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I am a junior angel in Silicon Valley. AMA
193 points by joshu on May 18, 2010 | hide | past | favorite | 227 comments
I occasionally invest in startups. Please chime in if you are also an angel.

1) Entrepreneurs need to understand that [ ... ] or I will stab their eyes out. Please fill in the blank.

2) What is the most broken thing about angel investing?

> Entrepreneurs need to understand that [ ... ] or I will stab their eyes out. Please fill in the blank.

Communication is key. If you want people to do things, you must communicate in ways that facilitate the action. Make it easier for me as I am bandwidth constrained.

> What is the most broken thing about angel investing?

I haven't been doing this long enough to have a sense for that, which is surprising. I am frequently cranky about things that don't work well.

Funny story: When I see names in the press that look familiar, I often check to see if I've communicated with them. I saw an article about a company that raised money, and checked, and sure enough I had talked with them about it.

The entrepreneur had written ten paragraphs. I sent a "sounds interesting, send screenshots or a prototype" and they wrote ten more paragraphs. I didn't follow up.

However, smarter people than me invested, so what do I know?

Probably you made him realize the importance of screenshots and working prototypes, while pitching.

Incidentally, I have sent at least three startups to your blog, just for an example of crisp thinking they needed to emulate.

Thanks, that is a wonderful compliment. If you have something specific you like crispified, I'd be happy to do a summary post about it. (The user experience of accessing my blog for the first time is terrible if you're not coming to a particular article, since it degrades into "what am I thinking about this week" and doesn't usually include context for the last four years.)

Not really.

I wish you'd do something bigger. You certainly have what it takes. I hope appointment reminder turns into that thing. (Also, ++ for using Twilio)

I'm cautiously optimistic. Bigger, though, is just a side effect of playing a game well, not a goal I really go after for it's own sake. Pick a name out of your Rolodex, any name: I wouldn't trade my life for his for all the tea in China.

Let me rephrase. Something wider in possibility.

When I started delicious, I had no idea that it would someday be a company. Instead it was a thing I wanted to make. But it turned out to be very pregnant with possibility.

I'd like to see you do something that is similarly wide.

Does that make any sense?

I get you.

I'm sitting at home at 3 PM on a Tuesday writing patches to the OSS project that spun out of the day job that spun out of the weeklong project which was supposed to, someday, buy me a video game. We never know what the future holds, right?

We're always creating the preconditions of our own future. At some times more deliberately than others.

What video game?

Thank you for this perspective. I was recently thinking about how hard we strive to become the best at what we do, and how hard it is to actually know if/when you have gotten there (let alone how long you will be there if you get there) and thus it is a horrible thing to hang our sense of significance and worth on. I don't know the specifics of how you define your sense of contentment, but it seems pretty clear that you do.

I know a guy who composed a message to aliens, uploaded it to his iPhone, traveled to Arecibo, and transmitted it to the stars.

I'm happy he's happy. I'm also happy he has never talked to me about my opinions on NASA. (Or iPhones, for that matter.)

I think you can safely say you are an intermediate or advanced angel.

I guess junior is opposite to senior. I don't sit on boards, I don't lead deals, etc.

Why don't you lead? I found when raising money that a lot of angels are like that. Is it just a time thing? If you found a startup you really loved, would you lead then, or just try to get someone else to?

I don't think I know enough yet.

* What do you like to see before you invest? idea? product? traction?

* What do you give more importance? idea or team?

* You've had incredible dealflow recently, how are you getting into all these deals? (Foursquare, Square, StackOverflow, DailyBooth, Canv.as)

* Since you don't lead, if you run across an interesting startup, do you make introductions or only co-invest in deals that come from other people?

* Better location for a pre-funding consumer internet startup: NYC or Bay Area?

* Bootstrap or raise money? Any particular reasons to choose the former or latter?

> What do you like to see before you invest? idea? product? traction?

I am trying to build intuition. So some of this is gut sense. Sometimes I look at deals and say, this is obvious. Sometimes I have to sell myself.

I look for new things that are in spaces that have a comfortable competitiveness climate.

> What do you give more importance? idea or team?

Both are important. See above.

> You've had incredible dealflow recently, how are you getting into all these deals?

Luck is a matter of being in the right place at the right time, so I take care to be everywhere. I know everyone. Foursquare: I knew Dennis from NYC. Square: I knew Jack from twitter. StackOverflow: I was on a panel with Joel once. Canvas: I suggested moot to TED and introduced myself at the conference. Dailybooth: Asked for an introduction to me.

> Since you don't lead

If I like the product, I introduce it to relevant people.

> Better location for a pre-funding internet startup

I'm fond of both NYC and Bay Area. I started Delicious in NYC.

> Bootstrap or raise money

Venture money is only useful in some situations - where capital will help grow the business. I also want to see something where I will conceivably get out someday; that's either acquisition or IPO. Do many privately held companies pay dividends?

Thanks! To rephrase the NYC vs SF question, if you were starting a new company today, where would you do it?

Personally I would be ok with either. I know great investors in NYC. There are more investors in the Valley. If you have something that is harder to get funded, it may be easier here.

I think that delicious is really awesome. I still use it pretty much every day, even though if anything the product has almost declined in quality over the past few years.

It feels like Delicious could have been the start of something even larger than a bookmark service, it's my primary resource for finding specific content (eg: rails + tutorial, photo + howto, etc.) I'm aware that that is a fairly large technical barrier in terms of how search works, but I feel it proves the potential for something really, really awesome. A real social search engine if you like.

Ever thought about buying it back off Yahoo?

I second this! Please someone buy back Delicious, or make a new one:

+ Delicious is lagging behind in mobile support.

+ Delicious could be taking more advantage of the conversation that people are having in their Notes section.

+ Delicious could be taking advantage of the links that are shared between users: help me find users that have similar but unique interests as I do. This would be true social networking on Delicious!

+ Delicious places priority on what is "Hot". This is not terribly useful since a lot of "Hot" links have already made the rounds on Twitter or in my Google Reader first.

+ Delicious could be taking advantage of links that are not yet popular but have a strong interest in category niches.

+ Delicious could be taking advantage of a user's top 10 tags: it's not an accurate assessment of a user's interest, but it gives me a quick assessment if I want to subscribe to their feed.

(I wish I could make another Delicious, but I'm not a programmer!)

I actually did at least several of these. But they forgot how those parts worked and rewrote them poorly.

I have. But then I'd be the bookmarks guy, and I'd rather go on to do something else.

I agree with you. I noticed something about Delicious: when I add a URL, it's rare that someone else hasn't already bookmarked it. That means that Delicious has, to a first approximation, everything interesting on the web. All organized by humans in a rich way. That's an astonishingly valuable data set. Relative to that value, the use that's being made of it is so low it's criminal.

Even if they aren't capable of evolving it, I wish Yahoo would at least make it fast enough that I don't cringe every time I use it.

pretty much every change Yahoo has done has been a step backwards, except for changing the url to delicious.com

That was actually my decision! We bought the domain before the acquisition. I think I heard it on the radio as "del issy oos" and knew it had to be changed.

dyslexic delicious deviants around the world thank you (i'm not one, i quite liked the exclusive deli.cio.us domain)

(yes that was intentional)

What's the best way for start-ups to get in touch with you? Do you respond to email pitches? What's the worst way to get in touch with you? Have you ever invested in a start-up that pitched you by email?

Do something that I've heard of before they end up in touch.

Cold emails rarely turn into anything.

The "valley advantage": what attributes of a business makes a company most able to take advantage of the valley? Do this apply to b2b as much or just consumer tech?

PS for the uninitiated, AMA = ask me anything

I think the Valley offers much easier access to funding. There are also lots of support organizations here -- lawyers, banks, etc, who will understand your needs much better.

I don't understand b2b and am terrified of it.

What terrifies you about b2b (besides not understanding it)?

Sales. Seems very hard. Not that that route is bad but I understand b2c better,

What attributes of twilio/weatherbill made you overcome this fear?

Good question.

Weatherbill was an earlier investment. I still wish I had put more in. I remember the exact line that convinced me: "You can upload your Quickbooks P&L and we'll calculate your exact exposure to the weather." I guess I like novel marketplaces more than I dislike b2b.

For Twilio, it was the quality documentation that convinced me.

Both companies have kick-ass CEO/founders.

Would you still consider investing in new B2B startups that have shown traction with sales?


Three questions:

1) Why do you find it harder to code these days? Does that bother you? It seems like you're still keeping up with a lot of python stuff from your delicious tagging.

2) Why hasn't anyone advanced the ball past delicious with bookmarking? I'm still a delicious nut, but I really want good search tied into it. Is there no business model or no real use to the data?

3) Do you believe in the Ron Conway style of angel investing? IE. invest in many interesting companies for better returns? Do you ever participate in follow-on rounds?

> Why do you find it harder to code these days?

I don't know. Too many distractions and anxieties? There's a lot of noise in my head. Yes, it bothers me.

> Why hasn't anyone advanced the ball past delicious with bookmarking?

I don't know. I should restart Muxway (the delicious predecessory)

> Do you believe in the Ron Conway style of angel investing?

I don't know enough about Ron's model to make a judgement. All we know is that it generates more "buy" decisions. I think that having a larger portfolio is stronger. Sometimes I do participate in follow-on rounds.

So far I'm surprised that a) nobody has really asked about exits or returns b) people that have asked questions about their own situations have been incredibly vague c) no questions about background or current work or d) no questions about delicious's creation, founding, and later sale.

Sort of on a): Are non-exit returns ever something you think about? E.g. the possibility of buying into the next craigslist and getting x% cut of some large revenue stream, but never getting an IPO or buyout? Or is that just too uncommon, and/or people with those intentions never cross your radar because they don't seek funding rounds?

I don't know specifics about craigslist, but I haven't heard of anyone who is an investor of a company that pays significant dividends. Not saying it doesn't happen, though.

I suspect that folks who have large revenue streams imminent would go to some effort not to dilute themselves.

I think a lot of us have read Founders at Work.

How about this, has your wealth made you happier?

Not really, no. I like making things.

At what point did you decide to sell Delicious to Yahoo? Did you sell because of the money offered, because the initial idea was more or less finished or something else?

Two reasons: The second round was more difficult than expected, and I thought that search engine integration made a lot of sense.

* How do you hear about the startups you invest in? (Introductions from people you trust?)

* What is the one piece of advice you would give to people who pitch their startups to you?

* How do you add value?

> How do you hear about the startups you invest in? (Introductions from people you trust?)

They come from all directions. One of my best investments came from a chance meeting with the now CEO at a party.

> What is the one piece of advice you would give to people who pitch their startups to you?

Hard to explain. I do a lot of this by gut sense. I look for: - strong people doing things in interesting spaces - belief but not inflexibility; religion is bad. - an ability to roll with the punches: reactions are as important as planning

> How do you add value?

I am a product guy, so I look at the product and can evaluate it. Same thing I use to choose the investments, I guess. I am also reasonably well connected and will use that as asked.

I heard you built one website a month, hunting for the right idea, until delicious clicked.

Would you ever fund a person you believed in for that kind of exploratory work?

I tried to build something interesting every year. I originally set out to be some sort of expert in social software (I think I succeeded, more or less) way back. In the past I built memepool and geourl and a bunch of other things you've never heard of.

However, I never really had the idea of building businesses, just interesting things. I wanted to get attention (I got myself invited to Foo Camp before I did delicious, for example) from folks outside my industry, as I worked at an investment bank.

I still build some small things here and there. I find it much more difficult to program now, though.

I think delicious picked up more users in a day when I left than in its whole first year of existence. So it took some time to figure out if it clicked... however, I know that I spent a lot of time making Muxway (delicious's predecessor) work right for me and had a good sense for what would work for other people.

I still build some small things here and there. I find it much more difficult to program now, though.

Care to share any links?

The last thing I was tinkering with was http://lensdb.com/ but it still needs a lot of work. I haven't worked on it in months and months.

I'm thinking of building an app to help manage my angel deal flow, of all things.

You have mail regarding that.

> Would you ever fund a person you believed in for that kind of exploratory work?

I've put money into a few things based on people's prior work, but generally the idea itself has to be interesting.

Was the recent stock market plummet your fault? Did you sabotage the investment banking industry on your way out?

Do you do back channel reference checks on founders?

You can't prove anything. I have an alibi.

I've done a series of angel investments, but was most active 99-01. Performance would probably put me in top decile v.c. for that time.

Had two liquidity events in last 2 years from advisory shares. Expecting an IPO in next year.

Most famous startup I passed on: Paypal, back when they were doing palmpilot stuff. ;)

Most famous startup I invested in: Napster, which went bankrupt

Best return: Giganet, acquired quickly by Emulex. Haven't heard of it? Could there be a connection? ;)

Present day: In the process of closing an angel round for my own new startup, mainly from friends I've known for a while who've built and sold off companies, plus a small number of friend of friends.

> Paypal

Ouch. I know the feeling.

Doesn't Emulex make connectors?

I would like to see some liquidity someday myself.

What's the startup?

We overlapped - I was at BofA Securities. My boss went on to Epoch Capital and then Schwab.

>> Paypal >Ouch. I know the feeling.

;) Yah, I also could have been in on Salesforce.com and a recent flip to MSFT if I'd pushed a little harder...

>Doesn't Emulex make connectors? Wow, I haven't looked at Emulex in so many years. That was at beginning of the decade...

>I would like to see some liquidity someday myself.

It'll come... it's funny that period between deal announcement and closing and liquidity, particularly w/ restricted stock and such. And also the ones that have taken 10 years to become liquid ;)...

> What's the startup?

Fosdev, I'll drop you a note.

> We overlapped - I was at BofA Securities. My boss went on to Epoch Capital and then Schwab.

Hehe, cool, I was helping Schwab Inst. first, then BofA Global Markets Group.

Hi Joshua

Would you invest in a pure mobile play (i.e. Something you needed a specific type of phone for)?

Reason i'm asking is that I quite often hear "yeah but what about everyone who doesn't have an XXX".



I am not fond of secondary franchises. If you are going to live in the shade of one tree, it'd better be a huge fucking tree.

I am also not fond of temporary opportunities. If you are doing X for Android because there's a successful X for iPhone and nobody has done it yet, then it's not a scaleable business.

It worked pretty damn well for Playdom. They did X for Myspace because there was an X for Facebook and it took them to a huge amount of revenue.

It's scalable as long as you can keep finding new Xes indefinitely.

Sure. I'm not saying it won't work - I'm just saying what I prefer to invest in.

Lots of things that I pass on go on to get acquired. It often makes me feel stupid and doubt my strategy and decision-making.

I'm also not entirely sure that I'm actually any good at this.

Has working at Google while being an active investor ever led to any conflicts of interest?

I generally avoid stuff that relies on heavy SEO or otherwise obviously directly competitive. Although I'd avoid some of that stuff merely because it is bad for the ecosystem before I worry if it bothers my employer.

I'm pretty clear where I work and what my burden of responsibility is. So entrepreneurs will end discussions when they learn where I work if I wasn't aware. Usually if there is a conflict issue it ends there.

I invest small amounts relative to my net worth and am unlikely to compromise my behavior for an investment. The E(v) of an investment, if you assume the 33% chance of a > 3x return is still not that big.

Although: Yahoo compliance forced me to pass on the first round of Twitter. Yet another reason I am annoyed at them.

> Although: Yahoo compliance forced me to pass on the first round of Twitter. Yet another reason I am annoyed at them.

Ouch. I would have thought you'd use a stronger word than "annoyed"!

What maximum % of your net worth would you allocate to angel investments?

Great. Any thoughts on parameter values?

According to Fred, 2 in 3 startups return even or fail, and 1 in 3 succeed.

Assuming I'm doing as well as he is (which I doubt) and that an exiting startup gets 10x the input, the formula suggests 25% or so.

This seems high. Also, startups are not independent bets. Who knows?

I've done 34-ish investments. One small exit. Two are doing very well. Two or three dead companies (sometimes, it is hard to tell.)

34ish and you say you're a junior angel?

I guess that makes me a junior associate at best.

I can't or won't negotiate terms, lead a round, syndicate a deal, or sit on a board.

So that makes me subordinate to people who do these things; they are therefore my senior.

heh, I just browsed Fortune's Formula and read about Kelly math. Excellent -- it's just like playing blackjack -- gotta control your bank.

upshot: if he does well, in a couple years his typical investment size will be $20-$50K. Investment size is a proportion of bank.

It's a good book.

Reading it inspired this: http://joshua.schachter.org/2008/09/amateur-economist.html

Curiously, I was a quant before I did delicious.

Do you get many business proposals from friends or relatives that you consider bad or uninteresting? How do you tactfully reject them? In general, did you have relationships with friends or relatives that changed in a significant way once you acquired a non-trivial amount of wealth?

A lot of friends are in the business. A bunch of the things I have invested in are things started by friends.

What portion of your investments are outside of the bay area? (If you travel frequently to NYC, exclude that too. I'm interested in how much remote investing you do.)


Is that because you won't invest outside the Bay area?


My network drops off very rapidly outside the Bay/NYC. So 1) I don't see as much stuff that way. 2) I'm less useful/valuable outside that area. 3) The companies will have a much tougher time outside that area.

1. What matters most to you: team, market or product?

2. You've said that you typically don't lead rounds and let others lead instead. What other angels do you respect the most?

3. Are there any deals that you regret passing on?

> team, market or product

All are important.

> other angels

There's a lot of great angels out there that I like to learn from. Aydin Senkut has shown me a lot that I've liked lately.

> deals that you regret passing on

There are always surprises. I think it's important to compare my feelings at the time I passed to the current feelings to benchmark my intuition.

What I regret more is companies I did want to invest in but either flubbed or wasn't able to get into.

Say you have an idea for a web startup, you're working on a prototype in your spare time. How should one make the jump from side project to getting funded? How did you do it with delicious?

Delicious started getting noticed a great deal. Press, etc. I think I had 30-40k users right before I started talking to Fred. This is in the days before user inflation, mind you.

I got several offers of acquisition for delicious in the 250k-500k range, and felt that if I actually worked on it full-time it would be worth more.

I turned down eight or so acquisition offers before I took VC.

How did you host/fund it prior to taking VC? Was it so low maintenance that this wasn't an issue?

(Many have said this already, but thanks for starting this thread. Very insightful.)

It wasn't that expensive to host.

At the time I got funding, I had 3u via an ISP (http://www.atlanticmetro.net/ now) in Telehouse. One of the servers I bought, and one was mailed to me out of the blue by Marc Andreessen.

* What is your favorite investment to date?

* Was delicious boot strapped?

* How do you feel about a publishing co (a la O'Reilly or PeepCode) as an investment?

> favorite investment

They're all my favorites. I try not to do the ones I hate.

The ones that seemed very obvious to me on first conversation were Etsy, Weatherbill, and Twilio.

> delicious bootstrapped

I worked on it for two years before raising funding. But I did raise VC.

> a publishing co

Feels like a long slog. I'm not fond of content as a business.

Whats the best place to raise $200k for an early-stage internet startup. A single angel? A group of angels? A seed fund?

I guess anything that works.

In my experience, companies raising less than 500k are making a huge mistake.

Is there anything you'd invest $10k on a $4mm pre in that you wouldn't invest $25k in on a $4mm pre? Assuming a $500k-1mm raise.

i.e., do you invest within your range based on your feelings about the investment, or just how oversubscribed the round is?

For me, a $10k investment and a $25k investment would take roughly the same amount of thought and time, so really it's just a 2.5x bigger payoff if you win.

Usually. 10k is when it feels more speculative. But often it is because I got cut down.

Why do you think that?

The point of raising funds is to hire people who can accelerate the growth of the business. $200k gets you a person or two, which doesn't do very much. So you find yourself raising again pretty much immediately. The fundraising process is a colossal waste of your time.

An entrepreneur going this route is not making good trade-offs.

In my experience, most of these companies fail.

If $200k is too small to be a worthwhile raise, what do you think of people getting money from Ycombinator?

If YC were just investing the dollars, it'd be a terrible deal. But it's doing a great deal more.

What if a product is doing pretty good, but it's not enough to support two founders yet? If they can put all their effort into the company it would accelerate growth (from 25% + 25% to 200% founders). And if that only takes $200k how is that different?

If $200k is good but $500k is not as good, it smells like a lifestyle business. That's not bad, but it's not a good investment for me.

How does a startup approach/contact you if it's looking to raise funds? I understand you don't lead the rounds, but you might potentially introduce a startup to lead investors.

Figure out my email and send it to me, but I may not respond.

A better idea would be to send it to AngelList.

Great. Thanks for the recommendation.

How should entrepreneurs screen potential investors to avoid personality or other conflicts?

Assuming you failed the above, how do you deal with an investor who's being difficult or disruptive?

That's a good question.

You have to talk to other entrepreneurs who took investment from the angel.

While any shareholder can cause problems, especially at that stage, a small percentage / non-board angel can't do TOO much damage, I think. But I've never really been in the situation. Ask grellas.

Hi, I'm raising money for my first startup (Business angel round) and I read lots of blogs to be familiar with the process(Dixon,Suster,Wilson,VentureHacks) but I am still eager to learn more about the subject. Do you know other good ressources (blog, book,video) to learn about how to raise money and the mechanisms ?

Thank you

Those are good resources. You also need a good lawyer. All of the folks you mentioned are good people.

Will you ever lead rounds/negotiate terms? How many more deals do you think you'll do before you reach that point?


I don't invest enough dollars to have that right. I don't have enough purse to increase the dollars I invest.

More importantly, I do not have enough stroke within the community to do this kind of thing.

I also am probably not ready to be a fulltime investor any time soon.

Why are you an angel investor? Since thats super-broad, here are some options (feel free to add more):

1. You think you can make decent returns.

2. You like helping people.

3. You find it a great way to avoid getting bored.

1 and 3, definitely.

I also like being near interesting projects.

1. Do you ask startups how exactly they are going to spend money? Or are you fine investing even if team doesn't know where each penny is going to be?

2. Since you must be involved with a lot of startups, how much time, attention and guidance you are able to give to an individual startup?

Use of capital is a typical open question. But no, I do not ask for a budget. They should spend most of it on people and the rest on other constraining resources.

A lot of them no longer need my help. Many don't use the time I do have available. I have plenty of time for my day job and even playing video games.

What value do you add (besides the money) to a project you invest in?

My product sense, mostly. My connections, a little. I try not to bother the founders unless they ask for help.

How much are you willing to be available to the companies you are invested in? Does your bandwidth allow for companies that would like some product advice, but aren't interested in funding at the moment? If so, what's the best channel to ask?

Let's say you invest 25k in a company. What's your expectation on when you will receive money, and how much are you expecting to receive?

I don't really think that way. Instead: will this be an enterprise worth being involved with? For example, are they going to change the world and make people's lives slightly better? Or do they, I dunno, write boring iPhone apps?

So you're doing it to improve the world and not for the money?

I call false dichotomy.


You are trying to make money. I am asking - when will you make the money and how much? If I put 25k in a business in 2008, when will I see a return and how much would that return be?

Or are you just doing it to be associated with these companies?

I don't know. I expect it will take 5-10 years to get a return in many cases.

I think this pays vast dividends outside of dollars: I get connections, notoriety, experience, exposure, and so on. I know about a lot of what's going on in the valley right now, for example.

I expect it will be better than investing in venture funds, but not by much. (I do this too.)

Would you have any advice for a startup that needs advisors and experience growing a company more than it needs straight up cash?

Is a company that makes this known a turnoff for angels, as by doing so it admits it doesn't have 'everything quite worked out'?

Find some advisors and mentors, then.

Honestly, set yourself up to make some mistakes and learn from them. Advice is rarely that useful.

If you don't need venture capital, don't raise. It sets certain expectations and puts you on a specific path.

I'm a big fan of the ideals of 37 Signals, such as embrace constraints, bootstrapping, etc. But, I feel that my day job is getting in the way i.e. time. Should I take the plunge and seek angel or continue on my bootstrapping adventures?

Not enough info. I switched to fulltime when my day job felt less important. Your attention and time are the scarce resource.

In general how far along is the startup by the time you invest?

I really want to see a working prototype first. Rarely do i invest without that.

How far along do you expect a prototype to be?

E.G., if I'm building a social web app, do you expect to just see a prototype with a few of the basic concepts? Or do you expect a first version that's already online and starting to get users?

The latter. You aren't learning anything until you are interacting with users, and learning is the most important thing you can possibly be doing.

Through friction the apple is polished, I think.

With that in mind, how do you feel about all of the people who rushed to send money to the NYU kids with the 'Facebook killer' in mind?

Well, as an investor in Kickstarter, I approve.

I feel bad for the Diaspora kids. They can't help but fail. Everyone will forget about it shortly, except for the people that gave money. I wish them the best of luck.

You don't see this as the best possible scenario for them?

They've been able to get everything they should need for success - adequate funding, lots of press, users who want what they're going to build so badly that they're giving them money sight unseen.

How could there be a better situation for someone who wants to take on Facebook?

Why aren't you starting a new venture yourself?

That is an excellent question.

If, hypothetically, you were starting a new venture yourself, what kind of change would you want it to make in the world if it succeeded?

One axis along which businesses find themselves has "direct utility" at one pole and "perceived utility" on the other. Perceived utility is stuff like sugary drinks, or pictures of attractive people, or whatever; we're drawn to like those things because of our psychology and evolutionary background. I don't mean to sound negative - if people like the things they can be good things. Like video games, for example.

I think that no business or product exists at either extreme (delicious, for example, over-empowered people's need to collect things; video games are inadvertently good at improving reaction time etc) but I'm pretty sure anything that leans toward direct utility and is large is going to have a significant positive impact in the world. I think Google is a pretty shining example here.

The things I like to build tend toward the "direct utility" side of things. Hopefully they will be large...

Ha. Not me, you can tell by the top section. He claims to be happy.

oops sorry. I did see your comment on that thread and didn't check the username of the OP. There are quite a few similarities between that guy's story and you, so I made an unverified assumption.

You weren't the only one. I think I wrote him to ask if he had any rich guy tips. I don't think I got any good ones.

On topic. I _really_ want to do this.[1] Whats your opinion? Sent a proposal to kickstarter yesterday, waiting for reply.


Sounds like an interesting idea.

A revolution in education is imminent. Better measurement, statistics, and analytics in the real world, better connectivity in the offline world.

Thanks for looking at it.

This is something I wanted to do for sometime, Salman Khan's video just re-ignited the passion I had when I first thought of it (I still have the detailed ~10 page draft lying around somewhere). I am hoping to go all-out on this, not sure how to approach some of the non-technical problems but I am researching/working on it. One way or another I will find a way and make this happen. rĂ¡pido.

Have you considered investing outside US, Central Europe for instance?

Not really. Maybe if I visited there. I don't like doing deals sight unseen.

Why not? In Poland we have beautiful girls ;) Additionally put an eye on http://www.globstar2010.com/en/index.php

What's something a startup has done that most surprised you by working when you expected it not to work?

Startups don't generally tell me about their decisions often enough for me to be able to benchmark this, I think.

Well that brings up my other question, which I wrote and deleted: what's the median frequency with which you talk to startups you've invested in, and how does that change (in a given case) with time?

They typically stop talking to me after the next investment (usually, when they have a Board of Directors they are responsible to)

Most startups do not update the non-board investors much.

I am on IM most of the time. There is a "Founders" section in my buddylist.

Would you invest in a used car dealership? (I am not even joking. I am launching one later this year.)

I invested in Carwoo. Probably a conflict.

What's the most unexpected thing you've learned along the way?

Saying "no" is the hardest part. Entrepreneurs are by nature a persistent bunch.

When investing, how important is a founder's educational background and work experience? What do you think is the best indicator of a successful founder?

I would like to see people who have succeeded in tough environments. Some degrees are like that, some are not. Evidence of having built something is better.

What are you wearing?

I am wearing a red "foo camp" tee shirt from 2007, jeans possibly from j-crew, and white gym socks I bought at walmart.

a year or two ago I threw out all my mismatched pairs of socks and bought all identical white socks. now I do not have to match and fold the socks when washing them. I just pile them into the drawer.

I do the same thing, except I bought lots of socks of different colors from the same range. Best feeling ever - not having to pair socks. (and being told you're wearing odd socks like some kind of mad man)

Want to be friends?

I've had the same thought about socks. I've pondered starting a business around the idea -- pay $100 and we'd send you a few samples of different sock brands. Then choose the one you want most and we'll send you 30 pairs -- all you'll need!



Looks like you've been beat, mate.

($100 is a ton of money for socks, most people don't care enough to care about socks.)

(think market skimming, not market penetration).


++ on the j-crew.

Hi Reilly.

(Reilly used to be my boss in the 90s. Much later I asked him to be on the board of directors for delicious.)

Hi Joshu,

1) How aggressive are you in getting deals done? Are you more like "lets have a chat, sign here" or more like "okay, call me if you ever need funding."?

2) I'm actually working on a site similar to Delicious, http://www.howl.com. Its not quite bookmarking, we call it link blogging. What do you make of the market? Thanks

I am not that aggressive. If the entrepreneur doesn't understand how I can help/add value/etc then I don't really push it. It's not something that comes up a lot.

Looks kinda neat. Feels tumblr-y. As an investor I avoid content-y stuff like this (how do you monetize? ads probably) but as a user and as a developer I like stuff like this.

howl looks neat (good domain) how are you better than tumblr?

still figuring that out. I think we're lighter and easier to post with. We also don't offer any blogging tools other than pasting links. We think we can do comments and content discovery better.

Thank you for doing this.

No problem.

When will you do something outside of tech? ie- food type of establishment (I see you mention this desire here a lot).

When I have a big enough purse that I can invest in things that will almost certainly lose money (unlike startups, where it's just probable.)

Are you doing it for financial reward or for the enjoyment of it?

Probably the second, currently. I haven't seen a lot of return in real dollars.

This applies to me personally, but I'll ask out in the open: Are you interested in advising young startups?

I don't really do advisory boards. It has different compliance hurdles due to my work situation.

Also, in my experience, startups are bad at fairly compensating their advisors. I'd agreed to seven or so advisories in the past and actually gotten paperwork for shares just a single time. One startup actually had me come in twice for advice and then later told me they decided not to have an advisory board.

Gotcha, thanks.

What's a fair equity share for an advisor, btw?

I dunno that one. It's typically not much.

For a typical advisory board member, usually .1 to .2% of company for a year's service, typically fully vested on grant (e.g., on a 10M share model, 10K or 20K shares/yr).

This can vary widely, of course, for special cases, but something along these lines is probably the norm in the Valley. As you note, not much.

This is why you hire a venture lawyer and not your uncle's friend's brother.

Hi grellas, I am a fan.

Thank you very much!

I am thinking about accepting an offer to join a startup with two founders (one technical, one non-technical) to be the first employee in a Biz Dev role. The company has no funding and a prototype will release in 1 month. I think the founders have been working for 5-6 months on it (probably 75% of their time in total).

They offer no salary, but a 1k / month stipend, and a very fair commission structure for sales revenues I bring in.

They offered me 1.0 - 1.5 % in common stock equity that will vest (as will theirs) over a typical 4 yr / 1 yr cliff path.

I feel that the equity offered is too low, given that my joining is a risky investment for me financially, similar to theirs as founders. What do you think is the appropriate amount of equity to ask for?

Would they fail if you didn't hire you?

Nope. I estimate that I can add 5% to the likelihood they succeed (which in itself is small), and about 20% to the upside if they make it.

Is Christopher Poole really moot's real/birth name?

I will ask to see his birth certificate.

My mother has met Moot... I should demand to meet his mom.

I realize this is getting off-topic from investing, but since that's the spirit of an AMA, is there an interesting story re: your mother meeting moot?

Not really. It was after this event: http://www.nytimes.com/2010/04/19/arts/design/19rhizome.html and I wanted to go to a diner.

Another funny story:

So it must have been 2004 and Stewart from Ludicorp wanted to show me this new "Flickr" thing they'd built, which was a sort of online flash chat thingy. I'd logged in and poked around, and said something to the effect of "this is neat, but I wonder if somebody's mother could use it." Stewart said to call mine and see what she thought, so I did.

A few minutes later, my mother comes into the chat room that Stewart and I are talking in. If I recall, nobody else is even logged into the system at the time.

"Mom, this is Stewart. Stewart, this is my mother."

Stewart says hello, she says hello, etc.

My mother says: "This is very nice, but I have one question."

Stewart: "What's that?"

My mother: "How is this going to make any money?"

The ultimate question. You should have your mom ask that question to all your portfolio founders.

Why did you get into angel investing?

(also, do you talk to yourself often?)

Ha, I was starting to fill out obvious questions that nobody asked, then got embarassed and deleted it.

I wanted to try to figure out of I was going to be a professional investor someday. I discovered that the hardest part for me is saying "no" a whole lot.

Yes, I do talk to myself.

Thanks for Answering... I learned a lot.

Rate of good versus bad pitches you get?

Actually, I don't see that many that are bad per se, but I don't understand or like everything I see.

Lots of bad entrepreneurs have problems that prevent me from actually seeing the pitch itself anyway.

I prefer to see prototypes, anyway. This keeps a LOT of crap out of the way.

What are the problems with bad entrepreneurs that keep you from seeing the pitch itself?

Thanks for your time answering these questions.

- doesn't have a prototype.

- will only walk me through the prototype in person.

- won't even tell me what the product does without a meeting.

- doesn't know how to communicate (way too verbose often)

- doesn't have a clear pitch to deliver

I've seen all of these.

Whats the range of your investment size?

Almost always $10k-$25k. I am a very small investor.

Someday you'll grow up.

Get this man some upboats. He's just making a joke.

How much equity does that usually get you?

Valuations are often in the $2mm-$5mm range. Sometimes much higher. Never lower. Calculate it out.

What do you understand the valuation to be when the financing is done as convertible debt?

The debt usually has a cap, so I assume the cap.

Stronger deals have no cap, so I am merely hopeful.

Do you ever invest outside of SV? Outside of the US?

NYC too. But I'm from there originally.

My one non-dollar-denominated investment is also the sole acquisition from my portfolio.

Is there a reason for that? I know that communication is key, but with Skype and daily builds, couldn't it be managed?

What are the prevailing terms for angel deals you've seen recently, and what do you consider to be "market" right now?

Lots more convertible debt lately, which I am not thrilled about.

Or do you mean numbers? Every deal is different.

I've heard of more capped valuations for convertible debt with negotiable interest and discount rates (and no warrant coverage), but also seen some angels openly demanding priced rounds. Are such capped convertible notes a good middle ground for debt that works like equity? Have you seen any that provide an alternative conversion if no priced round follows?

I guess so. I really dislike uncapped notes, obviously. Many notes convert after a fixed period of time.

Ok, so (like many/most angels) you like priced deals :)

Any other terms, or trends, you care to share?

(Roy, "truly junior" beginning angel in Boston)

Are you saying that you're not a fan of convertible debt?

Definitely not. I'm investing now, let me price it now.

I've noticed that both very hot and very cold deals are debt. Hot because they can demand it, and cold because they can't scrape a real round together.

I'd like to be an angel one day, but I'm still plumbing away at the entrepreneur thing first. I'd like to get a few successes under my belt, and really experience starting and growing the businesses, before I jump into investing.

What are some things I can be doing now to prepare myself for angel investing?

What do you do at google?

Press buttons, mostly.

Will you invest in a Chinese company?

I really don't understand the lay of the land there.

<--- Reddit is that way

IAMA is my guilty pleasure.

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