Pre-IPO Profits

Top Tips From Six Years of Startup Investing

Top Tips From Six Years of Startup Investing
By Adam Sharp
Date March 9, 2021
Share

Iโ€™ve now been investing in startups for more than six years. And itโ€™s taken that long to prove concretely that what Iโ€™m doing is working. 

This is the frustrating โ€” yet rewarding โ€” truth of startup investing. It takes a very long time to see results. But I am now more convinced than ever that investing in a broad, diversified basket of startups is an excellent long-term allocation of capital. 

However, if I could go back and do it all over again, I would do things a bit differently. 

Keep Investment Amounts Uniform

First, I would try to invest roughly the same amount in every deal. There are a few huge duds that I invested too much in. Likewise, there are some huge winners that I only invested a few thousand dollars in. It all worked out in the end. But I think my results would have been better if I had invested equally in all the deals.

Part of the problem for me early on was that many deals had a minimum of $5,000 or $10,000, and others were $1,000. Due to the small check sizes I was writing, my results are pretty uneven. Now Iโ€™m investing a larger amount in the average deal โ€” and I expect it to pay dividends down the road.

Invest in Multi-Company Funds

Another lesson Iโ€™ve learned is that investing in funds โ€” such as AngelList Rolling funds, AngelList Y Combinator funds and FundersClub Y Combinator funds โ€” has produced excellent returns. These investments are made upfront, before you know what youโ€™re investing in. But as long as Iโ€™m backing a good investor, Iโ€™m more confident than ever investing โ€œblindly.โ€ 

When you invest in a fund, the manager gets the cash upfront. And they can put it to use as soon as they find a good deal. They donโ€™t have to set up a syndicate for each deal โ€” a process that can take months and excludes some very promising investments due to time constraints. 

Investing in multi-company funds has gotten me into amazing companies such as Cleartax, Shipbob and Deel. I expect these investments to return a 5x-to-10x multiple of the entire amount I put into the funds eventually. In the future, I plan to invest in the AngelList Access Fund (minimum is $50,000 per quarter). That gives you access to hundreds of startup investments with a single investment. And I believe itโ€™s the single most attractive investment opportunity I know of today. I hope to be able to time my investment into this fund with a major market downturn, when valuations will likely drop significantly. 

Online startup investing is still young. But from what Iโ€™ve seen, Iโ€™m more excited than ever for its future.

Top Posts on Early Investing