AngelConf – my notes from Angel Investing conference

By Steve Poland • March 5, 2009

My apologies for any typos, etc. These are some blurbs I made notes of from the AngelConf conference put on by Paul Graham of Y Combinator. It’s available apparently as a ‘clip’ at Justin.TV here.

Ron Conway
• “have to have a portfolio, to have hits”
• “it’s not fun; it’s hugely interesting to talk to entrepreneurs who literally in front of you are telling you the future”.
• “spend 25% of my time in philanthropy”
• Need to be very dedicated to angel investing.
• Don’t invest in someone you don’t really like; life is too short. Have personal chemistry.
• You have to have value to add; you won’t get into the great deals [they have allocation problems; you have to fight your way in].
• Be patient;
• I recommend investing in a bunch of companies. [he invests 50k-100k]
• 10k-25k to get your feet wet.
• 1/3 of them will go out of business. Failure is part of learning process.
• Pick a sector you like; I like sectors that are Internet and have massive growth. Invest in several companies in that sector.
• Great deal flow (respect for entrepreneurs to get the access) and due diligence = great portfolio.
• Build a referral network of entrepreneurs that you can invest in with, etc.
• Reputation is very important – screw 1 entrepreneur, you’re screwed.
• As lead angel, you need to take the entrepreneur to Sand Hill Road and you help them get funded.

Dave McClure
• 13 deals personally in 4 years.
• Plan to screw up the first 10 investments.
• If goal is making money, this isn’t your thing.
• How does an entrepreneur define success

Paul Bucheit
• No signing of an NDA; if an entrepreneur requests one, they probably don’t have a clue.
• Assume the money you invest is gone; it’s like lottery tickets.

Andrea Zurich
• SGVentures
• Do I like the product? Would I be proud to speak about it at thanksgiving or to my parents?
• Can you explain it quickly?

Page Mailliard [Page Mailliard is a partner at Wilson Sonsini Goodrich & Rosati, where she specializes in corporate, securities, and venture capital law.]
• Who are clients? Do they have contracts with them?
• Is there a provision on change of control they can terminate?

Paul Graham
• You buy either stock [shares like preferred stock] or convertible debt; either works; don’t worry about it.
• Pick the right startups. When they talk about you, it’ll be, “He invested in Google!”
• You care about valuation and amount of money you put in.
• Dilution occurs next.
• Invest 10k – 2mm; how much? If startup raising 1mm, 50k is OK – 10k isn’t worth the work for them.
• Valuation – no rational way; no answer.
• If the idea doesn’t seem a bit crazy, then you’re probably too late to the deal. It’s ok for it to be a bit crazy.

Naval Ravikant
• Need tons of deal flow
• Use time efficiently; yours, the entrepreneurs.
• Deals from social friends;
• High quality deals come from other angels [they are putting their money in it].
• Don’t forward deals to other investors unless you’re investing in it.
• What’s your brand as an angel? [I’m the VentureHacks guy; I’m of Y Combinator]
• 2-3 founders.
• Don’t take board seats – waste of time.
• Very risky business

Michael Dearing
• Orbiting the giant hairball – book.

Mike Maples Jr.
• #12 – minimum number for statistical diversification.
• Met with 100 investors in 100 days
• $25k per quarter; 1 deal per quarter.
• Lived in Austin; moved to valley 4 years ago.
• If the startup cant be one of the big billion dollar businesses, not worthy of your time. We want the big deals in the end, be apart of the excitement.
• Book by ‘talo’ – ‘fooled by randomness’

Ariel Poler
• Balance your time – might spend 1 day a week with a company at first; then every other week; now at 500 people, hardly ever.
• Once a quarter, organize a lunch for 4-5 entrepreneurs; choose a topic. Get them to help one another.
• Connecting entrepreneurs with the right people is a big piece.

Panel of Dave Hornik and Greg Mcadoo from Sequoia:
• Must tell the story efficiently as an entrepreneur
• Big business opportunity.

Aydin Senkut
• Don’t do convertibles.
• “how do you differentiate and add value to something?”, so that others can talk about you and recommend you.
• You need to be a connector; you need to meet people 1on1, and that’s how you meet really great people and companies.
• 40 investments; 4 exits.

Jeff Clavier
• 32 investments in 18 months; 250k each.
• Big weights: founders, market scale, etc. Eventually scale tips.
• Not being sure it’s a sure shot, but taking the shot anyway.
• 74 deals in one year.
• Don’t write the first check; don’t lead the investments as a new angel. [you need a syndicate of others that’ll join you]
• Be content dealing with shit 24 hours a day.

Jim Young
• Why should a good entrepreneur pick you?
• There’s more money, than possible investments.
• Takes less money now to do a startup.
• Will the company benefit from your advice? [not money] If no, it’s likely a bad deal.
• Contacts, experience, advice.
• Only invest in things you know about, otherwise you’re a spectator buying a lottery ticket.
• Find people to invest with.
• “why you want to do this?”
• You’re at bleeding edge of technologies.
• Very very high chance you’ll never see the money back.

Michael Arrington
• It’s “co-opetition” – they are all competitors in the crowd, but helping you to become another new competitor.
• “More than a hobby, than a job”
• If you enjoy doing what you do, you’ll have better access to deals, and firmer friendships with other investors.
• Have to be nice.
• As an angel, you’re shepherding the entrepreneur through a process.

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Comments

11 Responses to “AngelConf – my notes from Angel Investing conference”

Daniel Brusilovsky on March 5th, 2009 11:56 pm (perm link)

I could not agree more with what Paul Bucheit said regarding NDA’s. They are just a waste of paper personally.
wayne lambright on March 6th, 2009 3:02 am (perm link)

Naval your a hypocrite. You just don’t have money or the balls to invest if you did you would have invested in my Tastyr or Imagedepsoit both of which we spoke about on two different occasions, You sent me the first email fishing for investment opportunity, you’re a deal slut, where are your deals publicly. Man up.
Jonathan Volk on March 6th, 2009 2:59 pm (perm link)

Wow! Lots of great tips!

Thanks for writing the notes!

~JV
Icarus but with real wings: Silicon Valley angels still flying towards opportunities » VentureBeat on March 6th, 2009 7:30 pm (perm link)

[...] check out the recorded video or the quotes below, as excerpted from the post by Hornick and from serial entrepreneur/investor Steve Poland’s coverage. VentureBeat investor Aydin Senkut, who spoke at the event, has a post with his takeaways [...]
Thomas Lukasik on March 6th, 2009 10:51 pm (perm link)

Thanks, Steve.. that is a very useful, interesting and incredibly informative post.

I feel as if I’ve just finished reading a book on Angel Investors!

You’ve presented a surprising and vivid picture of the diversity of attitudes and behaviors within a group that one might otherwise have thought would (individually) think more consistently or (collectively) share a more common set of guidelines or rules.

TL
links for 2009-03-08 « Blarney Fellow on March 8th, 2009 8:09 pm (perm link)

[...] » AngelConf – my notes from Angel Investing conference – By Steve Poland – web startup ideas and br… (tags: business startup) Possibly related posts: (automatically generated)My daily readings 10/17/2008test 03/31/2008test 02/17/2008Microsoft offers second app for iPhone [...]
Gweedo on March 10th, 2009 1:25 pm (perm link)

The reason they won’t sign NDA’s is that they are gossips. Everytime I visit the bay area within a day or to I’m up on the status of all the startups, I know things I shouldn’t know, I know whose going under, whose got what technology, etc. Often, apparently, before the CEOs of these companies know, because VC firms will tell each other things they don’t have the guts to tell the CEO!

Ever notice how anything that would protect a company from vultures, like NDAs, is considered an indicator that you’re clueless? And of course, you don’t want to be clueless, so you don’t stand up for yourself.

Granted, an NDA isn’t really that useful because even WITH an NDA these people can’t be trusted.

But the entire funding culture in the bay area, at least, is designed to separate you from your equity for little or no money.
Gweedo on March 10th, 2009 1:27 pm (perm link)

“If the startup cant be one of the big billion dollar businesses, not worthy of your time. We want the big deals in the end, be apart of the excitement.”

I bet every single one of the companies that are actually onto something like this, he will pass on, because he doesn’t understand it .

Notice also that this exhibits the standard investor attitude– “We want you to bet it all on a longshot”.

They don’t want *businesses* they want google, and so your company that could be a $100M business in 5 years will be forced to try to be a $1B in 3 years.

And when it fails, your effort is wasted, but they don’t care– they’ve got another dozen lottery tickets to get their gambling fix with.
Gweedo on March 10th, 2009 1:32 pm (perm link)

“Will the company benefit from your advice?”

Any investor who thinks he’s there to give advice, is one to avoid. One whose capable that you might choose to run questions by would be ok, but so many of these investors I meet think that they know a whole lot more than they actually do, and the experience is, they give really terrible advice– company destroying advice.

And if you don’t follow their bad advice? They try to oust you and replace you with their guy, who will follow their advice and run the company into the ground.

Policy should be: MONEY ONLY.

No ratcheting either– every investor is equal. No board seats. No advice.

If you think we can’t survive without your advice, don’t invest. IF you invest, then STFU unless we ask for your advice.
Capital Booster » Archives du Blog » AngelConf blurbs on March 10th, 2009 7:12 pm (perm link)

[...] if you want some more… [...]
chris mccann on March 17th, 2009 7:21 pm (perm link)

Here is the AngelConf video from Justin.tv including a transcript and notable quotes I wrote up from all the speakers check it out http://tinyurl.com/d8tpzd