1. Angel investing is a stupid way to make money.
    • Most companies fail. Even those invested in by top VCs. It is a power law business. How VCs make money is spreading their bets, and then doubling down on the few winners using reserves.
    • And angels/ seed stage investors raise SPVs to do follow on rounds.
    • There are two things to consider when it comes to investing in startups: Upside maximisation and downside protection.
    • Upside maximisation:
      • Most VCs put in a pro rata clause in the term sheet so that they get the right to invest in follow on rounds.
      • They have access to reserves so that they can double down on winners.
      • They have access to sell secondaries.
    • Downside protection:
      • Late stage investors have liquidation preference.
      • An angel has none of this. A few one off bets will just lead to them burning money.
  2. So why do angel investors still put in money?
    • Vanity/ Status: The sweet Twitter and Linkedin bio update. Pointless when you can put a 1L check in a startup and get this status.
    • Money: They think they will make money. As I explained earlier, it is very hard.
    • Now let’s come to some underrated reasons. Reasons why someone should do angel investing.
    • Supporting the ecosystem: You get to invest and support smart founders and help build the future. I know it sounds like virtue signalling, but a lot of smart angels/ early stage VCs actually write checks because of it.
    • They have made their money and they want to give back.
    • Optionality: A lot of VCs end up joining their portfolio companies. You get access to insider info, build a relationship with the founders and if you see a rocket you can jump.The HOP at Craftsvilla, was an ex VC. So was the Head of Merchandise and the Head of Strategy. The team was full of ex VCs. A lot of friends I have in the VC industry are people who worked at VC firms and then became operators.
    • You get to live multiple lives. Let’s face it, even if you work for a startup, you are on a single path. Let’s say you work at Razorpay, one of the hottest tradfi companies, and you are a Director. You are on a rocketship, fintech is hot, you are compensated well, and you have status too. But the problem is that you can’t stop thinking about crypto. The easiest way to explore, is to invest very small checks (let’s say 1-2 L) in 5 web3 startups. If you are a smart operator, startups would love to have you, especially with your fintech experience. You are down, what? 1-2 months salary? It is nothing in the long run. Now you can spend your nights post work and weekends working with these founders, helping them, building a relationship. And once you have conviction, you can jump by either starting up or joining one of these portfolio companies. - Investing opens multiple futures: Maybe you just want to understand different industries. You can sign up on Angellist or Letsventure and start reading memos sent by various fund managers. For this you don’t even need to invest. Just sign up. Be a Shark Tank judge without investing. Now you can start writing your own thesis on various startups. Play fantasy VC. Turner Novak did this years back. As someone living in the middle of fucking nowhere, it was his way of building credibility. Do this If you want to get into VC, but don’t have money or credibility yet. - You can’t stop thinking about startups: A lot of my friends invest in startups because they want to do more. Spending time with founders on weekends gives them energy. And they want to learn about various industries without reading books. Think of it like a cheaper MBA. - Build reputation in a region: A friend who moved to SE Asia has invested in close to 5 startups. This has opened up a new network for him. He has access to far more contacts in the region than he would have normally. Intro’ing becomes easier. Without knowing your value add, people are reluctant to talk to you. Especially in a new region. His founders will now introduce my friend as ‘Hey meet X, operator in Y startup + an angel in my company’ to their other founder friends and VCs. This opens up the opportunity to invest in other companies. And more career opportunities. - Show skin in the game: Want to get into VC later in your career? Invest small checks. Show judgement and value you can add to portfolio companies. - Angel investing is a 10 years+ game: A friend of mine is investing 20% of his salary every year writing angel checks. And he plans to do it for 10 years. He would have a portfolio of 50-100 companies by the end of these 10 years. He is playing a long game.Don’t do this if you want to optimise on short term returns or just to update Linkedin.
  3. Now let’s come to why I have decided to do it. I have done only 3 deals till now. But I am talking to a lot of VCs and friends who angel invest.
    • I have been somewhat lucky with the startup game. No big exits, but some liquidity. I have lived with a scarcity mindset for a long long time. I was worried that I would lose my job, become homeless, and might have to move back with my parents. I have had the chance to invest in at least 5 companies started by friends that have raised follow on investing or are in the process of raising. But I said No. I let my money lie in a savings account yes, a fucking savings account because I kept thinking that I am living in a dream world. What I have got in life is too good to be true. The bubble will burst, there will be a great depression, and I will have to go back to my savings. This is nothing new. My friends whose offers to invest I declined know this.
    • Now that I have a number in the bank account that makes me sleep well at night (it is not that big, my needs are limited), I want to get away from my scarcity mindset.
    • I was talking to a friend recently who is a very smart VC and someone I have respected for years. We were talking about mindset and he told me something illuminating. While I am always default No, think ways something can fail, he is the extreme opposite. He always thinks “It will work bhai, why won’t it work?” He is an eternal optimist. A real one. Not performing-on-Twitter-to-sell-shitcoins optimist. He is the same person who told me years back that his life is like Forest Gump jumping from one interesting opportunity to another, while I do Pros and Cons of going to the bathroom to pee vs waiting another 15 mins. (Okay, last bit I added, he did not say that.) So what I am saying is that I want change my mindset from ‘holy shit, this is the end’ to ‘wagmi’.
    • I don’t have to worry about deals. I get enough inbounds already. If I had only invested in my friends, I would have had good markups already. Yes, I am privileged and lucky to know many smart people. And I should take advantage of it.
    • And my founder friends will be happy. They have been asking me to invest for years.
    • I want to put my money where my mouth is. Show some skin in the game. Yes, my check sizes will be small. I am still risk averse. And yes, my friends don’t even need my money, but I want to show them my support beyond reviewing pitch docs and giving product gyaan.
    • What is the point of me reading 100 books a year, bookmarking 10000 blogposts, listening to a dozen investing podcasts a week, if I just read and listen and not do anything.
    • I have worked on enterprise bots/secure communication, ad tech, e-commerce, messaging/ productivity, and now mobility. In India and now in SE Asia. B2B and B2C.
    • I already help so many founders. Spend most weekends doing that. Investing seems like a natural extension.
    • I have worked in both Product and Growth. So I can add value to founders. I know I mostly shitpost nowadays and don’t write about work enough, but in the last 3 years I have had the chance to see my company grow 10X.
    • I lead growth and expansion for a BU that still does 100s of millions of transactions a year. [Probably more than most marketplaces in India.] That too during covid. I can sit and talk about marketplaces for hours. So why not use my knowledge instead of just shit posting here?
  4. How people get into angel investing and how I invest?
    • 1L INR is the lowest one puts when writing angel checks. People who have made good money put like 10L and get on the cap table. If you put 1L/2L you have to go through syndicates but pay carry.
    • I invest in no carry syndicates that founders run on AL and LV for friends.
    • I can’t afford to put 10L each cheque. If angel investing is like Poker, and it is I think, I would need 100 buy-ins. 100 buy-ins mean 10Cr. I don’t have that.
    • And if you can’t lose even 10L, I would say don’t start. Most investments will go to 0. It is the dumbest way to make money.
    • I am lucky to be part of multiple networks. By network I mean Whatsapp groups and also DMs from friends who send me deals the invest in.
    • If your source of deals is only AL or LV, you should probably wait and build your network first. Don’t fall into the mimesis trap of angel investing. Repeating again: Writing 1L checks won’t make you money or give status.
    • I could have invested for years, but did not till I thought yeah, fuck it, I have some money now, let me take more risks. And I have a big network. I run a Whatsapp group called Dhaniya Ventures where I share deals with well connected friends from the ecosystem and in return I also get access to deals early.
    • Don’t start investing till you have enough money and also a network to rely for deal flow.

Disclaimer: Not investment advice. Please don’t burn your money and then get mad at me.