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 you’re getting invited to one of Elon’s rounds and you’ve never met him or made money with him, you almost have to wonder if he’s run out of friends.
The urge to hunt for deals actually will lower your returns. Some of the best angel investors make early wins by investing in people in their close network, in spaces they know well.
Branch out after you’ve exhausted your network
It only makes sense to branch out when your network is exhausted. But now you also have a reputation and more capital—because you made some money and have been successfully investing in your network. Now you have reputation, capital and know-how.
Without those, it’s dangerous to start investing in spaces you don’t know, people you don’t know, and, most dangerously, deals you’re invited to by strangers. Because you can bet that if they’re inviting a stranger, they’ve already exhausted their network of close allies and comrades.