

Where to invest $300-600k in Silicon Valley? - tiredkid

Anon for this. I'm sitting on some cash - I'm not sure buying a condo, some index funds for retirement, or some such "sensible" thing is really my temperament. I'm far more tempted to try some angel investment. Ideally I'd start my own company but I'm a couple of years away from a greencard (will probably be 2 more years and I'll be 35 and ready for a mid-life crisis :*).<p>I've been here a little while working in large semiconductor companies as a compiler/systems software/architecture guy. But, I'd rather invest in some small groups which are not in such a capital intensive.<p>I don't have the extensive network of contacts, startup experience or cash that yc has, but perhaps hackers here can suggest a way to dip a toe in the water?
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pg
You shouldn't invest money in startups that you can't afford to lose. It's too
risky. And from what you say, this sounds like money you shouldn't be risking.

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sho
Exactly. My advice: get the condo, it's a great time to buy.

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pkrumins
noob question: what's a "condo"?

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callmeed
Short for "condominium"

Think of it as an apartment that you own outright ... and have a joint
ownership of the common areas

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tptacek
You probably can't invest in startups even if you want to. SEC Rule 501 limits
sales of securities to "Accredited Investors"; to qualify, individuals must
have over $1MM in net worth, or $200k in income for each of the preceding two
years _and_ a reasonable expectation of the same level of income this year.

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tiredkid
I'm an accredited investor. The amount I listed was the amount of my liquid
cash I was looking to invest; entirely separate from my long term investments
which are invested in places where I've already signed the paperwork assuring
them I'm accredited etc.

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pg
If you're an accredited investor that's different. Just come to Demo Day at YC
this August. (Send me an email to get an invitation.) Though some of the
startups at DDay will go straight to series A rounds, most will raise angel
money, and most of those would take investments as small as $20k.

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abstractbill
YC ran a great little conference called AngelConf[1] a few months back. I'm
not sure if it's intended it be a regular event, but if it is you should go to
the next one.

[1]: <http://www.justin.tv/angelconf/all?order=most_recent>

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anigbrowl
You could contact YC and ask if you can put in $100k.

Or sit down by yourself or with a friend, and draw up some rules: max
commitment to any one venture X, min equity requirement Y, time horizon Z. Say
you decide to start by investing $50k in $5k chunks. Then read HN and similar
as you already do, waiting for things that set your spider-sense a-tingle.
Interview them, see which ones excite you, throw some bucks at the ones which
won't let you sleep at night. Then your job is to check in with each of these
10 for half a day each week - not too onerous for them, not too consuming for
you. Assume that 7 of them will fail, 2 will survive but not thrive, and one
will still keep you awake at night in 3 months. Investing $50k in your gut
instincts with the knowledge that you'll likely lose 80% of it will probably
teach you more than 20 books or seminars.

Edit: the failures will of course result in a variety of emotions, but as long
as they fail in an interesting way they could yield great new friendships and
contacts.

Your second round of (say) $100k will be better invested, and the result of
that process will guide your third round of $250k, by which time you'll either
have found your feet or lost your shirt in the process of looking for them.

Edit II: it may sound stupid, but you could also purchase/establish a small
coffee shop with fast internet and a good tech library: give solo programmers
a place to hang out and hack and later marry them with a business advisor of
your own choosing.

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ajju
In my humble and uninformed opinion, YC is unlikely to take 100K in cash from
an angel investor unless they also brought in something with a LOT of real
strategic value that they need. I don't know the OP so I can't speculate as to
whether he would.

The coffee shop idea is also not an easy one to pull off and next to
impossible if you are not doing it full time. See "I opened a charming
neighborhood coffee shop. Then it destroyed my life."
<http://www.slate.com/id/2132576/>

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tiredkid
I agree; I don't think YC would be impressed with my 'strategic value'.

I don't want a coffee shop either - I couldn't think of anything worse.

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anigbrowl
There's only one way to find out. After all, you're not asking them for money;
it would be more like an internship. Best of luck whichever way you jump, it's
nice that you want to reinvest in your community.

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krav
Quite honestly, as someone who's involved in the Angel world, easiest way to
lose money - invest in startups. You have to invest in at least 20 to get an
idea of what you're doing. Just structuring a deal so you don't get washed out
later is something you'd rather learn from others than by hard experience.
You'd be better off joining a group like Sand Hill Angels where you can jump
in on deal flow, get advice from people who've been doing it for decades.

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dshah
I agree.

Angel investment is a very long term game and you'll be dealing with many
issues that are separate from the startup you're investing in.

I'd advise joining a reputable angel group or at least finding a few active
angels that you can "follow".

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ajju
If this is 100% of your savings put at least 300K (50%) in something safer
than a startup and be prepared to lose the other 50%. If you are not, ratchet
down the amount you want to invest to something you can afford to lose without
feeling too much pain.

-The remaining 300k is still more than enough for an angel investment in 3 startups.

-Don't rush into investing if you haven't done it before. Read everything pg has written. Go to angel events like angelconf but also to tech events in the areas you are interested in investing (conferences, barcamps, mobilecamps and so on) so you get to see something more substantive and 'real' than a pitch from the founders. (E.g. Zimbra did a lot of demonstrations of their products at events as technical as USENIX).

-Invest in the team, not (just) in the idea.

\- Someone else mentioned that startup founders prefer someone who offers not
just money but a rolodex and/or advice. This is true for smart founders. You
may not be able to contribute to web startups but there are startups in your
areas of expertise (compilers, semiconductors) that have potential. I
personally know of two: www.accelereyes.com and www.coreopsys.com (no personal
affiliation except friendship with founders) - although neither is in the bay
area. I am sure there are others like them.

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kicker
Buy rental property. Here's a crash course.

I bought a house in Salinas last year and have been earning positive cash flow
since last August, and the price has come down quite a bit since then. 10% ROI
is quite easy. You can get up to 20% ROI on the best deals.

The fact that you have a few hundred K in cold hard cash is a huge advantage.
Learn how to do title research and bid at government foreclosure sales at the
courthouse.

Check out <http://www.fidelityasap.com> for the sales in the past 7 days. (For
example, choose the city of San Jose, and search for the word "sold". Ignore
the ones that whose sales status is Sale Status: Back to Beneficiary, nobody
wanted these. We want to see what experienced investors bought). And we see,
as an example:

1317 Soto Ct San Jose, a 3/2 1200 sq ft house built in 1969(zillow.com)
selling for $220K. Notice that no one bid against this lucky buyer. Spend, I
dunno, $20K fixing it up, worst case. Get a mortgage for 25% down, 7%, 30 year
fixed. That's $55k down, $1100 a month or so in PITI. You rent the house out
for $2000 a month(check craigslist for real numbers).

So you're getting $900*12 / $75K = 14.4 % ROI AND they are paying off your
mortgage for you AND you're saving on your taxes. And the house will
appreciate in value, you hope.

The general rules is, the ROI is higher for more ghetto neighborhoods.
Modesto, Stockton, and Salinas has higher ROI than the Bay Area, but they are
1.5, 1.5 and 1 hour away from Santa Clara, respectively.

It's not rocket science. It's important to be patient, learn the rules, and
compare lots of numbers, but the hardest part is having the MONEY, and you've
got that already. I'm an young engineer with a day job, the above I picked up
over about a year and a half on the side.

The reason I'm posting this is to meet other people interested in this stuff.
Drop me a message at istarist @gmail.com, if you are.

~~~
e40
Just recently looked at the website you mentioned (fidelityasap.com) because a
neighbor's house is being auctioned and I wanted to know what was going on
with it.

I'm curious, LPS seems to have a lock on the foreclosure/auction market. Are
they the only ones, though? Are there other websites that list properties like
this?

Speaking of ghetto neighborhoods, according to fidelityasap.com, Oakland has
700+ properties being auctioned.

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garply
I actually don't think the tech in Silicon Valley will provide the best return
on your investment - it's no longer the wild west out here, more like the 3rd
generation of settlers setting up small to medium businesses. If you
understand the market, I think there are some really good companies (tech and
otherwise) in China that would be worth investing in. And if you want to
invest in the US, real estate is an extremely sane thing to do: Avoid 'hot'
areas, find a quiet but predictably growing area and buy up some land right
outside the currently developed areas - the development will eventually grow
over your property and you will profit handsomely.

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caffeine
Buy something risky like U.S. treasury bonds, startups are for wimps :)

Seriously, take a year and BE in a startup. You'll know what to do next. It's
hard to beat osmosis.

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timf
You say "ideally I'd start my own company" -- have you thought about quietly
preparing and working on the side on something for a few years? A few years is
not all that much time. When it comes time when you can quit and start a
company, you will have momentum and a nice personal runway.

Just curious.. that is what I would do.

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tiredkid
Yes, I've thought about that. In fact I've written some code already, I have
what I believe is a good niche and I know how to build what is needed, but I'd
also like to get more involved in the startup world in advance of my being
able to start my own company.

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robotrout
You obviously don't need to work (600k / 0.2 = 3M), so you're working two more
years for the green card.

Did you know that $50K investment in Brazil gets you a 5 year visa, and after
4 years, you get citizenship? Brazil is positioned well for the next several
decades, as oil becomes more expensive. The US will suffer in the next decades
as US taxes will grow much higher. Perhaps the US green card isn't worth it.

Still, it's only two more years, so perhaps, why not stay and get it? In that
case, why not begin your company now? You can outsource a lot of your code
development over the next two years, so that you're ready to go live, the day
you get your green card.

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tiredkid
I don't need to work for the money, but I need to work. More accurately I love
building things and having people use them. I could get a greencard, perhaps
more quickly, by investing $1m in a company according to my lawyers, and even
work on it myself, but I don't want to paint myself int a corner with needing
to hire at a certain rate or not being able to drastically change direction.

Yes, I've considered other locations. But, I think California has made me soft
- I love it here.

I don't need to outsource a lot of code development. Over the course of 2
years I can crank out a large % myself.

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sho
_"I don't need to work for the money, but I need to work. More accurately I
love building things and having people use them."_

God, wish I could high five you for that. I feel exactly the same way. And
this is why I always contend that hackers are actually closely related to
musicians. I've heard many musicians make similar statements: "Well, who cares
if it makes money, I just want people to listen to it". I think they're
closely related.

I've never met you, and I likely never will, but kudos to you, fellow
traveller - I just want to make shit better, too.

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joshu
Are you an accredited/qualified investor?

I recall you have to have a fairly large non-home kitty to be able to actually
invest in companies. Something like $1m in savings or > $200k/yr income. Ask
your lawyer.

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wheels
It sounds like you should find some folks that are already doing angel
investment and talk to them. I think there are mixed views on the "clubs", but
you'll want to find somebody that can take you through the steps and
potentially co-invest with you.

You could probably shoot a mail to YC and note interest in upcoming angel
events, angels in your area, about demo day and whatnot.

Also, <http://www.paulgraham.com/angelinvesting.html>

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gaustin
I've just started working on a web application similar to dailyburn.com, but
with a different market emphasis. For $10,000 dollars or so I could build it,
launch it this Fall, and maintain it for several years. I have several solid
ideas for making money with this.

Sadly, I don't live in a civilized place like Silicon Valley. I'm out here in
the sticks of Helena, Montana.

But anyway, let me know if you want to talk about it...

gaustin@gmail.com

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jasonlbaptiste
Get the condo. Save aside 25-50 max. Find a company that interests you, that
you would want to be active with as well. Invest the money there, and assume
you'll lose it. You'll learn the ropes the right way. From there, assess if
you want to do more of it. Angel investing sounds all dreamy and great, but it
may not be everything you expect.

Also watch angelconf videos.

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skmurphy
There are a several good Angel organizations in Silicon Valley. But they will
be looking for folks who can supply both money and expertise. I would look for
partners and do a software startup given your background. Please feel free to
contact me directly (I am not looking for funding but it's difficult to make
suggestions without asking more questions).

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thorax
Well, it's risky to be involved in startup investment. I never recommend
anyone put money anywhere unless they know enough about it to predict where it
might go (or at least know signs of trouble to look for).

Many companies of people on Hacker News are looking for angel funding. You
should reach out to those who seem most promising to you.

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darwinw
There are a lot of boot-strapped web start ups these days, I would suggest go
to their "about us" section or blog if they have one and get to know the
developers. Also, $300 - 600K is a big range. I would definitely think any YC
funded sites should be interested in getting cold hard cash from angel
investors

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manmanic
Spend at least $50k of that visiting the Valley regularly, attending
conferences, and building up a network of contacts. Otherwise you'll get
crappy dealflow and almost definitely lose it all (if you decide to invest at
all).

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tiredkid
I live here fulltime. More time networking is definitely on the cards - but I
think I need to concentrate on new circles. For example, I know well known
processor architects but no web people.

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siong1987
Since you know many well known processor architects, why don't you try to
invest in the area you already know(hardware)?

Startups are not all about WEB.

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rjurney
I would suggest you contact your local representative of the Angel Capital
Association and talk to them about it:
<http://www.angelcapitalassociation.org/>

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grandalf
I'd recommend talking with all YC rejects and picking some and investing $15K.
You could spend another $10K on lawyers and then set up VC meetings. It would
be risky but that's why you want to invest in startups, right?

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grandalf
One not so novel idea would be to buy up shares of Facebook from employees.

Chances are Facebook will have a nice exit in the next 5-10 years.

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prateekdayal
How do we get in touch with you? I can't find a way to PM you here. If you
don't mind investing in Indian web startups (with a global market), please
drop an email to prateek@muziboo.com. Even otherwise, we can have a quick
chat!

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mixmax
Pity you aren't in Denmark, we need some good angels :-)

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planck
Easiest way to double your money: fold it in half and put it in your pocket. I
guarantee no losses.

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darwinw
if only Bernie Madoff is still alive...

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tphyahoo
I'll bite.

I am putting together a product for doing simple administration of multi-
server configurations, allowing a quickie conversion from in-house servers to
the cloud (ec2 or others).

The emphasis is on configuration and management and not dashboard
functionality like rightscale, cloudkick, and the aws panel itself. Because
why reinvent the wheel? If you're interested ping me and I'll send you more
information. I would also be open to shares-for-housing. thomashartman1 at
gmail.

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sho
HERE! Here here here here here (waves hand) over here here here
HEEEEERRRRRRREEEEEEEEE

~~~
Shamiq
Link us?

