My path into venture capital began in the tech boom of the late 1990s. I met one of my mentors, Luis Villalobos, in 1998 when I was the President of an amateur sports platform called eteamz.com, where we served on the board together before selling it to Active Networks. Eteamz was an LA-based startup that ran an online community for sports enthusiasts. Luis founded the Tech Coast Angels, one of the leading angel groups in Southern California. Through Luis, I learned about the importance of diversification and the incredible return from this asset class if you intelligently deploy capital across enough companies. Twenty was the minimum number of companies that Luis’ Monte Carlo simulations indicated were required to take advantage of the returns of the asset class.
In 2004, I made my first technology angel investment into a small company called ZAG, that would later become TrueCar (NASDAQ: TRUE). It was run by Scott Painter, a serial entrepreneur who has incorporated more than 37 companies, most recently, FAIR, and has raised more $1.25 billion in debt and equity capital for those businesses over the last 20 years. Scott is one of the most prolific entrepreneurs I’ve ever met. That year I was also able to separately secure formal advisory roles in both LinkedIn (NASDAQ: LNKD) and Pandora (NASDAQ: P) — both very small companies at the time. Since I did not have enough cash at the time to reach my 20-company target, I had to invest my time — as an advisor or as a Founder. In each instance of investment or advising, I loved the entrepreneur, I loved the business model, and I felt like I could assist with the build of the company. I’m now up to more than 50 investments and don’t appear to show any signs of slowing down.
How you can get started in early stage investing:
- Become curious and WORK at it. During my early days, I learned as much as I could by advising companies and helping them with whatever they needed.
- Figure out your personal investment thesis. I only invest in companies where I feel like I can provide value. Furthermore, I learned to only invest in companies where I loved the founder and business model.
- Diversify your portfolio. As Luis Villalobos taught me, it’s important to deploy capital over across 20+ companies or you’ll quit after your first three when one of them fails. That means figuring out how much of your portfolio you are going to commit to this asset class, then divide by 20. There are many entities (like www.angelist.co) that enable you to invest as little as $1K into a deal.
I do miss Luis. He helped a LOT of entrepreneurs and a LOT of angels.
