8 ms·

Guide to Angel Investing

104 points by anishgodha 8y ago

lquist 8y ago
Entrepreneur has the best idea ever! He needs funds to build the product. I believe it's best practice these days to use "they" as a neutral pronoun. It seems like a small thing, but these little things add up.
- anishgodha 8y ago
  Fair point! Thanks for looking out :)
- dick_sucker2 8y ago
  I haven't heard of that as a best practice. In my English class in high school they only mentioned to keep it consistent. The preference should be given to the writer. Both men and women have contributed to society so their pronouns can safety be used in written text.
  - adjkant 8y ago
    The problem is the male default. Grammatically it's fine, but when hundreds of article default to male, it has a growing effect socially. "They" or "he or she" is typically customary these days, more and more so the former as the latter is annoying to write and the singular they is becoming more accepted as a grammatical change in English.
    - qaq 8y ago
      we need a shorthand s/he :)?
  - xevb3k 8y ago
    Your name is dick sucker 2 (I’m hazarding a guess, that your are not Richard Zucker or something similar). I’m not entirely sure your opinion on reasonable social norms holds much weight...
    - dick_sucker2 8y ago
      Many a man and woman has sucked a dick. It won't be in the history books, but I'm sure you can find some reference material.
- repsilat 8y ago
  I don't think English is the author's first language -- see the use of "defer" throughout the document. Maybe most polite not to nitpick.
  - adjkant 8y ago
    I don't think it's meant as a nitpick but more of a "hey, you may not know this but here's a helpful thing". The comment seems to have been both worded and received in that positive way and that's a great thing if you ask me :)
  - richardknop 8y ago
    Or use he or she instead. But yeah, they or he or she is most neutral.
- Pls_I_Need_Help 8y ago
  Typical HackerNews quibble to set the tone adrift. The context of the article is not as necessary as the punctuation and pronouns. ...Lets twaddle away...
outside1234 8y ago
Here’s my guide: 1. Put your money in a wheelbarrow. 2. Set it on fire.
- dpiers 8y ago
  Why are you on this site if you don’t believe in early stage investing?
  - cyberpunk0 8y ago
    Maybe tech news? Not everyone cares about marketing and overblown venture capital nonsense
  - charlesdm 8y ago
    Early stage investing is akin to setting your money on fire. Great if you get a homerun, but likely the story will end with you being out of pocket a significant amount of money. It's super high risk, with a low chance of success. There are plenty alternative assets to invest in with a better risk reward profile (stocks, acquiring proven and profitable tech products, even cryptocurrencies, and other alternative assets)
  - richardknop 8y ago
    This website is called hacker news. Most people here are interested in tech, programming and such. Angel investors and VC people are small minority.
    - joejerryronnie 8y ago
      I would think people interested in startup financing/investing are a bigger contingent of HN'ers than you assume. It is run by YC after all.
      - richardknop 8y ago
        Perhaps but if you look at most threads, they are very tech/hacker oriented and most commenters, if you read their posts or history, are software engineers here. I think that is at least 70% majority.
chriselles 8y ago
I had the chance to attend the 1st in-person YC Startup Investor School back in March. All content here: https://investor.startupschool.org https://investor.startupschool.org Really useful data driven investing fundamentals. The networking connections and opportunities have been invaluable. Thanks to YC and all who attended.
- hal9000xp 8y ago
  I watched all of these lectures online. It's truly insightful! I'm too poor to be angel investor but I do like to listen angel investors and venture capitalists because they can give me insights about how to find brilliant ideas and what's common signs of prospective ideas. I think advices from ex-entrepreneurs who turned into angel investors or venture capitalists are much more valuable than from first or one time successful entrepreneurs because they know both sides. It's hard to impossible to distinguish talent from luck based on one time success. But if someone repeatedly find unicorns over the years, it's most probably talent and I would listen that person with great attention. One of my key takeaways from these lectures - really good idea for startup often sounds like bad idea because if idea sounded obviously good it would be most probably already executed by some big corp. This takeaway teach me not be overly dismissive of ideas which are not obviously good and be careful with ideas which sound obviously good. P.S. I know that soft-skills (e.g. leadership) and team are very important for success but it's not insightful information.
  - chriselles 8y ago
    Good post. I’m constantly trying to learn both sides of the fence as a startup founder and angel investor. I truly believe learning how to be a better angel investor also helps one be a better startup founder, and vice versa. Two sides to the same coin. One of my biggest takeaways from the in-person YC Startup Investor School is how truly important reputation is. While I’ve always worked hard to develop a good reputation, it was reinforced just how incredibly important reputation and crystal clear communication is between founders and investors.
startupdiscuss 8y ago
I appreciate someone formally writing out their thoughts. My instinct and conventional advice reflects the principles outlined in this guide. However, how do we know it’s true? I know one entrepreneur who passed on the best deal of his life because there was no traction and the team seemed to be bad (he didn’t offer how he knew this.) They had a great product but of course he discounted that. It would be interesting to see what the data says.
- anoncoward111 8y ago
  Ultimately the one with the biggest pockets wins in that scenario. A firm that has enough money to fund 300 businesses will probably have a lot less variance/cash flow problems than one that can only afford to fund 30. The big fund won't pass on a murky deal because it can afford to be wrong.
  - dweekly 8y ago
    Weirdly enough most of the folks with large funds (e.g. mid-sized VC firms) do not make a large number of bets because their MO is to take a board seat with an investment. Because there's an effective limit on the number of boards one can sit on and fulfill a fiduciary duty to each corporation, there are only so many checks the firm will write. They are further constrained by fund timing (having a few years at the start to deploy capital and generally ten years to return it). Worse yet, they need one big success that will return the fund in order to earn carry. So they have a fixed number of bets, one of which must make it really big in less than ten years. Needless to say with all of these constraints most VC funds fail to beat the public markets. Many VCs given these constraints follow the advice in this article and invest mainly in companies that already have good traction. The problem is that everyone wants to invest in these companies so those that get in either overpay or have some reason why they have gotten access to proprietary deal flow. Angels that make small, passive investments can build very broad portfolios, wait patiently over long time horizons, and make money when even a single investment returns. Angels can afford to be wrong much more often and make much edgier bets. Nearly all seed funding these days is provided by angels. Over a broad portfolio, that's where the returns are. Background: started two companies, invested in 50+, advised 15+, run three funds/syndicates.
yani 8y ago
Angels should be willing to take higher risk and their biggest motivation should be innovation not return.
- whb07 8y ago
  If an investment has outsized returns would it not be due to some innovation ? Also the purpose of an investment is a return. I can’t tell if you’re being sarcastic or not, but what you’re mixing up research funding with capital investments.
- jabgrabdthrow 8y ago
  Founders should be willing to take less pay and their biggest motivator should be their name in lights, not traction
riantogo 8y ago
Can someone also share the actual steps of going about angel investing? If through my network I hear about a team in say, Africa, looking for investment, do I then ask them to list their project on AngelList? Do I then pay via credit card and AngelList takes care of getting money in their bank? Do I then get some form of legal contract specifying my share of equity? Who enforces the contract?
- buildbuildbuild 8y ago
  There’s a bit more structure in place. This is a great overview http://paulgraham.com/angelinvesting.html http://paulgraham.com/angelinvesting.html
mrfusion 8y ago
I always thought it would be cool to angel “invest” with coding time and expertise instead of money. Any ideas if that’s ever possible? Maybe that’s a good business idea to match up coders with free time to start ups?
- txmjs 8y ago
  Isn't this just the same as startups who hire engineers and "compensate" with equity and don't pay salaries?
  - mrfusion 8y ago
    Isn’t that pretty unusual? Plus I’d want to be courted like an investor instead of doing whiteboard interviews.

104 points by anishgodha 8y ago

Entrepreneur has the best idea ever! He needs funds to build the product. I believe it's best practice these days to use "they" as a neutral pronoun. It seems like a small thing, but these little things add up.

anishgodha 8y ago
Fair point! Thanks for looking out :)
dick_sucker2 8y ago
I haven't heard of that as a best practice. In my English class in high school they only mentioned to keep it consistent. The preference should be given to the writer. Both men and women have contributed to society so their pronouns can safety be used in written text.
- adjkant 8y ago
  The problem is the male default. Grammatically it's fine, but when hundreds of article default to male, it has a growing effect socially. "They" or "he or she" is typically customary these days, more and more so the former as the latter is annoying to write and the singular they is becoming more accepted as a grammatical change in English.
  - qaq 8y ago
    we need a shorthand s/he :)?
- xevb3k 8y ago
  Your name is dick sucker 2 (I’m hazarding a guess, that your are not Richard Zucker or something similar). I’m not entirely sure your opinion on reasonable social norms holds much weight...
  - dick_sucker2 8y ago
    Many a man and woman has sucked a dick. It won't be in the history books, but I'm sure you can find some reference material.
repsilat 8y ago
I don't think English is the author's first language -- see the use of "defer" throughout the document. Maybe most polite not to nitpick.
- adjkant 8y ago
  I don't think it's meant as a nitpick but more of a "hey, you may not know this but here's a helpful thing". The comment seems to have been both worded and received in that positive way and that's a great thing if you ask me :)
- richardknop 8y ago
  Or use he or she instead. But yeah, they or he or she is most neutral.
Pls_I_Need_Help 8y ago
Typical HackerNews quibble to set the tone adrift. The context of the article is not as necessary as the punctuation and pronouns. ...Lets twaddle away...

outside1234 8y ago

Here’s my guide: 1. Put your money in a wheelbarrow. 2. Set it on fire.

dpiers 8y ago
Why are you on this site if you don’t believe in early stage investing?
- cyberpunk0 8y ago
  Maybe tech news? Not everyone cares about marketing and overblown venture capital nonsense
- charlesdm 8y ago
  Early stage investing is akin to setting your money on fire. Great if you get a homerun, but likely the story will end with you being out of pocket a significant amount of money. It's super high risk, with a low chance of success. There are plenty alternative assets to invest in with a better risk reward profile (stocks, acquiring proven and profitable tech products, even cryptocurrencies, and other alternative assets)
- richardknop 8y ago
  This website is called hacker news. Most people here are interested in tech, programming and such. Angel investors and VC people are small minority.
  - joejerryronnie 8y ago
    I would think people interested in startup financing/investing are a bigger contingent of HN'ers than you assume. It is run by YC after all.
    - richardknop 8y ago
      Perhaps but if you look at most threads, they are very tech/hacker oriented and most commenters, if you read their posts or history, are software engineers here. I think that is at least 70% majority.

chriselles 8y ago

I had the chance to attend the 1st in-person YC Startup Investor School back in March. All content here: https://investor.startupschool.org https://investor.startupschool.org Really useful data driven investing fundamentals. The networking connections and opportunities have been invaluable. Thanks to YC and all who attended.

hal9000xp 8y ago
I watched all of these lectures online. It's truly insightful! I'm too poor to be angel investor but I do like to listen angel investors and venture capitalists because they can give me insights about how to find brilliant ideas and what's common signs of prospective ideas. I think advices from ex-entrepreneurs who turned into angel investors or venture capitalists are much more valuable than from first or one time successful entrepreneurs because they know both sides. It's hard to impossible to distinguish talent from luck based on one time success. But if someone repeatedly find unicorns over the years, it's most probably talent and I would listen that person with great attention. One of my key takeaways from these lectures - really good idea for startup often sounds like bad idea because if idea sounded obviously good it would be most probably already executed by some big corp. This takeaway teach me not be overly dismissive of ideas which are not obviously good and be careful with ideas which sound obviously good. P.S. I know that soft-skills (e.g. leadership) and team are very important for success but it's not insightful information.
- chriselles 8y ago
  Good post. I’m constantly trying to learn both sides of the fence as a startup founder and angel investor. I truly believe learning how to be a better angel investor also helps one be a better startup founder, and vice versa. Two sides to the same coin. One of my biggest takeaways from the in-person YC Startup Investor School is how truly important reputation is. While I’ve always worked hard to develop a good reputation, it was reinforced just how incredibly important reputation and crystal clear communication is between founders and investors.

startupdiscuss 8y ago

I appreciate someone formally writing out their thoughts. My instinct and conventional advice reflects the principles outlined in this guide. However, how do we know it’s true? I know one entrepreneur who passed on the best deal of his life because there was no traction and the team seemed to be bad (he didn’t offer how he knew this.) They had a great product but of course he discounted that. It would be interesting to see what the data says.

anoncoward111 8y ago
Ultimately the one with the biggest pockets wins in that scenario. A firm that has enough money to fund 300 businesses will probably have a lot less variance/cash flow problems than one that can only afford to fund 30. The big fund won't pass on a murky deal because it can afford to be wrong.
- dweekly 8y ago
  Weirdly enough most of the folks with large funds (e.g. mid-sized VC firms) do not make a large number of bets because their MO is to take a board seat with an investment. Because there's an effective limit on the number of boards one can sit on and fulfill a fiduciary duty to each corporation, there are only so many checks the firm will write. They are further constrained by fund timing (having a few years at the start to deploy capital and generally ten years to return it). Worse yet, they need one big success that will return the fund in order to earn carry. So they have a fixed number of bets, one of which must make it really big in less than ten years. Needless to say with all of these constraints most VC funds fail to beat the public markets. Many VCs given these constraints follow the advice in this article and invest mainly in companies that already have good traction. The problem is that everyone wants to invest in these companies so those that get in either overpay or have some reason why they have gotten access to proprietary deal flow. Angels that make small, passive investments can build very broad portfolios, wait patiently over long time horizons, and make money when even a single investment returns. Angels can afford to be wrong much more often and make much edgier bets. Nearly all seed funding these days is provided by angels. Over a broad portfolio, that's where the returns are. Background: started two companies, invested in 50+, advised 15+, run three funds/syndicates.

yani 8y ago

Angels should be willing to take higher risk and their biggest motivation should be innovation not return.

whb07 8y ago
If an investment has outsized returns would it not be due to some innovation ? Also the purpose of an investment is a return. I can’t tell if you’re being sarcastic or not, but what you’re mixing up research funding with capital investments.
jabgrabdthrow 8y ago
Founders should be willing to take less pay and their biggest motivator should be their name in lights, not traction

riantogo 8y ago

Can someone also share the actual steps of going about angel investing? If through my network I hear about a team in say, Africa, looking for investment, do I then ask them to list their project on AngelList? Do I then pay via credit card and AngelList takes care of getting money in their bank? Do I then get some form of legal contract specifying my share of equity? Who enforces the contract?

buildbuildbuild 8y ago
There’s a bit more structure in place. This is a great overview http://paulgraham.com/angelinvesting.html http://paulgraham.com/angelinvesting.html

mrfusion 8y ago

I always thought it would be cool to angel “invest” with coding time and expertise instead of money. Any ideas if that’s ever possible? Maybe that’s a good business idea to match up coders with free time to start ups?

txmjs 8y ago
Isn't this just the same as startups who hire engineers and "compensate" with equity and don't pay salaries?
- mrfusion 8y ago
  Isn’t that pretty unusual? Plus I’d want to be courted like an investor instead of doing whiteboard interviews.