Angel: How to Invest in Technology Startups--Timeless Advice from an Angel Investor Who Turned $100,000 into $100,000,000
The world has trillions of dollars sitting in bonds, cash, stocks, and real estate, which is all really “dead money.” It sits there and grows slowly and safely, taking no risk and not changing the world at all. Wouldn’t it be more interesting if we put that money to work on crazy experiments like the next Tesla, Google, Uber, Cafe X, or SpaceX?
People are searching for returns everywhere, but returns are becoming harder and harder to find as pools of capital become larger and larger.
Here in Silicon Valley people like to have “clean terms,” which means they shy away from devices like warrants and liquidation preferences. In fact, these are currently considered predatory by most professionals in the Valley.
Being a founder is amazing because you get to build what you want to see in the world and you’re the “god-king/queen” at your company, but the odds are wildly against founders making a huge return, while the odds are in favor of a lifelong angel or venture capitalist getting rich.
How to allocate your finite time and energy efficiently is something you constantly have to revisit as an investor, founder, parent, and human being. The cost of not revisiting your allocation of time is great, leading to massive regret at having spent too much time on a startup, marriage, friendship, or investment that is destined to disappoint you or destroy your soul.
You’re the sucker at the table who doesn’t realize that you’re just another monthly subscription, and random ad clicker, for corporate America. It’s time for you to unplug from the Matrix and realize that you don’t need to pretend you’re rich by getting the premium channel package, and actually get rich by taking intelligent risks.
The best deals are typically not on platforms like AngelList or at incubators like Y Combinator or 500 Startups. The best deals never see the light of day. They’re quickly filled by insiders who are sharing deal flow, and by elite founders with killer startups tapping their existing network.
There are dozens of theories about why startups succeed, from “It’s all about timing” to “You’re investing in founders” to “It’s the market that makes the startup.” It’s essential for us humans to build unifying theories for complex and random systems because we’re scared little bugs counting the days before our death while sitting on a random rock orbiting one of a trillion suns in a random universe that we know so little about.
Angels deal with a mortality rate in the 80 and 90 percent range, which can make your life feel more like that of a hospice worker than a financial wizard. Venture capitalists can move so far downstream that they deal with a mortality rate half that—or less—of an angel.
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.