Shaan shares how his angel investing portfolio has taken off — from early multi-bagger wins to a more systematic approach deploying nearly $2M per quarter. He covers how to get into great deals (brand, relationships, themes), the Bezos long-term orientation principle, how neo-banking as a theme led to multiple investments, and why startup investing compounds differently than stocks or real estate. Sam and Shaan also debate whether the angel fund or the ecommerce business will ultimately make Shaan more money.
Speakers: Shaan Puri (host), Sam Parr (host)
Shaan’s Angel Investing Results [00:00:00]
Shaan: I started angel investing almost one year ago — well, I did it in five or eight companies personally before that. A couple of them turned out to be meaningful, like turning $20K into $300K, $400K, $500K. I’m like, holy — this is how it works. But it sucks for a while, right? You invest and you’re like, well, that money’s gone, and you don’t ever hear about them. And then, “Oh nice, it works.”
In some of those cases those are huge markups. In other cases I’m now experiencing two-, three-, and four-x markups and I’m like, that’s awesome. What would have happened if I’d invested at a $10 million valuation instead of $50 million?
Sam: I’ve noticed your angel investing is on a tear. Our friend Su Li just said — whatever, Shaan, what did he say?
Shaan: He was joking. He was like, “Oh, I got this new brilliant investment strategy — Shaan invests in something, then he tells me about it two weeks to two months later, and then I pay 10x the price for the same company.”
And that’s literally what’s happened in like six or eight deals now. I’ll tell him about a company or he’ll tell me about a company a few months later, I’m like “Oh yeah, I invested in that.” He’s like, “Awesome, can you make an intro?” I make the intro and the price has gone up dramatically.
How to Get Into Great Deals [00:05:00]
Sam: How are you getting such good deal flow? It’s amazing.
Shaan: The easy answer is — I do this podcast, so people come inbound. The bigger this podcast gets, the more people want you to invest. But there’s this great thing my buddy Vishal taught me: startups are the only asset class where even if you want in, you don’t just get in. The security selects you just as much as you’re selecting the security.
That one insight is pretty important. It basically means you need to build your brand and reputation so that people want you in deals. The best deals are super competitive to get into. And you want founders, when they’re first thinking of an idea, to reach out to you.
So for example — I did a great deal recently, and it’s so funny — you’re going to hate this. You’ve been talking about short-term rentals. Somebody came to me with a short-term rental startup idea because they thought I was you.
Sam: Why didn’t you say that to me?
Shaan: The subject line was “Last one in” — like, “Hey, I have the smallest bit of allocation left in this company called Hostfully. You’ll love it because it’s literally exactly what you’re doing. You should get in.”
What they’re doing is software for people who manage multiple Airbnbs. Not someone renting out one home — people who run multiple properties, but they’re not a traditional property manager who owns a 32-unit building. Just like a SaaS tool that makes your life way easier as the owner of multiple vacation rentals. They had a few million dollars in recurring revenue. The valuation was great. Founder was really impressive. I was like, yes.
And you’re over there building your short-term rental club, building this community — and I got the benefit because people thought I was you.
Sam: That is a piss-me-off answer. Whatever.
Shaan: Send me the company name, you can email her. But here are some of the real drivers of deal flow.
First is relationships. When I share deals with you, you share deals with me. My buddy Julian Shapiro shares some of the best deals — he’s very active, very consistent. I’d say 40 to 50% of the portfolio comes from relationships with friends who are experts in one niche. Like, we’ve been doing a bunch of sales person software, and that’s because we have a relationship with Craft Ventures — started by David Sacks, who built Yammer and sold it for a billion dollars. His fund specifically focuses on SaaS companies.
Sam: Dave sends you stuff?
Shaan: Not me directly — my partner Rameen, who runs my fund. He has a good relationship with someone at Craft, so they’re trading notes all the time. We’re getting into a lot of their deals. And I do the same with my relationships in India and Southeast Asia, because I think that’s where a lot of opportunity is and where I have the right relationships.
Investing by Theme [00:14:00]
Shaan: The other thing is themes. Once I decide that a theme is correct — worth betting on — I learned from Su Li the level of aggression you need: go invest in that company and then the five other companies adjacent to it.
For example, neo-banking. This started several years ago where people said, “Look, banks are something everybody uses but has super low customer satisfaction. Their apps sucked, their marketing sucked.” So people started building digital-first banks.
The best example is Nubank in Brazil. People are underbanked there. They started a new bank — about to go public. A friend of a friend led the investment; now it’s a $10 billion company with millions of customers in Brazil. The same thing happened in the UK with Revolut and Monzo.
So the idea of neo-banking: can you make a slick app for customers, digitally market to go get customers, and partner with an established bank under the hood? Basically, under the hood it’s BBVA, but the customer relationship is with a company that’s great at customer experience.
Once you decide that’s a good idea, you then look at it in every geography. So we looked at Ramp and Brex. Brex was the fastest-growing YC company in recent years. They give credit cards to startups, and they get a portion of every swipe — maybe 1.3% of the interchange fee. Do the math: a million people spending $1,000 a year, they’re keeping 1.3% on each transaction — that’s a fast-growing company.
We did that math on neo-banks: how much is a neo-bank customer worth? How much is a credit card customer worth? Then we went and did it in every niche we could think of. We invested in Koho, which is doing this for Canada. Then we invested in Pluto, which is doing this in the Middle East.
Sam: Did you reach out to them cold?
Shaan: Exactly — just DM on Twitter. “Hey, I’m a believer in this for X, Y, Z reason. What you’re doing looks super interesting, would love to invest.” Sometimes it comes inbound, sometimes you go search and destroy. It’s like: how do you go hunt for the best companies doing this in this geography or with this customer base?
Sam: Aren’t you out of money in the fund at this point?
Shaan: I raised more money. I was like, before, I thought: will I get a million dollars’ worth of good deals every quarter? I don’t want to invest in crap. And now I realized my earlier fund size was too low. We’re doing almost $2 million a quarter. We raised more money because we just had better deals.
Why Startup Investing Makes Sense [00:25:00]
Shaan: I hated startup investing for a while because I was like, is this the best use of time and money? It feels like an expensive hobby — I’m just spending money and not getting anything in return.
Then I realized two things.
One: Bezos has this quote — one of the biggest competitive advantages you can have is being long-term oriented. If you have a 10-year view and the other guy is trying to maximize quarterly earnings, you can make bets they can’t make. Amazon basically said: we’re willing to lose money short-term to provide two-day shipping instead of seven-day, to have more inventory, to go into more verticals. That turned out to be the magic — the biggest competitive advantage Amazon had was their ability to be long-term oriented.
If you’re competing against someone who needs a result in one year and you’re willing to get the result in five or ten years, you can make lower-priced bets that will pay off bigger over a longer time horizon. That’s how startup investing works. If you need money now, startup investing sucks. If you’re willing to play a 10-year game, this could be an awesome game.
Two: compounding. If I wanted to beat the stock market, I need to be smarter than everybody else about something — and that’s just really hard. But if my advantage comes from my reputation and my network, that compounds every year. The more deals I share with you, the more deals you share with me. The more companies I have that are winners, the easier it gets to get into the next winner. Founders come to me because they’ll say, “I saw you did these five Indian unicorns — I’m an India founder, you should invest in me.”
Compounding happens in startup investing in a way that doesn’t happen in the stock market or even in real estate.
Angel Fund vs. Ecommerce Business [00:33:00]
Sam: What do you think will earn you more — the ecommerce thing or angel investing?
Shaan: Probably the ecommerce thing, because I own the majority of that company. If it sells for $50 or $100 million, I own most of it. Whereas with the fund, we invest $100K, we own 0.8% of the startup, I personally have about 14% of the carry after sharing with Rameen and Ben and Zach. So you’re owning a slice of a slice of something big versus owning the majority of something that sells for a decent chunk.
It’s so much better financially to own the majority of something. Whenever people raise money, I’m like: are you sure? You might be able to sell this for $50 million and make more than if you raised money and sold for $500 million.
Sam: Yeah, exactly.
Shaan: But I have to operate that other business. Whereas startup investing is just a joy — you read about cool ideas, you meet awesome founders, you say yes, you write the check, and they go do the hard work. It’s just a different thing.
You think about what’s the floor of the fund — I think a 3.5x would be a solid outcome, though nothing to write home about. But with a small fund like ours, you could see a 15x or 20x. There are literally crypto small funds that have done 100x in the same time period. The ceiling is high, the floor is reasonable. That’s a good bet.