investing in a company with one founder. You will find you can establish filters, even one as simple as “Do what you love.”
7. There are many paths to success. You have to be very careful about taking your limited experience and trying to shoehorn your companies into it.
Joshua Schachter (Delicious, Yahoo, Google) on building intuition as an investor:
The important thing is to figure out how to build intuition. A bunch of rules that you are going to have to make up and follow. You can’t do due diligence on every single company, so you have to have some easy, top-level rules.
I don’t like deals for under a certain value. I’m terrified of the music business, because of the competitive nature of that industry. In video, I think everybody is going to have trouble outracing YouTube, so I stay away from that. I invested in a telephony company, because it’s illegal to force companies out of business there, which is the opposite from the music business.
You have to do at least 10 deals a year. You have to have diversification, because most companies don’t go big—what happens is some guy at Apple or Google or eBay or whatever falls in love and buys your company for $25 million. It’s very random, even if you have spectacular precision.
Learn to say no, and try to do clean, crisp nos. If the entrepreneur asks for a reason, and you give it, and they fix their business plan and say “Can I have my money now?” that’s not the kind of person you want.
Mike Maples (Floodgate Fund) on Thunder Lizards and builders versus buyers:
I have a particular frame of reference on the types of companies I look for. I call them Thunder Lizards. To me, finding Thunder Lizards is all there is. That’s what I am in it for—I’m addicted to the rush of when a company just takes off and surprises you on the upside. If we see a company that has Thunder Lizard potential, we say, “Let’s work on helping them to raise a certain amount,” and we fill it out with a bunch of awesome angels. I like to call these Ocean’s Eleven. We like to find a team of angels that will add substance to the company.
When I first started angel investing, I was a former washed-up enterprise software guy from Austin, Texas. So my first question was, how many deals should I be prepared to do before I get a hit? There are smart people who have told me that 12 is the minimum, so I said
