Trends #0018 — Angel Investing

A Trends teardown of Angel Investing as a market: founders need early believers before traction exists, most investors wait for the traction, and angels are the ones who don’t. Problem/solution/players structure throughout.

Notes

• 🔎 Problem
• Founders need early believers, advice, networks and capital.
• Most investors wait on the sidelines until traction is clear.
• 💡 Solution
• Angel Investing: Angel investors are early believers. They invest in founders with billion dollar ideas and expect for most to fail.
• It’s counterintuitive. You can profitably lose 9 out of 10 bets if the winner returns 30x.
• 🏁 Players
• Angel Investors
  • • [Jason Calacanis](https://trends.us3.list-manage.com/track/click?u=5a0620ca3ebb8b31f0c94ed0d&id=378cb29b17&e=[subscriber-token removed]%22%20%5Ct%20%22_blank)
  • • [Adaora Udoji](https://trends.us3.list-manage.com/track/click?u=5a0620ca3ebb8b31f0c94ed0d&id=54eaa6e8b7&e=[subscriber-token removed]%22%20%5Ct%20%22_blank)
  • • [Allison Barr Allen](https://trends.us3.list-manage.com/track/click?u=5a0620ca3ebb8b31f0c94ed0d&id=3052dcbefe&e=[subscriber-token removed]%22%20%5Ct%20%22_blank)
  • • [Richard Felix](https://trends.us3.list-manage.com/track/click?u=5a0620ca3ebb8b31f0c94ed0d&id=a27d1a44f8&e=[subscriber-token removed]%22%20%5Ct%20%22_blank)
  • • [Minal Hasan](https://trends.us3.list-manage.com/track/click?u=5a0620ca3ebb8b31f0c94ed0d&id=230ad5f507&e=[subscriber-token removed]%22%20%5Ct%20%22_blank)
  • • [Jaren Glover](https://trends.us3.list-manage.com/track/click?u=5a0620ca3ebb8b31f0c94ed0d&id=9e3a35845e&e=[subscriber-token removed]%22%20%5Ct%20%22_blank)
  • • [Web Smith](https://trends.us3.list-manage.com/track/click?u=5a0620ca3ebb8b31f0c94ed0d&id=a924961267&e=[subscriber-token removed]%22%20%5Ct%20%22_blank)
  • • [Rodney Sampson](https://trends.us3.list-manage.com/track/click?u=5a0620ca3ebb8b31f0c94ed0d&id=35c0ecab85&e=[subscriber-token removed]%22%20%5Ct%20%22_blank)
  • • [Lenny Rachitsky](https://trends.us3.list-manage.com/track/click?u=5a0620ca3ebb8b31f0c94ed0d&id=6e046027ce&e=[subscriber-token removed]%22%20%5Ct%20%22_blank)
  • • [Nick Caldwell](https://trends.us3.list-manage.com/track/click?u=5a0620ca3ebb8b31f0c94ed0d&id=1ff3d3b415&e=[subscriber-token removed]%22%20%5Ct%20%22_blank)
• Angel-Funded
  • • [Haus](https://trends.us3.list-manage.com/track/click?u=5a0620ca3ebb8b31f0c94ed0d&id=a8b483cb47&e=[subscriber-token removed]%22%20%5Ct%20%22_blank)
  • • [Color](https://trends.us3.list-manage.com/track/click?u=5a0620ca3ebb8b31f0c94ed0d&id=082604f42f&e=[subscriber-token removed]%22%20%5Ct%20%22_blank)
  • • [Hipcamp](https://trends.us3.list-manage.com/track/click?u=5a0620ca3ebb8b31f0c94ed0d&id=7504b31bb0&e=[subscriber-token removed]%22%20%5Ct%20%22_blank)
  • • [Calendly](https://trends.us3.list-manage.com/track/click?u=5a0620ca3ebb8b31f0c94ed0d&id=f75e813430&e=[subscriber-token removed]%22%20%5Ct%20%22_blank)
  • • [Shyp](https://trends.us3.list-manage.com/track/click?u=5a0620ca3ebb8b31f0c94ed0d&id=32d073d2af&e=[subscriber-token removed]%22%20%5Ct%20%22_blank)
  • • [Calm](https://trends.us3.list-manage.com/track/click?u=5a0620ca3ebb8b31f0c94ed0d&id=9793ff7b2e&e=[subscriber-token removed]%22%20%5Ct%20%22_blank)
  • • [Caviar](https://trends.us3.list-manage.com/track/click?u=5a0620ca3ebb8b31f0c94ed0d&id=43c499d38e&e=[subscriber-token removed]%22%20%5Ct%20%22_blank)
  • • [Coinbase](https://trends.us3.list-manage.com/track/click?u=5a0620ca3ebb8b31f0c94ed0d&id=a78185174f&e=[subscriber-token removed]%22%20%5Ct%20%22_blank)
  • • [Superhuman](https://trends.us3.list-manage.com/track/click?u=5a0620ca3ebb8b31f0c94ed0d&id=11035ffc05&e=[subscriber-token removed]%22%20%5Ct%20%22_blank)
  • • [Snackpass](https://trends.us3.list-manage.com/track/click?u=5a0620ca3ebb8b31f0c94ed0d&id=c97029412a&e=[subscriber-token removed]%22%20%5Ct%20%22_blank)
• Syndicate Leads
  • • [Zach Coelius](https://trends.us3.list-manage.com/track/click?u=5a0620ca3ebb8b31f0c94ed0d&id=664262b3fb&e=[subscriber-token removed]%22%20%5Ct%20%22_blank)
  • • [Dr. Jenny Rooke](https://trends.us3.list-manage.com/track/click?u=5a0620ca3ebb8b31f0c94ed0d&id=40f53f079c&e=[subscriber-token removed]%22%20%5Ct%20%22_blank)
  • • [Elad Gil](https://trends.us3.list-manage.com/track/click?u=5a0620ca3ebb8b31f0c94ed0d&id=10471bb3a1&e=[subscriber-token removed]%22%20%5Ct%20%22_blank)
  • • [Tyler Willis](https://trends.us3.list-manage.com/track/click?u=5a0620ca3ebb8b31f0c94ed0d&id=0ff5938d4c&e=[subscriber-token removed]%22%20%5Ct%20%22_blank)
  • • [Brad Flora](https://trends.us3.list-manage.com/track/click?u=5a0620ca3ebb8b31f0c94ed0d&id=160c80e525&e=[subscriber-token removed]%22%20%5Ct%20%22_blank)
  • • [Dave Eisenberg](https://trends.us3.list-manage.com/track/click?u=5a0620ca3ebb8b31f0c94ed0d&id=69a5e9d171&e=[subscriber-token removed]%22%20%5Ct%20%22_blank)
  • • [Todd Goldberg](https://trends.us3.list-manage.com/track/click?u=5a0620ca3ebb8b31f0c94ed0d&id=91b9eebcd7&e=[subscriber-token removed]%22%20%5Ct%20%22_blank)
  • • [Tom Williams](https://trends.us3.list-manage.com/track/click?u=5a0620ca3ebb8b31f0c94ed0d&id=df531d179d&e=[subscriber-token removed]%22%20%5Ct%20%22_blank)
  • • [Kevin Laws](https://trends.us3.list-manage.com/track/click?u=5a0620ca3ebb8b31f0c94ed0d&id=2338401280&e=[subscriber-token removed]%22%20%5Ct%20%22_blank)
  • • [Sid Viswanathan](https://trends.us3.list-manage.com/track/click?u=5a0620ca3ebb8b31f0c94ed0d&id=8bec7c0cc9&e=[subscriber-token removed]%22%20%5Ct%20%22_blank)
• 🔮 Predictions
  • • More investors will expect founders to have a product ‘in the wild’ before investing. This signals resourcefulness. Especially for non-technical founders. [No-code](https://trends.us3.list-manage.com/track/click?u=5a0620ca3ebb8b31f0c94ed0d&id=6de20b4c0d&e=[subscriber-token removed]%22%20%5Ct%20%22_blank) tools lower the barrier to entry.
  • • More influencers will get paid in equity. Joe Rogan got a stake in Onnit in exchange for promotion. This [strategy](https://trends.us3.list-manage.com/track/click?u=5a0620ca3ebb8b31f0c94ed0d&id=80a43a160a&e=[subscriber-token removed]) aligns long-term interests with influencers.
• ☁️ Opportunities
• For Angel Investors
  • • Build a personal brand for proprietary deal flow. Make it clear how you help founders: expertise, network, audience, etc.
  • • Start a blog, podcast, newsletter and stay active on Twitter. Widen your [luck surface area](https://trends.us3.list-manage.com/track/click?u=5a0620ca3ebb8b31f0c94ed0d&id=06c1e95dd3&e=[subscriber-token removed]%22%20%5Ct%20%22_blank) and stay top of mind for founders.
  • • Keep an investment decision journal. Angel investing has slow feedback loops. This gives us time to [fool ourselves](https://trends.us3.list-manage.com/track/click?u=5a0620ca3ebb8b31f0c94ed0d&id=bed3d8cbd6&e=[subscriber-token removed]%22%20%5Ct%20%22_blank) about why we did or didn’t invest. Journals lock thoughts in time and keep us honest.
  • • Avoid the [risk of ruin](https://trends.us3.list-manage.com/track/click?u=5a0620ca3ebb8b31f0c94ed0d&id=675e3b9739&e=[subscriber-token removed]%22%20%5Ct%20%22_blank). Most suggest limiting angel investments to 5-10% of your net worth. Naval Ravikant [says](https://trends.us3.list-manage.com/track/click?u=5a0620ca3ebb8b31f0c94ed0d&id=fa8a9918ca&e=[subscriber-token removed]%22%20%5Ct%20%22_blank) don’t get into angel investing to make money because you probably won’t.
  • • Do investment [premortems](https://trends.us3.list-manage.com/track/click?u=5a0620ca3ebb8b31f0c94ed0d&id=14ac2d9af3&e=[subscriber-token removed]%22%20%5Ct%20%22_blank). Ask yourself, “If this investment fails, why did it?” Negative visualization helps mitigate/identify the riskiest parts of a deal. (Thanks to [Leon Lin](https://trends.us3.list-manage.com/track/click?u=5a0620ca3ebb8b31f0c94ed0d&id=8d9877fdca&e=[subscriber-token removed]%22%20%5Ct%20%22_blank) for this link)
  • • Write** fantasy **investment deal memos before you start investing. This is how Vedika Jain [landed at](https://trends.us3.list-manage.com/track/click?u=5a0620ca3ebb8b31f0c94ed0d&id=1040651c52&e=[subscriber-token removed]%22%20%5Ct%20%22_blank) Weekend Fund. VCs [do this](https://trends.us3.list-manage.com/track/click?u=5a0620ca3ebb8b31f0c94ed0d&id=c7f91e25dd&e=[subscriber-token removed]%22%20%5Ct%20%22_blank) too.
• For Founders
  • • Take [some money](https://trends.us3.list-manage.com/track/click?u=5a0620ca3ebb8b31f0c94ed0d&id=4b2f6c97fe&e=[subscriber-token removed]%22%20%5Ct%20%22_blank) off the table and join a syndicate. Angel investors hedge risk but most founders don’t.
  • • Keep a [decision journal](https://trends.us3.list-manage.com/track/click?u=5a0620ca3ebb8b31f0c94ed0d&id=6f34554574&e=[subscriber-token removed]%22%20%5Ct%20%22_blank). This helps you find patterns, identify bias and improve your decisions.
  • • Build an audience first. Leverage your reach to build a startup and raise capital.
• 😠 Haters
• “How dare you write this?! Are you an angel investor?”
• Not yet. And that almost stopped me. But I have a [growth mindset](https://trends.us3.list-manage.com/track/click?u=5a0620ca3ebb8b31f0c94ed0d&id=07f4df2ecd&e=[subscriber-token removed]%22%20%5Ct%20%22_blank). You should try it.
• “You forgot some angels.”
• AngelList has more than 42,000 investors on the platform. The Center for Venture Research estimated that there were 258,000 active angel investors in 2017.
• Trends.vc is known for brevity.
• Furthermore, some venture capitalists are mistaken for angel investors. What’s the difference? VCs take less risk, have [LPs](https://trends.us3.list-manage.com/track/click?u=5a0620ca3ebb8b31f0c94ed0d&id=3fe0e00d66&e=[subscriber-token removed]%22%20%5Ct%20%22_blank), invest bigger checks at later stages and move with teams instead of solo or syndicates. [Let me know](https://trends.us3.list-manage.com/track/click?u=5a0620ca3ebb8b31f0c94ed0d&id=7a6011ec90&e=[subscriber-token removed]%22%20%5Ct%20%22_blank) if you’re interested in a report on VCs.
• 🔗 Links
  • __1. __[Angel: How to Invest in Technology Startups](https://trends.us3.list-manage.com/track/click?u=5a0620ca3ebb8b31f0c94ed0d&id=243a4b14c9&e=[subscriber-token removed]%22%20%5Ct%20%22_blank) (Jason Calacanis)
    • o Invest in founders. “Would you buy stock in this person?”
    • o Start with syndicates and small checks.
    • o Negotiate pro rata and information rights.
    • 2. [How to Be an Angel Investor](https://trends.us3.list-manage.com/track/click?u=5a0620ca3ebb8b31f0c94ed0d&id=dc998b493f&e=[subscriber-token removed]%22%20%5Ct%20%22_blank) (Paul Graham)
    • o Start with syndicates.
    • o Understand dilution and valuations.
    • o Understand what makes a good founder.
    • 3. [How to Be an Angel Investor ](https://trends.us3.list-manage.com/track/click?u=5a0620ca3ebb8b31f0c94ed0d&id=e29dd8065d&e=[subscriber-token removed]%22%20%5Ct%20%22_blank)(Naval Ravikant and Babak Nivi)
    • o Think of yourself as a patron of innovation.
    • o Balance your portfolio with ultra-safe investments.
    • o Investing in groups makes for better decision making.
    • 4. [Memo](https://trends.us3.list-manage.com/track/click?u=5a0620ca3ebb8b31f0c94ed0d&id=79e287c698&e=[subscriber-token removed]%22%20%5Ct%20%22_blank) — [YC](https://trends.us3.list-manage.com/track/click?u=5a0620ca3ebb8b31f0c94ed0d&id=3357d4cc8d&e=[subscriber-token removed]%22%20%5Ct%20%22_blank) provides great questions to ask yourself as a founder.
    • 5. [The Underrated Types of Capital That No One Is Talking About ](https://trends.us3.list-manage.com/track/click?u=5a0620ca3ebb8b31f0c94ed0d&id=9ac5aed42e&e=[subscriber-token removed]%22%20%5Ct%20%22_blank)— [KP](https://trends.us3.list-manage.com/track/click?u=5a0620ca3ebb8b31f0c94ed0d&id=e28ffacdfd&e=[subscriber-token removed]%22%20%5Ct%20%22_blank) looks at intangible benefits that angel investors offer founders. Beyond financial capital. They offer belief capital.