How to Angel Invest
Naval: Hey everybody, it’s Naval and Nivi. We’re going to talk about something very different than what we’ve discussed in the past.
Back in the day, we did Venture Hacks, which was all about the game theory of venture capital and helping entrepreneurs raise money. Later, we talked about “How to Get Rich,” which was general advice on wealth creation for the average person who’s starting a business. Now we’re going to talk about angel investing.
Advice for new angels in technology hubs
We expect this podcast to resonate most with people who are in a technology hub and have started investing but are not yet pros. So brand-new angels, VCs and founders who are dabbling in it.
Let’s say you’re living in Silicon Valley—or you’re in Shanghai or Beijing, or you’re in Bangalore, or you’re in London, or you’re in New York—and you get access to a lot of interesting tech companies; you’re in the tech business and earned some extra money or raised some money. How do you become a good investor?
Where to learn the basics
This podcast assumes that you have some familiarity with investing. It’s not going to be a cold start. There are resources we can point you to for the cold start. Paul Graham wrote a piece called “How to be an Angel Investor.” There’s “How to be an Angel Investor, Part 2” on Venture Hacks. There’s a course called Future Investor. You can look at all of those for the basics.
We’re going to focus on more advanced topics in this conversation. We’re going to talk about things like how to figure out what a fair valuation is; what are the pitfalls of bridge rounds; how pro-ratas work; how can you squeeze into a round when there are VCs leading; when a co-investor is providing a valuable signal versus when they’re just talking their own book; how to size up markets and startups quickly; whether you should specialize in a single vertical or diversify into multiple verticals.
Open-sourcing what we teach at Spearhead
This podcast open-sources what we teach at Spearhead, a fund we created that trains the next generation of angel investors. It gives founders checkbooks, provides mentorship and teaches them the skill of investing, which is something that will be valuable to them for their entire lives.