Learn the key ideas of the book by Jason Calacanis


How to successfully invest in startups

Jason Calacanis is one of Silicon Valley’s most successful angel investors. In Angel, he shares his strategies for investing in startups, and takes us through the steps of his proven method for earning enormous amounts of money. He reveals how top investors calculate the risks and rewards involved in new ventures, and explains how the best startups leverage their relationships with angel investors to achieve extraordinary results.

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What is angel investing? A high-risk, early investment in a startup

“Angel investing” is when we invest money in the early financing rounds of a private company, with the aim of earning more than we put in, and much more than we could get from more secure and established investments, such as stock, bonds, or real estate. 

Angel investors often seem to invest in crazy projects; on the other hand, if it were a sure thing, everyone would want to get involved, and there would be no need for someone to believe in the founders of a startup precisely when nobody else does. Angels are usually interested in companies that are less than three years old, and have little or no traction – in other words, they have few users or low revenue. They are looking to find what is known as the “product-market fit”, which is when the startup’s product has found a group of potential, enthusiastic customers. When this happens, there is a good chance that the founder of the startup will be able to scale-up and monetise the business. 

When the founder has figured out how to make money from their product, and has scaled-up to a reasonable level, the company is either bought by another larger company, or it goes public. In technical jargon, these two possibilities are called ‘exits’, in other words, the moment when investors cash in their shares and get a financial return. 

Calacanis famously invested $25,000 in Uber when the company was worth around $5 million: it is now worth $70 billion in private markets. It is extremely rare to see a return of five to ten thousand times our original investment, but we can quite easily make more money than we invested if we make the right moves, and spend a couple of years working in the Silicon Valley, learning on the job, by making lots of individual private investments.

Angel investing is a high-risk, high-reward business: if we invest early enough in a startup that becomes a unicorn worth $1 billion, we will earn a potentially life-changing amount of money. However, because most startups fail, it is critical to have a diversified angel-investing portfolio. 

When we first start investing, we should meet as many people as we can, but invest in just a few deals. To start, we need to find fifty exceptional companies to invest in. Calacanis invests in just one company out of a hundred he meets with, so we would need to approach five thousand startups in five years, in order to cover our bases. This works out to twenty startups, and roughly twenty to thirty hours of our time, per week. In order to be an effective angel investor, we need a combination of accessible money, quality time, an influential network, and considerable expertise. We must be in a position to write a cheque, spend time with founders discussing important issues, give meaningful presentations to clients and investors, and give practical advice that saves founders time and money, or prevents them from making mistakes.


The key ideas of "Angel"

What is angel investing? A high-risk, early investment in a startup
To be a successful angel investor, we need to live in Silicon Valley
All possible funding rounds for a startup: from sweat equity to Series A
We do not need huge amounts of money to get started as angel investors: we can make use of “syndications”, which are online platforms that pool together multiple investors
In our first month as an angel investor, we should choose a syndicate with a lead who has invested in a unicorn, and target ten startups with specific promising characteristics
Our second month as angel investors: 30 days of meetings with other angel investors and founders
How to prepare for a meeting with a founder, and the four key questions to ask: what are you working on, why are you doing it, why now, and what is your unfair advantage?
When investing in a startup, we must make sure we are able to maintain our ownership percentage by investing in future financing rounds (pro rata rights), and that we have information rights
Take-home message

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