Sam and Shaan discuss angel investing as a career and lifestyle strategy. Shaan breaks down the economics of his rolling fund — expected returns, carry math, and why he’s not going all-in — while both hosts make the case that early-stage investing is uniquely valuable not just for money, but as a vehicle for learning, network-building, and cross-pollinating ideas back into your own business.
Speakers: Sam Parr (host), Shaan Puri (host)
Angel Investing as a Stream, Not a Hunt [00:00:00]
Sam: Shaan, do you think angel investing is going to be the future for you? Do you think this is going to be your full-time job?
Shaan: Angel investing, for me, is like just dipping a net into a stream of flowing water with a bunch of fish inside. I’m not taking a boat out, spending an afternoon out in the water fishing and trying to catch something. In front of my house there’s this stream with fish going through, and if I just put a net in, I can catch some great fish. That’s what angel investing is for me.
And that’s what it’s been, basically, for the last six or seven years — where my own friends, my own personal network, or things that come inbound through getting more popular on Twitter and the podcast lead me to some opportunities. People want you in their deals, and you get to see deals early.
Before, I used to sit on the sideline. I watched a bunch of those companies get big. Then I asked a rich friend, “Hey, if I give you a good deal that you invest in, can I get a piece of the carry?” He said yeah — that’s how I got into Lambda School, which is already kind of like a big winner. And then as soon as I did that, I was like, man, instead of getting a piece of this guy’s carry, why can’t I just do this myself?
So as I got a little more money, I started doing it myself. And then the rolling fund just lets me do it on steroids, where I can just do more.
Running the Return Math [00:02:30]
Sam: What percentage of your net worth — well, let’s say you invest four million dollars a year for eight years. How much income do you think you’re going to make? Two hundred grand a year? Millions?
Shaan: So a good fund is going to roughly 3x its money over a seven-to-ten-year period. Great will be 5x or more. And if you caught an Uber or a Coinbase, you know, you’re laughing — your returns are going to be super skewed by that one company that’s now worth tens of billions.
But let’s take the most conservative version of winning. Let’s say I triple the money. Over the next three years, I’m going to deploy 12 million dollars. If I 3x that, that’s 36 million dollars that comes back into the fund after returning capital. So a total of 148 million dollars. On that 36 million, that’s the profit — I get to keep 20% of the carry. That’s about seven million dollars. Roughly seven million dollars over an eight-to-ten-year time span.
And that’s why I don’t go all-in on it. Because I can make way more money building a business in that same amount of time.
Sam: Wait — you said seven million. That’s a significant amount of money. That’s a million dollars a year. So you’re thinking this will make you a million dollars a year for seven years, starting in seven years?
Shaan: No, it’s more like a lump sum that you get in seven years. I get nothing for seven years, and then as many of these companies die, some of them do okay, and a few winners emerge — eventually you reach a steady state where you keep going and you’re making a million a year.
Sam: Yeah. And what’s interesting is where you scale — when you start doing 20 million, 50 million, 100 million a year. Eventually that’s why you could see yourself hiring investment professionals. You could have a whole fund. Has any year paid out yet?
Shaan: Yeah, yeah. But I think there’s another important point — it’s not just about money. It’s about well-being. Investing has been a vehicle for learning and for connecting to really interesting people and for getting to go on these fun adventures where I’m learning about the latest things in crypto or the latest things in e-commerce, connecting dots.
And the other thing it’s done is it’s made my primary businesses far more successful, because I’m borrowing ideas. Like, oh wow, look how this e-commerce company does performance marketing. I’d never even heard of performance marketing until I invested in one. Then I brought it back to a newsletter company and thought, oh, we can buy Facebook ads and Google ads like this ecom company — like Warby Parker or whatever. I’m cross-pollinating ideas.
Does Investing Distract You? [00:06:10]
Sam: But does it distract you from your main job?
Shaan: That’s where I think it was smart that this other guy hired some people, and how I’m hiring some people now — because then you can be in two places at once. But you just have to take the risk of hiring someone at 150-200k.
Sam: Well, you don’t have to. I mean, I haven’t done that and I’ve still made a bunch of investments. But I’ve missed a lot of investments because of that very reason — because I was like, hey, I’m really laser focused on the business right now, so I’m going to look at a deal every three weeks instead of every day, and I’m just going to miss a lot of stuff.
You know, I missed — one of the CEOs of my company invested 150 grand in a crypto hedge fund, and he’s up to almost six million dollars of value. I missed that because I was just like, I’m busy, I can’t look at that right now.
Shaan: That’s totally true. And by the way, most of the time when people say “oh, it’s not about the money, it’s about the journey, it’s about the learning, it’s about the people you meet” — that’s almost always the tell that it actually is about the money, because if you took the money out, they wouldn’t do any of it.
But this is actually one of the rare things where that’s actually true. Because I was doing all these things — I was meeting founders, helping them with their businesses, getting excited and digging into new spaces, keeping a fantasy portfolio to learn — like, I’m tracking these spaces, I think these are going to be big, let me observe their growth tactics from the outside and try to see what’s working.
I was literally doing all those things for fun before I ever put a dollar in. I was subscribed to like 50 different angel syndicates because you didn’t have to put money in but you could get the investment memo. I was that annoying guy that was subscribed and never invested. But it was because I genuinely wanted to learn and wanted to meet these founders.
So this is one of the rare occasions where when you hear that, it’s not BS. In this case, I’m 100% on board.
Angel Investing as Entrepreneurial Steam Release [00:09:20]
Sam: Which is exactly how I think about it too. My other friend described it as a great way to just blow off some entrepreneurial steam. Because if you’re operating a business, all of a sudden you start hearing about vertical farming and crypto and NFTs and you learn about all this stuff. And part of you is like, should I be doing that? What the hell am I doing with this stupid real estate newsletter? I should be going out there building a ride-sharing company or whatever.
Investing gives you a way to get the high and dabble in that and have some financial upside, but it lets you stay focused as an entrepreneur. So that’s the weird psychological thing that comes from investing — aside from the learning, aside from the good friends you make and the network you build, you literally just get a release. And then you can go back to doing your thing.
Rolling Fund vs. Deal-by-Deal [00:10:45]
Sam: But Shaan, are you — the reason I did the syndicate thing, I’m doing it with Joe, and I bet my own money — it’s kind of like a rolling fund but it’s not. It’s only deal-by-deal. Whereas you have money you can deploy a little more freely. I didn’t do the rolling fund thing because I didn’t want to have customers I have to appease and talk to on a regular basis. I didn’t want a job. Do you feel like you now have a job because you have a hundred people who have given you money?
Shaan: No — I write a once-a-month update. And I like doing it anyway. It’s just: here are the new companies we invested in, here’s the conviction at the time I made the investment, here’s what I believed, here’s why I invested. I’d do that for my own documentation anyway. For five years from now, that’s an important thing for me. In this case, I just publish it to my investors.
And there was a little bit early on of actually getting the investors on board, but I took no meetings, I took no phone calls. I just said, here’s the link. And because of this podcast, because of my newsletter, because of my own track record and the deck I made — that was enough to raise the money. I know that’s not something everybody can do. Most people would have to knock on a bunch of doors and really sell this thing.
But the other thing you mentioned: for you, if you get busy and just don’t care about angel investing, you could just not do a deal for the next six months — no sweat. Whereas for me, I actually need to deploy this money. There’s a certain amount of startup pitches I need to take every month in order to be making great investments. I can’t just sit on my hands and decide I want to go on vacation or go super heads-down in my own business. I’ve taken on a fiduciary obligation to deploy these people’s cash.
Sam: Right.
Shaan: What I thought would be hard — I used to invest like 50k or 100k a quarter max, and now I have to deploy a million dollars a quarter. But I actually run out within the first two months of every quarter. So it’s not been an issue, because my check sizes are bigger. And once people know you’re investing, your friends send you deals. They’re like, hey, I’m doing this, this is a good deal — and you look at it and all the fundamentals make sense, there are other good co-investors, you didn’t even have to go find it. It came to you. That’s the best thing that happens.
How Much of Your Own Money to Put In [00:14:30]
Sam: What percentage of your liquid net worth did you allocate before this? Because now with the rolling fund, you’re investing OPM — other people’s money. You only put a small amount of your own money in.
Shaan: Before this, I was doing roughly 200-250k a year of my own money. I don’t remember exactly what that was as a percentage of my liquid net worth at that time. It was kind of substantial. It mattered to me — but also, going in, I knew this money was locked up for a long time. I can’t use it to go buy a vacation.
Sam: Over or under 10-15%? Was it more than 10%?
Shaan: I’d have to think about it. I don’t know how much money I had at the time because I’ve made more money in the last couple years than I did back then.
What I do remember is thinking when I very first started: I need about 300,000 of a bankroll to even do this — to have enough of a portfolio to give myself a shot. Because with angel investing, so many of your deals are going to be losers. I thought, okay, I need 20 to 30 bets, I need at least 300-500k of bankroll to do this.
At the very beginning I didn’t have that. That would have been an irresponsible amount of money for me — at the time, maybe half the money I had. So I said, okay, I can’t do that. That’s why I started talking to other people: hey, if I scout for you, can I get carry and you put up the capital? That’s how I got started.
Angel Investing as Your MBA [00:17:00]
Sam: I really like this compared to buying public equities when you have very little money — because of the learning and the connections and the benefit it can have on your own business. I was betting a high percentage of my money initially, and it really helped me. Rather than just buying Coca-Cola or Walmart or some publicly traded company where I learn nothing, meet no one, and it doesn’t really help the day-to-day of my newsletter business or community business — these investments were actually benefiting my ability to make money in my day job.
So when you’re small, it’s actually not a terrible idea — and in fact a better idea — to angel invest. I read a Tim Ferriss piece a while back, written before he started investing, where he basically said: I’m just going to fund my own MBA. If I was going to spend 200k on business school, I think I can learn more investing that 200k in a mix of public stocks and private startups.
When I read that I was like, absolutely. I will build a network, I will build business knowledge, I’ll have skin in the game, and this might actually become profitable. And the worst case scenario — rather than going to get my MBA at Wichita State — why would I not do this?
Shaan: Right.
Sam: So once I read that, that’s how I started thinking about it. I’m going to put 120k in — that’s basically business school. Let me just get going.
We actually did something similar with Summit, not just with investing. We lost 25,000 on the first summit we held, and various private summits in between where we’d lose 20 grand, 10 grand — and I always saw that as an investment in my network or my learning.
The same thing came up when I was talking to a guy the other day about coaching. He was debating whether it was worth the monthly amount, and he had 400 grand in savings. I was like, well, what do you want to do with the 400 grand? He wanted to put it into Robinhood and buy stock. And I’m thinking: man, if he knew about coaching, consulting, or even online courses — like a writing course from someone good — those things are so valuable. So worth the 3k here, 5k there.
If you have a little bit of money saved, I think that’s so much better than trying to make the index return when you don’t have that much money.
Shaan: Somebody said to me: concentrate to get rich, diversify to stay rich. When you don’t have much money, put your money into building yourself — building your learning, building your network. And then later, when you’re much richer, diversify and have a real portfolio allocation. That’s the right sequence.