It Took This Angel Investing Millionaire 4 Years to Learn This Lesson

Episode of My First Million with Sam Parr and Shaan Puri.

Transcript

Note: This transcript was auto-generated from YouTube captions. It may contain errors and lacks speaker identification. A full Gemini audio transcript will replace this.

Kind: captions Language: en out of just that group of friends I think there were probably two or three companies that have reached over five hundred million dollars in valuation and I would have been investing when they were like under five all right let’s talk about angel investing so my angel investing life started truly about six years ago seven years ago when I first moved to San Francisco so I moved to San Francisco I get a job as a product manager at a and an ideal lab called monkey inferno so p.m. kind of a boring job p.m. but not at a boring company this was a very interesting company was a company that builds companies an idea lab and I was the only product manager there was only product guy everybody else was an engineer and I’m making $120,000ayearandsoIdo{n}^{\prime }tthinkofmyselflikeaninvestorright120klivinginSanFranciscopayingcaliforniataxesyo{u}^{\prime }renotlikerollingandmoneyatallIhadalittlebitofmoneysavedupfrommypreviouscompanybutagainIdid{n}^{\prime }tthinkofmyselfinasinvestorssothefirstthingwasthefirstlessonofangelinvestingwasthinkofyourselfasaninvestorbecausethosefirstthreeorfouryearsIwasinSanFranciscoIhadtheopportunityIwasdoingmasterminddinnersIwasorganizingdinnersandmyfriendswerethefoundersofothercompaniesandyouknowifIhadjuststoppedworkingonmycompanyifIhadstoppedquitmyjobandallIdidwasjustwrite20kcheckstoallofthosefriendsitmighthavebeenImighthaveneeded250kbutIwouldhaveturnedthatintoyouknowatleastfivemilliondollarsjustoffthesuccessofthosefriendscompaniesandIwashelpingthemandIthoughtalotoftheirideasweregoodIthoughtalotofthemwouldsucceedIrememberItalkedtothefoundersofcalmearlyonwhencalmwasstrugglingtheycould{n}^{\prime }tevenraisetheirnextroundyoudid{n}^{\prime }tknowwhatwasgonnahappenitwasjustkindofAlextoilingawayandIrememberthinkingheythisgu{y}^{\prime }slikereallycommittedtothisandthisgu{y}^{\prime }sreallycreativeandIthinkh{e}^{\prime }srightabouttheworldlikeIthinkh{e}^{\prime }srightthatalotofpeoplewillwantthisalotofpeoplewillwanttohavemorecalmintheirlifeandIthinkpeopleorpeoplewillmeditateandyouknowtherewasaobviouslyitwas{n}^{\prime }tclear-cutbutIwouldhavebeenonthatcompanyandIwouldhavebeenonsixorseventhosecompaniesandseveralofthemdidreallywellcalmnowasyouknowamulti-billiondollarcompanysooutofjustthatgroupoffriendsIthinktherewereprobablytwoorthreecompaniesthathavereachedoverfivehundredmilliondollarsinvaluationandIwouldhavebeeninvestingwhentheywerelikeunderfivesothelessonIlearnedfouryearslaterwaswhythehellwasiinvestingtheseguyscompaniesIbelievedinthemIhadaccesstothemIjustdid{n}^{\prime }tthinkofmyselfinhisinvestortheexcuseIgavemyselfwasIdid{n}^{\prime }thavethecapitalbuttherealtherealitywasifyouarecreativeenoughifyo{u}^{\prime }reresourcefulenoughifyo{u}^{\prime }repersuasiveenoughifyo{u}^{\prime }redeterminedenoughyoucangetcapitalyoucangetanyresourceyouneedandsothatactuallybringsmetomyfirstangelinvestmentsothenextcompanyIgotreallyexcitedaboutfastforwardfourorfiveyears{I}^{\prime }mstilldo{n}^{\prime }tyouknowhaveyouknowmillionsofdollarsinthebanktogowritethesechecksandIseethiscompanycalledlambdaschoolandIhadbeenthinkingaboutaproductlikethisoraprojectlikethistogodomyselfandwhenIsawitIwaslikewhoathisgu{y}^{\prime }sdoingamuchbetterversionofwhatIwasthinkingmightmightworkwha{t}^{\prime }ssomethingIthoughtaboutdoingsoIstartedcallingtheguystarttalkingtohimandItoldhimyouknowIwanttoinvestinyourcompanywhichwastruenotalieIdidoneinvestinhiscompanybutIdid{n}^{\prime }ttellhim{I}^{\prime }veneverinvestedinanycompanysoIdefinitelywithheldthatandIsaidtellmeaboutyourcompanyIwanttoinvestandhestartedsentyouknowsharinghisslidedecksharingthematerialsand{I}^{\prime }mlikeyouknowIhavetofindawaytoinvestthiscompanyIthoughttomyselfokayIneedtoinvest25kinthiscompanyokaynoproblemIcansellastockthatIownorIcouldsayIcouldjusttakesomeofmysavingsanddothisonecompanywasnevergonnabeaproblembutwithangelinvestingyouneedaportfolioofcompaniesbecauseyo{u}^{\prime }reinvestinginearly-stagestartupsthisisextremelyhighriskoffailuresoinaportfolioof10companiesyouwouldexpectsomekindofdistributionwhereyo{u}^{\prime }regonnagetfourorfiveofthecompaniestogotozeroyouknowtwoorthreeofthecompaniestoreturnsomewherebetween1and3xandthenhopefullyyouknowyouendupwithoneortwocompaniesthatactuallybreakoutanddo10xplusideallyyougettosomethingthatdoesathousandXplusor10,000XplusthosearetheearlyinvestorsinuberforexamplesoanywaysIalwaysknewIcouldinvestinonecompanybutIneveryouneedabout30betstoreallybeyouknowanangelinvestortohaveapoorenoughofaportfoliowegiveyourselfachancetosucceedsoyouknowIwassittingtheredoingthemathandIsaidifIneedtoinvest$25,000 in 30 companies I need $750,000 I didn’t have that so that’s why I didn’t think of myself as an investor but what I did was very smart I kind of give myself credit on this one when I knew I want to invest in lambda school I said okay how do I get the money to invest in this and so I talked to a friend and I said who I knew invest and I said hey at this company that I think is really great I want to introduce you to them and in general I see a bunch of companies that are really interesting and I know you like to invest do you want to do a deal where you know I can sort of be a scout I can be a sort of a venture partner an entrepreneur who can help you with your investments and we can set up a deal so here’s what you know the first deal we set up was cool any deal we invest in I get 10% carry meaning I don’t have to put any capital in I take zero financial risk and I get 10% of the upside after he’s paid back his investment so it’s not huge returns right like Sequoia Scouts Sequoia is one of the biggest venture capital firms they had a scout program and they gave 50% to their scouts you know they were extremely extremely generous or 45% something like that so this wasn’t that but then again Sequoia didn’t pick me they didn’t even know who the hell I was so I took what I could get and I realized in order to get in to get companies if you talk to one company they want and they usually want to know what other companies have you invested in and so I knew I needed to start building a portfolio of labels so a bunch of logos that I could point to and say yep I invested in that company I invested in that company and that company you would be in good company if you were with those companies right that’s the core idea so I said let me start building this portfolio this guy’s willing to put up all the cash I get a piece of the upside let’s do it so we wrote the check into lambda school and I’m very grateful to him for you know bankrolling me in that and I think it was a you know fair enough deal so we invested when it was you know it was still a pretty expensive deal because by the time I organized this the valuation had gone up about three x’s so I lost a 3x returned just in the time it took me to to get you know sort of a backer and on the deal if it was just my own money and I could have invested after a first phone call I would have but anyways it’s gone up about ten times in value since then it’s that that investment which is illiquid but that’s the sort of paper valuation of that company today so that was the first dip in my feet in the water and I said alright that was good and I made a deal with myself which is cool I’m gonna try to invest in about five to ten companies per year this is what I might my goal was I said but you know I think five is the right sweet spot and unless I’m you know if I have free time I’ll go to ten a year but I’ll do five a year and whether it’s my own money or other people’s money now I’m thinking of myself in his invent as an investor so that’d be the first thing I would say to you guys is if you ever want to invest if you ever want to be an angel investor and play this extremely high-risk high-reward game of startup investing the the number one advice I would give to you is don’t wait till you’re rich to do it because at that point you know the financial returns it’ll just be a part of a broader portfolio it’s not gonna be that exciting but if you really want to do this I start thinking of yourself as an investor from day one and find ways to access the capital there are ton of people out there with capital myself included who would love for you to be bringing them deal flow and would happily give you carry on any deal that they invest in I remember there was a guy named Suroosh who is a 13 year old kid living in Canada and he used to use our product we built this website called blab it’s like kind of this zoom type of product he used to get blab all the time and he was like he came to me and he said hey I want to I don’t remember what our arrangement was but basically I told him I said you want to learn about this stuff I want you to go scout out three companies a week email me the best one you know the best one that you saw and why you think it would be a good investment why you think would be a bad investment in your kind of overall recommendation and one of those companies now several years later he’s I think 20 years old now so seven years later the very first company he sent me is a company called ply board that just raise money at a 1.1 billion dollar valuation he brought that email back up to me emailed me again being like hey why didn’t you invest in this thing I told you to I was like I know you’re 13 I didn’t believe you but yet there’s a bunch of examples like that where you can bring deals to other people and if they invest you can get karey and you could bring it to multiple people so you don’t have to be exclusive with any one person you could say great these five people all agree that if I bring them a great deal they’ll give me a slice to the upside great you could you could do that with five five different more established investors in any given time okay enough on that [Music] [Applause]