Interview with Rick Marini: Investor in Snapchat

In the first episode of AngelList Radio, we interviewed Rick Marini and learned how he started investing. He also shares what you can learn from his experience as a successful entrepreneur and angel investor.

Rick has founded and sold three companies, and is an investor in Snapchat, Reddit, Sprig, Luxe, Wanelo and over 40 other companies.

Here are a few of my favorite lessons from his interview:

  • Start as an advisor. “I think that’s a good way to start to go down the path of an angel investor, advising companies, showing real value. Eventually, you may want actually take a bigger chunk and make a direct investment.”
  • Start slow & budget enough money. Rick thinks he invested too much money early on and says it would “probably take making 30 to 40 investments to really get it.” Set aside enough capital to make at least 20 investments. Syndicates generally have a minimum of $1-$10K per deal, while direct investing usually has a minimum of $10-$25K.
  • Analyzing Luxe — what to look for in an investment. Rick breaks down his investment in Luxe, a successful on-demand parking company. Rick looks for three things; (1) teams that have executed successfully in the past, (2) people that are ambitious and data-driven, and (3) a large Total Addressable Market (TAM). With Luxe, Rick saw a great consumer experience, a big market and a data-driven CEO who had come from Zynga (well-known for their culture of using data to drive decisions). Rick explains his investment decision at 17:00.
  • Helping founders is the best way to earn pro ratas. The right to continue investing in later rounds, called a “pro rata right,” is generally reserved for major investors. While smaller investors may not be legally guaranteed pro rata, they can get it by being really helpful to the entrepreneur and asking them to save room in the follow-on rounds.

Share your favorite part of this interview by leaving a comment on Soundcloud.

Learn more about Rick’s investments on AngelList and follow him on Twitter.


Here’s a full transcript of our interview with Rick:

Tyler Willis: [0:10] Hey, everybody. I’m Tyler Willis. I’m an entrepreneur and an angel investor. This year I’m your host for season one of AngelList Radio. In our first season, we’re interviewing different angels and we’re learning about how they invest and what’s made them successful.

[0:24] Today, for episode one of AngelList Radio I’m joined by Rick Marini. Rick was a founder of Tickle, which sold to Monster for a hundred million dollars. He was a founder of BranchOut which grew incredibly quickly to over 800 million profiles before it was acquired by 1-Page.

[0:38] Rick’s third company, Talk.co, was recently acquired by the Hearst Corporation. In addition to raising over $50 million as an entrepreneur, Rick has invested in over 40 startups. He’s a sought after investor and consumer in R&D companies.

[0:52] Today we’re going to talk to him and learn what we can about angel investing. Rick, thanks for coming.

Rick Marini: [0:56] Sure. It’s good to be here. Thank you.

Tyler: [0:59] Before we dive in too deeply, tell me a little bit about how you started investing. Obviously, you’ve had a long history as entrepreneur. What made you want to cross the line and be an investor as well?

Rick: [1:08] Yes. I’ve been entrepreneur for last 15 or 16 years. With Tickle, my first company, that was around personality testing. There’s another company, a couple of years after our sale to Monster, called Lumosity, which very much was doing kind of Tickle 2.0, we called it.

[1:25] A friend of mine, Tim Chang was an investor in Lumosity and given my experience with Tickle, he thought I’d be a good adviser. That was back in 2008. That’s really when I started angel investing when I could get involved with some other companies like Lumosity and Windows Intros come from, people in [inaudible 1:43] like Tim Chang or other VCs.

[1:46] You can really get in there and add some value. That was really my first taste of angel investing.

Tyler: [1:51] How long have you been working in the technology industry and founding companies prior to becoming an investor?

Rick: [1:58] We founded Tickle…I graduated Harvard Business School in 1999. James Currier and I were classmates. We started Tickle in ’99. We sold the company in ’04, about five years of being entrepreneur and a couple of years with an earn out. In ’08, we really started doing a lot of angel investing. Call it 10 years as an entrepreneur.

Tyler: [2:21] Did you start angel investing right away or it sounds like you were an adviser first and then found your way into investing after that?

Rick: [2:26] Yeah. It started with advisory roles. Lumosity was one. Friendster, if you remember Friendster, a big social site at the time that we’re doing Tickle. Jonathan Abrams is a friend. I was advising there as well.

[2:38] I think that’s a good way to start to go down the path of an angel investor, advising companies, showing real value. Eventually, you may want actually take a bigger chunk and make a direct investment.

Tyler: [2:52] The reason I ask is a lot of the people that will be listening to this are either entrepreneurs or considering starting to invest, or people who are just starting to dip their toe into that world.

[3:03] Maybe before we run through your experiences directly, what advice would you give to somebody who’s thinking about maybe making their first investment or their second investment?

Rick: [3:13] Angel investing is a lot of fun, but it’s also high risk. You want to find companies that you can really understand. For me, I’ve been in the consumer space, like I said, for about 15 years, so I tend to really focus on companies in that space for a couple of reasons.

[3:31] One, I can assess them better, because I understand the space, I understand what they’re doing. Number two, because I can actually be helpful because it is in my area of expertise. That’s the first thing is understand what you can be helpful with and focus on those companies.

[3:45] Your reputation really is your currency as an angel investor. You want to really build your reputation. This takes years and years. For me, over a decade to get there, which is having the entrepreneurial background but also really helping these entrepreneurs.

[4:02] That’s a big deal to be able to get good deal flow, and to be able to get into the hottest deals is that you actually add real value.

Tyler: [4:10] The point you made about starting off as an adviser is a good one. I certainly took the same path. In fact, I was an adviser to your company, to BranchOut, well before I ever wrote my first angel investment.

[4:21] I think that was a helpful way for me to see, “What are the ways I can add value? Is this something where I think I can actually have a competitive advantage?” Thanks for that opportunity.

[4:31] But more importantly, I think that it is a very good path towards becoming an angel investor. Start being active first before you write checks.

Rick: [4:39] Absolutely.

Tyler: [4:40] Tell us about some of the investments you’ve made so far.

Rick: [4:43] Sure. We talked about Lumosity. But some others that a lot of folks would know would be Snapchat, Reddit, AngelList, Luxe, Wanelo, Poshmark, Sprig, HoneyBook, Massdrop, August Lock, and also an LP and several funds, like Accel and Binary Capital and some others.

[5:07] If you look at that list — and there’s another 30 — again, I tend to focus on consumer, but also within consumer, I really like marketplaces. I like network effect businesses. The larger the network, the more powerful it becomes. I like the On Demand economy.

[5:24] Even when I say consumer, you can really drill down to those specific areas that I really tend to focus my investments on.

Tyler: [5:32] Knowing that these startups are illiquid and you don’t really know what the returns are for years, it sounds like you’ve got a couple of ones that are household names that we all think will be big. Have you had any that have exited at this point or are you still in the early stages of your portfolio?

Rick: [5:46] Yeah, I’ve had a couple exit. A lot of the exit so far have been more the doubles or triples, in that range. Lumosity could be a unicorn. Snapchat and Reddit. Snapchat definitely, Reddit, as well.

[6:02] A lot of these others are still early stage. I talked about starting investing back in 2008, but I’d say over the last three or four years I’ve really focused on doing a lot of investments.

[6:15] A typical exit for most companies is going to be anywhere from 5 to 10 years. For many of these it’s still early. Often the biggest exits are going to come later on. You want to give these companies time to grow and to be able to have the biggest exit possible.

Tyler: [6:32] You said you’ve ramped up the number of investments you’ve made over the last few years. Was that a decision that you made upfront, to start slow, or did it work that way?

Rick: [6:42] Actually, [laughs] probably one of my early mistakes is that I did too many upfront, before I really knew what I was doing. A good friend of mine, Naval Ravikant, who runs AngelList, when I started, to start becoming an active angel, he said, “You know, it’s going to probably take you 30 to 40 investments before you really get it.

[7:04] You hear that 10,000 hours of work before you become an expert. In Naval’s mind, and he’s one of the best out there, he said 30 or 40. You also have to have the stomach to be able to write checks, 30 or 40 meaningful checks.

[7:19] He was right. Now I finally get it, or I hope I do. One of my early mistakes is that I probably said yes more than I should have upfront. I also looked at a lot of these deals where, “Wow, I know exactly what I would do with this company.”

[7:36] The reality is I’m not the CEO. I’ve got a bet on a team and a good founding group to actually execute on the idea because I’m not going to be there day to day. I can help advise, but I’ve got to rely on them.

[7:51] That was an early mistake. Now, I’m still doing probably one deal per month. On average I’d say I see a new company every day, so let’s call it 20 companies. That means I’m doing 1 out of 20 a month, so about five percent.

[8:05] By the way, a VC friend of mine I was talking to the other day, he said he saw about 700 companies last year. That’s about three per working day. He did two investments. That’s far less than one percent when the VC can actually make the investment. As an angel, I’m at about five percent.

[8:26] It is a high bar. I’m trying to have that bar rise and rise as I do more investments and have less time to be able to spend with every individual company.

Tyler: [8:36] When you were first getting started, did you set aside a certain am amount of money, did you set aside a plan? Was it ad hoc, or did you come into this with a very strict set of principles you wanted to adhere to?

Rick: [8:48] When I first started, I didn’t have the full plan. When Naval had said that to me about expecting to do 30 or 40 deals, my typical check size as an angel — not having a fund, just as an angel — is about 25K.

[9:03] If you’re going to do 30 or 40 that does start to really add up. When Naval said that to me I did make the commitment to say, “OK, well, then I’ll put that much of my personal capital to work because I really enjoy angel investing.” I believe that I can get a good return on that money. I don’t do it just for fun.

[9:22] I love doing it, but obviously you’re doing these to have a return. I did make the commitment to say I’m going to put that money towards angel investing and I’m going to go for it.

Tyler: [9:33] One of the things that I think is different today than 2008, or even 2012 when I started investing, is that you have a lot of opportunities with things like AngelList syndicates or other online vehicles where you can make much smaller investments. Maybe your initial check size doesn’t have to be 25K.

[9:52] Can you walk me through at least how you see the landscape today? What are the different options for somebody who wants to get started?

Rick: [9:59] The landscape definitely has changed from when I first started. Again, that was only seven or eight years ago. The biggest reason for that change actually is probably AngelList where I’ve got one of the bigger syndicates on AngelList. I’m a huge, huge fan of the platform.

[10:17] It really is starting to democratize the way angels can invest, as well as, with a syndicate model, people who are not active angels can back people like me, that have access to great deals, that hopefully have some experience and some good judgment along the way.

[10:36] That’s allowing a lot of companies to be able to raise seed money though angels, and the syndicates allow angels to write much bigger checks. For me, my syndicate has almost a million dollars behind it. I can start to write million-dollar checks, not just a 25K check, which really changes the way that seed investing can be done.

[10:57] In a lot of ways, seed investors have now taken over where Series A investors used to invest and everything is kind of got pushed back one step. With AngelList and…

[11:08] [crosstalk]

Tyler: [11:10] Say a little bit more about that. The point of Series A being pushed back, what do you mean by that?

Rick: [11:14] What I mean by that is Series A investing 10 years ago used to be more of a check size of two to five million. Now, with Series A can be anywhere can be anywhere from 5 to 15 million. A normal series A is probably around 10 million and that used to be a Series B. What’s happened is that now that angels can write bigger checks and AngelList is a big part of that.

[11:39] We can start to write that two million dollar check. One of the problems is evaluations have increased with that bigger check size for angels. But everything has gotten pushed back one step.

[11:51] When people talk about a Series A crunch, what’s happened is that the seed investors have taken in more of that risk — that early, early stage risks — which means the Series A guys can increase their bar to a higher level.

[12:05] You’ve got to show more traction, you’ve got to have more users, you’ve got to have some sales or whatever the milestones are because the C guys have pushed out that higher bar of risk to the Series A.

Tyler: [12:19] Sorry, I interrupted a little bit when you were talking about the different opportunities of where people can get started. It sounds like obviously there is now a professional — whether you want to call it seed B, C or micro seed or whatever else — seed investing class. There’s also now angels that are equipped with millions of dollars instead of thousands of dollars.

[12:41] There’s this class emerging of a new more professional early stage investor. There are also openings where your backers on AngelList.

[12:53] Talk to us a little bit about the folks that are backing you in this syndicate. Are these folks that are writing $25,000 checks or are they what used to be considered angels or are they some new category of investor?

Rick: [13:05] From my backers on AngelList, it’s everything from experienced guys like Naval Ravikant or Jason Calacanis or Scott and Cyan Banister, Josh Hannah who’s a VC, down to folks that want to invest 2,000 or 5,000, smaller amounts. These are typically entrepreneurs.

[13:25] They might be CEOs of other companies, they could be founders. They want to be able to have access to the deal flow that I have. For me, it creates great leverage to be able to write a bigger check and get a piece of that curry. It is kind of win-win, where I can write bigger checks for people who come from the industry who can hopefully be helpful to the founder.

[13:50] These people who are new angels and want to get involved, finally have a shot to get access to those deals that would be really hard to get if you went back in a syndicate. Because if you think about it, the best deals are often oversubscribed and those founders have the opportunity to bring in the best investors around the table.

[14:10] Which means if you are a new angel, if you’re someone who hasn’t done a lot of this, you’re not going to have access to those deals and of course, we all want the best deals. A syndicate gives you the opportunity to get in those deals when it would be typically shot out for you.

Tyler: [14:28] As somebody who wants to become an angel investor perhaps, somebody who hasn’t done a deal yet, syndicates might be a good way for them to observe other people’s thinking thought process.

[14:38] Might be a good way for them to put a little bit of money at risk and start to learn the lessons the hard way, get the 10,000 hours or their 30 and 40 investments under their belt. As they start wanting to go to direct angel investments, what would your advice be to get them into that deal full?

Rick: [14:57] I definitely think a good way to start again would be either becoming an adviser and showing that you can add real value or investing in a syndicate. Investing at a syndicate is going to be really passive because you’re just saying, “Hey, I pledged that I want…I’m going to put $5,000 or X dollars into every deal.”

[15:15] If you want to start to go direct, you have to show some value. I said, “Your reputation is your currency at Silicon Valley.” The people who are the most active angels it’s not because they can write a big check because there’s plenty of money flashing around. These angels get the best deal flow because they add real value.

[15:37] I would hope that you could call any of my 45 companies I’ve invested in and they’ll tell you, “Anytime we call Rick, he picks up the phone. He’ll help us with partnerships, with introductions, with recruiting, with strategic advice.” Being a real adviser to us. You’ve got to earn your way there.

[15:55] I feel like you just don’t get to write big checks for Uber without adding a lot of value along the way. You’re going to start out adding value in probably smaller companies that aren’t the hottest deal in Silicon Valley, and you work your way up.

[16:10] To me, I like the phrase, “The only time success comes before work is in the dictionary.” You got to work at these things to get the best deal flow and part of that for me has been being an entrepreneur for 15 or 16 years and having the lessons to apply.

[16:26] Part of it has been spending a lot of time with these companies to be helpful. Then you hope that the founders appreciate that and will tell other people that if I’m trying to get in a deal, I’d say, “Hey, call any of my guys and they’ll tell you I might put 25K in, but I strive to add 10X of value of that.” It’s something that you can’t just say, you got to do.

Tyler: [16:46] Let’s take a look at one of the deals you’ve done recently. Is there a deal that you’ve done over the last year or two that you could walk us through in-depth the thought process of how you met them, how you made a decision, how you ultimately wrote the check and maybe even what you’ve done since then?

Rick: [17:00] Yeah, sure. Let’s talk about Luxe originally called Luxe Valet, now just Luxe. Luxe is a really interesting company, they’re growing quickly. They started here in San Francisco and now they’re in seven or eight different cities across the US.

[17:14] Luxe is an on-demand parking service some people call it like Uber for parking where it’s a GPS enabled so everyone has a cell phone. They’ve got valets running around on their skateboards or scooters around the city.

[17:28] You just hit a button and you say, “Hey, I’m going to be here in like 5 or 10 minutes.” You could be driving to work or driving to a restaurant and one of their valets is boom, right there waiting for you. You’ve got a picture of them. They’ve got their Luxe key on and so you know, “OK. I can hand my keys over.” They park your car for you.

[17:45] The way that I met Luxe is a friend of mine named Justin Caldbeck who used to be over at Lightspeed and now he’s over at Binary Capital where I’m an LP.

[17:55] Justin called me and said, “Listen, we love this deal but it’s just too small. They’re only going to raise 500K and Lightspeed typically writes bigger checks. But hey, Rick, I think you could be really helpful for these guys given your background. So would you like to meet with Curtis?”

[18:08] We met with Curtis, the CEO over there and his team. Curtis and his team all came from Zynga and met with him. They checked off the boxes that are important to me and were looking at a deal.

[18:19] Number one is always going to be team. The team has to be an amazing team of founders that are going after a big idea. They can actually execute on the idea, because in Silicon Valley, ideas are easy, it’s all about execution.

[18:33] I believe that they had a great team, they’re really smart, they were numbers driven. The idea is huge. The idea has to have what we call a big TAM. TAM is Total Addressable Market.

[18:44] Parking is a huge market and if you look at what Uber did for transportation. A lot of people do drive into work or drive to a restaurant. They’re not always going to take an Uber especially, if they don’t live in the city. I saw a huge TAM. I love the idea. I love the TAM, the timing of it seemed right, the market needed to be disrupted.

[19:04] You’ve got companies that could fall into two categories, vitamin or painkiller. Vitamins make something that’s already existing a little bit better. That’s great. A painkiller is one like Uber. Like being in the back of a cab sucks. It’s smelly. The guy’s got the windows down. He’s playing some radio station you don’t like. You have to call and wait 30 minutes for them to pick you up. That’s a pain. Uber changed all of that.

[19:30] The first time you use Luxe, it’s like that first time on Uber where it’s magic. You press a button on your phone and this person just automatically shows up. It was just as, “Wow! This is awesome.”

[19:41] Again, the reason I got introduced to Luxe is because I’ve been friends with Justin for 10 years and built a great relationship with him. I’ve got a reputation of being helpful to entrepreneurs and Justin recognized that.

[19:54] As soon as I met with Curtis, maybe 30 minutes into the meeting, I was like, “Stop, I get it and I want to invest. Not only do I want to invest my typical 25K, I love it so much, I want to take this to AngelList and I want to do a 500K syndicate,” which I did. He let me do that.

[20:10] I also introduced him to Naval and some other people. When there’s a Series A at Luxe, I introduced him to my friend Ryan Sarver over at Redpoint. Redpoint was an investor in BranchOut. I knew them well.

[20:20] Ryan ended up leading that deal. I did another 500K syndicate. I’ve got well over a million dollars total invested into Luxe. It’s just a great business. A great story in how I got introduced from a VC and I brought it to another VC and did a syndicate on AngelList. I’m a big believer in what they’re doing.

Tyler: [20:39] You’re a consumer Internet expert at this point. You’ve seen hundreds, if not, thousands of products. You’ve evaluated them. I get why you felt that you could assess whether the pain was accurately solved with Luxe.

[20:52] Certainly, it’s a big idea. Lots of people park cars. Talk more about how you actually evaluated the team. What made you go, “This is the guy that I think is going to solve that problem.”

Rick: [21:01] You can often tell these things in the first 5 or 10 minutes of meeting a team whether or not you really believe in them. That’s probably true for most people you meet on the street as well.

[21:13] They were really numbers-driven, data-driven. A lot of that came from their training and years at Zynga. I really like that because in transportation, a lot of it is customer service. You got to keep them happy.

[21:24] In the backend, there’s a lot of data crunching that’s going on to make sure you’re sending the drivers in the most efficient route. They had a really good sense for all of that and the data science that goes on in the background. I really like that.

[21:39] Curtis just seem like someone who was capable, intelligent, greedy. The things that I like to hire for in my companies, he had all of those things. I just really connected with him. I felt like this is the guy that I can back.

Tyler: [21:54] You invested twice. You invested in the seed round and the Series A rounds. Do you follow on in most of your investments or some, or was that a rare event?

Rick: [22:02] As an angel investor, typically you don’t have what’s called pro rata or the ability to follow on your initial investment because you’re not what’s called a major shareholder.

[22:11] For Luxe, because I invested 500K through the syndicate, that counts as one investment and put me in the category of a major investor. That allowed me to have what’s called pro rata rights which means you can invest in the next round, your pro rata.

[22:27] Because of that, which is really important as an angel investor to be able to get that, I continue to invest in Luxe in future rounds. If you think about the long-term ability to make money, the pro rata, especially for VCs, is really important.

[22:42] If you did Uber in the first round, that’s great, but you want to do it every round because then you can maintain that same percentage ownership. That’s a really big deal. The syndicate allowed me to do that for Luxe.

Tyler: [22:54] You just mentioned you don’t have pro rata in most deals because it’s not common. There is a common clause that keeps minority investors from having pro rata.

Rick: [23:03] That’s right because it would be really tough for the entrepreneur to manage the pro rata for potentially dozens and dozens of small investors. That would be herding a lot of cats.

[23:16] Typically, the lawyers like it just to be a major investor and then they just have to track down a handful of investors to ensure that they had the ability. They don’t have to exercise that, but had the ability to invest in the next round.

Tyler: [23:29] In the deals that you’ve done, have you pushed for getting pro rata? It sounds like even if you only invested 25K, if the company is doing well, you want to keep participating. How do you ensure that you still have access in later rounds?

Rick: [23:43] It’s really hard to push for that upfront because if they offered it to me upfront, then legally they might have to offer it to everyone. The way to actually get it, if you’re just investing a small amount and you’re under that threshold, is to just add a ton of value along the way.

[24:01] If you’re adding a lot of value, you could go back to the entrepreneur in the Series A or the Series B or whatever subsequent round and say, “Hey, I love what you’re doing. I’ve added a ton of value here. I hope you believe I have. I really want to continue to invest. Could you carve out X dollars for me to invest in this round?”

[24:20] That’s basically acting like a pro rata without having to trigger any legal restrictions whether I could or couldn’t. That would be the entrepreneur saying, “Hey, you know what Series B investor? Rick’s adding a ton of value. He wants to write another check. Let’s bring him in.”

[24:39] Entrepreneurs, when they’re racing around and having a motivated VC, they actually have more power than they think. They can go back to the investor and say that them. Hopefully, the investor may know me by reputation or personally to be able to be like, “You know what? I believe Rick is going to add value. If he wants to put more money in, let’s go for it.”

Tyler: [24:56] Again, you put 500 plus K in the seed rounds, another 500K in the A. How did you evaluate whether they made enough progress? How did you make that decision to write the second check?

Rick: [25:08] Early stage, the milestones are a bit tougher that there are less to find. A lot of it was about just traction. Let’s look at how many customers do we have? What’s the retention rate? What’s the revenue?

[25:25] In Luxe, it might have been easier than some other companies that don’t have the revenue metrics. A lot of social companies don’t have that at that stage. With Luxe, it was easier to be able to look at that. User growth, user retention, revenue, how many cities are we opening in.

[25:44] Like Uber, once you know the playbook, you just got to go fast. That’s what Luxe is doing now and opening in other cities.

[25:50] We did have some decent metrics to dig into. They’re all up into the right, looking good. The market started to get crowded as well, but we felt that Luxe was the best positioned to take the market. I was excited to participate in that next round.

Tyler: [26:09] You mentioned that you’re an LP in a couple of different funds, maybe even more than two. Why be an LP? It feels like you’re playing in lots of different parts of the ecosystem. You’re an LP. You’re a direct investor. You’re a syndicate lead. You’re an adviser or founder. Why be an LP? What do you get out of that?

Rick: [26:27] I’m an LP in a couple. Accel, Binary, Rothenberg Ventures, Maven Ventures. I also back some people in AngelList like Naval and others.

[26:37] What it does? A couple of things. One, Accel had led my Series A for BranchOut. They’re obviously a top, top firm. To be able to invest in Accel is great and the returns have been good.

[26:50] Some of the smaller firms, the way I look at it is my friends are running these firms and I want to support them. B, still really important, is deal flow. They’re seeing tons of deals.

[27:02] I might be a small investor in these funds. My little tiny slice of that equity in any of these companies may not be a big difference for me. If they know that I could really help these companies and do a direct investment, I get all that additional deal flow.

[27:19] I could double dip in these companies. I’ve almost got all these people looking out for me out there because I’ve invested in their funds. When they see a company that I’d be perfect for, they call me and say, “Hey, even though you’ve got a small slice of this, do you want to make a direct investment?” I’ve done that several times.

Tyler: [27:37] This is actually a little understood tactic that is very commonly deployed. There are lots of people that are both direct investors as well as backing funds. I was actually shocked. I talked to a guy who’s a professional investor two or three weeks. He’s an LP in over 50 funds. It was all that. It was all deal flow and getting a better feel for the ecosystem.

Rick: [27:59] 50 is a lot. I’m probably in eight and that actually feels like enough.

[28:05] The other thing is you establish these great relationships with these ventures capitals that run these funds. Some of them are small funds and I send deals their way.

[28:15] The other thing I should say about deal flow is that as a seed investor, part of my job is not only to get good deal flow and have, hopefully, good judgment on who the winners will be. I also have to think about the Series A investor.

[28:28] That’s one of the biggest learnings I had from my early days of investing where I could look at a company and say, “Oh, absolutely. I could see…No-brainer, they will sell for 50 to 100 million dollars. No-brainer.” I sold my first company for 100 and it changed my life.

[28:41] Now, what I’ve realized after having a couple of those that I had mentioned before where it’s like two or three X, that’s a lot better than most people get in the market but still isn’t like the big evaluation. What I realized is if I only see a $50 million exit or $100 million exit, if the Series A investor only sees that, they’re actually going to pass. They all want to find the billion dollar companies.

[29:04] That was an important learning for me which is I want to find these great entrepreneurs, but I also want to find great entrepreneurs that have big ideas that could attract a Series A and Series B investment. That’s something that now is part of my calculus that I go through in doing a seed investment.

Tyler: [29:25] What are some of the other things that are part of that calculus? You mentioned team. You mentioned big idea for this exact reason. You mentioned solves a unique consumer pain. What are some of other things you’re looking for in a deal?

Rick: [29:39] Again, it always starts with team because even a great team has the ability to pivot. It’s funny. You think about all these overnight successes like Twitter. They were originally Odeo. Instagram, they were originally Burbn.

[29:52] There’s countless stories of teams that had to pivot their way into a huge success. You always want to follow a great team that can execute because it is hard. The idea obviously is important. The TAM is important.

[30:05] I also think about the timing. Why is this the right time? If you look at Uber coming out in 2010, the reason why Uber finally could work is that cell phones were ubiquitous. Everybody had a GPS-enabled device in their pocket for the first time. You could find out where everybody is and where the driver is, and actually be able to map that. Timing is important.

[30:26] Also, when I look at team, I look at what is your unique advantage. Do you have IP? Do you have specific experience? What is it that is going to allow you to beat everyone else?

[30:37] What I say to entrepreneurs often is, “OK. You pitch me your idea, interesting idea, but let’s say there’s five other teams in Silicon Valley already doing the same thing you are. How are you going to beat them? Why are you better than those other five?”

[30:52] If you just say, “Well, I’m going to work harder,” that’s not enough. I want to know, “Hey, I’ve been doing this 15 years. I’ve got patents in this.”

[30:58] XYZ, prove to me why you’re going to be the winner because it’s a good exercise for the entrepreneur as well to think, “If five other people are doing this, how would I win?” I want to hear that passion and that ability to execute before I’m going to make the investment decision.

Tyler: [31:17] How do you think about splitting your investments between safe and speculative? You’ve got some LP investments. You got a lot of direct investments that are very risky. I assume you’ve got some other things that are more standard, less risky parts of your portfolio. How do you personally allocate resources?

Rick: [31:36] All angel investing is speculative. It’s all high risk. For most people, you should not have more than five percent of your total portfolio in angel investments. If you’re really, really good and you do this quite a bit and you’ve got direct deal flow, maybe that bumps up to 10 percent, but stuff is high risk.

[31:57] You’ve got to balance your portfolio that way, where maybe 90 percent is just stock and bonds, and typical investing, and the other 5, up to 10 percent is in angel investments.

[32:10] Then, I would be looking for things that are kind of binary, that are highly speculative, meaning this is either going to be a zero, and there’s going to be a lot of zeroes in angel investing, or it is going to be the next Uber.

[32:20] It doesn’t mean — I like to play poker — that you play two-seven, which is the worst starting hand in poker, all the time, because you could hit a flop with three sevens. That’s not what I’m saying. I’m saying, you’re not doing angel investing to get two or three times your money. You’re doing it to find the next Uber.

[32:38] You’ve got to look for big disruptive companies, ideas, because, as I was talking to…again, I’ll bring up Naval Ravikant, who is a great angel investor. He was talking about his returns. He was an original investor in Uber. He said, if he adds up all his other 100 or so investments, Uber is still bigger than all those put together.

[33:02] If he looks at his number two investment, that’s still bigger than the other 97 or 98 put together. You’re looking for outsized returns, which means it’s got to be high-risk, highly speculative. For a lot of these, if you’re looking, “Hey, I could get two or three X,” that’s not going to be interesting for an angel investor.

[33:22] You want to find the next Uber. You’re looking for high-risk, high speculative, and understand that a bunch of those will be zeroes. If you get lucky, and you hit a big one, then it makes up for all the zeroes, 10x over.

Tyler: [33:34] As an entrepreneur…let’s flip to the other side of the table really quickly. When you were raising money for BranchOut, which raised $49 million, I think, if I’m not mistaken, how did you think about raising your first round of capital? Who did you approach? What were you looking for in the angels you talked to?

[33:49] How did people differentiate themselves, in what was a very competitive round?

Rick: [33:55] If you look back, in 2010, when we did the Series A for BranchOut, wow, we had some really, really good people involved. Accel led the Series A, and Kevin Efrusy was on my board, from Accel. Kevin was the first venture capital investor in Facebook. Peter Thiel was probably the first big angel investor, but Kevin led the Series A.

[34:18] That might be the best all-time venture capital investment. He put money into Facebook, I believe at a 90 pre, put $10 million in, so, incredible investment. Our relationship with Facebook, obviously, was very important to us, so having Kevin on my board was important, and having Accel, a top firm, was great.

[34:40] I also had Tim Chang, from Norwest, when Tim was at Norwest. Tim is a good friend, and someone that I really trust. I had Mike Maples from Floodgate, and I had about a dozen angels. Those angels include…they’re all my friends, but they’re guys that…I’ll go through some of these, and why I chose them.

[34:56] James Currier and Stan Chudnovsky, who I ran Tickle with. Michael Birch, who also worked for us at Tickle, and then did Bebo. Shawn Fanning, who is a founder of Napster, and is a great media guy. Chris Michel, who had run a couple companies sold to Monster.

[35:10] Josh Elman, who’s now over at Greylock, but back then he had bounced around between Facebook and Twitter, great entrepreneur. A guy named Matt Ocko, who is one of the smartest guys in Silicon Valley, and he runs Data Collective. I had Naval in there. Ben Ling, who was at Google.

[35:28] Dave Morin, who had the background from Facebook, and then Path. Othman Laraki, who was at Twitter. Matt Mullenweg at Automattic. If you start to look at that, I’ve got people now, who are backers, who are at companies like Twitter, like Facebook, like Google, Automattic, great, great companies.

[35:50] I felt like, anytime I need some help with any of those companies, I had someone backing me that could be helpful. That was part of the reason to bring in that group of angels, and alongside some really good Series A investors.

Tyler: [36:05] A star-studded lineup, with guys like Stan and James, you knew them well, and they also had known a ton about growth. You’ve got guys who are providing some level of partnership value. They can vouch for you, if you need to get something done at Facebook or Google.

[36:19] Was anybody, in that group, somebody that was unknown to you beforehand, or had they all developed relationships with you, before getting involved?

Rick: [36:27] I knew all of them, expect for Othman Laraki. Othman came in through Naval. Naval said, “Hey, this guy, he’s great. He’s over at Twitter. A high level guy over at Twitter. I want you to meet him.” I met Othman, and we just clicked immediately. By the way, he’s a very active angel, today.

[36:45] We really clicked, and I was very happy to bring him on.

Tyler: [36:51] When you’re an entrepreneur, when you’re in that seat, what you’re looking for from angels, are the ability to do leveraged help? Perhaps partnerships, or advocating with a big partner, the ability to have insight on some strategic area of the business. Is there anything else that I’m missing?

[37:05] What are the other things that you’d like to see an angel value at?

Rick: [37:10] Angels can act as your most important advisers. Bringing in a group of advisers is definitely important. When your angels are investing money, and hopefully they’re going to invest their time, as well, because inside the sausage factory is really, really ugly.

[37:30] There are absolutely going to be times when things don’t go great for your company. Every company — I can go through examples if you want — has gone through tough times. They don’t always say that, but they have.

[37:44] Having a group of trusted advisers, angels, that you can get into a room and shut the door, and just say, “Hey, I need some help, here. You’ve done this five times before. You’ve seen this movie 1,000 times. I know how it ends,” kind of thing. Sometimes you don’t feel like you can lay that all out to the board, in board meetings.

[38:05] You definitely can’t bring all that to your employees, because they’re not going to have the stomach to ride that crazy rollercoaster, to know all the things that are actually happening behind the scenes. You want to surround yourself with some great people that have experience, that can add a lot of value, and who are on your side.

[38:22] The investors are on your side, but they also have a fiduciary responsibility back to their LPs. The advisers and angels, that’s seen as more of a friendly relationship, entrepreneur friendly. I think having those guys around the table, it’s really important.

[38:39] What I tried to do, was to bring people who have different sets of skills, experiences, and access to companies, to be able to really broaden that for me. I did rely on these guys. It’s really important for an entrepreneur to do. You can’t do this all on your own.

[38:57] Look at Mark Zuckerberg, one of the best CEOs in Silicon Valley. Mark was smart enough to surround himself with people like Peter Thiel, and Marc Andreessen, and Sheryl Sandberg, and Don Graham, and many others, really smart people. He’s continuing learning from them.

[39:16] You want to rely on people like that, and when angel investors can be a big part of that, who you rely on, that’s wonderful for the entrepreneur, because they’re actually invested in the company.

Tyler: [39:27] You feel like the angel and entrepreneur relationship is friendlier and less formal, than the VC entrepreneur relationship?

Rick: [39:34] I do, and a lot of these often come from, either a prior relationship, or a trusted contact that made the introduction. Again, like when I met Othman through Naval, that was a trusted connection on both sides, for Othman, and for myself. A lot of angels come from a background of being an entrepreneur.

[39:56] “I’ve done this for 15 years. I know what you’re going through. I’ve had to hire hundreds of people and fire some people along the way. I’ve raised $58 million of capital in my career. I’ve done a lot of the things that they’re going to go through, so I feel your pain, and I want to help, because we’ve gone through the same kind of trials and tribulations, and you want to be helpful.”

[40:23] I think that’s what angels can offer, especially as former or current entrepreneurs.

Tyler: [40:28] Is it safe to say that, at least in your case, and feel free to speak whether this is more broadly true or not, that angels act as almost a support group for the founder? That it helps with founder psychology?

Rick: [40:41] Yeah, I think they do. I’d call it more an advisory group providing support, but they absolutely should. That’s what I try to do in my investments, or even as an adviser. I don’t want to just take shares and walk away. I want to be actively helping you. I put my name aside your company, and I want to help you grow this thing.

[41:03] I love when entrepreneurs call me at 10 o’clock at night, and absolutely, I pick up the phone and give them advice. Sometimes it’s a 5- or 10-minute phone call, and it’s just the question they needed. I had the answer for them, or I could make the introduction, and I’m happy to do that.

[41:18] This really goes back to what we talked about earlier, which is being a value-add angel, and being willing to take those calls, and to make those introductions. It’s really important, and it’s not just about putting money in, because my little $25K check is not what’s meaningful, in a $2 million, or 5 or 10 million dollar round. It’s all the other things that you can do to support the entrepreneur.

[41:42] For people who don’t come from that background of being an entrepreneur, this is why, maybe, angel syndicates are the right way to get into investing, because you can get access to these deals, but if you don’t have a value add, it’s going to be really hard to get great deal flow.

[41:57] Even that great deal flow has come, at least for me, through years, and years, and years of angel investing, and adding value, and building up a track record.

Tyler: [42:07] One of the things that I’m kind of interested in, from a founder psychology perspective, I’d be curious to dig in and get an example or two from how you walk the balance. As a founder, it’s incredibly hard. It’s always a roller coaster, there’s ups, there’s massive downs.

[42:22] Every company experiences incredibly broken moments, and usually, even the really good ones are broken, still. They’ve managed to hide it from the press well. If you’re a CEO, you’ve lobbed back and forth between this point of being incredibly fearful, and stressed, and pained, when things are going wrong, and then having incredible elation when things are going right.

[42:43] As an angel investor, as somebody who’s part of that support system, how do you provide, whether it’s guidance, or feedback, or support to an entrepreneur who is going through that challenge? How do you motivate them to keep driving for the big outcome, but also not force them to pretend to be happy when things are going wrong?

Rick: [43:02] That’s a great question, and probably a long answer to it. It’s really important for entrepreneurs to hear, as well as angels to understand, that it is a roller coaster. Entrepreneurs, they need to be supported. There’s been a lot of articles written in the last year or two, about how lonely it is for entrepreneurs, about how depressing it is.

[43:25] You’re taking all of that pressure. Everyone is saying they’re crushing it, they’re killing it, we’re doing great. I think that they want to believe that they are, even if they’re not. As an entrepreneur, your reputation is so tied to your company. You’re putting everything into it. You’re working 60, 70, 80 hours a week, probably seven days a week, and you’re putting everything into it.

[43:47] You want to crush it. You want to do it for you, and your friends, and your family, and especially for your employees and your investors. You want to believe that you are crushing it, but the reality is you’re not always going to be crushing it. You just brought up some companies, even great companies.

[44:02] Look, there are companies like Uber, right now, one of the best angel investments out there, is being blocked or sued all over the world. Airbnb is being blocked in many places, by the hotel folks. Facebook has been sued. LinkedIn has been sued. Twitter stock is down, and they finally have a CEO now.

[44:23] All these great companies have had all sorts of issues. If you think about that, what about the companies that don’t have that great reputation, or the financial resources. They’re not all killing it. The best advice, is just for the entrepreneurs to be more level-headed. You know you’re going to have some wins, celebrate those a little bit.

[44:44] You’re going to have some losses, don’t get too depressed, but also, learn from those. As a personal example, when BranchOut was at its peak, we were adding 500,000 new users every single day, with no marketing, all just viral on Facebook. Which is a lot of people. I remember, I was doing a lot of press, and I was on TV all the time, national TV shows.

[45:05] My wife, who was my girlfriend at the time, she was never impressed. I was like, “I’m going to be on CNBC today,” and she was like, “Yeah, OK. Cool.” I was like, “Why aren’t you excited?” She was right in that, “Hey, this might be great now, but I don’t want you to get too down later, when you’re not always going to have this.”

[45:24] When some of that went away, and I didn’t have it, and I got depressed, she reminded me of that. She also said, “Nobody cares about your press as much as you do.” It always feels so much more personal and emotional to an entrepreneur that great, or that really crappy article in TechCrunch, and you kind of live and die by it, almost like an actor in Hollywood waiting for the review.

[45:46] The reality is, just work hard, have a good idea, build a good team, work hard, iterate, talk to customers, and just keep focused, and just keep doing that. Don’t worry too much about the press. Don’t worry about trying to tell everyone you’re killing it. Let the numbers talk, and just work hard at it. Get great people around you to help you along the way.

[46:10] Try to stay level-headed, because this stuff is hard. Both, as an entrepreneur and as an angel, because there’s going to be a lot of zeroes, think more long-term.

Tyler: [46:20] Let me put that to the test a little bit. You’re counseling to keep their head down, and work hard, and don’t worry too much about perception, or about selling the crushing it dream. How would you react to an entrepreneur that is brutally honest with you about some of the problems in their business, as they’re trying to raise a seed round?

Rick: [46:41] That rarely happens.

[46:43] [laughter]

Rick: [46:44] I don’t think I’ve ever had that happen. I’ll tell you, it depends on the entrepreneur. I say that, because if it is a first-time entrepreneur that doesn’t have a lot of experience, I’d expect that they would acknowledge what they don’t know, but I also would be nervous that they’re not going to be able to get there without a lot of help.

[47:09] These things, startups, have an 85 percent fail rate already, so that would make me nervous, and I’d have to really decide whether or not I’m going to dedicate enough time to help them, and get other people around the table to help them.

[47:21] If it’s a more experienced entrepreneur, someone who’s done this three times, and has a great track record, and they say, “Listen, I figured out 8 out of 10 things, but these last 2 are killing me, and I don’t know if I’m going to be able to do this company. I don’t know if it’s going to work if I can’t figure those two things out.”

[47:36] That’s a great conversation to have, actually, because if I believe the eight that he has are already good enough, and we’ll figure out the other two, great. If those two are going to be true roadblocks, and we’re never going to get over those hurdles, then it’s great to have that conversation now, because why would we want to waste anybody’s time?

[47:54] His or her time as the entrepreneur, my time as the investor, asking other people to quit their jobs and come join you. I think having that honest conversation is actually great, up front. It’s just a scary thing for, especially a young entrepreneur to have, because they’re probably going to get a lot of noes along the way, and very few people that would actually dedicate the time to help them get through the roadblocks.

Tyler: [48:21] Let’s say that today you were just starting for the first time. You have never written a check. Maybe you just had your first exit, you’re coming out of Uber at the lofty evaluation, and you’ve got a nice checking account, you wanted to start angel investing. What would be the first year?

[48:37] What you do over that first year, to be successful at it?

Rick: [48:42] If you’re a founder that’s had a lot of good experience and some advisory roles, then I think you can start to do some direct deals. I’ll answer this in two ways. The first, as someone who’s been an entrepreneur. It doesn’t have to be a founder, just an entrepreneur that can add value.

[48:57] The hope is that you’ve got some area of expertise. Maybe you’re a data scientist, or a growth hacker, or a product strategist, whatever it is. You start to try to help these companies. Again, I would probably start as more of an adviser, and try to squeeze into some deals.

[49:13] I would put smaller checks, maybe write a $5,000 check, not a $25,000 check to start, or $10,000, something smaller. Just expect that it’s going to be a zero. We all hope it’s going to be huge, but expect that.

[49:29] If you don’t have that level of experience or expertise, then I would probably just go on AngelList, and start to back people that you think are investing in companies that you feel are interesting, and start to track all of this in a spreadsheet, or your portfolio. Try to start to detect patterns. Why are these companies working?

[49:52] Try to learn from that. As you start to get some pattern recognition, and maybe even get involved a bit more with some of the companies, if you can actually add real value, then you can start to get down the path of doing direct investments. I will say that if you haven’t done direct investments before, it is going to be a bit harder until you establish a track record.

[50:14] By being an angel investor through a syndicate, you can start to say, “Look, I invested in Luxe Valet through Rick’s syndicate, but at least I had access to Rick’s syndicate, and I was smart enough to forward with the deal.” You start to build your own little portfolio based on the deal flow and judgment of other angels.

[50:33] When you asked me about my portfolio, I’ve got Snapchat, and Reddit, and AngelList, and Luxe, and some great companies in there. That is part of my calling card, I think. “What have you invested in?”

[50:47] I think that the bigger part is the help I can give, but I think if I had done a bunch of crappy investments, then the entrepreneur might be less interested in having me on board, but if you’ve done some great investments, then I think that opens some doors for you.

Tyler: [51:05] You see some of that. Without naming names, I think some very well-known investors that are, “I invested in this moonshot company,” and they don’t mention that it was the Series C round, or that it was a 5K check.

Rick: [51:21] A 5K in Uber, in the first round would be fine with me. [laughs] I hear you, but I would also say, even if it was in the Series C at a higher valuation, much higher than the seed, I still give that investor credit for being able to get in. I’ll keep you as an Uber. I’d gladly have gotten into the Series C for Uber.

[51:46] If you have access to it, and it continues to go up, it’s still a good investment. It’s not as good as the seed round valuation, but having access to these deals is really, kind of number one. If you were to say what makes a good angel investor, without deal flow, without access to deals, it doesn’t matter, because you can’t do any good investments, number one.

[52:04] Number two, once you have good deal flow, it’s about judgment. I’d say I probably do about five percent investments for what I see, and most of these sees are less than one, so you’ve got to have really, really good judgment, both in what you put money into, and also, being able to say no, even if you believe that this company has a shot.

[52:23] Sometimes you just have to say no, for various reasons, and I think you’ve got to be able to recognize both sides — when you’ve got something that’s not going to be the big winner, and when to go all-in on the best ones.

Tyler: [52:35] How do you say no? Do you have a template, or a speech that you give when you’re turning someone down?

Rick: [52:40] No, I wouldn’t say it’s a template. Although, I have to have that conversation often, so it probably starts to sound similar. What I try to do, is I try to be respectful and direct. I want to give them some feedback, because I’ve been in their shoes many times, raising money. Even though I was an experienced entrepreneur the second time around…not the first.

[53:01] The first time around we had 25 noes for Tickle, before we got Andrew Anchor and David Hornik to say yes, at August Capital. 25 noes. That is really depressing, it’s frustrating. I’ve been in their shoes, so I get it. I always wanted to be respectful, and also I want to provide value.

[53:18] I want to be able to say to them, “Hey, this is why I said no,” and give them the feedback. I want them to be able to change up their pitch to say, “If you change the pitch this way, I bet it’s going to be more impactful for a different investor.” I want to help them out that way, and hopefully that’s just good karma down the road.

Tyler: [53:41] What’s something that you’ve learned in the last year? You’ve been doing this for a long time. What’s the newest thing you’ve learned?

Rick: [53:47] I think that insight to…if the Series A guy can’t see a big exit, then I shouldn’t be doing the seed around. It’s kind of a bummer. A lot of these guys who are raising a seed, they all believe they could get to a big exit. If the reality is the Series A guy isn’t going to view it that way, then it’s hard to justify doing the seed round.

[54:13] That’s been an interesting learning for me, because I didn’t think of it that way when I first started investing. I was just like, “Well, there’s no way this isn’t going to be a $100 million outcome,” and that’s exiting. I’ve just had to look at part of my job, as I need to get these guys ready for the Series A.

[54:30] I need to help them get the traction, get the sales, hire the right team, and make the right introductions to a Series A investor. That’s part of my job, but also part of that is ensuring that these guys have a business that is a Series A fundable business.

Tyler: [54:46] Any big deals that you missed, you either saw and didn’t have the judgment to say yes to, or wish you had gotten access to but couldn’t get in early?

Rick: [54:57] I think on AngelList I should have done Shyp. Shyp is doing really well. It’s still early days, whether or not that’s going to be a big, big exit. I wish I had done Shyp. It’s a cool service. One of the reasons why I really started to become an active angel investor, are companies like Uber and Dropbox.

[55:17] With Dropbox, I’ve been friends with Drew for probably over a decade. We used to play poker together, and that’s one that I should have just said, “Hey, dude, take my money. I want in.” The company was tiny back then. It was probably 15 people. With Uber…it’s funny.

[55:34] Uber had their five-year anniversary recently and sent out emails to everyone, to show how many rides you’ve had over the period you’ve been a member. I showed my wife that I’ve been a member for 61 months, which is older than the company because I was their original beta user.

[55:49] Travis and Garret have been my friends for well over a decade. They just put some credits on my account and they said, “Just start using the service. Just give us the feedback. We want your help.”

[56:01] Back then just to be fair it was all black cars, and I was like, “You guys just want to be rock stars and black cars, and limos, and whatever, and I’m from New Hampshire. We don’t do that.” I screwed up that one, because I should have just backed my friends.

[56:12] As an example August Lock, which Jason Johnson runs, I might have been literally the first dollar in August. It’s not my typical investment as hardware, and it’s my only hardware investment. Jason’s my friend and I wanted to back him, and I believed in him, so I did it.

[56:28] I did it at a very low valuation, and I just raised a big round at a high valuation. I’m very glad that worked out. That was a lesson from Uber and from Dropbox which is, “Hey, I’ve got access to…my friends run great companies. I’m really lucky that way. I need to just back my friends. And if a couple of these work and I get a couple zeroes along the way, that’s OK.”

[56:49] That was the lesson then.

Tyler: [56:52] Anything that we haven’t covered today, I want to be respectful of your time here, that you think we should absolutely share with listeners?

Rick: [57:02] We covered it partially. Being an angel investor, it sounds really cool, it sounds sexy and all that stuff. Hollywood in particular has really glamorized Silicon Valley through the social network movie, and “Silicon Valley” the show on HBO, which is great.

[57:21] The reality is that it’s a high risk category, and most of these are zeroes. You’ve got to be able to take on that risk, and not do it just because you want to be an angel investor and that sounds cool. Do it because you want to help the companies. You want to put a small amount of money in, and add a lot more value along the way.

[57:43] That to me is a reason to become an angel investor. You’re working hard to help the entrepreneur, and to help your own return. That’s the reason why I do it, and I love it, and I’m willing to take the risks, is because I love the entrepreneur ecosystem.

[57:57] We’re very, very lucky in Silicon Valley to be able to find these great companies that are changing the world, and invest in them, and be part of them, and I love that. I also know that in order to do my part, I’ve got to continually add value, and network, and meet people, and all those things that have to be done.

[58:17] You have to work hard to put yourself in a position to be lucky. If you really want to be an active angel, you’ve got to make that decision to go for. The other way again would be syndicates, and that’s not a bad way to dip your toe in the water too.

Tyler: [58:32] You mentioned risk. Now it might be even thought of as a riskier time than normal, it’s a frothy environment. The word bubble keeps popping around. Is now a good time to get started, or would you recommend people hold off for a little while?

Rick: [58:47] Yeah. Valuations have come up a lot in the seed round. Seed rounds used to be priced more like three, four, five million dollar valuations. Now we’re seeing them 8, 9, 10 million, sometimes even higher. Anything over 10 in a seed round, just makes me nervous.

[59:04] Things are frothy right now. I’m not saying that we’re in a bubble. I don’t think we’re anywhere where we were back in 2000. The public market’s PE ratios are much more reasonable now. I do think that there’s a lot of money sloshing around in the seed, and I think that the Series A is at a much higher bar now.

[59:27] Is it the right time to invest? I would say no matter what time you invest, go slow. It should be a small portion of your portfolio. Go slow. Try to find companies that you believe are winners because you understand the market, you think that the angel investor really has a good feel for that type of company, and just go slow and learn.

[59:51] Don’t do too many upfront, because that was one of my mistakes. Now, I’m going in a much more tempered way. That would be my advice on taking on that risk.

Tyler: [60:03] Rick, thanks so much. If people want to learn more about you, what’s a good place to look you up?

Rick: [60:08] You can find me on AngelList. Just search Rick Marini. Please feel free to back my syndicate if you like what I’m investing in, also at Twitter @rmarini. You can find me there. Please follow me there, as I tend to tweet about entrepreneur and angel-related articles.

[60:27] If you are enjoying this podcast, please follow me in those two places, on AngelList and on Twitter.

Tyler: [60:34] Thanks so much for coming by.

Rick: [60:36] Thank you, Tyler.

Tyler: [60:36] Cheers.


Originally published at blog.angel.co on November 24, 2015.