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.