Branch out from your network after you’ve built your reputation

Naval: The best deals tend to come from your network—people you’ve trusted for a long time, especially early on.

It’s notoriously difficult to invest in one of Elon Musk’s companies. Even in high-priced rounds, it’s nearly impossible to get into a SpaceX or a Neuralink. All the people Elon has made money with in the past swoop in, get first rights and take up the full allocation.

If the market never shows up or shows up late, your brand is shot

Nivi: You don’t want to build a brand around a specific market thesis, right?

Naval: You don’t want to build a brand around the transition from X technology to Y technology—because when that transition is complete, so is your brand. You also don’t want too narrow of a brand or a brand in a space that doesn’t materialize. If you have a cleantech brand that’s focused entirely on solar and solar doesn’t arrive on schedule,

Founders can also apply for a $10M fund when they graduate

Today, we’re opening applications for the third class of Spearhead—where founders get their own funds, so they can learn the craft of angel investing.

Founders backing founders

We’re getting bigger in this class: Founders now get $1M angel funds and can also apply for a $10M fund at the end of the program.

We’re targeting current or past founders in four locations: Silicon Valley, Los Angeles,

I pitched growth hacking to Twitter; they passed on it—but they let me invest

Naval: Strangely enough, my brand started out in growth hacking. I co-built a Facebook app that got 20 million installs pretty quickly, and I used that as my calling card with entrepreneurs. This was in the early days before Andrew Chen blew it open for the world.

A friend told me about Twitter. Back then, it was still text-message based and very much a toy. It was the pre-app.

You have to be willing to do something that hasn’t been done before

Naval: Whatever your brand is, it has to be clearly articulated; it has to be messaged. It has to be authentic to who you are. It should be differentiated from what everybody else is offering, and it should resonate with entrepreneurs. The worst strategy is taking a lot of coffee meetings or saying, “I’m a good, passive, hands-off person. I won’t bother you, and I’m always available to help.” It’s too generic.

The airwaves are too crowded for undifferentiated content and distribution

Naval: As we discussed, the first way to build a brand is being a good investor to begin with. A second way is creating content that helps entrepreneurs. A third way is building infrastructure or platforms that help entrepreneurs.

Paul Graham can get into deals because of Y Combinator. Nivi and I often can get into deals because we started AngelList. Ryan Hoover can get into deals because he started Product Hunt.

A brand is an authentic reputation you have with founders and investors

Nivi: To get into good deals, you must give startups a reason to pick you over other investors. You need a brand. Typically, this means adding value to the startup in some unique way. Let’s talk about 101 different ways to build a brand.

Naval: This is the meat of it, the heart of it. We’ll get into how you develop judgment and the ins and outs of raising capital.

Most returns come from a few deals—don’t let them pass on you

Nivi: There are so many sources of dealflow out there, from friends and incubators to AngelList, FundersClub and Republic. Why is it so important to get into the deals you want to get in to? What happens if you don’t?

The majority of returns come from a few deals

Naval: One out of 100 or 1000 companies account for the majority of the returns every year.

You need to raise money, develop judgment over time and gain access to the right deals

Naval: The three things it takes to get into investing are capital, judgment and dealflow.

Capital is the hardest or easiest to get—depending on your circumstances

To get capital, either you make your own money to invest, or you gain enough trust from other people to invest their capital.

As the hits get bigger, it makes more sense to invest and a little less sense to start companies

Naval: Like other industries, the best way to make money in technology is to own a piece of a business. “You’re not going to get rich renting out your time. You must own equity—a piece of a business—to gain your financial freedom.”

Founder, employee or investor?

How do you gain substantial equity in a business? One of the classic models is to start your own company.