Ten years. 100 investments. Three years in, I'm at 30, and I'm finalizing a new one right now.
Why 10 years? Why 100 companies? Story time…
Walking Away
In 2019, I walked away from a great job.
I worked in medical software for many years. The field had been good to me, but I felt like I'd done everything I was ever going to do in that business. Plus, I'd made a little bit of money, and I wanted to see what else the world had to offer.
I bounced around for a while, doing some volunteering, some work as an extra on film sets, French conversation groups, you name it. Then, around Christmas in 2020, I read Jason Calacanis' book Angel.
If you have any interest in investing in startups or raising money for a startup, read this book ASAP. It's one of the most actionable books I've ever read, and it's not boring.
I was fascinated by the world Jason described. So, I started listening to his podcast This Week in Startups too.
Making Plans
"Maybe I can do this," I began to think.
I knew it would take 10 years or more for an early stage company to exit. If I wanted to see if I was any good at this, I'd have to give it a decade.
So I committed to invest in 100 companies over 10 years. Here's how I arrived at the number 100…
I took the amount of money I was okay with losing and divided it by the minimum investment for most companies. Whether a syndicate or direct, I can usually get in for $5,000.
So, I took the $500,000 I was okay losing and divided by $5,000. That's 100 investments.
Don't Forget Reserves
Those 100 investments are only half the picture. The other half is follow-on.
Over time, I'll narrow those 100 first bets down to 10 or 20 top performers. These are companies with strong growth that raise a Series A.
For those elite special ops level founders, I'll throw in an additional $25k or more. A few have already gotten it.
Illiquidity Risk
100 investments is my goal, but you never want to put any system on autopilot.
Depending on how my non-startup investments perform, I may need to slow down at some point. I don't want to get too illiquid, with too much money in startups and not enough in liquid assets.
This may mean taking a pause at around 70 as I await some exits. I could still make an investment here and there. I could also be useful to founders in other ways, like helping them get their decks in ship shape.
But for now, it's all systems go.
How I Think About Deals
When I look at a deal, everything goes back to my 10 year plan.
Looking at a deck this morning, I kept thinking, "This is pretty good!" They had around $500k ARR growing fast and a strong team.
But the valuation was steep, a $30 million post. So I thought to myself, "Is this the best deal I can do in the next month or two?"
It wasn't. So I passed.
Having a clear plan for your investments tells you where to set the bar. And knowing where that bar is, that's everything.
Defining Success
So, after 10 years, how will I know if this angel investing experiment is a success?
A 3x fund is usually considered to be a top quartile VC fund. That's my goal.
If I give a basket of my investments 10-12 years, did they 3x? If so, this experiment was a winner.
So far, it's looking good. Here are my top 4 companies so far, all seed and pre-seeds done in the last 3 years:
- $17 million ARR
- $10 million
- $7 million (2)
Wrap-Up
My commitment to myself was to do this for 10 years. So what happens in 2031?
I'm free to leave startupland and never come back. But something tells me that's not gonna happen.
I'm way more obsessed and fanatical about investing than when I started! Each week, I seem to work a little more, try a little harder.
On weekends, holidays, vacations, even a camping trip last weekend, I have to stop myself from working. It's too darn interesting!
No one knows what the future holds, but odds are I'll be here a while.
Are you interested in investing in startups? Leave a comment and let us know!
If you enjoyed this post, subscribe for more like this!
More on tech:
Why I Don't Pay for Angel Groups
Meet My Latest Investment: Melengo
Talking Startups on the OpenVC Podcast
Save Money on Stuff I Use:
Fundrise
This platform lets me diversify my real estate investments so I'm not too exposed to any one market. I've invested since 2018 with great returns.
More on Fundrise in this post.
If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!
Misfits Market
I've used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!
I wrote a detailed review of Misfits here.
Use this link to sign up and you'll save $15 on your first order.
No comments:
Post a Comment