Do You Believe in Angels?

Dear Early Investor,

Chinese company Alibaba is enjoying its last days as a private company. And why not? It’s expected to be the largest tech IPO ever. It could raise as much as $15 billion at a valuation of up to $200 billion.

So who won? Who lost?

Who knew?

The 18 Chinese individuals who founded Alibaba back in 1999 were the biggest winners. They couldn’t have dreamed of a better outcome.

Japan’s SoftBank has a 37% share. Count it as a huge winner too.

As for who knew, I for one didn’t see Alibaba growing this big. But I’ve liked Alibaba for a very long time, since I first went on its site about a dozen years ago.

At the time, I was in the import-export business and looking for construction glass. I assumed the cheapest suppliers would be from China. So I thought it would be a good time to use a small and unknown Chinese site called Alibaba.

First off, the site was bigger than I thought. And much to my surprise, I found three price quotes from Vietnam that were lower than China’s. So I sent one of my people to Vietnam to visit the companies and get shipment dates. All three suppliers were legit and gave us compelling offers.

Right there and then I wanted to invest in Alibaba, but I didn’t. Or, more to the point, I couldn’t.

Alibaba was a private Chinese company. Its shares were hard to come by and I was far too busy with my international business dealings to figure out how to get my hands on them.

So I passed. Among my regrets (and I’ve got a mansion full), this one is a doozy.

If I knew then what I know now, I would have given Mr. Tim Ferriss a call. He’s an angel investor with a Midas touch, having carved out early equity stakes in Facebook, Twitter, Shopify, Digg, Posterous and a dozen other young but fast-growing companies.

Another company he invested in very early? Alibaba.

Yahoo is getting all kinds of credit for its 24% stake in Alibaba. In the last 12 months, its shares have risen almost 60% despite poor revenue growth. In fact, the web portal posted its first revenue growth in more than a year last week when it reported on its first quarter’s performance.

The reason its shares have done so well?

Alibaba. Yahoo is the other big winner.

You Want a Piece of Alibaba?

I heard about a dozen times last week that if you want a piece of Alibaba, Yahoo is the only way to do it.

And every time I heard this piece of advice, it made my blood boil. How much more Yahoo’s shares will grow after it sells 40% of its stake in Alibaba is anybody’s guess.

It’s a pretty ridiculous way to play a growth-stage pre-IPO company.

Tim obviously knows what he’s doing. Wouldn’t it make more sense to invest along with him in the next Alibaba or Facebook or Twitter?

Or maybe you’d prefer Ben Davenport?

I doubt you’ve heard of him. But Ben is a remarkable technologist and entrepreneur. He helped build Google’s AdSense. And before that, MSN Explorer. He’s also a software engineer at Facebook.

And his portfolio isn’t too shabby either. He’s an early investor in KAYAK and BitPay (a PayPal for Bitcoin). He also founded a startup called Beluga. You’ve never heard of it because it was only around for eight months. It was promptly sold to Facebook, where it began life as the company’s “Facebook Messenger.”

If Ben doesn’t fit the bill, how about Elad Gil?

He worked at Google for many years. His startup, MixerLabs, was bought by Twitter, where he became vice president of corporate strategies. His portfolio of startups makes your mouth water: Pinterest, Airbnb, Square, Optimizely and Zenefits are just a few of his star companies in the making.

As it happens, these three investors/entrepreneurs have run syndicates on the AngelList site. If you don’t know what a syndicate is, read one of our March articles that explains it here.

You Can Believe in These High-Flying Angels

You can wait to join one of their next syndicates.

But AngelList is now gift wrapping an even more enticing offer.

It’s a fund that lets you invest right alongside all three investors – Tim, Ben and Elad – at the same time. You don’t have to choose among them. And you can invest just a fraction of the $200,000 the fund is giving to its high-flying angels when they want to add a startup to their portfolio.

Joining Tim, Ben and Elad are four more exceptional startup investors…

  • Gil Penchina. He earned $25 billion from investing early in 60 startups (including LinkedIn).
  • Mike Baker. He founded Enpocket in 2004, which was bought out by Nokia. He’s now president and CEO of DataXu, a startup that has raised more than $55 million.
  • Andrew Chen. He was an early investor in AngelList and Secret (raised $8.6 million in March) and was recently an entrepreneur-in-residence at Mohr Davidow Ventures (MDV), a Silicon Valley-based firm with $2 billion under management.
  • Joshua Schachter: He invested in Kickstarter, Square, Optimizely and MakerBot (sold to Stratasys last year for $403 million). He founded del.icio.us, a bookmark-sharing service that was bought by Yahoo. He also founded Tasty Labs, acquired by WalmartLabs last year. Recently, Joshua founded and heads GeoURL, a location-to-URL reverse directory.

The name of this fund is Maiden Lane. It’s backing them all.

The idea behind Maiden Lane isn’t really new. It follows the same principle that gave rise to the popular “hedge fund of hedge funds.” A hedge fund of hedge funds invests in best-performing hedge funds while providing instant diversification.

Likewise, this fund invests in the best-performing angels.

Think of your investment portfolio as a pyramid. The top 5% are your power hitters. Investing in startups is one way to hit a home run. But these angel investors also hit for power.

And putting 1% of your investable savings into them is a great way to tap into an investment pool made up of some of the best startup investors in the country.

  • Joe

    I enjoyed this article but am having trouble understanding what you mean. You said:
    It’s a fund that lets you invest right alongside all three investors – Tim, Ben and Elad – at the same time. You don’t have to choose among them. And you can invest just a fraction of the $200,000 the fund is giving to its high-flying angels when they want to add a startup to their portfolio.

    I went to the Maiden Lane website to get info but it says there is a $200K minimum Please explain the fraction of the $200K.
    Joe