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

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

#161

Post by caro_douglos »

This post reminds me of "the war of art" where you're encourage to make the decision right off the bat of whether or not you're a professional or an amateur.

I'm somewhat biased when it comes to angels because most of the experiences I heard (http://etl.stanford.edu/) were almost always homeruns. Sure there's the down in the gutter claims every investor tries to sob about where they lose money but let's be honest wouldn't it be great if someone gave a talk and said how much they lost (and how much they're continuing to lose) by attempting to get rich quick.

So far bootstrapping appears to best way of weeding out the shitty angels who haven't been in the game for a minute.....it's a pleasure to not deal with someone wanting to give you a check while telling you what their expectations are for YOUR business not their 10k+ check.

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

#162

Post by quickthrower »

taneq wrote: post #133
cbhl wrote: post #127

Earlier quoted context omitted.

A $5k check will give a super-early-stage "startup" (two or three college kids) with no salaries and about $1000/month burn rate ("living expenses" in the right market outside of SV) about four months of runway. You'd have to approach at a sufficiently early stage (like so: http://velocity.uwaterloo.ca/funding/velocity-fund/ ).

What share of the company would you expect for that kind of investment? If the amount would be trivial then why would you bother (little reward for so much risk), but if it's non-trivial then why would they accept your money, given how small the amount is compared to the value of their sweat equity? If they really believe in what they're doing, they won't want to give chunks of it away so cheaply. Conversely, if they…

Yes anyone who can start a startup can hustle up 5k. Alternatively they can go Ramen. Or get a personal loan. Or work in Macca's for a bit.

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

#163

Post by dharmon »

ScottBurson wrote: post #68
mindcrime wrote: post #65

There is a small cadre of people who actually have what it takes to successfully build an NBT, and experienced investors are pretty good at recognizing them. I really do question this. The "problem of induction"[1] comes into play when you start talking about pattern matching and learning from "experience". That is, there's no guarantee that the future will look like the past. Before Zuckerberg was Zuckerberg, I wond…

I recall seeing a comment by Paul Graham somewhere to the effect that Zuckerberg set off his "founder detector" very strongly. This was after Zuckerberg was successful, admittedly, but it at least gives some suggestion that someone skilled at recognizing founders would have seen his potential.

It wasn't a comment on HN, but during an interview (video) he did with MZ on YC. I don't have a link, but that may help.

Zuckerburg was telling a story of how he built a "social" website to share notes for an art history class, except he didn't have any notes himself but got everyone to share theirs so he could pass his exam. This supposedly was an early experience that started him thinking about social websites and sharing online.

PG then commented how his internal alarm was going off saying "fund him. Fund him", and how even though it was too late he can't shut off his brains instinct to sniff out good founders.

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

#164

Post by erikb »

polote wrote: post #5

Summary: beginners almost never invest well. And it is the same for stocks, many people think they will make money by investing in a specific company because their logic says it is good idea. Investment is a job, and to win you need experience

This blog post is also showing, however, that it is possible to make experiences without learning much. He doesn't seem to have figured out how it works, because that part is still rather unclear in his text.

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

#165

Post by d--b »

I love the difference of tone between this article and the usual Silicon Valley pieces.

For me, the most important thing that Ron conveys is that being an entrepreneur is an incredibly foolish thing to do. Silicon Valley created myths of passionate geeks who worked in their mom's garages and went on to make billions. Who doesn't want that?

But the reality of Silicon Valley today is that because of these myths, most people work their twenties away for a chance to buy a lottery ticket...

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

#166

Post by erikb »

lisper wrote: post #11
trevyn wrote: post #7

> There are a myriad ways to make a company fail, but only two ways to make one succeed. One of those is to make a product that fills a heretofore unmet market need, and to do it better, faster, and cheaper than the competition. That is incredibly hard to do. (I'll leave figuring out the second one as an exercise.) Is he implying some sort of unethical behavior as the second way?

Yes. [UPDATE: before you downvote this answer you should know that I am the OP.]

Oh, I have totally missed that part. Happy to see that you didn't lose the money without learning something.

What decision have you made? Howling with the wolves or getting back to being a sheep? I'm still unclear in this part and actually hoped for some suggestions in one or the other direction.

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

#167

Post by erikb »

lisper wrote: post #40
trevyn wrote: post #30

Earlier quoted context omitted.

Something specific, or just unethical behavior in general?

Not "in general", but there is a long list of unethical behaviors that, sadly, can contribute to success. Selling snake oil. Abusing monopolies. Flat-out lying. However, it's not good to go to the other extreme. I've seen companies fail because the CEO bent over too far backwards to be ethical and as a result let people walk all over him. One of the qualities that seems to be required in a successful founder is a wil…

Let's not forget stealing. Letting someone else do the hard work of figuring out the Next Big Thing and then taking over is very profitable.

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

#168

Post by Victoria454 »

soup10 wrote: post #156
mojuba wrote: post #114

Earlier quoted context omitted.

Considering that "cool kid" founders do engineering themselves and that they typically don't pay salary to themselves, 10k could cover their initial hosting or say hardware prototyping costs.

"Cool kids" should not be taking 10k checks except as a favor, every investor they take on and have to maintain a relationship with is a potential distraction to the business. I'm lucky to have more than enough capital to run my business until we're done prototyping and ready to start growing.

I'm making $86 an hour working from home. I was shocked when my neighbour told me she was averaging $95 but I see how it works now. I feel so much freedom now that I'm my own boss. This is what I do, .====http://ow.ly/P0wk30aVXfN

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

#169

Post by logicallee »

SeoxyS wrote: post #157
logicallee wrote: post #137

Earlier quoted context omitted.

They could be awful at recognizing them and only invest when founders show up with a box pooping out bars of gold already, and not at any point before then, since they're so awful at recognizing them. so you can have a 100% success rate (investing only in founders that show up with a box already pooping bars of gold) while having a 0% ability to identify successful founders. a high hit rate does not mean you can eval…

If they keep growing into bigger boxes pooping gold, then you've done a pretty good job as an investor. It's all about IRR; if you invest and your investment grows, it doesn't matter what stage you invest at. Keep in mind that for every Series C company that's pooping gold bars still 90% will fail, and a lot of investors are gonna lose money investing at that stage.

of course, I said "100% success rate", under the scenario I sketched they're great investors. I just showed that this doesn't mean they can recognize the cadre of people who have what it takes. They could be 100% successful while having 0% ability to recognize anyone whose boxes aren't pooping gold yet.

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

#170

Post by lisper »

graycat wrote: post #131
lisper wrote: post #120

Earlier quoted context omitted.

> We can outline a simple recipe in just three steps for success as an IT startup: You might as well put a sticker on your forehead that says, "SUCKER." Four of my investments (including a startup of my own) were absolute slam-dunks according to your process: large, well-established markets, orders of magnitude price-performance improvement over the competition, good IP protection. They all failed. Like I said: unles…

Fill us in; why did they fail? I've seen a lot in business, and I never saw anything as challenging and perverse as your "creative ways the universe will come up with to screw you". The worst I heard of was law suits by patent trolls. For "secret sauce" in IT, that's in software locked up in the internals in a secure server farm. Tough to know just what is in that. Tough to get a judge to force you to present all you…

> Fill us in; why did they fail?

That would take a book. Or at least a lot more blog posts.

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