Guide to Angel Investing

[chriselles]

I had the chance to attend the 1st in-person YC Startup Investor School back in March.

All content here:

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]

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.

[startupdiscuss]

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]

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.

[riantogo]

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]

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

[mrfusion]

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]

Isn't this just the same as startups who hire engineers and "compensate" with equity and don't pay salaries?

[yani]

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

[whb07]

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]

Founders should be willing to take less pay and their biggest motivator should be their name in lights, not traction

[lquist]

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.

[repsilat]

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.

[anishgodha]

Fair point! Thanks for looking out :)

[dick_sucker2]

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.

[outside1234]

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

[startupdiscuss]

I think you ought to include more details.

I head that Sequoia uses a cast iron wheelbarrow but those things rust out. The new generation - the AZ16 of the world - uses alloys that are more resilient.

Can anyone comment? Is it true that machine learning wheel narrows are best?

[dpiers]

Why are you on this site if you don’t believe in early stage investing?

[jsolson]

I bought a sailboat. Similar effect, but lower carbon emissions.

[grosjona]

I like this approach, it has fewer steps and it doesn't waste other people's time.

[allenscope1]

It doesn't sound well at all.