Since there's been a lot of Twitter chatter about this, here's a thread on

How to Get Started as a Microangel investor in startups?

>>
1) First, my biggest learning (that I wish I'd learned in my 20s) was that there are a LOT of angel investors in Silicon Valley who are investing $1k checks. Seriously.

Previously, I'd thought that you need to be investing $25k+ checks in order to be an angel investor.
2) So while you do need to have *some money* to be able to angel invest, it's not as much as most ppl think. You don't need to be super rich.

So conceptually, angel investing can be pretty accessible. Getting deal flow & education have been the bigger blockers to date.
3) Let's first talk strategy. It's VERY IMPT to understand that angel investing is RISKY!

Most of your investments will return $0. You will lose $$. So it's impt to have great portfolio construction.
4) This video that I put together on why VCs are obsessed with unicorns ($1b valuation cos) will help walk through this thinking:

5) tl;dr, you will lose $$ not just on companies that shut down but also on the ones that continue to do well but never have liquidity as well as the ones that do have liquidity but you are at the bottom of the preference stack and later stage investors hose you.
6) And as such, your winners need to make enough money to cover all of your losses plus make more money.

As an angel, you don't need to go for the biggest outcomes ever (unlike VCs who manage other ppl's $$) but it's impt to have a similar mindset -- 2x wins are not good enough
7) The way to combat lots of losses is to invest in a lot of cos to diversify your portfolio.

One of the biggest mistakes new investors make is thinking they can really pick well & putting a big chunk of cash on 1 co. Don't try to pick a co. Select a portfolio.
8) And for beginners, a bigger startup portfolio is better IMO.

A) It helps w/ diversification - mitigate downside risk.
B) It helps you learn and get reps in.

Investing requires practice like everything else. So you have to see a lot and invest a lot to get better.
9) There are lots of opinions on "concentrated" vs "large" portfolio theory.

The pros & cons are large portfolio mitigates risk but returns too. A concentrated portfolio increases both risk & upside. I think for beginners, it's better to walk first. Then think about running.
10) This is why it's helpful to be investing smaller amounts such as $1k. If you're going to diversify in say 100 companies -> $100k over say 5-10 years. This means that you need to have $10-20k per yr.

That's the kind of budget you need for this to mitigate risk IMO.
11) Further, when you have no dealflow, you need to team up with ppl who do in order to maximize your chances.

Try to find other people who have been angel investing or even funds to at least look at companies with.
12) Although you may have different opinions from these investors, in order to practice, it's helpful to understand how other ppl think about things (and understand what they think about) when they are making a decision.
13) Once you are able to tag along other ppl for dealflow, this is really a game of decision making and how can you improve your decision over time. The more disciplined you are in your thought process / rubric, the more you can improve over time.
14) This is a great interview that @HarryStebbings did with @AnnieDuke one of my favorite thinkers / authors / poker players.

thetwentyminutevc.com/annieduke/

It is entirely about how to make decisions, score them, and get better at them.
15) Like sports or musical instruments, in order to get better, you need to take in feedback, and work on those *specific weaknesses*.

However, many investors don't get better, because the cycle from beginning to exit is yrs. So how do you get feedback to get better?
16) In startup investing, there's short term and long term feedback.

In the short term -- it's making a decision to invest into a startup. Then work w/ the startup to re-assess whether your hypotheses were true.
17) For example:

Hypothesis: "I think this team is focused"

And then let's say you work w/ a team -- and they are really scattered and all over the place. They are doing too many different things. Things that don't matter. Starting other side businesses. Etc.
18) It's often hard to figure this out, because you are not going to be day-to-day with the team. And from my learnings across hundreds of companies, most company updates don't really say much. Hah.
19) But you can mentor at an accelerator and work w/ companies week over week. That's one way (and you can learn a lot BEFORE you put down your own money too).

You can also work w/ your cos on a project. Help them w/ their deck. Their website. Provide feedback on their product.
20) All of these things help you validate or disprove specific hypotheses. Over time, you will build a mental model of assess on various criteria better as well as what is impt to you.

This is how you get better at angel investing.
21) Finally, it's a long term game. So most of your cos - even the ones that do REALLY well, will not look great in the beginning. They will face MANY downs and will have to pivot.

So it's impt to look at the long term and be willing to wait (& potentially lose) all your money.
22) One final thought -- ppl ask how can you invest only $1k?

Make a fast decision. The say, "Hey - really love what you are doing. But unfort I'm not rich enough to invest more than $1k. But I won't be a pain & can help you [x]."

X = intros, deck or prod feedback, etc

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More from @dunkhippo33

16 Jan
Some Friday (is it Friday? The days blur together) night thoughts on what makes for a “good startup idea”:

1) First, it’s really in the eyes of the beholder. Investors use their life perspective to assess.

For this reason we need more funders w more varied life perspectives.
2) Next, the way to get big fast is to get a lot of customers quickly. (Obv!)

VCs are not good at articulating this but what they are looking for are fast big sales.

How does this occur?
3) One way this can happen is through network effects or virality.

If you can get the flywheel going here, you can get big really fast.

Marketplaces tend to have these types of characteristics. Some b2b cos do too (eg calendly or zoom)
Read 9 tweets
11 Jan
A thread on capital calls:

-why VCs have basically no cash on hand?
-what are they?
-why should founders and emerging managers care?

>>
1) When you hear that a VC has raised $15m, the biggest misnomer is that you think their investors have actually wired them $15m.

However, that couldn't be further from how things actually work as funny as that sounds!
2) Here's why - when investors (called limited partners or LPs) commit to investing in a fund, they are making a commit over a period of time.

If an investor commits $500k, they don't have $500k just lying around to send to anyone. Usually that money is tied up elsewhere.
Read 30 tweets
5 Jan
I wouldn't have invested in my own startup @launchbit at @HustleFundVC (but really appreciate all of my investors who did!)

This often shocks people but here's why >>
1) On the investor side, there are so many amazing startups. If I said yes to all whom I thought would do well, I would need 5x more $$.

So the bar is HIGH. There are a lot of exceptional ppl & you cannot say yes to everyone. This is what bums me out the most in being a VC.
2) So how do you whittle down who gets that "investment" check? For lack of a better phrase, you basically start nitpicking.

-valuation is too high!
-not enough differentiation / too competitive
-idea isn't unique

etc..
Read 24 tweets
5 Jan
Random musing this AM: structured data on startup investors.

Something that has plagued startup ecosystems for so long is entrepreneurs simply don't trust investors. (I know - I was/is one of those entrepreneurs)

There have been many attempts at this solution - a thread >>
1) There have been attempts to create a Yelp of Investors. Starting with The Funded, through RateMyInvestor through @VCGuideHQ etc..

And this is fine - it certainly illuminates experiences that entrepreneurs have (good or bad) and that's valuable.
2) But like Yelp, you have the issue that most ppl want to consumer content and not participate.

So you capture snapshots -- again great to have some data, but not it's not complete per se.

You also get the outliers -- both the good and bad.
Read 11 tweets
5 Jan
Entrepreneurship is a mind game. Can you push to get that next customer by next wk? Can you stretch your dollar to get something done?

But there are plenty of HARD mental activities.

What makes it hard are the relationships involved >>
1) Yrs ago, I started a co w/ a friend. I didn't realize then that his wife was not excited about his working on a startup. She wanted him to get a stable job.

Ever since then, I spend a LOT of time getting to know SOs & spouses. They are just as impt as your co-founders.
2) Morale is so so impt. Not just your morale but everyone on your team. And all the impt ppl in their life.

Often it's hard to know what the true morale is, because you're the boss, and no one tells the boss what they really think. It's your job to find out.
Read 15 tweets
4 Jan
Welcome Will! and welcome back!

Will is the only person I've ever hired who did all the work BEFORE starting the job. To everyone who is looking for a job in venture, this is how he landed this

Read on >>
Early 2019, he emailed.

Him: Are you hiring for summer internships?
Me: No. no budget. no role. esp not MBAs who are looking for high salaries and don't know anything (as someone who has one)
Him: ok, will you let me just shadow and jump in here and there?
Me: ok
Him: [goes and does all this stuff] I've set up your entire deal flow triaging system w/ auto emails. All you need to do is put in your credit card.

Me: Oh! Thank you! (what we use today) We have a bit of $$ in SG w/ if you want in the summer. But not MBA lev.Might cover housing
Read 8 tweets

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