Angel: How to Invest in Technology Startups—Timeless Advice from an Angel Investor Who Turned $100,000 into $100,000,000

Valuations matter, but what’s more important is that you get into the best deals. I know people who passed on Twitter and Zynga based on their Series A valuations, in the low tens of millions, only to see those serial entrepreneurs and their companies become worth billions. A quick way to understand the valuation is to ask the founder directly, “Ho

Angels don’t write deal memos, but they should, because deal memos force you to crystalize your thinking in the short term. They also help you refine your selection ability in the future by reading your past deal memos to see what you got right and wrong.

Remember, on average we get paid out seven years after we invest in a company—if we get paid at all. If an angel has a twenty-year career investing and they start at forty years old, then they’ll start seeing returns when they are almost fifty—with just twenty good years left to spend that money.

This is a marketplace and valuations can go up and down, but valuations are not as important as understanding who the other investors are, how the business is doing, who the customers are, and who’s on the team.

If you’re doing deal memos, office visits, and talking to customers when investing $2,500, you’re going to be a powerful Jedi by the time I’m finished training you.

When you meet with fellow investors, your goals are: Figure out what they invest in and why. Figure out what value they bring to startups. Make sure they understand what value you bring to startups. Ask them, “Have you seen anything interesting lately?” Offer them, “I just invested in these two startups, which are exceptional. Would you like to get

Due diligence in early-stage investing is the voluntary act of looking into a business or individual before giving them your money. Due to the small amounts of money at stake, say $25,000 from a typical individual angel, many folks skip this step.

Startup founders often sell too early, leaving money on the table. VCs often force founders to hold out and swing for the fences, risking blowing up companies and locking in gains. We angel investors are generally along for the ride. The good news is that our industry has figured out this divergence of interest and has come up with an effective way

They are often exceptionally good at spending money and spinning yarns, but they frequently become habitual beggars who are so disconnected from the actual product and customers that they don’t reach product/market fit with anyone except, wait for it, investors. I’m looking for founders who are scrappy—what we call capital efficient.