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...the cash, from selling the business has built momentum for other projects like [...] angel investing, I just knew that would be in there. Why do so many tec

...the cash, from selling the business has built momentum for other projects like [...] angel investing, I just knew that would be in there. Why do so many tech people seem to think that VC investment is what they want to be doing once they have spare cash? This isn't a personal critique of the OP, but it just seems so very common in general. I don't understand it.

asmithmd1 9y ago
How else would you invest your money? Index funds in a stock market whose price is going hockey stick? With banks out of the business of loaning people money there are genuine opportunities out there where people can put money to work. I imagine he is not going to be gambling on ICOs but investing in profitable companies.
- charlesdm 9y ago
  10% a year on a million is still (way) better than throwing 4x $25k at a random startup through angel investing. Hell, with current interest rates, you might as well use some portfolio margin and borrow an extra million.
  - joosters 9y ago
    Yeah, exactly. Profitable VC investment is often described as a numbers game, where you need to make maybe hundreds of investments to smooth out the inevitable numerous failures. 4x $250k angel investments is basically a long shot gamble. On the flip side, if you do spread your investments and invest in lots of companies, you as an individual aren't going to be able to have enough time to help or advise any one startup in a meaningful way.
    - alien_at_work 9y ago
      How often do angels get screwed when VC's come in? Genuinly asking, not trying to make some point.
      - joosters 9y ago
        Sorry, I'm talking about VCs/angels as the same thing, and not trying to say anything about the investment time/stage/size/whatever.
  - asmithmd1 9y ago
    Are you saying you can expect 10%/year with your money in the stock market? No stockbroker will tell you that, it is more like 6%-8% over a 10 year time frame. And you have to have the courage to watch your balance drop 50% over a 1-2 year time span and still stay in.
    - alien_at_work 9y ago
      > it is more like 6%-8% over a 10 year time frame Uh, it's 6-8% compounded over what ever time frame. Which is actually still quite good and probably handily beats most angel investment returns.
    - erikbye 9y ago
      S&P 500 ETF Trust gained 63.42%, last 10 years. Vanguard 500 Index Fund, 130.56% since 2010. And neither look like hockey sticks.
    - icedchai 9y ago
      My own accounts have earned over 11.5%/year, for the past 10 years. This was through the financial crisis, where I did see huge drops like you describe, held, and continued to invest. Longer term 6 to 8% feels about right though.
    - charlesdm 9y ago
      If you put some time into it and learn how to properly invest, yes. If you made a million today, you probably want to just keep it in an account and wait until a 20%+ correction happens before buying in, though -- it's been quite while since the last significant drop.
      - joosters 9y ago
        Trying to time the market? Good luck with that.
        vinceguidry 9y ago
        All active investment, unless you're a market maker, is market timing.
- sidlls 9y ago
  I'd invest in equities, commercial real estate, and residential real estate development. Most tech companies looking for angel investment or VC money are just other versions of information selling (that is, information about people) or social interaction or both. They aren't worth "giving back" to, from either a tech perspective (from the perspective that they'll possibly advance technology) or from an investment perspective (they'll almost certainly perform worse than even conservative investment).
growt 9y ago
I think it's because before the sale you were on the other side of the table dreaming about how easy the VC life is (just spending some cash and letting you do the actual work).
soneca 9y ago
I believe this a great feature that create "tech hubs". It is the "give back to the community" of tech entrepreneurs. It is not just a financial decision.
- joosters 9y ago
  But there's plenty of ways to 'give back to the community' without being the one waving the chequebook. In particular, if you've got the spare time to work on other projects, you can do plenty to help out.
  - duggan 9y ago
    Some folks have more spare money than spare time. If you've got the spare time, cool, if you've got the spare money, cool. What's the issue here?
    - joosters 9y ago
      I've no issue with angel investing. It does start to irk me when people talk about it as 'giving back to the community' though. That used to be called charity, not investment.
      - duggan 9y ago
        Ok I think that's a reasonable position to have. However, giving back to a professional community seems like it would run on a different set of fundamentals to giving back to a social community. Could one not equally apply the argument to non-monetary activities -- giving talks, running events, writing OSS software, etc? That's all stuff that normally falls under the mantle of giving back to the community, yet it often confers resume benefits. What is it that makes it different?
  - erikbye 9y ago
    When you're busy with your new, own projects, time is in short supply. Are you seriously going to complain that people angel invest? It's of great benefit to founders.
nathan_f77 9y ago
I think it's just a lot of fun to meet other entrepreneurs, and be involved in what they're building. Definitely more fun than putting your money into some index funds.
danieltillett 9y ago
I "invest" in new startups because I want to help the next generation. I put invest in quotation marks because I don't expect to make any money (I will be happy if I break even), but I do want to give back and create the environment that I never had access to. I know others feel the same.
- KGIII 9y ago
  Some of my investment is to empower people that I like. Some is just to help them over a temporary financial hurdle. Some is more like a gift than an expectation of a financial reward and, honestly, a loss is the expected outcome. I'd also add something to the general topic. I never expected to sell my company and I think that actually helped. I drew a salary and kept my finances distinct from the legal entity that was the company. As it was I was the only owner, there were no investors to please, so profits went into growing and securing the business. Note: I consider sharing the profits with employees to be part of business growth and security. That meant I had complete ownership and a healthy business, without much real debt. This was attractive and it was quite surprising, sort of, when the offer came in. It was only sort of surprising because there had been a few rumors about it. So, I'm of the mind that the mentality drove the process and the process influenced the results. Of course, there is survivorship bias and I'm just a single data point.
  - kdscruggs 9y ago
    Congrats on the sale! Very noble of you, big fan of your approach. Ultimately, my goal is to eventually do the very same (give good people their chance to flourish and create good business). Have you seen any correlation to the "no pressure"/generous aspect of your investments to the success or failure of said investment? My feeling is that the lack of stress attached to the investment may make it easier for the founder to achieve their goals. No anxiety about failure to pay you back = no self fulfilling prophecy. Probably depends on the founder.
    - KGIII 9y ago
      No, but I don't have any frame of reference other than this. I treat every investment as a potential total loss, at least in this area. So, I don't really pressure or tell people what to do. So far, it's barely profitable.
tylertringas 9y ago
I use the term "angel investing" pretty loosely here. Not implying picking startups on angelist, but more like small investments in other Micro-SaaS businesses. Still formulating a strategy for investing tbh as it's the first time in my life I've have real captial to deploy, but I feel like I have a better competitive advantage investing in what I know rather than securities
- joosters 9y ago
  Hey, good luck to you. Again, it's nothing personal, and I don't mean to be insulting your choices, I just find it interesting that VC investment is so popular a choice for moneyed tech workers.
- troydavis 9y ago
  Whether you have an advantage or disadvantage depends on your goal. If you want a series of potentially-fun lottery tickets in industries and teams you choose, you have an advantage. If you want any return (and I mean any, as in, recovering any capital), you have 3 huge disadvantages: insufficient diversification[1], a lack of dealflow, particularly great deals, and inexperience evaluating and participating in other people’s startups. These are all surmountable, but doing so is an occupation. If you don’t already read Matt Levine, the “Retail Traders” section of https://www.bloomberg.com/view/articles/2017-10-09/retail-voters-and-insider-traders https://www.bloomberg.com/view/articles/2017-10-09/retail-vo... applies to picking a small quantity of individual startups too. The reason to do it is because it’s fun (and you’re comfortable losing all of the principal), not to earn average risk-adjusted returns. [1]: Check out 500 Startups’ presentations and posts on how much diversification is required to expect average returns for the asset class. Here’s one: https://500.co/not-so-simple-math-on-venture-portfolio-size/ https://500.co/not-so-simple-math-on-venture-portfolio-size/
sparrish 9y ago
Seems a bit ironic that a successful bootstrapped business owner would want to do angel investing.
- tylertringas 9y ago
  Appreciating the good discussion here around "angel investing" which I broadly agree with depending on how you define it. Just want to clarify that for me personally, I meant just investing in early-stage businesses in creative ways; not VC, moonshot, whatevers. In the run up to launching many failed businesses prior to Storemapper I accumulated nearly $60k in credit card debt, which functioned more or less like an angel investment from Chase et al. I think there are lots folks who could build a good business but don't have access to even that level of "capital" or don't want to take that kind of risk and might instead look for an "angel" investment. Maybe. Still early in formulating a strategy to be honest. (further reading if you're curious: https://tylertringas.com/debt-free/ https://tylertringas.com/debt-free/)
  - moeamaya 9y ago
    Both ourselves and our fellow bootstrap friends have eerily similar tales of CC debt as our first investors. $30k for a nearly profitable bootstrap founder is rocket fuel.
mbesto 9y ago
I am not a financial advisor, but generally speaking you should only be putting 5% of your net worth into high risk investments (i.e. angel investing). Some people have done the opposite (95% of net worth) and gotten extremely lucky on going all in (see Jason Calacanis's book Angel for example). > I don't understand it. I do. Angel investing is a status symbol in tech circles. https://twitter.com/sama/status/623685126849822720 https://twitter.com/sama/status/623685126849822720
ringaroundthetx 9y ago
"paying it forward" is part of the silicon valley culture, and as other markets mature they try to adopt that mentality as well. without it, this is one of many aspects that will make it impossible for some hamlet in Bumbaf* Cheapsville to be "the next silicon valley"
- joosters 9y ago
  I always thought "paying it forward" spoke of acts of charity, not investment (and to those who say that VCs don't expect any reward and invest solely through good spirit, perhaps they should then be making investments that don't give them the potential of huge paydays?) Interestingly though, a read of "paying it forward" in wikipedia - https://en.wikipedia.org/wiki/Pay_it_forward https://en.wikipedia.org/wiki/Pay_it_forward - teaches me that the phrase can also be implemented in the contract law of loans. I never knew!
Kiro 9y ago
Because it's fun. You wouldn't want to do it if you had the money?
briandear 9y ago
I want to “invest” in the opportunity to sit back, write books and fly airplanes. Angel investing seems like its fraut with constant bombardment from bullshitters. Spending my days looking at decks and listening to the noise of how great someone’s revolutionary idea for delivering fresh made salads to Brooklyn hipsters is would drive me nuts. Perhaps I’d take my money and go build schools in the Himalayas or something. But to each his or her own!
DeBraid 9y ago
People go with what they know. Makes sense to skew towards industry where one has acquired lots of information.

asmithmd1 9y ago

How else would you invest your money? Index funds in a stock market whose price is going hockey stick? With banks out of the business of loaning people money there are genuine opportunities out there where people can put money to work. I imagine he is not going to be gambling on ICOs but investing in profitable companies.

charlesdm 9y ago
10% a year on a million is still (way) better than throwing 4x $25k at a random startup through angel investing. Hell, with current interest rates, you might as well use some portfolio margin and borrow an extra million.
- joosters 9y ago
  Yeah, exactly. Profitable VC investment is often described as a numbers game, where you need to make maybe hundreds of investments to smooth out the inevitable numerous failures. 4x $250k angel investments is basically a long shot gamble. On the flip side, if you do spread your investments and invest in lots of companies, you as an individual aren't going to be able to have enough time to help or advise any one startup in a meaningful way.
  - alien_at_work 9y ago
    How often do angels get screwed when VC's come in? Genuinly asking, not trying to make some point.
    - joosters 9y ago
      Sorry, I'm talking about VCs/angels as the same thing, and not trying to say anything about the investment time/stage/size/whatever.
- asmithmd1 9y ago
  Are you saying you can expect 10%/year with your money in the stock market? No stockbroker will tell you that, it is more like 6%-8% over a 10 year time frame. And you have to have the courage to watch your balance drop 50% over a 1-2 year time span and still stay in.
  - alien_at_work 9y ago
    > it is more like 6%-8% over a 10 year time frame Uh, it's 6-8% compounded over what ever time frame. Which is actually still quite good and probably handily beats most angel investment returns.
  - erikbye 9y ago
    S&P 500 ETF Trust gained 63.42%, last 10 years. Vanguard 500 Index Fund, 130.56% since 2010. And neither look like hockey sticks.
  - icedchai 9y ago
    My own accounts have earned over 11.5%/year, for the past 10 years. This was through the financial crisis, where I did see huge drops like you describe, held, and continued to invest. Longer term 6 to 8% feels about right though.
  - charlesdm 9y ago
    If you put some time into it and learn how to properly invest, yes. If you made a million today, you probably want to just keep it in an account and wait until a 20%+ correction happens before buying in, though -- it's been quite while since the last significant drop.
    - joosters 9y ago
      Trying to time the market? Good luck with that.
      - vinceguidry 9y ago
        All active investment, unless you're a market maker, is market timing.
sidlls 9y ago
I'd invest in equities, commercial real estate, and residential real estate development. Most tech companies looking for angel investment or VC money are just other versions of information selling (that is, information about people) or social interaction or both. They aren't worth "giving back" to, from either a tech perspective (from the perspective that they'll possibly advance technology) or from an investment perspective (they'll almost certainly perform worse than even conservative investment).

growt 9y ago

I think it's because before the sale you were on the other side of the table dreaming about how easy the VC life is (just spending some cash and letting you do the actual work).

soneca 9y ago

I believe this a great feature that create "tech hubs". It is the "give back to the community" of tech entrepreneurs. It is not just a financial decision.

joosters 9y ago
But there's plenty of ways to 'give back to the community' without being the one waving the chequebook. In particular, if you've got the spare time to work on other projects, you can do plenty to help out.
- duggan 9y ago
  Some folks have more spare money than spare time. If you've got the spare time, cool, if you've got the spare money, cool. What's the issue here?
  - joosters 9y ago
    I've no issue with angel investing. It does start to irk me when people talk about it as 'giving back to the community' though. That used to be called charity, not investment.
    - duggan 9y ago
      Ok I think that's a reasonable position to have. However, giving back to a professional community seems like it would run on a different set of fundamentals to giving back to a social community. Could one not equally apply the argument to non-monetary activities -- giving talks, running events, writing OSS software, etc? That's all stuff that normally falls under the mantle of giving back to the community, yet it often confers resume benefits. What is it that makes it different?
- erikbye 9y ago
  When you're busy with your new, own projects, time is in short supply. Are you seriously going to complain that people angel invest? It's of great benefit to founders.

nathan_f77 9y ago

I think it's just a lot of fun to meet other entrepreneurs, and be involved in what they're building. Definitely more fun than putting your money into some index funds.

danieltillett 9y ago

I "invest" in new startups because I want to help the next generation. I put invest in quotation marks because I don't expect to make any money (I will be happy if I break even), but I do want to give back and create the environment that I never had access to. I know others feel the same.

KGIII 9y ago
Some of my investment is to empower people that I like. Some is just to help them over a temporary financial hurdle. Some is more like a gift than an expectation of a financial reward and, honestly, a loss is the expected outcome. I'd also add something to the general topic. I never expected to sell my company and I think that actually helped. I drew a salary and kept my finances distinct from the legal entity that was the company. As it was I was the only owner, there were no investors to please, so profits went into growing and securing the business. Note: I consider sharing the profits with employees to be part of business growth and security. That meant I had complete ownership and a healthy business, without much real debt. This was attractive and it was quite surprising, sort of, when the offer came in. It was only sort of surprising because there had been a few rumors about it. So, I'm of the mind that the mentality drove the process and the process influenced the results. Of course, there is survivorship bias and I'm just a single data point.
- kdscruggs 9y ago
  Congrats on the sale! Very noble of you, big fan of your approach. Ultimately, my goal is to eventually do the very same (give good people their chance to flourish and create good business). Have you seen any correlation to the "no pressure"/generous aspect of your investments to the success or failure of said investment? My feeling is that the lack of stress attached to the investment may make it easier for the founder to achieve their goals. No anxiety about failure to pay you back = no self fulfilling prophecy. Probably depends on the founder.
  - KGIII 9y ago
    No, but I don't have any frame of reference other than this. I treat every investment as a potential total loss, at least in this area. So, I don't really pressure or tell people what to do. So far, it's barely profitable.

tylertringas 9y ago

I use the term "angel investing" pretty loosely here. Not implying picking startups on angelist, but more like small investments in other Micro-SaaS businesses. Still formulating a strategy for investing tbh as it's the first time in my life I've have real captial to deploy, but I feel like I have a better competitive advantage investing in what I know rather than securities

joosters 9y ago
Hey, good luck to you. Again, it's nothing personal, and I don't mean to be insulting your choices, I just find it interesting that VC investment is so popular a choice for moneyed tech workers.
troydavis 9y ago
Whether you have an advantage or disadvantage depends on your goal. If you want a series of potentially-fun lottery tickets in industries and teams you choose, you have an advantage. If you want any return (and I mean any, as in, recovering any capital), you have 3 huge disadvantages: insufficient diversification[1], a lack of dealflow, particularly great deals, and inexperience evaluating and participating in other people’s startups. These are all surmountable, but doing so is an occupation. If you don’t already read Matt Levine, the “Retail Traders” section of https://www.bloomberg.com/view/articles/2017-10-09/retail-voters-and-insider-traders https://www.bloomberg.com/view/articles/2017-10-09/retail-vo... applies to picking a small quantity of individual startups too. The reason to do it is because it’s fun (and you’re comfortable losing all of the principal), not to earn average risk-adjusted returns. [1]: Check out 500 Startups’ presentations and posts on how much diversification is required to expect average returns for the asset class. Here’s one: https://500.co/not-so-simple-math-on-venture-portfolio-size/ https://500.co/not-so-simple-math-on-venture-portfolio-size/

sparrish 9y ago

Seems a bit ironic that a successful bootstrapped business owner would want to do angel investing.

tylertringas 9y ago
Appreciating the good discussion here around "angel investing" which I broadly agree with depending on how you define it. Just want to clarify that for me personally, I meant just investing in early-stage businesses in creative ways; not VC, moonshot, whatevers. In the run up to launching many failed businesses prior to Storemapper I accumulated nearly $60k in credit card debt, which functioned more or less like an angel investment from Chase et al. I think there are lots folks who could build a good business but don't have access to even that level of "capital" or don't want to take that kind of risk and might instead look for an "angel" investment. Maybe. Still early in formulating a strategy to be honest. (further reading if you're curious: https://tylertringas.com/debt-free/ https://tylertringas.com/debt-free/)
- moeamaya 9y ago
  Both ourselves and our fellow bootstrap friends have eerily similar tales of CC debt as our first investors. $30k for a nearly profitable bootstrap founder is rocket fuel.

mbesto 9y ago

I am not a financial advisor, but generally speaking you should only be putting 5% of your net worth into high risk investments (i.e. angel investing). Some people have done the opposite (95% of net worth) and gotten extremely lucky on going all in (see Jason Calacanis's book Angel for example). > I don't understand it. I do. Angel investing is a status symbol in tech circles. https://twitter.com/sama/status/623685126849822720 https://twitter.com/sama/status/623685126849822720

ringaroundthetx 9y ago

"paying it forward" is part of the silicon valley culture, and as other markets mature they try to adopt that mentality as well. without it, this is one of many aspects that will make it impossible for some hamlet in Bumbaf* Cheapsville to be "the next silicon valley"

joosters 9y ago
I always thought "paying it forward" spoke of acts of charity, not investment (and to those who say that VCs don't expect any reward and invest solely through good spirit, perhaps they should then be making investments that don't give them the potential of huge paydays?) Interestingly though, a read of "paying it forward" in wikipedia - https://en.wikipedia.org/wiki/Pay_it_forward https://en.wikipedia.org/wiki/Pay_it_forward - teaches me that the phrase can also be implemented in the contract law of loans. I never knew!

Kiro 9y ago

Because it's fun. You wouldn't want to do it if you had the money?

briandear 9y ago

I want to “invest” in the opportunity to sit back, write books and fly airplanes. Angel investing seems like its fraut with constant bombardment from bullshitters. Spending my days looking at decks and listening to the noise of how great someone’s revolutionary idea for delivering fresh made salads to Brooklyn hipsters is would drive me nuts. Perhaps I’d take my money and go build schools in the Himalayas or something. But to each his or her own!

DeBraid 9y ago

People go with what they know. Makes sense to skew towards industry where one has acquired lots of information.