
How to Invest in Startups - eusebio
https://blog.samaltman.com/how-to-invest-in-startups
======
m_ke
> You should try to limit yourself to opportunities that could be $10 billion
> companies if they work (which means they have, at least, a fast-growing
> market and some sort of pricing power). The power law is that powerful. This
> is easy to say and hard to do, and I’ve been guilty of violating the
> principle many times. But the data are clear—the failures don’t matter much,
> the small successes don’t matter much, and the giant returns are where
> everything happens.

This is the main reason why most people should avoid VC money. As a
founder/employee all of your eggs are in one basket and the chance of having a
billion dollar exit is practically 0. VCs get to raise billion dollar rounds,
live off of the 2-3% management fees and go around spraying and praying with
the hope of hitting a unicorn. If that doesn't work they take their top
donkeys and try to pump and dump them, marking up their investments in the
process in order to raise another round.

~~~
zby
I have a feeling that this is all past results that don't guarantee future
performance. It is tuned to the time when Google, Amazon and Facebook were
created - but this evolution phase is over.

From Ben Thompson newsletter:

"""

where would $1 have been best invested on March 25, 2015, when Altman wrote
his post?

* Unicorn basket: Uber ($41.2 billion -> $53 billion), Palantir ($15 billion -> ~$26 billion), Airbnb ($10.5 billion -> $35 billion), Dropbox ($10 billion -> $7.4 billion), Pinterest ($11 billion -> $10.4 billion), and SpaceX ($10.1 billion -> $33.3 billion) = +$67.2 billion and a CAGR of 11.6%.

* SAP 500: From $2061.05 to $3,234.85, for a CAGR of 9.87%

* Big Tech: Apple ($714.84 billion -> $1,321.6 billion), Microsoft ($338.6 billion -> $1,210.1 billion), Google ($386.1 billion -> $938.6 billion), Amazon ($172.5 billion -> $929.6 billion), Facebook ($230.9 billion -> $595.1 billion) = +$3,152.06 billion and a CAGR of 23.14%

"""

plus correction:

"""

However, I did err by not including dividend payouts, which are basically
reassignments of market cap to individual investors. Interestingly, this
results in an annualized S&P 500 return of 11.7%, which actually beats the
unicorn basket annualized return of 11.6%! More on this in a moment.

"""

~~~
mbesto
> where would $1 have been best invested on March 25, 2015, when Altman wrote
> his post?

Which is an unfair criticism to Altman, because typical VC returns only mature
7~10 years later. If you put $1 into Uber in 2009 and exited at IPO, your
returns would far exceed the S&P. This is a terrible financial analysis from
Thompson, but I don't think that was his real point from the newsletter
anyway.

That being said, the point still stands, investing in venture is generally NOT
a good strategy in of itself. The general recommendation is less than 5% of
your overall net worth.

~~~
eanzenberg
This is weird, because if you are talking about tenor of 10 years, you need to
include the 90% of companies that exited at $0.

~~~
exhaze
Of course you include them - the whole point of VC investing is that even if
most of your companies exited at $0, the 1 10,000%+ return made up for it.

------
dsalzman
“ The spectral signatures of the best companies I’ve invested in are
remarkably similar. They usually have most of the following characteristics:
compelling founders, a mission that attracts talented people into the
startup’s orbit, a product so good that people spontaneously tell their
friends about it, a rapidly growing market, a network effect and low marginal
costs, the ability to grow fast, and a product that is either fundamentally
new or 10x better than existing options.

You should try to limit yourself to opportunities that could be $10 billion
companies if they work (which means they have, at least, a fast-growing market
and some sort of pricing power). The power law is that powerful. This is easy
to say and hard to do, and I’ve been guilty of violating the principle many
times. But the data are clear—the failures don’t matter much, the small
successes don’t matter much, and the giant returns are where everything
happens.”

This is just one type of company and limiting yourself to just that is
limiting and a driver to some of the mind bubble issues in SV.

~~~
Traster
The purpose of start up investing is to find companies that are going to
become more valuable. In order to do that you need to predict what other later
stage investors are going to find valuable. You're not there to change the
world, you're there to flip a dog-walking service for 10x return. So that dog
walking service better be run by a tall white guy who practices yoga and
constantly talks about transforming the world.

~~~
sgrove
It seems your analysis isn't very generous. Your example would likely fail the
litmus test laid out in the first paragraph on at least these points (at the
_very_ least):

\- a mission that attracts talented people into the startup’s orbit

\- a product so _good_ that people spontaneously tell their friends about it

\- a network effect and low marginal costs

\- and a product that is either fundamentally new or 10x better than existing
options.

~~~
Traster
I'm sure the wag founders are talented. I'm sure that some of wag's customers
love it. I'm sure that you can argue that it has the same network effect as
uber. I'm sure the founders of wag will effuse about a paradigm shift in the
canine ambulatory marketplace of ideas.

------
throwaway713
> but people tend to be either slow movers or fast movers and that seems
> harder to change. Being a fast mover is a big thing; a somewhat trivial
> example is that I have almost never made money investing in founders who do
> not respond quickly to important emails.

I think I’m self-aware enough to recognize that I am probably a slow mover,
and this is one of the most annoying aspects of my personality that I would
like to change. I get hung up on small details, iterate too many times, and
want things to be “perfect” before I publish or share them.

Has anyone successfully changed this aspect of themselves? Sam mentions that
this personality trait seems to be mostly invariant over time, but surely
there are some habits that one could develop that lead to an eventual change
(if not in personality, then at least in behavior).

~~~
dv_dt
I think there are areas where slow movers have an advantage. For instance, an
area where the cost of an iteration is high - a slow mover may have an
advantage planning and executing the iteration.

But, if you want to get faster, one thing is to ask yourself - do I have
enough information to make a decision; is it possible to get more information
- almost always the answer is yes, but will the cost in money or time or other
resources be worth the additional information for the decision - or do we
discover just as much moving forward to discover if a decision is wrong.
Another question is if a decision is wrong, can we recognize that outcome
quickly and what is the cost to move to a different decision.

------
krm01
Some comments in here seem to miss the point. Sam’s perspective here is from
an investor’s pov. He’s _not_ saying that everybody should build a unicorn.
From a VC/Angel perspective it only makes sense to invest in those kinds of
companies. So if you’re not that kind of company, you probably shouldn’t
bother running after VC money. Instead, build a profitable business over which
you have full control and can support you, your team and preferably make you
financially independent.

Sam, or SV’s, way of thinking is not the only path to success.

Im not fond of VC startups, but that doesnt mean it’s a wrong endeavor. Most
of the apps we use on a dAily basis exist _thanks_ to that model.

~~~
oska
> Most of the apps we use on a dAily basis exist thanks to that model.

Don't count me in that 'we'; an app coming from a VC funded company is a red
flag for me _not_ to use that app. Any app that I've used from that category
I've later come to regret. The last one was duolingo, and I now realise I was
suckered there too.

~~~
askafriend
So these companies are red flags and regrettable experiences for you?

Spotify

GitHub

Dropbox

Facebook (+ Whatsapp, IG)

Google

Twitter

AirBnB

Slack

Uber/Lyft

Amazon

etc, etc. I could keep going all day.

~~~
oska
There's only two on that list that I use and both on the desktop, not as an
app. One that I regret signing up for and am in the process of moving away
from; the other I use anonymously and would like to see displaced.

~~~
askafriend
You don't use Google Maps? No LinkedIn? Stripe? Square? SpaceX? Tesla? Unity?
Epic Games? Twilio? Docker? Elastic? Cloudflare? Android? YouTube?

Ok, it's fine if you don't use them...but to see no value in these companies
at all? Come on - that's ridiculous and I suspect you know that but want to
push a few buttons.

~~~
oska
I see SpaceX and Tesla as different. They are engineering/manufacturing
companies and have a legitimate need for venture capital to help meet the very
heavy capex demands on such companies in their first 10 or so years. (I also
wouldn't include Cloudflare).

What I don't like and would describe as unhealthy is the use of venture
capital to massively scale software companies, usually in a 'free-service'
model, until they have grown to monopolise the market and can then be
'monetised'. I think that is a very toxic model.

And no, I didn't mean to push buttons. I was only objecting to the assumption
made in the original comment to which I replied. My viewpoint is far from
unique, however much it may come as a surprise to you.

------
xwowsersx
Sometimes it feels like a lot of the attempts to find themes and trends in
terms of what makes startups successful are very much in hindsight. I'm not
saying you can't tune your vision to some degree to identify strong startups,
but it seems like a lot of the time people are looking at successful/strong
founders and then identifying any of the traits they have as markers of
success. I guess there is a pattern though? There's a reason successful VCs
continue to succeed and aren't just one hit wonders..

~~~
ganeshkrishnan
The only pattern is "resourceful" founders and plenty of money. Saying there
is science behind investing in early stage startups is like saying there is
science in finding out successful humans. It's all hogwash. Market size, MRR,
ARR TAM, PAM, CAM, WHAM are all absolutely irrelevant and just straws that
investors like to clutch to when they have no idea what to do. (Microsoft
started writing basic programs with just few thousand basic programmers,
facebook was hotornot app, google was a search app etc etc)

What really matters is how obstinate the founders are. And equally important
is how much money they have.

It's much more predictable to invest in stocks even if they are the sum of
human emotions.

~~~
mdorazio
I don't really agree with the first part. The world is packed with startup
founders who are obstinately cranking away on ideas years after it's become
obvious to everyone that it will never work.

Things that increase the small chance of success are addressable market size,
timing, founder track record, and product-market fit. I agree with you on
available capital since it enables teams to pivot multiple times, try things
that might not work, and scale quickly at massive deficits by undercutting
competitors and spending heavily on marketing.

~~~
ganeshkrishnan
This is why I quoted "resourceful" because this is not intelligence or
anything quantifiable. Success has almost nothing to do with intelligence, if
intelligence can even be precisely defined. I remember the CEO of Redhat
quoting that he decided to do a startup because he thought he was not
intelligent enough for working.

"Resourceful" is switching plans and finding a way to make it work.

Addressable market and market fit changes as startup evolves. And founder
track record only works because of network connections , VCs trusting you with
money and the founder already being rich.

As with everything hamfisting money into startup increases it's chances. Uber
for dog walking? electric scooters?

What's the saying.. When the wind blows hard enough, even chickens can fly.

------
tempsy
my "tin foil hat conspiracy" is that all the talk in tech about startup
investing just distracts everyone from real wealth creating opportunities that
already exist in public markets that literally anyone can access.

seed investors/VCs/etc are incentivized to discount public equity
opportunities because they're trying to prove their own value to their LPs

~~~
rhizome
VC is an industry unto itself, a discrete _sport_ even, and essays like this
are defined in terms of that industry: the business of "exits" by acquisition
or IPO. Opportunities that anyone can access are thoroughly offtopic.

Frankly, I have to wonder who is the audience for this post.

~~~
mamurphy
>Frankly, I have to wonder who is the audience for this post.

I had the same thought. My guess would be founders of "hot" companies. Altman
is signaling that he knows all the ways to be a great investor (and presumably
puts them into practice).

------
davidw
"The spectral signatures of the best companies I’ve invested in are remarkably
similar. "

I want to say something snarky about bombarding a company with electrons to
ionize it, but it's actually a pretty good metaphor.

I think the "help them" bit is good, too, and something a lot of VC's don't
seem to be that good at.

~~~
verelo
> I think the "help them" bit is good, too, and something a lot of VC's don't
> seem to be that good at.

I look forward to the day I meet a VC good at helping a company. I think, most
of them are good at motivating founders by creating economics that displease
the founder if they don't perform, but that's more of a stick than a carrot.
I'd love to meet and hear about a VC truly focused on the carrot side of
things.

~~~
jacquesm
In our customer portfolio we have several of these. But definitely not all of
them. VCs good at helping companies are usually early stage. Later on you're
more or less expected to fend for yourself unless a crisis hits.

One way in which such help materializes is in the form of a board, and the
quality of that board can make a huge difference. It could even be a net
negative.

------
giansegato
> Finally, I’ve found that most of the time when founders call asking for
> vague help, what they are really asking for is emotional support from a
> friend. Invite them over to your house, make them tea or pour them a drink,
> and start listening to their struggles.

That's super true. In my experience, it's always difficult to see investors as
peers sharing the struggle with you, but who more than them can do it?

~~~
DoofusOfDeath
> In my experience, it's always difficult to see investors as peers sharing
> the struggle with you, but who more than them can do it?

For any given startup, wouldn't the founders have much more at stake than does
the VC? I'd expect the VC to have many concurrent investments, whereas the
founders' whole life is wrapped up in that company.

I would think that owners of other businesses of similar size would be much
more sympathetic.

~~~
giansegato
You're very right. What I was referring to was actually relative to the
external world. IMHO it's easy to fall in the trap of seeing investors as
"antagonists" you gotta win over, ready to spot any weakness even AFTER
investing in you, but in truth, they're actually really rooting for you. With
the major exception of vested employees, there's no one else that will root
for you as much as they do

------
thorwasdfasdf
> It seems that more people want to be investors than founders

This may or may not be true but it paints an innacurate picture. There's
always a ton of highly talented people willing to be founders and start
businesses. And there's always a ton of businesses with plenty of labor to
start new projects. All you need to do is look at the insane number of brand
new projects created on ProductHunt every single day. There's only enough
consumer demand to satisfy a tiny percentage of those products created. This
indicates a massive oversupply of highly talented labor.

The problem is opportunities. opportunities to build real value that people
are willing to pay for, are sorely lacking. In short, everything that can be
done (legally) has been done (the low hanging and mid hanging fruit). And, all
that's left is the really really hard stuff.

------
mrnobody_67
I think the returns are in the Series A.

Invest on a $20M SAFE Note in a 90 day old startup out of YCombinator, or
write a check at a $30-35m pre-money valuation at a company doing $2-3m in
revenue with 300% growth rate, metrics, referencable customers, the
beginning's of a team....

------
sharker8
As a fellow aspiring essayist and man of letters, please greet this comment
with a bit of forgiveness for I assure you I have the utmost empathy for
anyone tasked with writing an essay in the genre of "generalizable advice for
startup founders and investors" or "observations on capitalism and the role of
startups therein". But let my gripe also be recorded as follows. Why must we
continually imbibe to the dogma of successful angel investors with such utter
disregard for critical thinking? Upon first glance I noticed the recycling of
the old trope the iPhone, which I've seen before in this essayist's prose.
Steve Ballmer pointed out that it was the bundling of the iPhone with AT&T
contracts that allowed it to expand, not some merry band of first generation
iPhone lovers. I recall with equal love and loyalty my Creative Zen Mosaic mp3
player, circa 2009, which led to no such outcome for Creative, not for lack of
my extreme love and admiration. And let it also be known that the essay
commits no shortage of fallacies, most notably the straw man fallacy, in which
we are led to believe that most investors think only about the current size of
the market. Either we are supposed to believe that those in positions of
wealth, power, and influence, have no concept of how markets might change in
size over time, or might not have a concept of time altogether. Both equally
unlikely. Instead, we tell ourselves smugly, that investors must all be robber
baron caricatures like the oilmen of yore or the real estate tycoon who now
inhabits the white house, completely unaware of the changing and dynamic
nature of the world, and that we, though we may be poor, might be able to
create fabulous wealth with this secret knowledge.

------
xs
Anyone know anything about investing in podcasts? Like, suppose you find a
fresh new one, where it has a lot of potential but just needs more
practice/exposure/equipment. And you want to help them get there quicker by
giving say $20,000 in hopes they hit it big and their show becomes very
profitable down the road.

Perhaps investing in a twitch channel or youtuber is similar?

I just wonder if there's any help or guides to doing this or if it's ever been
done.

~~~
rexreed
What's the exit / return for the investor? You're better off just sponsoring
it or finding sponsors for them and splitting the proceeds or just giving it
all to them. But investors? I don't think there's a rational strategy here.

~~~
xs
Poking around I found this: [https://pod.fund/](https://pod.fund/)

Apparently they are investing in podcasts with a lot of potential. And then
when they become profitable they take a cut of the earnings.

~~~
rexreed
It's basically a high interest unsecured loan on future revenues. It's very
much the Mr. Wonderful model from Shark Tank. 7-15% return on revenues for 3-5
years on $25k-$50k investment. Maybe it makes sense for some, maybe it
doesn't. But as an asset category? I wouldn't be plowing money into podcasts
expecting much of a return. The successful podcasts don't need your money.

------
paul7986
Step one: Be born into a upper middle class to uber wealthy family with
connections to even more money & power (was in an incubator out of 10 of us 1
succeeded; sold his company for $350 million & his father was a VC)

Step two: Try your hand many times with your ideas, each time hitting up your
built in wealthy network (VCs) you were indirectly or directly born into

Step three: Maybe you the rich get richer and you get to invest in startups or
you give up and become a VC cause they are your people. If you become a VC or
an angel you invest in rich kids because you want to make money; safer bets
then investing in the poor kid.

Those who don't follow the above mold.. go ahead ...startup while working a
full time job.. oops first, 2nd or 3rd didnt work.. damn now i have mouths to
feed there go my startup dreams while richie richie is on his tenth living off
other people's money. Now if your poor go ahead startup but you need to feed
yourself.

~~~
ryanmercer
And, at least anecdotally, I've found similar to be true for just people in
general. Being from a family with means acts as a de facto dues card being
invested in (education, upbringing, connections) and a college degree acts as
a de facto dues card for general employment.

You can't tell me Sam being a student at Stanford, and the benefits of a
middle class upbringing, weren't big pros when he was being chosen for that
first batch of YC investment. Would a high school drop-out with a GED, with
the exact same idea and a co-founder with a similar background to them have
been given the same opportunity? Would they have had other investors even
remotely interested? Would they have had their company purchased for 43
million dollars?

I do not have a degree, I did not want to take tens of thousands of dollars of
student loan debt on. I am 34, companies want a 4-year degree for most entry-
level stuff now (and I'm not even CS). I still do not want to take on tens of
thousands of dollars of student loan debt.

So change wealthy to "formally educated".

\- Step 1: be born into a wealthy middle class family and/or qualify for lots
of scholarships and/or qualify for lots of grands and/or be willing to take
debt that might take you a decade or more to pay off for the hope of higher
earnings

\- Step 2: graduate and get a starter job that allows you to minimally service
your student loan debt, obtain graduate degree while working

\- Step 3: work those connections made with graduate degree, become boss of
someone with 10x as much experience on the job with minimal real-world
experience yourself.

Those that don't follow the above mold... go ahead... apply for
promotions/better positions based on experience alone... oops 4-year degree
required to get past pre-application screening, rejection "we're looking for
someone with experience AND a 4-year degree", unfortunately the promotion is
only open to employees with a 4-year degree so consider getting one... damn
now I've been doing the job for the employer for 13 years and my boss has been
in the industry for 5, and my boss also qualifies for the extra training the
company provides as a manager and manager-level only awards making their CV
even more impressive both internally and in the industry... damn, I'm taking
home less this year because of the insurance increases... if I go get a
degree, in 4-6 years I'll have 40-60k$ of student loan debt at 4.53% interest
while only making 34k annually but I'd be eligible to apply for a position
making 7% more!

------
vincentmarle
Sam Altman has this weird style of writing with such an authoritative voice to
sound convincing with very little substance to back up his claims (my other
favorite one is the one about "life advice" when he turned 30 years old [1]).
It would be perfectly fine to convey the same thoughts by just being a bit
more humble and make it clear that these are just his (unfounded) opinions.

> I look for founders who are scrappy and formidable at the same time (a rarer
> combination than it sounds); mission-oriented, obsessed with their
> companies, relentless, and determined; extremely smart (necessary but
> certainly not sufficient); decisive, fast-moving, and willful; courageous,
> high-conviction, and willing to be misunderstood; strong communicators and
> infectious evangelists; and capable of becoming tough and ambitious.

> The spectral signatures of the best companies I’ve invested in are
> remarkably similar. They usually have most of the following characteristics:
> compelling founders, a mission that attracts talented people into the
> startup’s orbit, a product so good that people spontaneously tell their
> friends about it, a rapidly growing market, a network effect and low
> marginal costs, the ability to grow fast, and a product that is either
> fundamentally new or 10x better than existing options.

This reads like a bad Tinder profile. It becomes problematic when aspiring
entrepreneurs (I certainly have been guilty of this when I was just starting
out) start believing they should now optimize for a certain founder profile
that a particular investor (especially a well-known one, like Sam Altman) is
looking for. Other investors have other profiles, I know of one who supposedly
only invests in GSB graduates, even though his investment track record has
very little to do with GSB. When you believe this as a young founder, you'll
work hard to fit that profile and will reach out to them when you think you've
finally marked off all the check marks, only to find out that the investors
will back track on their thesis and find another reason not to fund you. The
truth is that most investor theses, no matter how well formulated, break down
in the face of FOMO, and will not matter much when it comes to writing checks.
The paradox of raising money is painfully obvious: investors will want to
invest the most when you least need it, not when you meet some random
investment thesis.

It's important to realize that Sam Altman is human too, and makes mistakes
like anyone else:

> However, sometimes bad founders have good ideas too, and investing in them
> is the chronic investing mistake that has been hardest for me to correct.
> (My second biggest chronic mistake has been chasing investments primarily
> because other investors like them.)

I'm willing to bet that in reality, most of Sam's investments looked more like
this rather than meeting the high standards he laid out. I just wished he
would be more humble to admit this.

[1] [https://blog.samaltman.com/the-days-are-long-but-the-
decades...](https://blog.samaltman.com/the-days-are-long-but-the-decades-are-
short)

~~~
sjg007
I call it the Hacker (News) Essay style and it's a persuasive essay style.
Paul Graham writes in the same style. So I see its adoption as the result of
the master-apprentice process. It is most effective with 20:20 hindsight
because nobody can predict the future.

------
rexreed
Fool me once. Fool me twice. Oh heck, fool me three times. But I'm not going
to be fooled again. I've stopped investing in startups (so-called angel
investing) when I realized that it's a fools' errand to invest in super early
stage startups or in "convertible notes" or "pre-seed rounds" without any sort
of informational or operational leverage. I'd rather invest in myself and
other asset classes.

~~~
jeffshek
But fool you ten times, and you get Dropbox.

~~~
irjustin
10x that number and you're on the right track (still hoping for a Dropbox).

Angels should be trying to do about 100 deals to break even. Seeds roughly
50-60 deals VC's 30 PEG 5-10

Angels who write 10k checks @ 100 deals JUST to break even extremely tough.
Deal sourcing is so hard.

Anyone who thinks they can get by w/ < 100 as an Angel is largely fooling
themselves. New VC's fall into this trap regularly. The pro's know the numbers
and the pattern matching.

Fool's money is fool's money if you jumped too far w/o knowing what the pool
is made of, so at least learn what the primary patterns are before you jump
too deep.

~~~
monort
Is that 100 startups with ideas, you would be willing to build yourself?

~~~
irjustin
As an investor, no, don't limit yourself to ideas you would build yourself.
Know just enough to decide whether the idea has merit and the team is worth
the trouble.

Angel.co has a great article because there's enough data now to make some
insights[0]. TL;DR; any credible deal - get in on it.

But it needs to be law of large numbers, so don't start until you can support
100/60/30/5 deals for your size. No matter how good the idea/team sounds at
the angel level, it's likely to fail. YC still has a 50% failure rate >5
years. Arguably they're the 'great filter'.

[https://angel.co/blog/venture-returns](https://angel.co/blog/venture-returns)

------
xfactor973
The accreditation rules really bother me. Excluding people based solely on
wealth is silly. I think you should be able to take a test to prove you know
enough to invest.

~~~
ketzo
Eh. The U.S. education system has taught me that anyone* can beat any* test.
Seems like there's value in saying "if you really fuck up, you are at least
have a background that says this will not be your entire livelihood."

*almost.

------
whiddershins
‘ For example, although the iPhone was derided for not having many users in
its first year or two, most people who had an iPhone raved about it in a way
that they never did about previous smartphones.’

I was there, and that was only half-true, or not really true.

I recall statements like “I’ve never had such a feeling of relief as the
moment when I threw it out of a moving car window.” And early adopters
generally complaining with almost brain melting frustration at any number of
UX boondoggles.

I think people knew somehow it was the future, and couldn’t stop talking about
their iPhones, but a lot of the talk was negative.

Without hindsight bias there might be a deeper lesson to learn from the
iPhone, that “users love it” isn’t the perfectly accurate wording to summarize
adoption conditions.

~~~
truculent
I think part of what kept the iPhone going forward was the inevitability of
the many minor flaws and missing features (Copy+Paste!) being added in the
near future.

~~~
ryanmercer
>and missing features (Copy+Paste!)

Oh man, I forgot about that. That was so annoying! I went to the iPhone from
Motorola Q9h (and before that a Treo 650) and was like "What?!? I can't copy-
paste?!?! What is this BS?!"

------
xenocyon
> I have almost never made money investing in founders who do not respond
> quickly to important emails.

My nightmare is a boss who expects synchronous responses to emails.

------
mrnobody_67
Potentially really bad timing on this post.

I'm calling peak bubble in 2020, Softbank companies imploding all over the
place... investors ratcheting up terms on later stage rounds, tons of IPOs at
40%+ below last valuation, and we're encouraging more people to invest.

Anybody doing angel investing should consider themselves a "patron of
innovation", and assume zero returns.

------
Rerarom
It would also be interesting to see how to short startups.

------
neposesame
Interesting that both sama and pg have both used the phrase "spectral
signature" in articles published within a week of each other.

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ryanmercer
Step 1 is really: "be unlike 70-90% of the United States and actually be able
to qualify as an investor. Good luck getting there."

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tempsy
For those who don’t think public markets present enough risk, Nancy Pelosi is
set to net $130K off Facebook call options expiring this week
[http://clerk.house.gov/public_disc/ptr-
pdfs/2018/20010631.pd...](http://clerk.house.gov/public_disc/ptr-
pdfs/2018/20010631.pdf)

~~~
lalos
Can you share the link for all Congress? or how does one browse these
declarations?

~~~
tempsy
Yes you can easily search by congressperson on that website

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qaq
For some reason made me think of Matthew McConaughey speech in The Wolf of
Wall Street

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H8crilA
Not a single thing about modelling? Do VCs even know basic accounting? Does
anybody care about balance sheets, income statements and reports? "Accounting
is the language of business", if you believe that old guy from Nebraska.

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fnord77
side question - are these "invest in pre-ipo shares" services that offer
private shares to semi-public investors worth looking at ?

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jakobmi
Off topic: I can't subscribe to this blog with any of my emails (at the bottom
of the page), getting a "Invalid email" for literally any valid email address
I would enter.

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alexashka
If you swap the context of investing in start-ups to the extreme of praying to
the correct Gods to get rainfall, you'll be hard pressed to find any
differences.

From personal experience, if you pray on Tuesday evening and if it's a colder
than usual morning on Wednesday, you pray on Thursday, I've found that it
appeases the rain Gods.

This is comparable to 'founders need to have X quality and Y quality, and
respond to emails quickly'. It's silly.

Except it's not silly if what these guys are doing is taking _other_ people's
money to invest. Then it all begins to make sense - in the past the priests
talked to Gods via special powers. Today, nerds speak to the God of intellect
and science. They need to put out predictions and rationalizations to
reinforce faith in their ability to talk to the God of intellect and science.
It's the same mechanism, the Gods have changed. We're playing a confidence and
faith game over and over again.

The entire scientific grant system is based on priesthood, which is why
anytime somebody actually makes a scientific breakthrough, the existing priest
caste tries their best to ridicule and ex-communicate them while another set
of priest-potentials fights to take credit for the discovery and establish
themselves as new priests. Real science gets in the way of the priesthood
system by undermining the credibility of existing priests.

Hence my bold prediction - within the next 10 years, there'll be a billion
dollar start-up with founders who don't quickly reply to emails and whatever
other voodoo Sam believes he possesses to tell success from failure apart -
it's all hubris, besides the trivialities of 'willing to work hard,
intelligent, goal oriented'.

~~~
woah
Maybe it just makes Sam’s life easier if his founders respond to emails fast

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gist
> The spectral signatures of the best companies I’ve invested in are
> remarkably similar

Why is it necessary for writers to over-complicate with this type of phrasing
any points that they are trying to make? My thought is it distracts.

Why not just use 'qualities of the best companies'?

I point this out because if you are a startup and you are doing marketing you
should avoid anything other than simple language that pretty much anyone can
understand.

I could infer what the writer (Sam) meant from the context but there is no
reason I should have to do that.

Also little organization or structure in the presentation.

~~~
SpicyLemonZest
To many people (including me), this type of phrasing doesn't distract. It
draws a more vivid image of what he means. I suspect the same is true for you
with other turns of phrase; before the spectral signature thing, for example,
he calls investor laziness "a bug that you can exploit" rather than directly
saying "other investors should do this thing so you will have an advantage if
you do it".

I agree it's not the kind of thing you want to do when marketing to the
general public, but the target audience for an essay on how to invest in
startups isn't the general public.

~~~
gist
We will have to disagree on the point I guess. To me it's just a typical
barrier that both tech people and attorneys throw up to keep out newbies
and/or make it more difficult for them. And it's also somewhat (for lack of a
better way to put it ) 'snotty' you could say.

And there is a wide divide between people that might invest in startups
(someone's uncle or mother) vs. 'the general public' (ie 'watches family
feud').

Also to your exact point I am sure there are vastly more people that would be
able to understand what was meant by 'a bug that you can exploit' vs.
'spectral signatures'.

I am thinking that someone pitching investors and using what amounts to (or
appears to be) an invented or recently invented way of referring to a concept
would not have a good reception either.

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rsp1984
_Thanks to Jack Altman, Max Altman, and Luke Miles for reviewing drafts of
this_

Realising that there's a "Sam & Max" in the Altman family made me giggle :)

