Thoughts on Angel investing ( takeaways from Angel by Jason Calacanis )

I care deeply about the environment , i feel trying to do something for the environment is one of the ways we can find meaning in our lives , also protecting the only planet we have so that we can keep survive in mutual co-existance with other species and resources would be great for us all and also build an important framework for how we should not treat the planet and how we as a species figured how to save ourselves . Apart from reducing electrical usage , recycling properly and waiting for electric cars to become mainstream so that instead of filling petrol/ diesel/ CNG / gas in our cars we would charge our cars to get from point A to B , what else can humans do to solve this mammoth of a problem?On researching i feel the three major ways to solve this problem are the following : — a) Build a solution that solves this problem through either a non profit , charity or a startup thats singular vision is to solve that particular problem once in for all . b) Be an educator in this space , read , research , document , curate and showcase all this information down in the form of a show on youtube , through blogs on a website and podcasts , breakdown this information and turn it into actionable insights for the regular public to get involved in multiple projects , solutions around the world or in their own immediate neighbourhood and c) Make a lot of money and either invest in startups as an angel investor or a venture capitalist or start a fund , raise money , invest in companies that get sold to bigger companies or go public and help you make money for your limited partners as well as your partners and yourself . After reading Angel by Jason Calacanis , a highly important read to understand the inner workings of what it takes to be an angel investor , i’ve got a deeper understanding of what it takes to be an early stage angel investor and what the day to day life of that journey entails . A couple of things i would like to share that were my key takeaways from this book :-
1) Jason calacanis is great at maths and right from talking numbers with a founders that come to meet him , by simply them answering questions such as : how much money did you raise ? what is your burn rate per month per user ? do you have any revenue ? he can calculate and answer how much runway or time do they have left before they run out of money which leaves the founders perplexed enough to think he’s a psychic .
2) How different the life of an angel investor is from a venture capitalist , first and foremost a venture capitalist works in a team like environment with their partners and they make daily decisions together on how to invest and who to invest in , while angel investors take their own time on their own to decide who to meet and invest in without the trappings of a team and being influenced by other people’s opinions and strategies .
3) After a company is formed and incorporated : founders , venture capitalists and employees all get board seats and board meetings must take place on a weekly or monthly basis . I always knew board meetings were important but it was not clear to me what used to happen at those meetings , this book helped me understand which now makes obvious sense to me that the point of board meetings is so that every one that has a seat at the table can expand the value of the company , so that the overall pie and every slice keeps getting bigger and more valuable so that ultimately when the company is either sold or bought there’s a big exit or profit for everyone involved .
4) Venture capitalists are paid management fees and other fees for their service to handle limited partner’s money . This blew my mind because i thought venture capitalists were borrowing other people’s money but it turns out that they’re paid for their services , apart from receiving a major chunk of the profits on the exit of a company . ( I still am not fully sure about this and might have to research more , feel free to correct me )
5) Pro rata rights are super important for angel investors . An angel investor takes a chance on an early founder by investing their own money into the founders company , its a leap of faith in a time of need that can help both the founder and the investor if done properly ; however , when more investors join the table in the form of venture capitalists chances are the shares bought by the investment made by the angel investor can shrink and their stake in the company can reduce significantly if they don’t have the pro rata rights to invest more money into the company to maintain their share proportion . Now this was shocking to me mainly because when this happens as a successful company thats growing will likely attract bigger investors , that means the money invested by angel investors at first wasn’t enough and that they would have to pay more to maintain their own stake even when they took a chance when no one else would . As unfair as that seems to me , Investors must have enough money to shell out at times like this if they really believe in the company .
6) How to talk to founders and how founders should talk to investors : Angel investors must be sure not to add more stress and always try and provide more and more value to the founder and the companies lives .If many angel investors are investing in one company it becomes like a game for you to decide how you , with your network , skills , goodwill and marketing prowess can bring more value than other angel investors to the table while founders should always follow up and keep angel investors in the loop about challenges , problems and any other help if needed .
7) Following up and unprofessional attitudes : Continuing from the previous point , its super important to follow up with angel investors as they would like to know if they can avoid any unnecessary problems that can be avoided such as : being unable to hire for a certain position or their cofounder leaves them or the company shuts down privately or they run out of money , all these highly important problems can be avoided but many founders that are non confrontational by nature or are scared to fail or discuss their problems leave angel investors in the dark hence resulting in problems that could have been avoided .
8) Losing money and making money : For every smart investment in companies like uber , airbnb , instagram , youtube etc there’s hundreds and thousands of investments in the companies that no one will ever know off because they never took off or survived past the first year , companies that weren’t able to find product market fit or burnt through their money quickly on expensive offices and gestures and not being able to make enough revenue or raise another round to stay in business . The chances that you will lose money are higher than the chances that you will make money , to avoid losing money one must have the experience to bet on the founder and the founding team and their ability to survive which requires seeing a lot of deaths to gain experience .
9) How you have to be in silicon valley to make anything happen : Due to the fact that the network effects are so powerful in silicon valley , theres a higher chance you will get funded , build a credible team and become a billion dollar company in silicon valley than anywhere else atleast thats what jason calacanis believes to be true . He believes that great founders can be found anywhere but in order to thrive like the giant companies that rule our world one must choose to relocate there ; i’m doubtful if many founders would be able to survive the costs of living in the valley but thats a topic for a different blog .
10) Why are you even doing this in the first place ? : jason says they’re various reasons why someone would invest in startups , they could invest for delight , to get the thrill of betting on markets , to bet on a promising founder or they want to solve a problem that they care about ( like i do for climate change ) . Decide what attracts you to investing in companies and why do you want to do this if you really want to do this at all .
11) Investors that invest in films and surviving an ai apocalypse : Jason states that he has inside information that founders that invest in films or are an executive producer in Hollywood films do so for the sole reason that they can attend cool parties . Also at the beginning of the book he says he knows a bunch of billionares and multi millionares that have bought up islands that have no internet connection so that they can survive the ai apocalypse if it ever occurs , he claims that the book should teach you enough so that you can survive such a scenario if it ever occurs .
12) FANG stocks , thats an abbreviation for Facebook , amazon , netflix and Google , he says these companies will continue to reign and thrive for the next 10–15 years and the same cannot be said for companies like twitter and snapchat which are not money making machines and are doubtful that they will survive .
13) Rocket ships can fly or blow up : These investments and activities happen at a fast pace with a lot of urgency since many investors want a slice of the pie and just like any rocketship , startups can fly or can explode in your face losing all value and marketshare . Expect to see a lot of rocket ships burn up before some start flying .
14) Angel investors are powerless and have no say : After you’ve invested in a company and have received your shares , chances are you will not be on the board of directors or in the board meetings or have a say in how the company is run , all you can do is follow up with the founders every 100 days or so and make sure that they’re doing fine and if they need any more help , introductions ,investors or employees to keep going .
15) How to start and keep the track record going ?
Jason recommends starting small , keep aside anywhere between 1000–25000 dollars (or however small but significant amount you can start with in your own currency ) and invest in startups in the form of syndicates with platforms like Angelist etc . You can join a syndicate which a list of investors that have more experience than you that are investing in a particular company , invest 5000 dollars across multiple companies , follow up with other syndicates , try and bring value and provide connections or employees for the company to grow and flourish . When you do this across lets say 8 companies and build twitter or email lists with common contacts so that you are in the loop of whats happening with that particular startup , You can call yourself an angel investor . The more experience you gain the more you will learn and maybe one day invest individually outside these platforms or become a syndicate lead yourself one day .
Mainly , what i took away from this book is the complexity and the amount of work it takes to follow up and be in the loop and always be on the hunt for future companies so you can invest more in upcoming companies . You might lose more than you might make initially atleast until your experience helps you bet by finding winning founders and teams . Its a lot like poker which Jason calacanis happens to be good at as well , to be able to pick up on trends , patterns , to catch a bluff and predict, estimate and then bet smartly by making educated guesses for future returns .
The only reason that i would invest would be to support and help future clean tech companies , those companies will be across verticals such as recycling , water , battery storage , electrification of cars , lab grown meat , vegan clothing , plant based meat , agriculture methods , solar , wind and other ways of generating and storing energy so that we can transition to a carbon neutral world . But just as that change might take sometime to happen , it would take me a while to make enough to invest in these companies as well which i feel is a great pursuit for any angel investor , venture capitalist or entrepreneur out there . Theres a lot to do ! So , Lets Get Started .
