-Nosense of portfolio construction.
-Noframework to tell the good deals from the bad.
Don'tmake my mistakes.
Hereare my top 8 tips and resources for investing in tech startups.
Builda thesis for what you want to invest in.
Alignthe thesis with what you know well. For me that's B2B SaaS and B2BMarketplaces. Don't waste any time looking for anything that doesn't fit inthat box.
Youcan always branch out later.
Findat least 10 deals that match your thesis.
Reviewthem in detail. Where do they fit against industry benchmarks?
There'slots of resources out there for this, but I like this one from InitializedCapital.
Doit before you tell the founder you want to invest.
Writingdown your investment rationale is critical to clarifying your thinking. It alsogives you a record you can reflect on in 2, 5, or 10 years time to determinehow solid your thinking was. This is crucial as it takes years to see how yourinitial thesis plays out.
Dealmemo's are a must-do.
I dothis for three reasons:
Itensures I haven't missed anything
Itshows that I'm serious about the opportunity
Itoften times helps improve and/or reinforce the Founder's pitch
Youlook at deals every day. You know the items that are well positioned andattract you to a deal, and those that turn you off. When you can pitch theFounder's idea back to them BETTER than they pitched it themselves, you standout as an investor as someone who can add value.
Iwent too big on my early deals.
Don'tbe me. Instead, shoot for 20 investments over a 4 year period (or 5 deals /yr). If you have $10k/yr to invest, that's a budget of $2k per deal.
If$2k is your MAX budget, stick to it.
Ifyou're an unknown Angel Investor, it's unlikely Founders will get excited overa $2k check. You need to sell yourself onto the cap table. If you focused onyour thesis and picked businesses you know extremely well, and wrote a kick-assdeal memo that proves you understand the opportunity space, you're ahead of 90%of Angels out there. Your knowledge is an asset. As-is your ability to put inthe work to demonstrate you'll be a valuable addition to the cap table.
Incompetitive deals (i.e. the best deals), you need to show the Founders thatyou'll be a valuable addition to their cap table.
Everyoneis an expert at something.
Wheredoes your expertise overlap with the needs of the Founder(s)? Tell them. Bespecific. Where can you connect the team to Talent &/or Capital? Again, bespecific.
Addthese to your pitch.
Yourgoal as a new Angel is to avoid complexity. To that end, YCombinator introducedthe SAFE in 2013 to create a standard way for startups to raise small amountsof money fast. Almost all startups today use SAFEs. They're a fast, easy wayfor smaller Angels to invest in a standardised way. Minimise your legal costsby sticking to the standard YC SAFE template.
Halfof investing is not making silly mistakes. I've learned all these lessons andmore the hard way. By following these 8 tips and tricks, you'll have a greatfoundation to begin your Angel Investing career.
Interestingin starting your Angel Investing career? Consider joining the Prodigio Capital.Prodigio runs a syndicate allowing you to invest the best Founders across LatinAmerica & Africa.
Foras little as $1000 you can begin to build your own diversified portfolio oftech startups in the most attractive regions in the world. There’s no upfront fees or commitments, andyou get the flexibility to choose which deals you’d like to participate in,retaining total control over your portfolio.