8 ms·

Seed investing is not something for amateurs, in fact frankly I don't think investing in public companies is for amateurs. I would tell ordinary people to inves

by pg_bot 14y ago

Seed investing is not something for amateurs, in fact frankly I don't think investing in public companies is for amateurs. I would tell ordinary people to invest in index funds and don't invest in startups at all. You should not be investing in startups because you think it is going to change your life. You shouldn't be doing it unless you're rich enough that your life wouldn't be changed by making lots of money. - Paul Graham

pg 14y ago
Wow, that's funny. As I was reading that, I was thinking "what a thoughtful comment for HN." At least I'm consistent. Twould be nice if you punctuated it properly though.
- Mahn 14y ago
  Interesting. It looks like one can summon PG by just quoting him. We should try this more often.
  - phreanix 14y ago
    You have to say his name 3x.
- pg_bot 14y ago
  Sorry transcribing from video is a little harder than from an essay. You try to tow the line between the speaker's rhythm and correct syntax to form the natural voice of the person speaking. Here is the video for the actual quote. http://www.bloomberg.com/video/breaking-down-billion-dollar-startup-valuations-1zxUEMyJTYeY8SEMC9Olew.html http://www.bloomberg.com/video/breaking-down-billion-dollar-... skip to 4:47.
- aashaykumar92 14y ago
  I'm a bit confused by this...why did you fund Wefunder then? "Amateurs" are exactly the people that will be funding startups on Wefunder...
  - pg 14y ago
    If you imagine investors organized concentrically with the sort who physically show up on Demo Day at the center, I think the sweet spot for this type of thing is the next ring out: people who are not focused on startup investing, but who either understand startups well (like rdl) or are rich enough to learn about them by trial and error.
    - deleted 14y ago
      [deleted]
    - aashaykumar92 14y ago
      Ok I see your point and agree with it, but Wefunder is metaphorically opening up to nearly the entire universe by eventually allowing anyone to invest--it doesn't seem to be doing anything to stop 'amateurs' from investing. I'd like to believe that there are many people have a couple thousands dollars that they'd be willing to invest in a startup that seems promising. In the next year, I will theoretically be able to invest in startups via Wefunder...and I am in college with just one startup under my belt. I like to think I understand startups well but given my age and experience, I bet there are people who understand them far better than I do...and far less as well.
      - robomartin 14y ago
        > but given my age and experience Given your age and experience you have NOHTING to loose. Experiment. Fail. Learn. Succeed. One of my all-time favorite sayings is by Mark Twain: "A man holding a cat by the tail learns something he can learn no other way". If you think you understand startups enough to risk $1,000, by all means, do it! You will learn something regardless of the outcome. And, frankly, at your age, if you are intelligent about it there are virtually no negatives.
        aashaykumar92 14y ago
        Yes sir, I plan on doing so! I was only responding to the seemingly-odd assumption that only the "next ring" of investors is what Wefunder is going for--at least that's what I got from pg's response to why he/YC funded Wefunder. To me, there is no way to keep it to only this "next ring" and it doesn't seem that Wefunder is trying to do this. They are trying to appeal to those who are even several "rings" away.
kurtko 14y ago
This begs an interesting question: perhaps the way for the public to become seed investors is through diversification (i.e. index-style investing applied to small companies as well). Already, something analogous is possible through micro-cap index funds. That said, I agree that ultra-small companies are not a place to put all of your capital for the long haul, but they could provide correlation advantages with respect to the broader market in small doses.
melvinmt 14y ago
I agree that ordinary people shouldn't bet their life savings on startups. But this allows an average well-informed SF employee to invest $1,000-2,000/month of his/her salary into any startup they like - hardly a life changing amount. See it as a Kickstarter on steroids. At least this gives us a chance too to invest in the next Dropbox and Airbnb.
- runako 14y ago
  Worth noting: $1,000-2,000/month stashed in a less risky asset class (e.g. index funds) over 30 years is likely to be enough for most people to retire comfortably. That's potentially life changing over the long term.
  - wilfra 14y ago
    Indeed. Nobody should limit their investments to just these. For every $1,000 you put into a crowdfunded company, you should be investing at least $4,000 in more traditional and safe investments. And 20% is even a lot. That assumes a young person who has high future earnings potential and a high risk tolerance. 5-10% would be more reasonable for most people. That said - this is certainly an asset class one could beat the S&P500 with, as long as you aren't just throwing darts and are actually investing in companies you know a lot about and understand.
    - jwallaceparker 14y ago
      > traditional and safe investments This made me chuckle. The "traditional" investment vehicles of US stocks, real estate and bonds are anything but "safe" these days.
      - wilfra 14y ago
        The last few years are not representative of the long term. Over the long term stocks, bonds and real estate - in aggregate - rise in value. If you don't want to risk short or medium term fluctuations and black swans, the ultimate traditional and safe investment is a savings account. If you're the type that thinks fiat currency is only worth it's weight in toilet paper, then buy gold. For any of these investments you'll have more left at retirement than if you put 100% of your capital into startups that ended up going out of business.
car 14y ago
Shouldn't that read "...unless you are rich enough that your life wouldn't be changed by losing lots of money."?
digikata 14y ago
This is a devil's advocate question, but what's the difference between investing one's money, and one's own time & labor at a possibly high opportunity cost in a startup. Or stated another way, if an amateur shouldn't invest their money, what makes it ok for a startup employee to invest their labor?
- drumdance 14y ago
  Employment at a good-ish startup is a good investment in your skill set. Yes, ideally you will make a lot of money on an IPO or acquisition, but even if not you will develop expertise and broaden your network. Just throwing a few thousand at something you can only watch from afar won't get you that.
gavanwoolery 14y ago
Investing is not just about returns anymore. On Kickstarter, millions of people invest in products, not for a return but because they want the product to exist. I would very willingly toss my money down the blackhole of seed markets, because it is a "fair shot." Other markets are not. The stock market and index funds are driven by volume (i.e. rich people) fear, our economy, or stupid politicians. I would gladly fund a product to see it exist, and all the better if I have a shot at making a return on something I believe in. People don't invest in the stock market because they believe in the company, they do it because they have a gut-feeling it might move up that day. In '96 or '97, I predicted that Valve was going to be very successful, just based on a very early preview I saw of Half-Life - I was just a teenager at that time. I have made many similar calls (honest to god) across many companies including NVidia, Intel, Google -- because I believed in them before any of them went public (for the record, there is not a single public company that I believe in). What I wouldn't give to be able to invest my money where I believed it would do good.
- gfodor 14y ago
  In most circles the definition of investing is the deployment of capital for some expected return on that capital. You can't just take something else that feels like investing and start calling it that.
  - gavanwoolery 14y ago
    I agree - what I am trying to say is that there is more to investing than money in, money out, and risk. For example, I would feel a lot better losing money by investing in an innovative product, than losing money because the economy went down. Investing in progress, return or not, is its own reward.
aneth4 14y ago
I'm not rich enough that my life wouldn't be changed by lots of money, but I know startups pretty well. I invest around $10K once a year in a startup, usually with a friend who I believe strongly in. One of them so far was a disaster, and oddly enough he was the highest profile of these investments. One was quite lucrative. Another is looking to be a great return, having recently raised at more than 10x. I don't think investing 5% of your income and/or capital in startups is a bad idea if you have reason to believe someone will be successful. The key is to consider the money lost once you invest it. Don't expect anything back.

by pg_bot 14y ago

pg 14y ago

Wow, that's funny. As I was reading that, I was thinking "what a thoughtful comment for HN." At least I'm consistent. Twould be nice if you punctuated it properly though.

Mahn 14y ago
Interesting. It looks like one can summon PG by just quoting him. We should try this more often.
- phreanix 14y ago
  You have to say his name 3x.
pg_bot 14y ago
Sorry transcribing from video is a little harder than from an essay. You try to tow the line between the speaker's rhythm and correct syntax to form the natural voice of the person speaking. Here is the video for the actual quote. http://www.bloomberg.com/video/breaking-down-billion-dollar-startup-valuations-1zxUEMyJTYeY8SEMC9Olew.html http://www.bloomberg.com/video/breaking-down-billion-dollar-... skip to 4:47.
aashaykumar92 14y ago
I'm a bit confused by this...why did you fund Wefunder then? "Amateurs" are exactly the people that will be funding startups on Wefunder...
- pg 14y ago
  If you imagine investors organized concentrically with the sort who physically show up on Demo Day at the center, I think the sweet spot for this type of thing is the next ring out: people who are not focused on startup investing, but who either understand startups well (like rdl) or are rich enough to learn about them by trial and error.
  - deleted 14y ago
    [deleted]
  - aashaykumar92 14y ago
    Ok I see your point and agree with it, but Wefunder is metaphorically opening up to nearly the entire universe by eventually allowing anyone to invest--it doesn't seem to be doing anything to stop 'amateurs' from investing. I'd like to believe that there are many people have a couple thousands dollars that they'd be willing to invest in a startup that seems promising. In the next year, I will theoretically be able to invest in startups via Wefunder...and I am in college with just one startup under my belt. I like to think I understand startups well but given my age and experience, I bet there are people who understand them far better than I do...and far less as well.
    - robomartin 14y ago
      > but given my age and experience Given your age and experience you have NOHTING to loose. Experiment. Fail. Learn. Succeed. One of my all-time favorite sayings is by Mark Twain: "A man holding a cat by the tail learns something he can learn no other way". If you think you understand startups enough to risk $1,000, by all means, do it! You will learn something regardless of the outcome. And, frankly, at your age, if you are intelligent about it there are virtually no negatives.
      - aashaykumar92 14y ago
        Yes sir, I plan on doing so! I was only responding to the seemingly-odd assumption that only the "next ring" of investors is what Wefunder is going for--at least that's what I got from pg's response to why he/YC funded Wefunder. To me, there is no way to keep it to only this "next ring" and it doesn't seem that Wefunder is trying to do this. They are trying to appeal to those who are even several "rings" away.

kurtko 14y ago

This begs an interesting question: perhaps the way for the public to become seed investors is through diversification (i.e. index-style investing applied to small companies as well). Already, something analogous is possible through micro-cap index funds. That said, I agree that ultra-small companies are not a place to put all of your capital for the long haul, but they could provide correlation advantages with respect to the broader market in small doses.

melvinmt 14y ago

I agree that ordinary people shouldn't bet their life savings on startups. But this allows an average well-informed SF employee to invest $1,000-2,000/month of his/her salary into any startup they like - hardly a life changing amount. See it as a Kickstarter on steroids. At least this gives us a chance too to invest in the next Dropbox and Airbnb.

runako 14y ago
Worth noting: $1,000-2,000/month stashed in a less risky asset class (e.g. index funds) over 30 years is likely to be enough for most people to retire comfortably. That's potentially life changing over the long term.
- wilfra 14y ago
  Indeed. Nobody should limit their investments to just these. For every $1,000 you put into a crowdfunded company, you should be investing at least $4,000 in more traditional and safe investments. And 20% is even a lot. That assumes a young person who has high future earnings potential and a high risk tolerance. 5-10% would be more reasonable for most people. That said - this is certainly an asset class one could beat the S&P500 with, as long as you aren't just throwing darts and are actually investing in companies you know a lot about and understand.
  - jwallaceparker 14y ago
    > traditional and safe investments This made me chuckle. The "traditional" investment vehicles of US stocks, real estate and bonds are anything but "safe" these days.
    - wilfra 14y ago
      The last few years are not representative of the long term. Over the long term stocks, bonds and real estate - in aggregate - rise in value. If you don't want to risk short or medium term fluctuations and black swans, the ultimate traditional and safe investment is a savings account. If you're the type that thinks fiat currency is only worth it's weight in toilet paper, then buy gold. For any of these investments you'll have more left at retirement than if you put 100% of your capital into startups that ended up going out of business.

car 14y ago

Shouldn't that read "...unless you are rich enough that your life wouldn't be changed by losing lots of money."?

digikata 14y ago

This is a devil's advocate question, but what's the difference between investing one's money, and one's own time & labor at a possibly high opportunity cost in a startup. Or stated another way, if an amateur shouldn't invest their money, what makes it ok for a startup employee to invest their labor?

drumdance 14y ago
Employment at a good-ish startup is a good investment in your skill set. Yes, ideally you will make a lot of money on an IPO or acquisition, but even if not you will develop expertise and broaden your network. Just throwing a few thousand at something you can only watch from afar won't get you that.

gavanwoolery 14y ago

Investing is not just about returns anymore. On Kickstarter, millions of people invest in products, not for a return but because they want the product to exist. I would very willingly toss my money down the blackhole of seed markets, because it is a "fair shot." Other markets are not. The stock market and index funds are driven by volume (i.e. rich people) fear, our economy, or stupid politicians. I would gladly fund a product to see it exist, and all the better if I have a shot at making a return on something I believe in. People don't invest in the stock market because they believe in the company, they do it because they have a gut-feeling it might move up that day. In '96 or '97, I predicted that Valve was going to be very successful, just based on a very early preview I saw of Half-Life - I was just a teenager at that time. I have made many similar calls (honest to god) across many companies including NVidia, Intel, Google -- because I believed in them before any of them went public (for the record, there is not a single public company that I believe in). What I wouldn't give to be able to invest my money where I believed it would do good.

gfodor 14y ago
In most circles the definition of investing is the deployment of capital for some expected return on that capital. You can't just take something else that feels like investing and start calling it that.
- gavanwoolery 14y ago
  I agree - what I am trying to say is that there is more to investing than money in, money out, and risk. For example, I would feel a lot better losing money by investing in an innovative product, than losing money because the economy went down. Investing in progress, return or not, is its own reward.

aneth4 14y ago

I'm not rich enough that my life wouldn't be changed by lots of money, but I know startups pretty well. I invest around $10K once a year in a startup, usually with a friend who I believe strongly in. One of them so far was a disaster, and oddly enough he was the highest profile of these investments. One was quite lucrative. Another is looking to be a great return, having recently raised at more than 10x. I don't think investing 5% of your income and/or capital in startups is a bad idea if you have reason to believe someone will be successful. The key is to consider the money lost once you invest it. Don't expect anything back.