sense that anyone can use it meaningfully.

It is introduced with the sentence "There are a myriad ways to make a company fail, but only two ways to make one succeed" (where the second is left as an exercise for the reader.)

This introductory sentence does not permit the writer to follow up with folksy and false bullshit. This is like my saying "there is only one way to prove that a function will return the correct output for all input", then naming that one way (wrongly, but unironically) as "copy it verbatim from a StackOverflow answer".

The reader deserves more. Writers don't have the liberty to spread such nonsense.

--

Edit: I finished reading the article. It is outlandishly wrong. It says "There is a small cadre of people who actually have what it takes to successfully build an NBT (next big thing), and experienced investors are pretty good at recognizing them."

This is demonstrably false: investors are demonstrably bad at recognizing these people, who often go through hundreds of rejections (because investors are bad at recognizing them) before building the next big thing.

Really, this article could hardly be more wrong.

You know less about investing and the world than before you read it.

On the other hand, you learn more about what an angel thinks is happening, so I guess it's a wash.

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