Operating Manual
"It’s a particularly hard time to invest in start-ups", as Sam Altman writes, and this operating manual is based on that thinking in a piece Sam wrote in January 2019.
The short version of that piece:
- Get access to good dealflow by adding value.
- Make good decisions about what to invest in.
- Convince the winners to choose you as an investor.
And that's pretty much how I'm trying to work and have worked. After 15 years in Silicon Valley, I've been on all sides of the fences, as an angel investor, as an employee (Accenture) and as an operator (Mogotix early on, intermix.io all the way through).
On the third point of convincing the winner to choose you as an investor - I think that any founder will want a syndicate as part of their capital raise. You can read some of my thinking on that on Medium.
But it's mainly because of one trend. The large funds have gotten bigger. For example, Peter Wagner at Wing has observed that trend.
But while the funds have gotten bigger, the number of partners in the fund have stayed the same, and they all still do the same number of deals per year (about 4). With the number of partners and deals constant, the average deal size has to go up.
As a consequence, the expectations for ARR have gone up along with it (if you're SaaS, and most start-ups these days are), to around $1.5M ARR and above. The traditional "$2M on $8M" seed round doesn't provide enough runway to get there anymore - but many seed funds are still writing checks in the $1M range only per deal.
That has opened a window for AngelList Syndicates to participate in the early seed rounds.
Please see my operating manual.
