Top 10 Lessons Learned Angel Investing $1M+ in 2020
I tripled down on angel investing this year, investing $1M+ in ~20 companies in 2020. I’ve learned what feels like 5 years worth of lessons in 1 year of investing. Here are my 10 biggest takeaways for anybody interested in getting started investing:
- Ownership reality > ownership mindset.
The earlier you think of yourself as an investor, the better. Investing in startups is a cheat code to participating in the future with asymmetric upside. Worst case, you lose 1x your money; best case you 1000x it.
2. Invest in founders that are better than you.
When you’re floored by a founder, work with them. Period. If you’re with the right people you’ll either (a) make a killing because they’ll figure it out / see something you don’t or (b) learn a ton and develop a killer network.
3. Always play the long game.
I worked with a Founder for months before getting to invest in the company. If you add value, the Founder wants you in. This ecosystem is also really interconnected. I got into another oversubscribed deal this year because of a reference from that same Founder.
4. Break down investing into 3 phases.
Phase I: Did I see the company? Speaks to my connectivity
Phase II: Did I say yes? Speaks to my judgement
Phase III: Did they say yes? Speaks to my value
Hone in on all 3 and figure out where you’re weak / strong.
5. Surround yourself with people that are world class.
Arjun Sethi has been an amazing friend and mentor throughout my angel investing journey. The best scenario when angel investing early on is actually not about the $; it’s about learning a system.
6. Do the work.
Get the deck, research the space. I’ve heard 100 pitches this year. You get better at pattern matching / spotting obvious flaws; but you will find yourself on the wrong side of a go / no go decision if you carry mistaken assumptions into the room.
7. You can diligence yourself out of literally every deal.
It’s a herculean effort for a startup to succeed. If you just focus on “what can go wrong”, you will literally say no 100% of the time. Instead ask yourself, “if this goes right, how big can it be.”
8. This is the only asset class where the Founder also picks you.
It pays to be genuine and helpful. Startups aren’t an asset you can indiscriminately dump capital into. Founders have a say on who they want to work with. This bar for the best deals is pretty damn high.
9. Analysis paralysis is fatal.
You have to be comfortable moving quickly and dealing with imperfect information or angel investing is impossible. There were a couple awesome deals (in retrospect) where I could have invested, but fell into analysis paralysis and missed.
10. This really is an incredibly exciting time for tech.
There’s a lot of noise about how there’s too much capital sloshing around. I think there isn’t enough capital moving around. To believe the ecosystem is overcapitalized is to believe that human creativity is fully tapped.
Thank you to all the amazing Founders that have let me be a part of their journey. I’m pumped to see you all soar in 2021 and beyond!
