Lenny's Newsletter · Product & Work
TIER 5 2022-01-25
> ## Q: I want to get into angel investing. How does one get started, and what’s surprised you most about it so far? Over the past five years, I’ve angel invested in over [140 companies](https://www.lennyrachitsky.com/investing). Twelve have grown into unicorns, 10 more are on track to get there this year, and I suspect many more will get there eventually.  I’ve invested my own cash, [scout checks](https://superscout.co/programs), with the [Airbnb alumni syndicate](https://airangels.co/), and the [Airbnb alumni fund](https://www.wsj.com/articles/airbnb-alums-raise-early-stage-venture-capital-fund-11627903800). AngelList recently shared that I was in the [top 20 investors on their platform](https://www.angellist.com/blog/solo-capitalists-vs-vc-firms). All of that is not to say I’ve got it all figured out but rather that I’ve been very active, things seem to be going in the right direction, and, most importantly, I have a bunch of first-party data to learn from. To answer your question, I’ve spent the past week reviewing all of my past investments, and below I’ve laid out my seven biggest surprises about angel investing so far. I’ve also included advice about getting started, a bit about how I evaluate startups, and, as a bonus, I’ve roped in a ton of my favorite angel investors to share their insights throughout. #### Disclaimers: 1. I only do this part-time, and I only vaguely know what I’m doing. Buyer beware. 2. These learnings may turn out to be wrong when all is said and done. I’m still very early in my investing career. 3. I’ve been investing through a bull market. Many people look really smart right now. 4. I’ve missed many great deals and made many bad investments. 5. This is not investment advice. I’m just sharing my experience. *Thank you to these amazing investors for contributing their insights to this post: Aaron Schwartz, Alexis Zhu, Andrew Chen, Ann Miura-Ko, Austin Rief, Brian Nichols, Brett Berson, Charley Ma, Christopher Fong, Cristina Cordova, Dan Becker, Daniel Rumennik, David Breger, Harry Stebbings, Jack Altman, Jamie Quint, Jeff Chang, Jeff Kozloff, Jonah Greenberger, Jules Walter, Julia Lipton, Julian Shapiro, Leo Polovets, Louis Beryl, Packy McCormick, Sharrifah Lorenz, Sriram Krishnan, Todd Goldberg, and Varsha Rao 🙏* Let’s get into it. ## My biggest surprises about angel investing so far If you think about it, angel investing is an amazing deal. You give a bit of cash to someone who will work the hardest they’ve ever worked in their life, for years, and if they can make it work, you make a lot of money. Seems almost unfair. But it’s not all rainbows and butterflies. Most startups fail, most angel investors lose money, and it’s a very expensive hobby. Looking at my 140+ investments, here are my biggest surprises so far. #### 1. I’m usually wrong about which investments will do best When I invest in a startup, I make sure to record how confident I am in that investment—OK, Good, or Great. Looking back, only a *third* of my best investments—the companies that are on track to drive the biggest returns—I rated as Great at the time of investing. Meaning, if I invested only in companies I had Great confidence in, I’d have missed out on two-thirds of my biggest successes. I obviously thought they were a good enough bet to invest in, but I didn’t have 100% conviction in most of the companies I’ve invested in. And it turns out that’s the right move as an angel investor. > #### “VCs like to pretend that they’re really smart, but ultimately it’s just math. A single 100x or 1,000x deal will return your fund. But it’s nearly impossible to know which deal that will be. The important thing is to invest in enough deals that could 100x+.” > > #### —[Julia Lipton](https://twitter.com/JuliaLipton), investor > #### “Conventional investing wisdom tells us that VCs should pass on most deals they see. But our research indicates otherwise: At the seed stage, investors would increase their expected return by broadly indexing into every credible deal.” > > #### —[Abe Othman](https://www.angellist.com/blog/venture-returns), Head of Data Science, AngelList Venture Angel investing is much more about [not missing the big winners](https://www.angellist.com/blog/what-angellist-data-says-about-power-law-returns-in-venture-capital) than it is about avoiding losers. And as [AngelList found](https://www.angellist.com/blog/venture-returns), early-stage investors do best if they invest in every credible deal vs. trying (and usually failing) to pick the few winners. This is also why the general advice is to invest the same check size into every deal—two of my largest markups are also my smallest checks :( **Takeaway:** If you see something special about the startup, and there’s a path to a 100x exit, consider investing even if you don’t have full conviction. #### 2. Most deal flow comes from other investors—not founders, friends, or colleagues Seven of my first 10 deals were in my friends’ companies. The other three came from other investors sharing a deal with me. As I’ve gotten more active, that ratio has reversed. Now the majority of investments I make come from other investors (mostly angels and solo capitalists).  **Takeaway:** Increase your deal flow by building relationships with other active investors. The two best ways to build relationships are to: 1. Build a skill that is useful to startup founders, so that other investors benefit by introducing you to them (e.g. “We can connect you to Lenny, who can help you with growth strategy”). 2. Share great deals with them, and help them get into great deals. > #### “You can’t be a great investor if you don’t see any deals. Being a friendly collaborator with other investors is one of the best ways to see more investment opportunities. You essentially multiply the surface area of what you see. And if you share the companies you are most excited about with others, they will do the same, and you can build a good natural filter for deals.”” > > #### —[Daniel Rumennik](https://linkedin.com/in/rumennik/), GP at AirAngels > #### “The best way to get deal access isn’t to be great with founders—it’s to have other investors think you’re great with founders. Build a high NPS with investors, since they have meaningfully more reach than an operator. But of course, fight hard to be great with founders too or else this will all crash down.” > > #### —[Aaron Schwartz](https://linkedin.com/in/aaroncharlesschwartz), investor, 3x founder Special shoutout to [Sriram](https://www.notion.so/sriramkri/Sriram-Krishnan-5a434396fb9d43bfaebce6aa5c1f5e01), [Dan](https://www.linkedin.com/in/rumennik/), [Jamie](https://twitter.com/jamiequint), [Todd](https://toddgoldberg.com/), [Siqi](https://twitter.com/blader), and [Julian](https://twitter.com/Julian) for sharing the most deals I’ve invested in 🤜🤛 #### 3. Great deals are currency among investors To build on the above learning, the best way to build relationships with other investors, and thus deal flow, is to share great deals with them. The more great deals you share, the more deals they’ll share with you—simple as that. This isn’t always the case due to status differentials (e.g. I share many deals with Sequoia and a16z and barely ever do they share deals with me, lol), but in general this holds true, especially with angels and solo capitalists (where most of your deals will likely come from). > #### “It’s advantageous (and fun) to be collaborative as an angel investor. Sharing deals with other investors keeps you top of mind for when they’re investing in something. I personally try to only send deals when I’m investing (or very close to it) so my ‘signal’ is strong. In general, I want other investors to be excited when one of my deals is in their inbox. Over the long run, I think being known as a collaborative angel with good taste is most ideal.” > > #### —[Todd Goldberg](https://twitter.com/toddg777), entrepreneur and investor > #### “By default, investors mostly share the deals they’re asked to share by founders. Or they share the deals that need help being filled. That has adverse selection (but there are always exceptions, of course, like when founders want ‘strategic angels’!). In contrast, when you get truly close with other investors, some will start proactively pitching you to founders to get you into even the hardest-to-get-into deals. This is why the depth of relationships matters so much more than the breadth in venture.” > > #### —[Julian Shapiro](https://twitter.com/Julian), writer and investor **Takeaway:** Seek out three to five awesome angel-investor friends and share everything you see with them. Two tips: 1. Once you decide to invest in a startup, ask the founder if he or she is looking for more great angels. If yes, suggest your co-investors. 2. Send a weekly email to your angel friends sharing the deals you’re looking at. Share just the URLs and a short blurb, unless you have permission to share the deck. Once you decide to invest, tell them asap in case they also want to try to join the round. *Note: If a founder asks you to keep their round confidential, you need to respect that. But in most cases, if you ask, founders are happy to meet more awesome angels.* #### 4. Angel investing is more about access than picking There are three parts to angel investing: capital, access, and picking. Based on my experience, access is by far the most important part. If you have access, you can raise capital, and generally the most popular deals (i.e. the ones already discovered) also end up doing well. So picking becomes secondary. > #### “As an angel investor, it’s more important to be swimming in a pool of good potential investments than to be an exceptionally good picker. Obviously if you’re able to be both, it’s better :) but if you had to choose between being in a position to see great deals and then picking randomly, or coming across average deals and picking expertly, choose the former.” > > #### —[Jack Altman](https://twitter.com/jaltma), investor and CEO of Lattice > #### “Judgment is important but overrated.” > > #### —[Naval](https://venturehacks.com/11-lessons), investor and co-founder of AngelList Looking at my own data, over two-thirds of my biggest winners were “hot” deals at the time, and similarly, over two-thirds of the hot deals I’ve invested in have gone on to do very well. Not all investments in hot deals will do well, but broadly, getting access to hot deals is key. For that reason, much of angel investing these days is marketing yourself as an investor and getting founders to take your money. > #### “There are so many incredible founders building great companies today that one of the hardest things to do is to stand above the noise. Even exceptional products need help telling their story and reaching customers and potential hires. Being able to bring that to the table is a leveraged way to help: instead of recommending one hire, you can tell their story to an audience of hundreds of potential hires.” > > #### —[Packy McCormick](https://twitter.com/packyM), writer and investor > #### “With the perfect levels of information that exist today on different firms and investors, the question LPs must ask of investors they evaluate is: Is this investor an aspirational source of capital that the very best founders consistently choose?” > > #### —[Harry Stebbings](https://twitter.com/HarryStebbings), podcaster and investor > #### “I hate when people think investing is all about picking winners. This presupposes that as an angel you can get into any deal you want to. Definitely not true! Ask yourself—what is your right to invest in a deal? Working at a16z taught me that we are not just picking companies and entrepreneurs to work with—the best ones are choosing to accept our money. So what is your reverse pitch to entrepreneurs?” > > #### —[Louis Beryl](https://www.linkedin.com/in/louisberyl/), investor and 3x founder One way to track your “access” is: whenever you see a big fundraising round or great exit, to ask yourself—did I have a chance to invest in that company? All that being said, your picking skills are still important to build over time. A third of my best investments weren’t in hot rounds, and not all hot deals do well. Even top VCs often make terrible decisions. It’s wise to place a portion of your bets on under-the-radar deals that you’re excited about. Especially if you have unique insight into the opportunity that other investors may be missing. **Takeaway:** Work on building your ability to get into hot deals, and don’t stress out about not being able to pick, especially early on. #### 5. It’s mostly about becoming someone founders want on their cap table To build on the above point, the best way to get access, and thus accelerate your angel investing career, is to become a person founders want to have on their cap table. There are four paths to this: **1. Useful knowledge:** Become very smart about something founders will need help with, e.g. hiring, fundraising, growth strategy, product, marketing, scaling internationally, etc. > #### “Money is cheap now, so you have to have something other than money to get access. The best thing to have is unique expertise that founders want access to. In my case, it’s my experiences and lessons learned from working on growth early on at companies like Twitch, Reddit, Mercury, and Notion that founders tend to find worthwhile. It can be in any important area, though: sales, operations, people, engineering, marketing, etc.” > > #### —[Jamie Quint](https://twitter.com/jamiequint), investor > #### “You will differentiate yourself as an investor if you understand which of your skills are most valuable to founders and inform them of your experiences in those areas. What’s helped me the most are referrals from founders and investors (including Lenny) to companies that are seeking angels with skills I’ve developed at places like Slack and YouTube (e.g. product-led growth, scaling product teams).” > > #### —[Jules Walter](https://www.linkedin.com/in/juleswalter/), investor and PM at YouTube **2. Audience:** Build an audience that founders can someday rely on to amplify the startup’s story (e.g. [Packy](https://twitter.com/packyM), [Harry](https://twitter.com/HarryStebbings?), [Erik](https://twitter.com/eriktorenberg), [Sahil](https://twitter.com/SahilBloom)). > #### “Building an audience today is more crucial than ever. Why? In compressed fundraising timelines, content allows you to build a ‘pre-sales’ relationship with founders where they know you and how you think, well before meeting you in a raise. This positions you ahead of others who have not created such content.” > > #### —[Harry Stebbings](https://twitter.com/HarryStebbings) **3. Signal:** Build status as an investor such that your being on the cap table becomes a strong signal (e.g. [Elad](https://twitter.com/eladgil), [Cyan](https://www.linkedin.com/in/cyanb/), [Naval](https://twitter.com/naval)). > #### **“I track how well I’m doing as an investor by how often I co-invest with Elad Gil.”** > > #### **—Me** **4. Reputation:** Build an amazing reputation with founders, such that they tell all of their founder friends about you. > #### “Founder NPS scores matter a lot. You may not see the value of being a service-oriented investor in the short run, but over the long run it compounds and the results show up in the most unexpected ways. And founders don’t forget. You as an investor may have to talk to several founders a day and have to context-shift regularly. Every conversation for you may or may not be memorable. But for the founder, you’re only one of a handful of investor conversations, so every interaction will be memorable.” > > #### —[Sriram Krishnan](https://www.notion.so/sriramkri/Sriram-Krishnan-5a434396fb9d43bfaebce6aa5c1f5e01), investor But the bar isn’t super-high: > #### “The bar is surprisingly low for actually being value-add. If you help a founder find and hire an engineer, as an example, you’re already in the top 0.01% of investors for them in terms of value-add.” > > #### —[Charley Ma](https://twitter.com/charleyma), investor and GM at Alloy > #### “It’s surprising to me that often founders do not get practical, sometimes basic, execution and ops advice from their VC partners, but that’s where angels can really help.” > > #### —[Varsha Rao](https://www.linkedin.com/in/varsharao/), investor, former Head of Ops at Airbnb, and CEO of Nurx > #### “Be helpful to as many people as you can at every stage of their journey. You don’t know where your biggest investment returns will come from. Mine came from helping a founder sell his prior startup to someone in my network. Even though I never invested in that startup, being helpful will open up new investment opportunities.” > > #### —[Christopher Fong](https://www.linkedin.com/in/cfong), investor and founder of Xoogler #### 6. Follow high-signal leads. But not only. After seeing how professional VCs operate, particularly how much time they spend on due diligence, reference calls, market research, etc. (i.e. hours and hours), I’ve come to realize that as an angel investor, I’ll never be as good at picking deals as they are. I just won’t. As lame as it sounds, I’ve found the best strategy as an angel investor is to try to get into deals led by top investors for the majority of your bets. It sounds obvious, but many angel investors try to find just the diamonds in the rough. I think that’s a losing strategy, especially if you do this only part-time and don’t have the time to get deep on each deal. > #### **“For companies that get to the finish line, it’s not unusual for me to spend 2-3 weeks getting to know the founder and their business. Now, this is partially due to my strategy—only invest in 2-5 companies per year and spend a lot of time with them. I will look into a number of pieces around the business, including their investor updates (to assess how their thinking evolves) and the feature updates (to assess speed of building), and will spend a lot of time on core beliefs around their business (what they believe that they are not willing to let go). I also spend time talking to customers if they have them and references for the founders.”** > > #### —[Ann Miura-Ko](https://twitter.com/annimaniac), GP at Floodgate > #### “The amount of time I spend on diligence varies a lot depending on how familiar we are with a sector. If it’s a sector we know well, we can offer to invest after a few meetings over the course of a few days. If a sector is new to us, we’ll usually do four meetings over two weeks, a few calls with domain experts in our network, and customer reference calls. I’ve done as many as a dozen customer reference calls to really understand a business. And of course, multiple Susa investors join later meetings, so our investment decisions combine multiple people’s points of view.” > > #### —[Leo Polovets](https://twitter.com/lpolovets), GP at Susa Ventures Looking at my own data, over 80% of the investments I’ve made with high-signal investors (i.e. a top-tier investor leading it) are on track to become big successes. Unless you think you’re a uniquely talented picker and have the time to do it, you’re probably better off trying to get into high-signal deals vs. discovering hidden gems. > #### “Social proof can get a bad rap, deservedly so because it can be a herd mentality where one monkey imitates the other. […] In the stock market, you can’t follow Warren Buffett into a hot deal, because he’ll only tell you a month after he did the investment. The instant he invests, the price of the deal goes up. And when he announces it, the price goes up even more. > > #### However, in private markets the price of the deal stays relatively fixed until the entire round is done. So it’s advantageous to be a late, credible mover.” > > #### —[Naval](https://spearhead.co/social-proof) All that being said, my single biggest winner was a low-signal investment. The next 10 best were not, however. So do both. **Takeaway:** As an angel, most of your investments should probably go into rounds led by [top-tier funds](https://www.forbes.com/midas/). But place maybe 30% of your bets on low-signal startups that you’re very excited about or have unique insight into (e.g. the tech, the founders, the market). One caveat is that a16z and Tiger are both Tier 1 investors but also very prolific investors—them leading a round means a lot less these days than a fund that invests less frequently, like Sequoia, Benchmark, Accel, First Round, etc. #### 7. Power laws are real 70% of my paper gains are currently from a single company (which includes three separate investments in subsequent rounds), and 80% are from just four companies. If I had missed these four investments, my performance would have been incredibly average. But I didn’t, and that’s the key—you need to hit a few 100x to 1,000x returns in order for this whole endeavor to be worth your time. Which again comes back to the broad strategy of betting on many companies vs. trying to pick the few winners. > #### “It’s not about all your deals being winners, but instead a few mega-winners that drive all the returns. So do you believe that these founders have the talent, the resources, the vision, and mostly the will to try and build not a $1 billion company but a $100 billion company?” > > #### —[Louis Beryl](https://www.linkedin.com/in/louisberyl/), investor and 3x founder > #### “A few companies will generate most of your returns; the power law has been super-real for me. One company represents 85% of my gains, and the top 10 represent 95% of my gains (though most of my investments are early from the past 1-2 years).” > > #### —[Daniel Rumennik](https://linkedin.com/in/rumennik/), GP at AirAngels **Takeaway:** Optimize for not missing the 1,000x returns vs. avoiding losing bets. Which, coming back to the very first lesson, essentially means placing many bets. I’d guess you need to invest in at least 30 companies before you have a shot at getting into one rocket ship. This also means having the budget to invest in 30 companies. Plan ahead. ## How to get started in angel investing The five most common ways to get started angel investing: #### 1. **Invest in your friends and former colleagues** Make it known that you want to back them if they ever start something, and pay attention to any hint of their starting something. That’s exactly how I started and how most angels start. > #### “Telling your smartest friends you believe in them so much you would write a check almost regardless of what they do goes a long way and also makes them remember you when they’re fundraising. Being a founder is scary and riddled with self-doubt, so getting this early stamp of validation can be incredibly memorable for them and generate goodwill.” > > #### —[Jonah Greenberger](https://www.linkedin.com/in/jonahgreenberger/), investor and CEO of Bright #### 2. **Pair up** Pair up with a few people who are actively investing and share everything you see with them. As you saw above, this is where most of my deals now come from. #### 3. Join syndicates Sign up for a bunch of [AngelList syndicates](https://www.angellist.com/syndicates). There’s no money up-front, you can invest small amounts, and you get to see how investors evaluate each deal and start to see what good deals look like. > #### “The quickest way to get access to deals is to join AngelList syndicates. Nowadays, you'll see top syndicate leads invest at the same terms as tier one funds, and share their allocation with operator angels. Bonus points for syndicate members who add-value to the founders they invest in.” > > #### —[Brian Nichols](https://www.linkedin.com/in/briannichols11/), investor #### 4. **Join angel training programs** My three favorites are [First Round Angel Track](https://angeltrack.firstround.com/), [Hustle Fund Angel Squad](https://www.hustlefund.vc/angelsquad), and [On Deck Angels](https://www.beondeck.com/angels). Also, check out platforms like [Stonks](https://stonks.com/). #### 5. **Cold outreach** Cold email/DM founders of products you love and ask about investing, especially early-stage. This works more often than you’d think. > #### “When you know of strong founders starting a company, don’t wait for them to raise money, apply to an accelerator program, etc. Get into the company as quickly as you can via a standard SAFE. They’ll appreciate your conviction in them, and you won’t have to worry about trying to get allocation when there may not be enough room later on.” > > #### —[Cristina Cordova](https://twitter.com/cjc), angel investor and advisor > #### “When sourcing deals, cold outreach works. Founders are excited to hear from angels who are excited about what they are building and will usually take your call. Be proactive!” > > #### —[Alexis Zhu](https://www.linkedin.com/in/alexiszhu/), investor and head of payments partnerships at Stripe ## What I look for when evaluating a startup There’s nothing revolutionary in what I look for, and I’m still learning to do this better every day, but here’s what I focus on when looking at a startup (in priority order): 1. **Pain:** How significant is the pain that this product is solving? Is it a small pain or a “can’t live without this product” pain? If there are budget cuts or a new hot app comes out, will people stick with this? 2. **Big and growing market:** Are there enough people with this pain? Could it get to a $1B/year revenue business someday? 3. **Evidence of PMF:** Is there enough reason to believe this team can solve this big pain? Is there strong organic growth, killer testimonials, or high retention? 4. **A+ founders:** Is the team executing frighteningly fast, with high intensity, and do they have unique insights into the problem? If another team emerges doing the same thing, will I feel good about who I’m backing? 5. **Unfair advantage:** What will give this team an edge over (future) competitors, or the status quo? Do they have a unique insight, a clever distribution strategy, proprietary data, or incredible tech? 6. **Business model:** Is it software-based, ideally with recurring revenue and high margins and selling to companies that move quickly and embrace new technology? 7. **Rocket-ship-ness:** Broadly, I try to get into every rocket ship (on track to for $1B/year+) business , no matter the price. ### Bonus: Advice about angel investing As a bonus, I asked my friends in the [First Round Angel Track](https://angeltrack.firstround.com/) program and other angel friends for their biggest surprises and learnings about angel investing so far. Here’s what they shared: #### 1. Just get started > #### “It’s so much easier to start angel investing than I had realized. I thought about it for years before doing anything about it, and I was amazed by how accessible it is. I feel silly in hindsight. There is so much content out there. If you want to become an angel, start today.” > > #### —[Sharrifah Lorenz](https://www.linkedin.com/in/sharrifah-lorenz/), investor and head of partnerships at Loom > #### “Don’t be afraid to start with little/no money. I started angel investing too late because I assumed I didn’t know enough, or didn’t think anyone would take small investors. My first few checks were $3K and $5K, and that’s only after I got the courage to even ask. Those investments gave me experience and courage to meet and invest in more founders. It compounds on itself over time. (AngelList makes this super-easy today.)” > > #### —[Daniel Rumennik](https://linkedin.com/in/rumennik/), GP at AirAngels > #### “Keep your early checks very small. Your first checks should be viewed as learning experiences. Write a detailed memo on why you invested and what you loved about the team. These will be invaluable as you start to understand what makes a great company and founder. Only then should you start to deploy larger sums of money.” > > #### —[Austin Rief](https://twitter.com/austin_rief), investor and CEO of Morning Brew > #### “Deal throughput is key. The more deals you see, the more you’ll be able to tune and home in on the opportunities that make sense for your investing criteria. At first you may feel the pressure to invest in a lot of what comes through (i.e. FOMO), something you’ll want to resist to balance out your portfolio, but as you see more, you’ll begin to understand the attributes that are attractive to you and become more selective. And the more you see, the more comfortable you will become when you do say yes or no.” > > #### —[Andrew Chen](https://www.linkedin.com/in/andrewfchen), investor and SVP at GlobalE #### 2. Start with your network > #### “By far the best source of investment opportunities for me have been people I’ve had the chance to work with. This isn’t just former coworkers starting companies themselves but also connecting me with their former coworkers starting companies. They have been the best-performing and most fun investments!” > > #### —[David Breger](https://www.linkedin.com/in/davidbreger), investor and Director of Product at Google > #### “A significant portion of my deal flow comes from existing founders in my portfolio who are referring other founders in their network to me. Many founders reach out to friends asking, ‘Who are the angel investors you took money from and have been the most helpful?’ If you’re one of the top two or three value-add angel investors for your portfolio companies, you’ll get some incredible deal flow as a result.” > > #### —[Cristina Cordova](https://www.linkedin.com/in/cristinajcordova/) #### **3. It’s a long game** > #### “It takes at least 8 to 10 years for companies to realize their potential. Startups that are perceived to be early winners might flame out. Startups that you’ve written down to zero might end up doing well. It’s extremely hard to judge who is going to succeed or fail in the first one to five years.” > > #### —[Sriram Krishnan](https://www.notion.so/sriramkri/Sriram-Krishnan-5a434396fb9d43bfaebce6aa5c1f5e01) > #### “When starting on the angel investing journey, many times (and in my case), your losing bets materialize much faster than your winning portfolio companies. Thus, it’s hard to keep conviction and continue investing as self-doubt rises and you question your investment decision-making criteria/abilities. Do a retrospective on the ones that flamed out and tweak your criteria if necessary, but keep investing. Portfolio theory will prevail.” > > #### —[Jeff Kozloff](https://www.linkedin.com/in/jeff-kozloff-4004662/), investor and CEO of TrialScope #### **4. What to look for when picking** > #### “Co-founder chemistry, prior working relationship, and trust are more important than anything else (market, TAM, product-market fit, etc.) in the early stages.” > > #### —[Sriram Krishnan](https://www.notion.so/sriramkri/Sriram-Krishnan-5a434396fb9d43bfaebce6aa5c1f5e01) > #### “When evaluating opportunities, angel investors should focus on the next 18 months—not the next 18 years. This may seem counterintuitive, as investing is a game of casting into the future, envisioning what might be and trying to spot breakout companies that can go the distance. But no great company has ever made it to the summit without successfully passing through basecamp first. When you start assessing the opportunity to get to a more near-term milestone, versus just thinking through the fuzzier question of ‘Can this be a $10B company?’ then you have more to work with. It transforms the decision from speculating about moat and TAM, to focusing on the strength of the founding team, how many customers already love the product, and early signs of market pull.” > > #### —[Brett Berson](https://firstround.com/person/brett-berson/), Partner at First Round Capital  > #### “Most of the big winners in B2C are not ‘hot’ at the seed stage; there is low predictability.” > > #### —[Jeff Chang](https://www.linkedin.com/in/jeff-chang-82467459/), investor and advisor #### **5. On angel investing as a whole** > #### “I’ve found the angel investing community to be refreshingly welcoming and collaborative. Adding value for early companies or other investors via perspective, expertise, and/or deal flow always seems to come back to you in spades.” > > #### —[Dan Becker](https://www.linkedin.com/in/becker513/), designer and investor > #### “I genuinely find founders and other angels to be nice to one another. When you’re a small check, founders and other angels generally want to find ways to work you—we all want to work with great people!” > > #### —[David Breger](https://www.linkedin.com/in/davidbreger) ### In closing To summarize, here’s an overview of what I’ve learned. **Biggest surprises about angel investing so far:** 1. I’m usually wrong about which investments will do best. 2. Most deal flow comes from other investors—not founders, friends, or colleagues. 3. Great deals are currency among investors. 4. Angel investing is more about access than picking. 5. It’s mostly about becoming someone founders want on their cap table. 6. Follow high-signal leads. But not only. 7. Power laws are real. **How to get started:** 1. Invest in your friends and former colleagues. 2. Pair up. 3. Join syndicates. 4. Join angel training programs. 5. Cold outreach. **What I look for when evaluating a startup:** 1. Pain 2. Big and growing market 3. Evidence of PMF 4. A+ founders 5. Unfair advantage 6. Business model 7. Rocket-ship-ness I’ll close with one final quote from Naval: > #### “You’re living inside the gold mine—people are digging up gold next to you. The returns in this industry are higher than anything else. You understand it so well, and you have specific knowledge. If you’re in the tech industry, you should be doubling down. I don’t know a better industry or better place on the planet to be investing, for today.” > > #### —[Naval](https://nav.al/angel-1) Good luck! ## 📚 Further study 1. [How to Angel Invest, Part 1](https://nav.al/angel-1) by Naval 2. [How to Angel Invest, Part 2](https://nav.al/angel-2) by Naval 3. [How to be an angel investor](https://www.paulgraham.com/angelinvesting.html) by Paul Graham 4. [Angel: How to Invest in Technology Startups](https://www.amazon.com/Angel-Invest-Technology-Startups-Timeless-Investor/dp/0062560700) by Jason Calacanis 5. [Reading Social Proof Is an Art Form](https://spearhead.co/art) by Naval 6. [Investing in Public: Non-Obvious Lessons from 100+ Angel Investments](https://sacerdoti.medium.com/investing-in-public-non-obvious-lessons-from-100-angel-investments-a5951985593e) by Tod Sacerdoti 7. [The 11 Lessons Dharmesh Shah Learned From 80+ Angel Investments](https://thehustle.co/11-lessons-dharmesh-shah-learned-from-80-angel-investments/) *Huge thanks to everyone who shared their insights, and have a fulfilling and productive week 🙏🙏🙏* ## **🔥 Featured job openings** 1. **Clubhouse:** [Growth Product Manager](https://www.lennysjobs.com/jobs/ed55d82e-f9b6-47b7-837d-b8f29b9e2b41) (SF, Remote-US) 2. **Earthly Technologies:** [Senior Product Manager](https://lennys-jobs.pallet.xyz/jobs/958ba7ed-1571-4249-a103-2e58dfcc40bd) (Remote-US, Remote-CANADA) 3. **Otta:** [Product Manager](https://lennys-jobs.pallet.xyz/jobs/896bc872-ef34-44a5-85bd-74784e9bea89) (London) 4. **Sonar:** [Product Manager, Integrations](https://lennys-jobs.pallet.xyz/jobs/d830dd44-5885-452a-a0fc-681a667d20c5) (ATL, Remote-US) 5. **LiveAuctioneers:** [Senior Product Manager, Platform](https://lennys-jobs.pallet.xyz/jobs/4550e1ee-d35a-4975-9bb1-ec28725672cc) (NYC, Lehi UT) 6. **Writer:** [Product Designer](https://lennys-jobs.pallet.xyz/jobs/2da796a4-bd41-4797-b052-3224fc5adbf2) (SF, Remote-Global) 7. **Shortwave:** [Growth Product Manager](https://lennys-jobs.pallet.xyz/jobs/f67128c7-7420-4e94-8548-5c9bfdfbe66e) (Remote-US) *Browse more open roles, or add your own, at [Lenny’s Job Board](https://lennysnewsletter.com/jobs).* **If you’re finding this newsletter valuable, consider sharing it with friends, or subscribing if you haven’t already.** Sincerely, Lenny 👋