In the startup world unicorns are extremely rare. As rare as… the unicorns tend to be. Having one of them in your portfolio is an extraordinary accomplishment. But having 6 unicorns among your first 100 angel investments is already outside the realm of things possible.
Jason Calacanis is a man who has done that and much much more. Here are my 3 takeaways after watching an interview with him on YouTube:
Lesson #1
When starting as a new angel investor join as many investment syndicates as you can. With access to the deal flow read the pitch decks and deal memos. You can even challenge yourself to a game and start by making two lists. Call the first one “I think that this is going to work for the following reasons…” and the second — “I think that this is not going to work for the following reasons” (this one is likely to be much longer). Then you can make up your mind and even estimate how confident in your conclusions you are on a scale from 1 to 10. The time will show how accurate your analysis was.
While playing games is good, nothing beats real investing. Jason compares it to playing poker with stakes of USD 1 a point and losing, say, USD 40. The pain of losing, he argues, is an important part of your learning curve.
Lesson #2
You may, and most probably will, come across startups that are being developed by founders who retain their full-time jobs. They may be doing this with or without their employer’s consent but, according to Jason, this makes no difference. His advice to investors is to stay away from side hustles. There is always a risk that the employer can withdraw its permission or even claim the product idea. Founder’s clear full-time commitment to the startup is a non-negotiable and critical precondition for investment.
Lesson #3
When you have a proven investment track record and do not suffer from undue modesty (as Jason does not) you can name laws after yourself. Jason’s law is summed up as follows: “I don’t need to know if your idea is going to succeed. I just need to know that you are going to succeed”. He stresses that he is not investing in a product; he invests in what he calls the arch of the founder’s career. This requires the ability to talk to founders and to cut through the BS. Jason says that he is primarily looking for passion, skills, understanding of how to build a product and how to build a team.
And, finally, as a bonus, Jason’s thoughts on pivots. In his opinion most of the time we use this word incorrectly. It is a pivot when based on all the experience we have accumulated we change our direction slightly. It is like keeping one foot static and making just a small side step with the other foot. When we declare that the idea has failed and that now we are going to do something completely different it is not a pivot, it is something else.
For those willing to watch the full interview and select their own top 3 lessons here is the link — https://www.youtube.com/watch?v=2zhqpzzS3Bc
This note was first published on Medium.com on 3 September 2024.
