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Top Tips From Six Years of Startup Investing

Top Tips From Six Years of Startup Investing
By Adam Sharp
Date March 9, 2021

I’ve now been investing in startups for more than six years. And it’s taken that long to prove concretely that what I’m doing is working. 

This is the frustrating — yet rewarding — truth of startup investing. It takes a very long time to see results. But I am now more convinced than ever that investing in a broad, diversified basket of startups is an excellent long-term allocation of capital. 

However, if I could go back and do it all over again, I would do things a bit differently. 

Keep Investment Amounts Uniform

First, I would try to invest roughly the same amount in every deal. There are a few huge duds that I invested too much in. Likewise, there are some huge winners that I only invested a few thousand dollars in. It all worked out in the end. But I think my results would have been better if I had invested equally in all the deals.

Part of the problem for me early on was that many deals had a minimum of $5,000 or $10,000, and others were $1,000. Due to the small check sizes I was writing, my results are pretty uneven. Now I’m investing a larger amount in the average deal — and I expect it to pay dividends down the road.

Invest in Multi-Company Funds

Another lesson I’ve learned is that investing in funds — such as AngelList Rolling funds, AngelList Y Combinator funds and FundersClub Y Combinator funds — has produced excellent returns. These investments are made upfront, before you know what you’re investing in. But as long as I’m backing a good investor, I’m more confident than ever investing “blindly.” 

When you invest in a fund, the manager gets the cash upfront. And they can put it to use as soon as they find a good deal. They don’t have to set up a syndicate for each deal — a process that can take months and excludes some very promising investments due to time constraints. 

Investing in multi-company funds has gotten me into amazing companies such as Cleartax, Shipbob and Deel. I expect these investments to return a 5x-to-10x multiple of the entire amount I put into the funds eventually. In the future, I plan to invest in the AngelList Access Fund (minimum is $50,000 per quarter). That gives you access to hundreds of startup investments with a single investment. And I believe it’s the single most attractive investment opportunity I know of today. I hope to be able to time my investment into this fund with a major market downturn, when valuations will likely drop significantly. 

Online startup investing is still young. But from what I’ve seen, I’m more excited than ever for its future.

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