2015.7.09–190

26 Lessons Learned from Investing in 26 Startups

1. Entrepreneurs are always overly optimistic
2. If anything seems fishy or out of the ordinary, immediately pass
3. Any signs that the entrepreneur isn’t self-starting and resourceful, immediately pass
4. Everything takes twice as long and costs twice as much
5. Look for a pattern where the entrepreneur had already started a prior business, failed, and is at it again
6. Lean startups are better than heavy startups
7. Expect regular investor updates
8. More traction reduces risk
9. Lack of liquidity is one the biggest challenges
10. Exits are few and far between
11. Plan for 7–10 years before seeing a return on investment
12. Exit value is more important than entry value (e.g. a small piece of a big pie is usually better than a big piece of a small pie)
13. Reserve twice as much as the original investment for follow-on investments (e.g. exercising the pro-rata rights)
14. Personality fit is more important than entrepreneurs realize
15. $300k is the ideal amount for a seed round
16. Build a portfolio for diversification
17. Investor jargon is more prevalent than expected
18. Know that winning a pitch competition isn’t the same thing as a successful startup
19. Fewer seed-funded startups as a percentage raise a Series A round
20. Developing rapport well in advance of investing is important
21. Evaluate the Investment Readiness Level
22. Seed capital is different from venture capital
23. Bet on the horse, course, or jockey
24. Understand the difference between friendly customers and unaffiliated customers
25. Milestones met pre-investment help improve confidence
26. Investing is an incredibly hard way to make money

2015.7.09