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I am a junior angel in Silicon Valley. AMA
I occasionally invest in startups. Please chime in if you are also an angel.
- pg 17y agoI think you can safely say you are an intermediate or advanced angel.
- joshu 17y agoI guess junior is opposite to senior. I don't sit on boards, I don't lead deals, etc.
- mattmaroon 17y agoWhy don't you lead? I found when raising money that a lot of angels are like that. Is it just a time thing? If you found a startup you really loved, would you lead then, or just try to get someone else to?
- joshu 17y agoI don't think I know enough yet.
- zxz 17y ago<--- Reddit is that way
- joshu 17y agoIAMA is my guilty pleasure.
- thejo 17y ago* How do you hear about the startups you invest in? (Introductions from people you trust?) * What is the one piece of advice you would give to people who pitch their startups to you? * How do you add value?
- joshu 17y ago> How do you hear about the startups you invest in? (Introductions from people you trust?) They come from all directions. One of my best investments came from a chance meeting with the now CEO at a party. > What is the one piece of advice you would give to people who pitch their startups to you? Hard to explain. I do a lot of this by gut sense. I look for: - strong people doing things in interesting spaces - belief but not inflexibility; religion is bad. - an ability to roll with the punches: reactions are as important as planning > How do you add value? I am a product guy, so I look at the product and can evaluate it. Same thing I use to choose the investments, I guess. I am also reasonably well connected and will use that as asked.
- paulgb 17y agoThe "valley advantage": what attributes of a business makes a company most able to take advantage of the valley? Do this apply to b2b as much or just consumer tech? PS for the uninitiated, AMA = ask me anything
- joshu 17y agoI think the Valley offers much easier access to funding. There are also lots of support organizations here -- lawyers, banks, etc, who will understand your needs much better. I don't understand b2b and am terrified of it.
- jasonlbaptiste 17y agoWhat terrifies you about b2b (besides not understanding it)?
- joshu 17y agoSales. Seems very hard. Not that that route is bad but I understand b2c better,
- jasonlbaptiste 17y agoWhat attributes of twilio/weatherbill made you overcome this fear?
- joshu 17y agoGood question. Weatherbill was an earlier investment. I still wish I had put more in. I remember the exact line that convinced me: "You can upload your Quickbooks P&L and we'll calculate your exact exposure to the weather." I guess I like novel marketplaces more than I dislike b2b. For Twilio, it was the quality documentation that convinced me. Both companies have kick-ass CEO/founders.
- shafqat 17y agoWould you still consider investing in new B2B startups that have shown traction with sales?
- jmillerinc 17y agoWhat maximum % of your net worth would you allocate to angel investments?
- joshu 17y agohttp://en.wikipedia.org/wiki/Kelly_criterion http://en.wikipedia.org/wiki/Kelly_criterion
- jmillerinc 17y agoGreat. Any thoughts on parameter values?
- joshu 17y agoAccording to Fred, 2 in 3 startups return even or fail, and 1 in 3 succeed. Assuming I'm doing as well as he is (which I doubt) and that an exiting startup gets 10x the input, the formula suggests 25% or so. This seems high. Also, startups are not independent bets. Who knows? I've done 34-ish investments. One small exit. Two are doing very well. Two or three dead companies (sometimes, it is hard to tell.)
- timcederman 17y ago34ish and you say you're a junior angel? I guess that makes me a junior associate at best.
- joshu 17y agoI can't or won't negotiate terms, lead a round, syndicate a deal, or sit on a board. So that makes me subordinate to people who do these things; they are therefore my senior.
- danbmil99 17y agoheh, I just browsed Fortune's Formula and read about Kelly math. Excellent -- it's just like playing blackjack -- gotta control your bank. upshot: if he does well, in a couple years his typical investment size will be $20-$50K. Investment size is a proportion of bank.
- mdolon 17y agoWhen investing, how important is a founder's educational background and work experience? What do you think is the best indicator of a successful founder?
- joshu 17y agoI would like to see people who have succeeded in tough environments. Some degrees are like that, some are not. Evidence of having built something is better.
- einarvollset 17y agoHi Joshua Would you invest in a pure mobile play (i.e. Something you needed a specific type of phone for)? Reason i'm asking is that I quite often hear "yeah but what about everyone who doesn't have an XXX". Cheers, Einar
- joshu 17y agoI am not fond of secondary franchises. If you are going to live in the shade of one tree, it'd better be a huge fucking tree. I am also not fond of temporary opportunities. If you are doing X for Android because there's a successful X for iPhone and nobody has done it yet, then it's not a scaleable business.
- mattmaroon 17y agoIt worked pretty damn well for Playdom. They did X for Myspace because there was an X for Facebook and it took them to a huge amount of revenue. It's scalable as long as you can keep finding new Xes indefinitely.
- joshu 17y agoSure. I'm not saying it won't work - I'm just saying what I prefer to invest in. Lots of things that I pass on go on to get acquired. It often makes me feel stupid and doubt my strategy and decision-making. I'm also not entirely sure that I'm actually any good at this.
- deleted 17y ago[deleted]
- aditya 17y ago* What do you like to see before you invest? idea? product? traction? * What do you give more importance? idea or team? * You've had incredible dealflow recently, how are you getting into all these deals? (Foursquare, Square, StackOverflow, DailyBooth, Canv.as) * Since you don't lead, if you run across an interesting startup, do you make introductions or only co-invest in deals that come from other people? * Better location for a pre-funding consumer internet startup: NYC or Bay Area? * Bootstrap or raise money? Any particular reasons to choose the former or latter?
- joshu 17y ago> What do you like to see before you invest? idea? product? traction? I am trying to build intuition. So some of this is gut sense. Sometimes I look at deals and say, this is obvious. Sometimes I have to sell myself. I look for new things that are in spaces that have a comfortable competitiveness climate. > What do you give more importance? idea or team? Both are important. See above. > You've had incredible dealflow recently, how are you getting into all these deals? Luck is a matter of being in the right place at the right time, so I take care to be everywhere. I know everyone. Foursquare: I knew Dennis from NYC. Square: I knew Jack from twitter. StackOverflow: I was on a panel with Joel once. Canvas: I suggested moot to TED and introduced myself at the conference. Dailybooth: Asked for an introduction to me. > Since you don't lead If I like the product, I introduce it to relevant people. > Better location for a pre-funding internet startup I'm fond of both NYC and Bay Area. I started Delicious in NYC. > Bootstrap or raise money Venture money is only useful in some situations - where capital will help grow the business. I also want to see something where I will conceivably get out someday; that's either acquisition or IPO. Do many privately held companies pay dividends?
- aditya 17y agoThanks! To rephrase the NYC vs SF question, if you were starting a new company today, where would you do it?
- deleted 17y ago[deleted]
- huangm 17y ago1. What matters most to you: team, market or product? 2. You've said that you typically don't lead rounds and let others lead instead. What other angels do you respect the most? 3. Are there any deals that you regret passing on?
- joshu 17y ago> team, market or product All are important. > other angels There's a lot of great angels out there that I like to learn from. Aydin Senkut has shown me a lot that I've liked lately. > deals that you regret passing on There are always surprises. I think it's important to compare my feelings at the time I passed to the current feelings to benchmark my intuition. What I regret more is companies I did want to invest in but either flubbed or wasn't able to get into.
- staunch 17y agoWhats the range of your investment size?
- joshu 17y agoAlmost always $10k-$25k. I am a very small investor.
- jimboyoungblood 17y agoSomeday you'll grow up.
- joshu 17y agoGet this man some upboats. He's just making a joke.
- johns 17y agoHow much equity does that usually get you?
- joshu 17y agoValuations are often in the $2mm-$5mm range. Sometimes much higher. Never lower. Calculate it out.
- jimboyoungblood 17y agoWhat do you understand the valuation to be when the financing is done as convertible debt?
- joshu 17y agoThe debt usually has a cap, so I assume the cap. Stronger deals have no cap, so I am merely hopeful.
- grandalf 17y agoWhat value do you add (besides the money) to a project you invest in?
- joshu 17y agoMy product sense, mostly. My connections, a little. I try not to bother the founders unless they ask for help.
- christonog 17y agoHow much are you willing to be available to the companies you are invested in? Does your bandwidth allow for companies that would like some product advice, but aren't interested in funding at the moment? If so, what's the best channel to ask?
- patio11 17y ago1) Entrepreneurs need to understand that [ ... ] or I will stab their eyes out. Please fill in the blank. 2) What is the most broken thing about angel investing?
- joshu 17y agoIncidentally, I have sent at least three startups to your blog, just for an example of crisp thinking they needed to emulate.
- patio11 17y agoThanks, that is a wonderful compliment. If you have something specific you like crispified, I'd be happy to do a summary post about it. (The user experience of accessing my blog for the first time is terrible if you're not coming to a particular article, since it degrades into "what am I thinking about this week" and doesn't usually include context for the last four years.)
- joshu 17y agoNot really. I wish you'd do something bigger. You certainly have what it takes. I hope appointment reminder turns into that thing. (Also, ++ for using Twilio)
- patio11 17y agoI'm cautiously optimistic. Bigger, though, is just a side effect of playing a game well, not a goal I really go after for it's own sake. Pick a name out of your Rolodex, any name: I wouldn't trade my life for his for all the tea in China.
- jaybol 17y agoThank you for this perspective. I was recently thinking about how hard we strive to become the best at what we do, and how hard it is to actually know if/when you have gotten there (let alone how long you will be there if you get there) and thus it is a horrible thing to hang our sense of significance and worth on. I don't know the specifics of how you define your sense of contentment, but it seems pretty clear that you do.
- rms 17y agoIs Christopher Poole really moot's real/birth name?
- joshu 17y agoI will ask to see his birth certificate. My mother has met Moot... I should demand to meet his mom.
- paulgb 17y agoI realize this is getting off-topic from investing, but since that's the spirit of an AMA, is there an interesting story re: your mother meeting moot?
- joshu 17y agoNot really. It was after this event: http://www.nytimes.com/2010/04/19/arts/design/19rhizome.html http://www.nytimes.com/2010/04/19/arts/design/19rhizome.html and I wanted to go to a diner.
- joshu 17y agoAnother funny story: So it must have been 2004 and Stewart from Ludicorp wanted to show me this new "Flickr" thing they'd built, which was a sort of online flash chat thingy. I'd logged in and poked around, and said something to the effect of "this is neat, but I wonder if somebody's mother could use it." Stewart said to call mine and see what she thought, so I did. A few minutes later, my mother comes into the chat room that Stewart and I are talking in. If I recall, nobody else is even logged into the system at the time. "Mom, this is Stewart. Stewart, this is my mother." Stewart says hello, she says hello, etc. My mother says: "This is very nice, but I have one question." Stewart: "What's that?" My mother: "How is this going to make any money?"
- rokhayakebe 17y agoThe ultimate question. You should have your mom ask that question to all your portfolio founders.
- staunch 17y agoAre you doing it for financial reward or for the enjoyment of it?
- joshu 17y agoProbably the second, currently. I haven't seen a lot of return in real dollars.
- mayop100 17y agoWhats the best place to raise $200k for an early-stage internet startup. A single angel? A group of angels? A seed fund?
- joshu 17y agoI guess anything that works. In my experience, companies raising less than 500k are making a huge mistake.
- trevorturk 17y agoWhy do you think that?
- joshu 17y agoThe point of raising funds is to hire people who can accelerate the growth of the business. $200k gets you a person or two, which doesn't do very much. So you find yourself raising again pretty much immediately. The fundraising process is a colossal waste of your time. An entrepreneur going this route is not making good trade-offs. In my experience, most of these companies fail.
- staunch 17y agoWhat if a product is doing pretty good, but it's not enough to support two founders yet? If they can put all their effort into the company it would accelerate growth (from 25% + 25% to 200% founders). And if that only takes $200k how is that different?
- joshu 17y agoIf $200k is good but $500k is not as good, it smells like a lifestyle business. That's not bad, but it's not a good investment for me.
- deleted 17y ago
- ct4ul4u 17y agoWhat are you wearing?
- joshu 17y agoI am wearing a red "foo camp" tee shirt from 2007, jeans possibly from j-crew, and white gym socks I bought at walmart. a year or two ago I threw out all my mismatched pairs of socks and bought all identical white socks. now I do not have to match and fold the socks when washing them. I just pile them into the drawer.
- rokhayakebe 17y ago++ on the j-crew.
- pclark 17y agoI do the same thing, except I bought lots of socks of different colors from the same range. Best feeling ever - not having to pair socks. (and being told you're wearing odd socks like some kind of mad man) Want to be friends?
- joshu 17y agoARE YOU MY FRIEND? [Y/n]
- jwegener 17y agoI've had the same thought about socks. I've pondered starting a business around the idea -- pay $100 and we'd send you a few samples of different sock brands. Then choose the one you want most and we'll send you 30 pairs -- all you'll need! Feedback?
- pclark 16y ago($100 is a ton of money for socks, most people don't care enough to care about socks.)
- deleted 17y ago[deleted]
- icey 17y agoRate of good versus bad pitches you get?
- joshu 17y agoActually, I don't see that many that are bad per se, but I don't understand or like everything I see. Lots of bad entrepreneurs have problems that prevent me from actually seeing the pitch itself anyway. I prefer to see prototypes, anyway. This keeps a LOT of crap out of the way.
- ephermata 17y agoWhat are the problems with bad entrepreneurs that keep you from seeing the pitch itself? Thanks for your time answering these questions.
- joshu 17y ago- doesn't have a prototype. - will only walk me through the prototype in person. - won't even tell me what the product does without a meeting. - doesn't know how to communicate (way too verbose often) - doesn't have a clear pitch to deliver I've seen all of these.
- tlrobinson 17y agoWhy did you get into angel investing? (also, do you talk to yourself often?)
- joshu 17y agoHa, I was starting to fill out obvious questions that nobody asked, then got embarassed and deleted it. I wanted to try to figure out of I was going to be a professional investor someday. I discovered that the hardest part for me is saying "no" a whole lot. Yes, I do talk to myself.
- gruseom 17y agoWhat's something a startup has done that most surprised you by working when you expected it not to work?
- joshu 17y agoStartups don't generally tell me about their decisions often enough for me to be able to benchmark this, I think.
- gruseom 17y agoWell that brings up my other question, which I wrote and deleted: what's the median frequency with which you talk to startups you've invested in, and how does that change (in a given case) with time?
- joshu 17y agoThey typically stop talking to me after the next investment (usually, when they have a Board of Directors they are responsible to) Most startups do not update the non-board investors much. I am on IM most of the time. There is a "Founders" section in my buddylist.
- auston 17y ago* What is your favorite investment to date? * Was delicious boot strapped? * How do you feel about a publishing co (a la O'Reilly or PeepCode) as an investment?
- joshu 17y ago> favorite investment They're all my favorites. I try not to do the ones I hate. The ones that seemed very obvious to me on first conversation were Etsy, Weatherbill, and Twilio. > delicious bootstrapped I worked on it for two years before raising funding. But I did raise VC. > a publishing co Feels like a long slog. I'm not fond of content as a business.
- carpdiem 17y agoWhat's the most unexpected thing you've learned along the way?
- joshu 17y agoSaying "no" is the hardest part. Entrepreneurs are by nature a persistent bunch.
- shawndrost 17y agoWhat portion of your investments are outside of the bay area? (If you travel frequently to NYC, exclude that too. I'm interested in how much remote investing you do.)
- joshu 17y agoNone.
- dzlobin 17y agoThis applies to me personally, but I'll ask out in the open: Are you interested in advising young startups?
- joshu 17y agoI don't really do advisory boards. It has different compliance hurdles due to my work situation. Also, in my experience, startups are bad at fairly compensating their advisors. I'd agreed to seven or so advisories in the past and actually gotten paperwork for shares just a single time. One startup actually had me come in twice for advice and then later told me they decided not to have an advisory board.
- dzlobin 17y agoGotcha, thanks. What's a fair equity share for an advisor, btw?
- joshu 17y agoI dunno that one. It's typically not much.
- grellas 17y agoFor a typical advisory board member, usually .1 to .2% of company for a year's service, typically fully vested on grant (e.g., on a 10M share model, 10K or 20K shares/yr). This can vary widely, of course, for special cases, but something along these lines is probably the norm in the Valley. As you note, not much.
- samd 17y agoIn general how far along is the startup by the time you invest?
- joshu 17y agoI really want to see a working prototype first. Rarely do i invest without that.
- jaybol 17y agoWith that in mind, how do you feel about all of the people who rushed to send money to the NYU kids with the 'Facebook killer' in mind?
- joshu 17y agoWell, as an investor in Kickstarter, I approve. I feel bad for the Diaspora kids. They can't help but fail. Everyone will forget about it shortly, except for the people that gave money. I wish them the best of luck.
- icey 16y agoYou don't see this as the best possible scenario for them? They've been able to get everything they should need for success - adequate funding, lots of press, users who want what they're going to build so badly that they're giving them money sight unseen. How could there be a better situation for someone who wants to take on Facebook?
- edanm 17y agoHow far along do you expect a prototype to be? E.G., if I'm building a social web app, do you expect to just see a prototype with a few of the basic concepts? Or do you expect a first version that's already online and starting to get users?
- joshu 17y agoThe latter. You aren't learning anything until you are interacting with users, and learning is the most important thing you can possibly be doing. Through friction the apple is polished, I think.
- jonpaul 17y agoI'm a big fan of the ideals of 37 Signals, such as embrace constraints, bootstrapping, etc. But, I feel that my day job is getting in the way i.e. time. Should I take the plunge and seek angel or continue on my bootstrapping adventures?
- joshu 17y agoNot enough info. I switched to fulltime when my day job felt less important. Your attention and time are the scarce resource.
- bramcohen 17y agoWas the recent stock market plummet your fault? Did you sabotage the investment banking industry on your way out? Do you do back channel reference checks on founders?
- joshu 17y agoYou can't prove anything. I have an alibi.
- maxklein 17y agoLet's say you invest 25k in a company. What's your expectation on when you will receive money, and how much are you expecting to receive?
- joshu 17y agoI don't really think that way. Instead: will this be an enterprise worth being involved with? For example, are they going to change the world and make people's lives slightly better? Or do they, I dunno, write boring iPhone apps?
- maxklein 17y agoSo you're doing it to improve the world and not for the money?
- joshu 17y agoI call false dichotomy.
- maxklein 17y agoObviously. You are trying to make money. I am asking - when will you make the money and how much? If I put 25k in a business in 2008, when will I see a return and how much would that return be? Or are you just doing it to be associated with these companies?
- deleted 17y ago[deleted]
- joshu 17y agoI don't know. I expect it will take 5-10 years to get a return in many cases. I think this pays vast dividends outside of dollars: I get connections, notoriety, experience, exposure, and so on. I know about a lot of what's going on in the valley right now, for example. I expect it will be better than investing in venture funds, but not by much. (I do this too.)
- jasonlbaptiste 17y agoWhen will you do something outside of tech? ie- food type of establishment (I see you mention this desire here a lot).
- joshu 17y agoWhen I have a big enough purse that I can invest in things that will almost certainly lose money (unlike startups, where it's just probable.)
- david927 17y agoDo you ever invest outside of SV? Outside of the US?
- spoiledtechie 17y agoThanks for Answering... I learned a lot.
- bramcohen 17y agoWhy aren't you starting a new venture yourself?
- joshu 17y agoThat is an excellent question.
- kalvin 17y agoIf, hypothetically, you were starting a new venture yourself, what kind of change would you want it to make in the world if it succeeded?
- joshu 17y agoOne axis along which businesses find themselves has "direct utility" at one pole and "perceived utility" on the other. Perceived utility is stuff like sugary drinks, or pictures of attractive people, or whatever; we're drawn to like those things because of our psychology and evolutionary background. I don't mean to sound negative - if people like the things they can be good things. Like video games, for example. I think that no business or product exists at either extreme (delicious, for example, over-empowered people's need to collect things; video games are inadvertently good at improving reaction time etc) but I'm pretty sure anything that leans toward direct utility and is large is going to have a significant positive impact in the world. I think Google is a pretty shining example here. The things I like to build tend toward the "direct utility" side of things. Hopefully they will be large...
- adityakothadiya 17y agoHow does a startup approach/contact you if it's looking to raise funds? I understand you don't lead the rounds, but you might potentially introduce a startup to lead investors.
- joshu 17y agoFigure out my email and send it to me, but I may not respond. A better idea would be to send it to AngelList.
- adityakothadiya 17y agoGreat. Thanks for the recommendation.
- runT1ME 17y agoWould you have any advice for a startup that needs advisors and experience growing a company more than it needs straight up cash? Is a company that makes this known a turnoff for angels, as by doing so it admits it doesn't have 'everything quite worked out'?
- joshu 17y agoFind some advisors and mentors, then. Honestly, set yourself up to make some mistakes and learn from them. Advice is rarely that useful. If you don't need venture capital, don't raise. It sets certain expectations and puts you on a specific path.
- joshu 17y agoSo far I'm surprised that a) nobody has really asked about exits or returns b) people that have asked questions about their own situations have been incredibly vague c) no questions about background or current work or d) no questions about delicious's creation, founding, and later sale.
- _delirium 17y agoSort of on a): Are non-exit returns ever something you think about? E.g. the possibility of buying into the next craigslist and getting x% cut of some large revenue stream, but never getting an IPO or buyout? Or is that just too uncommon, and/or people with those intentions never cross your radar because they don't seek funding rounds?
- joshu 17y agoI don't know specifics about craigslist, but I haven't heard of anyone who is an investor of a company that pays significant dividends. Not saying it doesn't happen, though. I suspect that folks who have large revenue streams imminent would go to some effort not to dilute themselves.
- felixmar 17y agoAt what point did you decide to sell Delicious to Yahoo? Did you sell because of the money offered, because the initial idea was more or less finished or something else?
- joshu 17y agoTwo reasons: The second round was more difficult than expected, and I thought that search engine integration made a lot of sense.
- samd 17y agoI think a lot of us have read Founders at Work. How about this, has your wealth made you happier?
- mwerty 17y agoWhy are you an angel investor? Since thats super-broad, here are some options (feel free to add more): 1. You think you can make decent returns. 2. You like helping people. 3. You find it a great way to avoid getting bored.
- joshu 17y ago1 and 3, definitely. I also like being near interesting projects.
- pavs 17y agoI really enjoyed your Reddit AMA http://www.reddit.com/r/IAmA/comments/azgs6/iama_guy_who_sold_his_startup_and_i_have_like_20m/ http://www.reddit.com/r/IAmA/comments/azgs6/iama_guy_who_sol...
- joshu 17y agoHa. Not me, you can tell by the top section. He claims to be happy.
- pavs 17y agooops sorry. I did see your comment on that thread and didn't check the username of the OP. There are quite a few similarities between that guy's story and you, so I made an unverified assumption.
- joshu 17y agoYou weren't the only one. I think I wrote him to ask if he had any rich guy tips. I don't think I got any good ones.
- pavs 17y agoOn topic. I _really_ want to do this.[1] Whats your opinion? Sent a proposal to kickstarter yesterday, waiting for reply. [1]http://news.ycombinator.com/item?id=1351584 http://news.ycombinator.com/item?id=1351584
- joshu 17y agoSounds like an interesting idea. A revolution in education is imminent. Better measurement, statistics, and analytics in the real world, better connectivity in the offline world.
- deleted 17y ago[deleted]
- johns 17y agoWill you ever lead rounds/negotiate terms? How many more deals do you think you'll do before you reach that point?
- joshu 17y agoDunno. I don't invest enough dollars to have that right. I don't have enough purse to increase the dollars I invest. More importantly, I do not have enough stroke within the community to do this kind of thing. I also am probably not ready to be a fulltime investor any time soon.
- medianama 17y agoThank you for doing this.
- joshu 17y agoNo problem.
- clutchski 17y agoI heard you built one website a month, hunting for the right idea, until delicious clicked. Would you ever fund a person you believed in for that kind of exploratory work?
- joshu 17y agoI tried to build something interesting every year. I originally set out to be some sort of expert in social software (I think I succeeded, more or less) way back. In the past I built memepool and geourl and a bunch of other things you've never heard of. However, I never really had the idea of building businesses, just interesting things. I wanted to get attention (I got myself invited to Foo Camp before I did delicious, for example) from folks outside my industry, as I worked at an investment bank. I still build some small things here and there. I find it much more difficult to program now, though.
- joshu 17y agoI think delicious picked up more users in a day when I left than in its whole first year of existence. So it took some time to figure out if it clicked... however, I know that I spent a lot of time making Muxway (delicious's predecessor) work right for me and had a good sense for what would work for other people.
- rokhayakebe 17y agoI still build some small things here and there. I find it much more difficult to program now, though. Care to share any links?
- joshu 17y agoThe last thing I was tinkering with was http://lensdb.com/ http://lensdb.com/ but it still needs a lot of work. I haven't worked on it in months and months. I'm thinking of building an app to help manage my angel deal flow, of all things.
- stefanobernardi 17y ago
- bdevil1 17y agoSay you have an idea for a web startup, you're working on a prototype in your spare time. How should one make the jump from side project to getting funded? How did you do it with delicious?
- joshu 17y agoDelicious started getting noticed a great deal. Press, etc. I think I had 30-40k users right before I started talking to Fred. This is in the days before user inflation, mind you. I got several offers of acquisition for delicious in the 250k-500k range, and felt that if I actually worked on it full-time it would be worth more. I turned down eight or so acquisition offers before I took VC.
- bdevil1 17y agoHow did you host/fund it prior to taking VC? Was it so low maintenance that this wasn't an issue? (Many have said this already, but thanks for starting this thread. Very insightful.)
- joshu 17y agoIt wasn't that expensive to host. At the time I got funding, I had 3u via an ISP (http://www.atlanticmetro.net/ http://www.atlanticmetro.net/ now) in Telehouse. One of the servers I bought, and one was mailed to me out of the blue by Marc Andreessen.
- johns 17y agoHas working at Google while being an active investor ever led to any conflicts of interest?
- joshu 17y agoI generally avoid stuff that relies on heavy SEO or otherwise obviously directly competitive. Although I'd avoid some of that stuff merely because it is bad for the ecosystem before I worry if it bothers my employer. I'm pretty clear where I work and what my burden of responsibility is. So entrepreneurs will end discussions when they learn where I work if I wasn't aware. Usually if there is a conflict issue it ends there. I invest small amounts relative to my net worth and am unlikely to compromise my behavior for an investment. The E(v) of an investment, if you assume the 33% chance of a > 3x return is still not that big. Although: Yahoo compliance forced me to pass on the first round of Twitter. Yet another reason I am annoyed at them.
- jedc 17y ago> Although: Yahoo compliance forced me to pass on the first round of Twitter. Yet another reason I am annoyed at them. Ouch. I would have thought you'd use a stronger word than "annoyed"!
- paraschopra 17y ago1. Do you ask startups how exactly they are going to spend money? Or are you fine investing even if team doesn't know where each penny is going to be? 2. Since you must be involved with a lot of startups, how much time, attention and guidance you are able to give to an individual startup?
- joshu 17y agoUse of capital is a typical open question. But no, I do not ask for a budget. They should spend most of it on people and the rest on other constraining resources. A lot of them no longer need my help. Many don't use the time I do have available. I have plenty of time for my day job and even playing video games.
- rokhayakebe 17y agoWould you invest in a used car dealership? (I am not even joking. I am launching one later this year.)
- joshu 17y agoI invested in Carwoo. Probably a conflict.
- agoric 17y agoWhat are the prevailing terms for angel deals you've seen recently, and what do you consider to be "market" right now?
- joshu 17y agoLots more convertible debt lately, which I am not thrilled about. Or do you mean numbers? Every deal is different.
- royrod 17y agoOk, so (like many/most angels) you like priced deals :) Any other terms, or trends, you care to share? (Roy, "truly junior" beginning angel in Boston)
- agoric 17y agoI've heard of more capped valuations for convertible debt with negotiable interest and discount rates (and no warrant coverage), but also seen some angels openly demanding priced rounds. Are such capped convertible notes a good middle ground for debt that works like equity? Have you seen any that provide an alternative conversion if no priced round follows?
- joshu 17y agoI guess so. I really dislike uncapped notes, obviously. Many notes convert after a fixed period of time.
- budu3 17y agoAre you saying that you're not a fan of convertible debt?
- joshu 17y agoDefinitely not. I'm investing now, let me price it now. I've noticed that both very hot and very cold deals are debt. Hot because they can demand it, and cold because they can't scrape a real round together.
- pclark 17y agoI think that delicious is really awesome. I still use it pretty much every day, even though if anything the product has almost declined in quality over the past few years. It feels like Delicious could have been the start of something even larger than a bookmark service, it's my primary resource for finding specific content (eg: rails + tutorial, photo + howto, etc.) I'm aware that that is a fairly large technical barrier in terms of how search works, but I feel it proves the potential for something really, really awesome. A real social search engine if you like. Ever thought about buying it back off Yahoo?
- joshu 17y agoI have. But then I'd be the bookmarks guy, and I'd rather go on to do something else.
- gruseom 17y agoI agree with you. I noticed something about Delicious: when I add a URL, it's rare that someone else hasn't already bookmarked it. That means that Delicious has, to a first approximation, everything interesting on the web. All organized by humans in a rich way. That's an astonishingly valuable data set. Relative to that value, the use that's being made of it is so low it's criminal. Even if they aren't capable of evolving it, I wish Yahoo would at least make it fast enough that I don't cringe every time I use it.
- pclark 17y agopretty much every change Yahoo has done has been a step backwards, except for changing the url to delicious.com
- joshu 17y agoThat was actually my decision! We bought the domain before the acquisition. I think I heard it on the radio as "del issy oos" and knew it had to be changed.
- 17y ago
- bjonathan 17y agoHi, I'm raising money for my first startup (Business angel round) and I read lots of blogs to be familiar with the process(Dixon,Suster,Wilson,VentureHacks) but I am still eager to learn more about the subject. Do you know other good ressources (blog, book,video) to learn about how to raise money and the mechanisms ? Thank you
- joshu 17y agoThose are good resources. You also need a good lawyer. All of the folks you mentioned are good people.
- swombat 17y agoWhat's the best way for start-ups to get in touch with you? Do you respond to email pitches? What's the worst way to get in touch with you? Have you ever invested in a start-up that pitched you by email?
- joshu 17y agoDo something that I've heard of before they end up in touch. Cold emails rarely turn into anything.
- fleaflicker 17y agoWhat do you do at google?
- joshu 17y agoPress buttons, mostly.
- coffeemug 17y agoDo you get many business proposals from friends or relatives that you consider bad or uninteresting? How do you tactfully reject them? In general, did you have relationships with friends or relatives that changed in a significant way once you acquired a non-trivial amount of wealth?
- joshu 17y agoA lot of friends are in the business. A bunch of the things I have invested in are things started by friends.
- gyardley 17y agoHow should entrepreneurs screen potential investors to avoid personality or other conflicts? Assuming you failed the above, how do you deal with an investor who's being difficult or disruptive?
- joshu 17y agoThat's a good question. You have to talk to other entrepreneurs who took investment from the angel. While any shareholder can cause problems, especially at that stage, a small percentage / non-board angel can't do TOO much damage, I think. But I've never really been in the situation. Ask grellas.
- xg 17y agoThree questions: 1) Why do you find it harder to code these days? Does that bother you? It seems like you're still keeping up with a lot of python stuff from your delicious tagging. 2) Why hasn't anyone advanced the ball past delicious with bookmarking? I'm still a delicious nut, but I really want good search tied into it. Is there no business model or no real use to the data? 3) Do you believe in the Ron Conway style of angel investing? IE. invest in many interesting companies for better returns? Do you ever participate in follow-on rounds?
- joshu 17y ago> Why do you find it harder to code these days? I don't know. Too many distractions and anxieties? There's a lot of noise in my head. Yes, it bothers me. > Why hasn't anyone advanced the ball past delicious with bookmarking? I don't know. I should restart Muxway (the delicious predecessory) > Do you believe in the Ron Conway style of angel investing? I don't know enough about Ron's model to make a judgement. All we know is that it generates more "buy" decisions. I think that having a larger portfolio is stronger. Sometimes I do participate in follow-on rounds.
- btw0 17y agoWill you invest in a Chinese company?
- joshu 17y agoI really don't understand the lay of the land there.
- coryl 17y agoHi Joshu, 1) How aggressive are you in getting deals done? Are you more like "lets have a chat, sign here" or more like "okay, call me if you ever need funding."? 2) I'm actually working on a site similar to Delicious, http://www.howl.com http://www.howl.com. Its not quite bookmarking, we call it link blogging. What do you make of the market? Thanks
- pclark 17y agohowl looks neat (good domain) how are you better than tumblr?
- coryl 17y agostill figuring that out. I think we're lighter and easier to post with. We also don't offer any blogging tools other than pasting links. We think we can do comments and content discovery better.
- joshu 17y agoI am not that aggressive. If the entrepreneur doesn't understand how I can help/add value/etc then I don't really push it. It's not something that comes up a lot. Looks kinda neat. Feels tumblr-y. As an investor I avoid content-y stuff like this (how do you monetize? ads probably) but as a user and as a developer I like stuff like this.
- toppy 17y agoHave you considered investing outside US, Central Europe for instance?
- adrianscott 17y agoI've done a series of angel investments, but was most active 99-01. Performance would probably put me in top decile v.c. for that time. Had two liquidity events in last 2 years from advisory shares. Expecting an IPO in next year. Most famous startup I passed on: Paypal, back when they were doing palmpilot stuff. ;) Most famous startup I invested in: Napster, which went bankrupt Best return: Giganet, acquired quickly by Emulex. Haven't heard of it? Could there be a connection? ;) Present day: In the process of closing an angel round for my own new startup, mainly from friends I've known for a while who've built and sold off companies, plus a small number of friend of friends.
- joshu 17y ago> Paypal Ouch. I know the feeling. Doesn't Emulex make connectors? I would like to see some liquidity someday myself. What's the startup? We overlapped - I was at BofA Securities. My boss went on to Epoch Capital and then Schwab.
- adrianscott 16y ago>> Paypal >Ouch. I know the feeling. ;) Yah, I also could have been in on Salesforce.com and a recent flip to MSFT if I'd pushed a little harder... >Doesn't Emulex make connectors? Wow, I haven't looked at Emulex in so many years. That was at beginning of the decade... >I would like to see some liquidity someday myself. It'll come... it's funny that period between deal announcement and closing and liquidity, particularly w/ restricted stock and such. And also the ones that have taken 10 years to become liquid ;)... > What's the startup? Fosdev, I'll drop you a note. > We overlapped - I was at BofA Securities. My boss went on to Epoch Capital and then Schwab. Hehe, cool, I was helping Schwab Inst. first, then BofA Global Markets Group.
- srw 17y agoImagine that somebody is beginning a company that will be valued at >$ 1 Billion in three years and you believe on that. What will be your investment range and % of shares for an angel investment today. Also assuming that this company will not require any extra investment. Just a question.
- Utility 17y agoI am thinking about accepting an offer to join a startup with two founders (one technical, one non-technical) to be the first employee in a Biz Dev role. The company has no funding and a prototype will release in 1 month. I think the founders have been working for 5-6 months on it (probably 75% of their time in total). They offer no salary, but a 1k / month stipend, and a very fair commission structure for sales revenues I bring in. They offered me 1.0 - 1.5 % in common stock equity that will vest (as will theirs) over a typical 4 yr / 1 yr cliff path. I feel that the equity offered is too low, given that my joining is a risky investment for me financially, similar to theirs as founders. What do you think is the appropriate amount of equity to ask for?
- kevinelliott 16y agoI'd like to be an angel one day, but I'm still plumbing away at the entrepreneur thing first. I'd like to get a few successes under my belt, and really experience starting and growing the businesses, before I jump into investing. What are some things I can be doing now to prepare myself for angel investing?