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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

#221

Post by srtjstjsj »

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'…

Why should you get free money from later investors?

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

#222

Post by srtjstjsj »

danieltillett wrote: post #108
lisper wrote: post #79

Earlier quoted context omitted.

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) the…

Actually the "fighting the last war” effect was the reason everyone passed on Google. Almost all the VCs (and other companies) thought the search war and been fought and won five years before. Rather than looking at Google from an unbiased viewpoint (that Google was the first to solve search), they saw it as the 17th competitor in a mature market. I think the difference with Facebook is the network effect and that it…

when you look at MS, Apple, Amazon, Oracle, Google, Facebook, what really sticks out is that all except Google had incredibly ruthless founder/CEOs. Google somehow made it big on a few good hosting deals, amazing software engineering + math, inventing the online advertising economy

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

#223

Post by srtjstjsj »

ScottBurson wrote: post #83
lisper wrote: post #40

Earlier quoted context omitted.

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…

You have to be willing to drive a hard bargain, but that's not unethical, nor does it make you an asshole. I'm not sure being an outright asshole is ever required. Do you think it is?

Bill Gates, Steve Jobs, Larry Ellison, Jeff Bezos, and Mark Zuckerberg agree that being an outright backstabbing asshole is required.

Larry Page and Sergey Brin do not.

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

#224

Post by srtjstjsj »

gizmo wrote: post #45
lisper wrote: post #40

Earlier quoted context omitted.

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…

It's not _required_ to be unethical, it's just really tempting when you see others get rewarded for their unethical behavior. "When circumstances demand it" is of course the excuse of all unethical people throughout history. Total weak sauce.

If you are not unethical _and a competitor is_, the competitor will have an edge.

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

#225

Post by srtjstjsj »

Theodores wrote: post #100

I prefer the phrase philanthropy to angel investing. As I understand it philanthropy is using your own hard earned money for lost causes of one's own choosing. This is different to fundraising or giving money to charity. With a modest philanthropy budget you can change lives and be able to support others achieve their dreams. Everything can be on an individual basis with no formal framework. For instance, what happen…

Yes, a failed business is called a hobby.

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

#226

Post by eldavido »

mdpopescu wrote: post #199
JamesBarney wrote: post #153

Earlier quoted context omitted.

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.)

I think you're talking about this, which was cited in the book Grit: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3910317/

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

#227

Post by graycat »

lisper wrote: post #213
graycat wrote: post #212

Earlier quoted context omitted.

The Flownet article was nice. I got reminded of lots of old networking stuff, e.g., ATM. From about 1980 to about 2000, LAN technology was a chaotic war. The war part was from all the competitive battles. The chaos was from all the different technologies, often to address some of the issues in the link you gave. There was no cheap, easy, perfect solution. So, there were the various versions of Ethernet. Also there wa…

> Flownet was a long way from "orders of magnitude" (factors of 10) better. That article was written towards the end of FlowNet, when we were already winding it down. The work started in 1990. We built our first (and only) prototypes in 1992 (self-funded). Fast Ethernet was not introduced until 1995, and at that point our BOM cost was 20 times lower because our NICs used 100% off-the-shelf commodity hardware, and we…

Nice.

You illustrated an old, back of the envelope standard for investing in new hardware: The new stuff has to be at least 10 times better than the old stuff.

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

#228

Post by lisper »

srtjstjsj wrote: post #220
lisper wrote: post #57

Earlier quoted context omitted.

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…

Did "not spending 1 more year as an employee at Google" cost you more or less than all of your later wins?

More. And by a huge margin. Leaving Google early was by far the most costly financial decision I've ever made in my life. But I don't regret it. You have to focus on the money you made and not the money you didn't make or you'll be miserable no matter what happens because no matter how well you do you could have always done better in hindsight.

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

#229

Post by arikr »

aerosmile wrote: post #132
arikr wrote: post #128

Earlier quoted context omitted.

Benchmark Capital has a pretty small number of bets, and a pretty high hit rate, from my perspective. They certainly seem better at picking than most. Though I'd say a lot of that is of course positive selection - the best founders self-select to Benchmark/Sequoia/A16Z, and to Greylock/Accel.

Genuinely curious if your choice to group those investment firms is intended to imply something about them - such as they generally work together/compete with each other, belong to the same tier, etc.

Yes, due to tier.

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

#230

Post by mindcrime »

mdpopescu wrote: post #199
JamesBarney wrote: post #153

Earlier quoted context omitted.

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.)

I believe that was a mention of something like that in Thinking, Fast and Slow.
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