aivarsjurcans.com

Design by Artis Briedis

Very few people are as credible angel-investing evangelists as Jason Calacanis is. I have written several notes about his investment advice already before. However, every new video I come across brings forward another thought or different angle. Yes, I admit that I have become a fan.

These are my three takeaways after watching Jason and Lex having a long conversation about different topics at Lex Fridman podcast:

Lesson #1: And the winner is …

In most industries, it is about 20 people who will win in a category. And approximately 80% of that category will be owned by the top 2 or 3 players.

Jason emphasises that 2 things are impossible to fake:

• a product that is built really well; and

• customers who are delighted with the product.

Until recently it took decades for a company to grow to become international. Now it may take 2-3-4 years for a startup to go global. There are several factors facilitating this, including:

• the app store ecosystem;

• ability to make online payments; and

• a supercomputer in every person’s pocket.

The craziest and most outlandish ideas that everyone laughs at usually are the ones that bring the highest returns.

Lesson #2: In growth we trust

The VC’s (or any external investor’s) money is like jet fuel for extraordinary growth. However, the danger is that it may also blow up the startup. The companies may underestimate the pressure they will face from their investors. 

Here is a quick illustration of why this happens to be so:

• the fund (or a high net worth investor) with USD 30 million in investable capital can invest in 30 companies – USD 10 million each;

• it is highly likely that 7 out of 10 companies will not make it;

• there will be pressure for the remaining three to generate returns of 30x to 60x;

• passive investment in the stock market index on average doubles your money in about 10 years; 

• to compensate for the risks investors in startups are looking to at least triple their money.

Because of this investors will always push the companies to grow to 100x and beyond. Your company may be growing 50% a year but investors will push to double or triple the growth rate.

Lesson #3: Brace yourself for bad news

The harsh reality of angel investing is that the bad news will come first. For the initial 5 years you will be feeling like an idiot (Jason’s choice of words, not mine). You are likely to be seeing one investee company after another going bust. Watching your portfolio following the J-curve in its development will be depressive. 

However, the dark times will pass at some point. In years 5 to 7, you are likely to see the real results of your investment. Just be patient.

As a final note: everyone may have an idea. We all have millions of ideas going through our minds every hour, even while we sleep. There is no prize for having a good idea. In entrepreneurship, it is all about the execution.

For those willing to try and pick top lessons of their own here is a link to the video. You may also want to have a look at Jason’s book “Angel: How to Invest in Technology Startups—Timeless Advice from an Angel Investor Who Turned $100,000 into $100,000,000” (I may be receiving a commission if you decide to purchase it). 

* from anything that you are reading, watching or hearing you can realistically expect to remember only a limited number of things. My solution is to pick just 3 items or ideas from any material. This number is non-negotiable. Even the most extraordinary experience gets compressed into 3 things to remember. This approach has worked well for me.

This note was first published on Medium on 4 December 2024.

Aivars Jurcans has more than 20 years of corporate finance and investment banking experience. His services are currently available through Murinus Advisers. More of Aivars’ writings can be found on his page Corporate Financier’s Notes.