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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

#191

Post by sah2ed »

vxNsr wrote: post #186
lisper wrote: post #109

Earlier quoted context omitted.

> Are Uber's actions an example of necessary assholish behavior? No, I don't think so. But I have a conflict of interest here because in 2008 I made my own attempt at starting an Uber-like thing (I called it iCab). It failed before launch because we were unable to get any of the local cab companies to work with us. The idea of using black cars never occurred to us, so Travis gets props for that. I think he's gone way…

I would argue that you were simply too early to market, now that Uber succeeded there are a ton of cab hailing apps trying to keep cabs relevant.

Anyone can say they were too early to market as the main reason for their failure.

The idea of hailing cabs electronically is not new. A confluence of factors helped Uber figure out how the idea could work, in hindsight.

> "The idea of using black cars never occurred to us, so Travis gets props for that."

lisper is right: using blacks cars was a much better strategy than trying to negotiate with local cabs in trying to gain traction

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

#192

Post by lisper »

sah2ed wrote: post #190
lisper wrote: post #189

Earlier quoted context omitted.

iCab started almost a year after Uber (it was called Ubercab back then). And there were half a dozen other also-rans that started about the same time.

You seem to be contradicting yourself then if you say "iCab started almost a year after Uber" when you wrote above that: " But I have a conflict of interest here because in 2008 I made my own attempt at starting an Uber-like thing (I called it iCab). Uber was not yet a thing until 2009.

Yeah, sorry, my mistake. iCab started in late 2009.

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

#193

Post by snarf21 »

mysterypie wrote: post #180
Nelson69 wrote: post #98

So fundamentally as an angel you're in early. That usually means that you face dilution. I also wouldn't think it would be that unusual for the business to make a pretty dramatic pivot or two and that initial angel investment may have been for something else entirely by the time the company finds its legs. There are basically 3 things you can do in that dilution situation: 1) Do nothing and go from basically owning t…

> As an angel you're in early. That usually means that you face dilution. I've always wondered why early investors don't include an anti-dilution clause in the contract? It could be structured in many ways, but it could be simple as "my share of the company will always be 18% (or whatever), no matter what, until I sell". Then when the company takes on more investment, it'll be up to the new investors and the company'…

If you are going to take on follow up money someone is going to get diluted. So where is it going to be? Squash the founders until they have no upside? Then why would they stay? When the money is this early, it has to be the existing investors. Some come in on the next round for a smaller number to keep their percentage fixed.

From working in a lot of very early stage companies, the two things I have seen is that some of these angels don't understand that the 10K they put in will probably need two more fundings of the same size before things get to an A round. Also, too much funding isn't tied to the right kind of metrics from the start. It is mostly about being cool and disruptive with no plan for the early customer and measuring everything from the beginning to truly know the health of the startup. ymmv

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

#194

Post by sjbase »

mysterypie wrote: post #180
Nelson69 wrote: post #98

So fundamentally as an angel you're in early. That usually means that you face dilution. I also wouldn't think it would be that unusual for the business to make a pretty dramatic pivot or two and that initial angel investment may have been for something else entirely by the time the company finds its legs. There are basically 3 things you can do in that dilution situation: 1) Do nothing and go from basically owning t…

> As an angel you're in early. That usually means that you face dilution. I've always wondered why early investors don't include an anti-dilution clause in the contract? It could be structured in many ways, but it could be simple as "my share of the company will always be 18% (or whatever), no matter what, until I sell". Then when the company takes on more investment, it'll be up to the new investors and the company'…

Makes it much harder to raise future financing, which is bad for everyone.

A company who has given away equity with anti-dilution is much less attractive for a new investor. If 30% of the company is allocated on anti-dilution, that means everyone else without anti-dilution is fighting for the remaining 70%. ALL future dilution comes out of their share. It acts like a dilutive multiplier.

So any new investor is going to want anti-dilution also. But there's only ever 100 percent. So you end up with new investors trying to force old investors to sell (or tasking the founders/board with doing so). This is not uncommon in reality.

BTW, most anti-dilution works by allowing existing investors the option to put in more money with each new round. I.e. they can "top off" their equity to X%, but only by investing more. So as an angel, you might have invested $100k for a few points, but to stay topped off in future rounds, you start having to invest a lot more as the valuation goes up. Not everyone has the desire or liquidity to do that.

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

#195

Post by taway_1212 »

dbcurtis wrote: post #77
seibelj wrote: post #26

Earlier quoted context omitted.

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.

There is a small subset of people who are able to work 80+ hours weeks without end (and are also intelligent, conscientious etc.). I think a significant portion of highly successful people belong to this group.

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

#196

Post by jonnathanson »

Every single word in this article burns clear and bright and true. Every word. Every paragraph. Every penny paid for every hard lesson learned.

If you want to get into the angel game in 2017, and you want to do it to make money, then I'd sincerely advise you to go take out $5-10k for a weekend in Vegas, and try to get really good at a game of complete chance, like roulette.

"Good" at roulette, you're thinking? What can that possibly mean?

It means having a large bankroll and knowing your tolerance for burning through it. It means understanding how to pace yourself, so that you're not blowing through your bankroll in the span of a few minutes. It means getting the itch out of your system, if, indeed, this is merely an itch.

Can't afford to fly to Vegas and blow 10 grand in a weekend? Don't get into angel investing. You can't afford it. I say this not as a snobby rich asshole, but rather, as the sort of nouveau-riche asshole who lost quite a bit of money many years back, doing exactly what the author did, and losing money I learned in retrospect I didn't really want to lose.

I still make the occasional investment, but as part of a group. By and large, those investments go to founders we've worked with before, or who come highly regarded. We invest super early, we eat a fuckton of risk, and we expect to lose 99.999% of the time. We're too small-time to play the game any other way at the moment.

Angel investing is about bankroll and access, and if you're wondering whether you've got the right access, you don't. So you're left with bankroll. Have fun, and try to get lucky if you can help it. :)

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

#197

Post by Top19 »

jonnathanson wrote: post #196

Every single word in this article burns clear and bright and true. Every word. Every paragraph. Every penny paid for every hard lesson learned. If you want to get into the angel game in 2017, and you want to do it to make money, then I'd sincerely advise you to go take out $5-10k for a weekend in Vegas, and try to get really good at a game of complete chance, like roulette. "Good" at roulette, you're thinking? What c…

Well written post, especially the first paragraph.

Thanks for using the term "nouveau riche". Don't know why, I haven't heard it since college, but made me laugh.

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

#198

Post by crispytx »

jonnathanson wrote: post #196

Every single word in this article burns clear and bright and true. Every word. Every paragraph. Every penny paid for every hard lesson learned. If you want to get into the angel game in 2017, and you want to do it to make money, then I'd sincerely advise you to go take out $5-10k for a weekend in Vegas, and try to get really good at a game of complete chance, like roulette. "Good" at roulette, you're thinking? What c…

Yeah angel investing seems to be a wealthy mans game. You probably need to make at least 10 bets to have a chance at earning your money back. I did a little research and it looks like the first YC batch was comprised of 9 companies. Two of those companies, Reddit and Loopt, likely generated all the returns for that batch.

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

#199

Post by mdpopescu »

JamesBarney wrote: post #153
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…

And also memory is very tricky. I imagine there are lots of people who met Zuckerberg thought he didn't have it took, but now believe they always thought we was going to succeed. That's why I suggest angel investors write down everything they thought about an encounter with someone immediately after the meeting. Why you think they'd succeed and fail? Then when you follow them in the future you can compare your notes…

I remember an article where someone said they were doing this in the Army, writing / saying "this guy has the potential to be great" or "this guy will wash out quickly", and discovering 20 years later that their predictions had no relationship to reality. (Can't find that article anymore though.)

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

#200

Post by c1utch1 »

kumarvvr wrote: post #149

The author has mentioned "random shit that markets do, like completely ignore clearly superior products..." Can anyone give me such examples?? I am curious.

Most obvious example is when an enterprise software / hardware startup will have superior product than bigco in their space. However, bigco sales & marketing budget and status quo stop the startup from gaining enough traction for success.
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