

Should you even be an investor? - ivankirigin
http://blog.kirigin.com/angel

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richardjordan
I think the key challenge to this method is one of your caveats. The challenge
for a new investor isn't picking which of the best of the best you think would
be good investments. It is making a return by picking from the second, third
or fourth tier deals you can get into with no track record. There's a reason
the angels we know if today were the guys we saw at every event for years
building up that deal flow.

~~~
ivankirigin
Agreed. The good news is that there are a few things you can do to make
yourself more appealing relative to other investors. This is all based upon my
experience on the other side of the table fundraising: decide quickly and
decisively, be quick with your comms, and be nice.

I think the handshake deal protocol will help those who want to be bold and
act fast. Like I mentioned, these decisions were based on watching the pitches
on stage, not even the follow up meetings. <http://ycombinator.com/hdp.html>

~~~
richardjordan
Well good luck. I like that you're thinking it through. I've talked to so many
"angels" who just made some money and decide they want to invest in startups
so just spray and pray. I always hope that if I get a good exit at some point
in the future I'd give back to the community by becoming an angel investor in
a smart, considered way, like this.

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imjk
I don't think it's an accurate assessment of one's ability to be successful as
an angel investor based on which ycombinator startups they would choose to
hypothtically fund. Ycombinator startups already go through a thorough vetting
process by some of the most experienced investors out there just to enter the
class. I don't think a ycombinator class would be accurately representative of
the type of deal-flow a typical rookie angel would encounter.

~~~
ivankirigin
Why couldn't a rookie just go to demo day? Why does the method matter if the
result is profit?

Also, I didn't mention it here, but I'd be interested in tracking other
accelerator demo days too. It would be fun to see the differences.

Overall, the use of demo day is a convenience because this is just a hobby
before I dive in.

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chollida1
Reid Hoffman did an excellent talk at Stanford where he said something
similar.

His main point was that most new investors make the mistake of thinking "this
company would be successful if I was running it".

That leads to investors meddling with CEO's as they have preconceived notions
of how the company should be run.

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2pasc
Ivan - I like the idea.

One advice though - raising subsequent funds for a startup is great, but by no
means this means liquidity as an investor. In your hypothetical case, you
would have made money on SocialCam. But as many terms give you 2x your money
if the Company sells without additional rounds after the angel round, I doubt
you would have made much money. It's money, sure.

Also - it happens that angels can exit some of their investment after a Series
A or Series B, but I think this is the exception more than the norm.

~~~
ivankirigin
Yeah, people don't talk much about it because of the clear signaling issues.
One investor I talked to said something like "we haven't had many exits, but
I've sold a hell of a lot of stock".

Obviously it is hard to plot when I'd be in the black without knowing what
"hell of a lot" means

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ajju
Good points Ivan. This is actually a really good exercise.

Two considerations one can't take into account with virtual investing are:

(1) Would the company be willing to take money from you? (They may already
have raised, may not be willing to take the amount you are offering, may
prefer to go with other investors)

(2) What are the terms? Would they work for you?

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ivankirigin
1\. Indeed. This is what I was trying to raise in one of the caveats. This is
a bit like dating: sometimes there just isn't chemistry. You need to
demonstrate value on top of money.

2\. I presume as a small angel I wouldn't make the market here, I'd just
participate. Sam Altman mentions this thinking here, and I agree
<http://blog.samaltman.com/upside-risk> . I'd pick the companies first and get
in at whatever terms, obviously trying to get as much of the company as
possible for my money.

~~~
ajju
Yes, my point regarding 2 was whether you would be willing to participate at
the valuation/cap that they are raising at, unless you are completely price
agnostic.

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ivankirigin
I shared my post to a few folks who said they’d like to play the bracket with
friends, like “startup madness”. I love the idea. In fact, when I started
tracking W12, I asked some friends who had been to demo day to participate. It
was just another tab in a spreadsheet.

If you want to build something like this, here are two thoughts. First,
tracking variable amounts making tracking time and valuation much more
important. Here I’ve just assumed equal investments at demo day. Second,
because it is fake money, to simulate a real deal flow, the amount of
investments should be limited. 10 every 6 months sounds good.

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wellboy
Wow, somebody should make a game, where everybody could "invest" in companies.
Basically it would just be copying Angellist and everybody would get $1M of
play money in the beginning, then there would be a leaderboard of "investors",
who made the most return on their startups. This could be an interesting
reputation system and everybody would have equal chances.

