> if a VC investor is doing their job well, they will make sure to keep investing in your company until they have a good amount of ownership. This means it is against their incentives to introduce you to other investors or do anything else that interferes with their ability to buy more shares in your company for a good price.
this is only true for larger multi-stage funds who compete with each other, not for Seed or Series A-only funds
Yes, it's completely backwards really. In most successful companies, a VC's holdings are likely to decrease over time, not increase, as the company raises more money and existing investors are diluted. And investors are (in general) motivated to introduce you to new later stage investors because it increases the value of their holdings, even when diluted.
That's because most of us can't actively remember back to the dot com bust and have only been around for the boom times since. Success is great! Say you're an early investor, with 2 million shares out of 10 million issued, or 20% of the company at a $10 million valuation, or $2 million dollars. Pretty good! $2 million is $2 million.
The AI boom is in full swing. You've got product market fit, lots of paying users, everything is gucci. So when they issue 40 million more shares to new investors, there's 50 million shares out there, you have 2/50 million, but, hey, lookit! The new valuation is $100 million. You now have $4 million of a $100 million company. Not bad! It turns out that when things are good, things are quite good!
Unfortunate, it's discovered that your product is actually the torment nexus. Users flee, the bubble pops, the entire sector goes bust, your remaining users sue you, you run out of money. Your board fires you and the new CEO takes on a new round of investors. They issue 950 million shares, at a $one million valuation.
Fuck.
For all your hard work, your blood sweat and tears. Failed personal relationships. Your 2 million shares are now 2/1000 of $1 million, or $2,000. That's right, two thousand dollars only. Do not past go, Do not collect money to FIRE, hope you can get a job running Door Dash, except that got automated away so you can't do that.
Edit: Before commenters reply, That's not possible! I have preferential rights written into my contract. They won't and can't do that! And maybe you're right. Maybe you've got a totally iron clad contract written up by a lawyer who experienced the com bust and there are provisions against the exact scenario written above isn't possible. Except you were collecting a founder's salary of $50,000 /year and don't have $200k in savings to afford a high-powered corporate lawyer to sue and get back what's left of your company. Say you do regain control, it's got a $1 million valuation for a reason. Maybe it'll be like Pebble and you win, and you can run it as a life-style business because there are enough loyal customers who like your brand of torment nexus, and you eke out $10,000 of revenue (gross, not net) per month. Not bad per se, but still not the NYSE bell ringing IPO you were hoping for. Plus you're in debt to your lawyers and it's going to take forever to pay them off.
No successful company is issuing 40 million shares to new investors from a base of 10 million. Why would investors or founders sign off on that level of dilution?
And ultimately, if your product is the torment nexus, nobody is going to make money regardless of valuation.
> Why would investors or founders sign off on that level of dilution?
That’s fair. It was just to get to the third act. If you can think of a way to do part two that’s equally succinct that’s more plausible, I’d love to hear your rendition.
Yeah. In my experience investors in the early rounds are eager to do introductions because they’re still seeking to validate the investment internally.
If they led a pre-seed, they’d be happy to see someone else lead the seed round because then it’s easier to make the case within the fund that they should maintain or increase their stake.
External validation means a lot when the company is young.
I like this in general but I think it’s sad the friends and family who helped you don’t get any financial upside.
I also take issue with calling this angel investing:
> I angel invest primarily through my scouting relationship with the VC firm Andreesson Horowitz. They give me a budget for investing in each fund and I get a fraction of the carry.
Full agree. This is... just being a VC. If it's not your own money and you're aligning with someone else's thesis, you're just a vc with crappier terms
Yeah as mvkel said it’s just being a VC with shittier terms.
Why not just be an actual angel? Presumably the author has the capital for it now. And if they’re confident enough to risk someone else’s capital why not risk their own?
Its the same as "bird dogging" or wholesaling in real estate or really any series of other middlemen or wholesale business who do the hard work of finding the deal but don't necessarily have the cash or want to run the business end to end.
1. You're extremely rich.
2. You see it as a learning opportunity or you enjoy helping, without thought of financial reward.
What will happen, at the slightest whiff of success, is that professional investors and VC will swoop in at a moments notice, and dilute you to pieces.
In the end, you will have paid for the company while it was small, to get it started, and then the VC:s will snatch it away by diluting you. Hence nr 1 above, but be prepared to spend!
Future investors can negotiate liquidation preference and participation terms that will give them a bigger part of the pot than their % ownership during a “liquidation event” I.e. basically any outcome other than an IPO will trigger those rights
Sure. But "liquidation events" are not the events that give you the wins. The point of angel is to get in while the company is cheap. Dilution is part of the math.
But aren't the terms of a SAFE that you'll get the same terms as the best terms (MFN) offered to investors in the next round, up to a cap?
Seems like you get just as diluted by future rounds as the professional VCs that will make up the next round, if you get the same terms?
FWIW I don't think angel investments make any financial sense but see them as a minor chance of upside and a significant way to help and connect with people.
He's a retired pro basketball player. He's since made early investments in companies like Hugging Face[1], Coinbase, and Robinhood.[2] If you earn millions in your 20s, didn't spend it, and have a killer work ethic, you can flip careers to professional investor.
He's an hall of fame basketball player who has made a shit-ton of money, drafted after one year of collge with a team of bankers investing his money, he's definitely not "hustling two jobs" simultaneously. The semi-remarkable thing is he hasn't blown his wealth on gambling or pet sharks.
If it were that easy, the norm wouldn't be blowing the wealth on gambling or pet sharks lol.
If he has successfully assembled a team of bankers that has been as successful as his portfolio suggests, while allowing him to be completely hands off, the man clearly has talents beyond the basketball court.
Later on it looks like he classifies him as a "vanity angel" rather than a "strategic angel." It sounds like it can be useful to have someone with name recognition as an investor when you're talking to people who aren't very familiar with the space.
if you are trying to convince people to invest on name recognition vs. knowledge of your space, or ability to move the company forward it doesn't seem like a great guide for getting angels: "be lucky and get someone famous with lots of money".
> Elad was elusive but the angel who was most consistently influential and supportive during my entire five-year run at Akita. We had a fifteen-minute call almost every quarter, sometimes at an unpredictable time, but always full of great guidance.
How helpful can a person who spends less than 5 hours over 5 YEARS be? How much time are they even spending learning / thinking about the company?
Unrelated to article, but I had a call with Jean when she was running Akita pre-acquisition, and she was so thorough and thoughtful. We didn't end up buying Akita for various reasons, but I remember walking away thinking, this person can not fail.
‘One conversation that stuck with me: I was telling Kevin how my two lead investors had both interviewed a key product hire for the company. One was positive and one was in the middle. Kevin said to always be “strong yes” or “strong no” if I could help it. I still hire according to this philosophy today.‘
Is the idea that you should ask for strictly binary yes/no feedback from interviewers, and only move forward if there’s a “strong yes” consensus from this process?
In the spirit of finding the right person through serendipity:
I’m actively looking for intros to angels who are interested in B2B lending. The tariffs have completely disrupted the US SMB lending ecosystem and automation is going to have to ramp up rapidly to close the gap.
Myself and my team have a AI automation tool, we are revenue generating, technical founding team with 2x maths PhDs
Please email me (email in profile) if relevant to someone you know
I see the crux of this post is that they gave a lot of valuable advice to someone who was, at the time, inexperienced. Surely you can acquire sage advice without giving up equity by just hiring someone with experience. And they'd be onboard full-time instead of 15 minutes a quarter. It seems to me the biggest value is the obvious one. That they give you money.
And sorry for opening a political can of worms, but I wouldn't touch anything that touches Andreesen with a 10 foot pole at this point. He's taken a serious heel turn and is openly endorsing Fascism.
Hot take: Another woman talks about her emotional journey as an angel investor. I am tired of these articles. A huge number of them: You can beat them by investing in the S&P 500 via a low cost ETF. What (economic) value these angel investors providing? I will tell you: Little, to zero, to negative.
>> I told him I wanted investment from Kevin Durant. It was fall 2018, KD was playing for the Warriors, and he had won Finals MVP earlier that year. I was a KD fan and had heard he did tech investing.
So you skipped a friend or family member because KD is good at basketball and has lots of money? Super "field guide" /s
A friend or family member can’t get you box seats in an NBA game. You would be surprised how far that gets you in sales. I was a client of a recruiting company - hiring people through them - and they had season tickets to basketball games and baseball games they would give away.
> if a VC investor is doing their job well, they will make sure to keep investing in your company until they have a good amount of ownership. This means it is against their incentives to introduce you to other investors or do anything else that interferes with their ability to buy more shares in your company for a good price.
this is only true for larger multi-stage funds who compete with each other, not for Seed or Series A-only funds
Yes, it's completely backwards really. In most successful companies, a VC's holdings are likely to decrease over time, not increase, as the company raises more money and existing investors are diluted. And investors are (in general) motivated to introduce you to new later stage investors because it increases the value of their holdings, even when diluted.
That's because most of us can't actively remember back to the dot com bust and have only been around for the boom times since. Success is great! Say you're an early investor, with 2 million shares out of 10 million issued, or 20% of the company at a $10 million valuation, or $2 million dollars. Pretty good! $2 million is $2 million.
The AI boom is in full swing. You've got product market fit, lots of paying users, everything is gucci. So when they issue 40 million more shares to new investors, there's 50 million shares out there, you have 2/50 million, but, hey, lookit! The new valuation is $100 million. You now have $4 million of a $100 million company. Not bad! It turns out that when things are good, things are quite good!
Unfortunate, it's discovered that your product is actually the torment nexus. Users flee, the bubble pops, the entire sector goes bust, your remaining users sue you, you run out of money. Your board fires you and the new CEO takes on a new round of investors. They issue 950 million shares, at a $one million valuation.
Fuck.
For all your hard work, your blood sweat and tears. Failed personal relationships. Your 2 million shares are now 2/1000 of $1 million, or $2,000. That's right, two thousand dollars only. Do not past go, Do not collect money to FIRE, hope you can get a job running Door Dash, except that got automated away so you can't do that.
Edit: Before commenters reply, That's not possible! I have preferential rights written into my contract. They won't and can't do that! And maybe you're right. Maybe you've got a totally iron clad contract written up by a lawyer who experienced the com bust and there are provisions against the exact scenario written above isn't possible. Except you were collecting a founder's salary of $50,000 /year and don't have $200k in savings to afford a high-powered corporate lawyer to sue and get back what's left of your company. Say you do regain control, it's got a $1 million valuation for a reason. Maybe it'll be like Pebble and you win, and you can run it as a life-style business because there are enough loyal customers who like your brand of torment nexus, and you eke out $10,000 of revenue (gross, not net) per month. Not bad per se, but still not the NYSE bell ringing IPO you were hoping for. Plus you're in debt to your lawyers and it's going to take forever to pay them off.
No successful company is issuing 40 million shares to new investors from a base of 10 million. Why would investors or founders sign off on that level of dilution?
And ultimately, if your product is the torment nexus, nobody is going to make money regardless of valuation.
FWIW, I remember the dot com bust very well.
> Why would investors or founders sign off on that level of dilution?
That’s fair. It was just to get to the third act. If you can think of a way to do part two that’s equally succinct that’s more plausible, I’d love to hear your rendition.
Yeah. In my experience investors in the early rounds are eager to do introductions because they’re still seeking to validate the investment internally.
If they led a pre-seed, they’d be happy to see someone else lead the seed round because then it’s easier to make the case within the fund that they should maintain or increase their stake.
External validation means a lot when the company is young.
Do you have a portfolio or any direct experience to share? It seems the author is speaking from experience.
Many funds only invest in a few rounds. The $10M micro VC that participated in your seed round isn’t making a dent in your $100M D raise.
Syndicates are much stronger than a sole VC leading everything. There’s just way more capital and help with a syndicate.
I like this in general but I think it’s sad the friends and family who helped you don’t get any financial upside.
I also take issue with calling this angel investing:
> I angel invest primarily through my scouting relationship with the VC firm Andreesson Horowitz. They give me a budget for investing in each fund and I get a fraction of the carry.
Full agree. This is... just being a VC. If it's not your own money and you're aligning with someone else's thesis, you're just a vc with crappier terms
Well, sounds like a VC but without a good bit of the stress and hassle. Like you wouldnt have to gin up money from LPs
That’s what angel investing is.
Instead with this strategy you get a whopping 5% of profits and Andreessen gets 95% for your efforts / network.
What? The scout doesn’t risk capital, of course they get only limited return.
Yeah as mvkel said it’s just being a VC with shittier terms.
Why not just be an actual angel? Presumably the author has the capital for it now. And if they’re confident enough to risk someone else’s capital why not risk their own?
Yeh this is more like being a salesman selling funding contracts for a VC firm to startups, a weird dynamic.
Its the same as "bird dogging" or wholesaling in real estate or really any series of other middlemen or wholesale business who do the hard work of finding the deal but don't necessarily have the cash or want to run the business end to end.
Stay away from the Angel investor game unless:
1. You're extremely rich. 2. You see it as a learning opportunity or you enjoy helping, without thought of financial reward.
What will happen, at the slightest whiff of success, is that professional investors and VC will swoop in at a moments notice, and dilute you to pieces.
In the end, you will have paid for the company while it was small, to get it started, and then the VC:s will snatch it away by diluting you. Hence nr 1 above, but be prepared to spend!
How does this happen with the typical SAFE?
Future investors can negotiate liquidation preference and participation terms that will give them a bigger part of the pot than their % ownership during a “liquidation event” I.e. basically any outcome other than an IPO will trigger those rights
Sure. But "liquidation events" are not the events that give you the wins. The point of angel is to get in while the company is cheap. Dilution is part of the math.
But aren't the terms of a SAFE that you'll get the same terms as the best terms (MFN) offered to investors in the next round, up to a cap?
Seems like you get just as diluted by future rounds as the professional VCs that will make up the next round, if you get the same terms?
FWIW I don't think angel investments make any financial sense but see them as a minor chance of upside and a significant way to help and connect with people.
100%
Angel investing is a fools game, unless you enjoy it for its own sake.
> Martin and Mike both advised strategic angels instead of friends and family to fill out the round, so that’s what we did.
How is Kevin Durant (pro basketball player) a strategic angel for a monitoring/observability company?
He's a retired pro basketball player. He's since made early investments in companies like Hugging Face[1], Coinbase, and Robinhood.[2] If you earn millions in your 20s, didn't spend it, and have a killer work ethic, you can flip careers to professional investor.
Idk why nobody's done a good feature on him.
[1] https://finance.yahoo.com/news/kevin-durant-investment-portf...
[2] https://parlemag.com/2025/04/kevin-durant-business-ventures/
I'm not questioning his investment abilities, just curious what he offers that is strategic (advice, dealmaking, etc).
Aside: Saquon Barkley's (pro football player) portfolio is insane https://www.readtheprofile.com/p/saquon-barkley-investment-p...
The ability of your enterprise sales team to invite a $50M deal prospect to a luxury box with Kevin Durant is not to be underestimated.
This 100%
KD is trying to be steve young and leverage his bay area fame to get a seat at the table
Not retired (plays for Houston) but doesn’t lessen your point one bit.
lol that's egg on my face. I just assumed he wouldn't be working two full time jobs at once.
That's wild.
He's an hall of fame basketball player who has made a shit-ton of money, drafted after one year of collge with a team of bankers investing his money, he's definitely not "hustling two jobs" simultaneously. The semi-remarkable thing is he hasn't blown his wealth on gambling or pet sharks.
If it were that easy, the norm wouldn't be blowing the wealth on gambling or pet sharks lol.
If he has successfully assembled a team of bankers that has been as successful as his portfolio suggests, while allowing him to be completely hands off, the man clearly has talents beyond the basketball court.
A good feature wouldn't call KD a retired NBA player yet :)
Later on it looks like he classifies him as a "vanity angel" rather than a "strategic angel." It sounds like it can be useful to have someone with name recognition as an investor when you're talking to people who aren't very familiar with the space.
if you are trying to convince people to invest on name recognition vs. knowledge of your space, or ability to move the company forward it doesn't seem like a great guide for getting angels: "be lucky and get someone famous with lots of money".
Low time burden, low emotional burden, unlikely to interfere or micromanage?
> Elad was elusive but the angel who was most consistently influential and supportive during my entire five-year run at Akita. We had a fifteen-minute call almost every quarter, sometimes at an unpredictable time, but always full of great guidance.
How helpful can a person who spends less than 5 hours over 5 YEARS be? How much time are they even spending learning / thinking about the company?
Literally thinking of how to solve your problems while you are on call with them
Unrelated to article, but I had a call with Jean when she was running Akita pre-acquisition, and she was so thorough and thoughtful. We didn't end up buying Akita for various reasons, but I remember walking away thinking, this person can not fail.
she seems a force of nature for sure. appreciate you sharing
How to win the lottery, a field guide.
Not really anything actionable there.
If you don't want to lose your money, don't become an angel investor.
Kevin Hartz is the most desirable angel in the valley IMO. His advice and generosity with his time is unparalleled.
I’m not quite sure what’s the takeaway here:
‘One conversation that stuck with me: I was telling Kevin how my two lead investors had both interviewed a key product hire for the company. One was positive and one was in the middle. Kevin said to always be “strong yes” or “strong no” if I could help it. I still hire according to this philosophy today.‘
Is the idea that you should ask for strictly binary yes/no feedback from interviewers, and only move forward if there’s a “strong yes” consensus from this process?
This dates back to similar advice from Joel Spolsky 25 years ago (v1 was posted in 2000).
https://www.joelonsoftware.com/2006/10/25/the-guerrilla-guid...
As it was put to me over the years:
Have you ever regretted hiring someone who you were 100% sure on?
Have you ever regretted hiring someone you weren't 100% sure on?
Definitely or no, it's that binary sometimes.
related, story of the startup https://newsletter.pragmaticengineer.com/p/how-to-sell-an-ea...
Good guide.
In the spirit of finding the right person through serendipity:
I’m actively looking for intros to angels who are interested in B2B lending. The tariffs have completely disrupted the US SMB lending ecosystem and automation is going to have to ramp up rapidly to close the gap.
Myself and my team have a AI automation tool, we are revenue generating, technical founding team with 2x maths PhDs
Please email me (email in profile) if relevant to someone you know
May we all have this man’s network
This woman.
Her name is Jean Yang.
Fascinating. I guess people go through this in different ways. Don’t know any startup founders who took a path with this structure.
Ultimately she did exit to Postman so whatever she did was successful though of course one cannot cargo cult everything.
https://news.ycombinator.com/item?id=36787860
Great post. She applies her analytical CS thinking to the angel process.
I see the crux of this post is that they gave a lot of valuable advice to someone who was, at the time, inexperienced. Surely you can acquire sage advice without giving up equity by just hiring someone with experience. And they'd be onboard full-time instead of 15 minutes a quarter. It seems to me the biggest value is the obvious one. That they give you money.
And sorry for opening a political can of worms, but I wouldn't touch anything that touches Andreesen with a 10 foot pole at this point. He's taken a serious heel turn and is openly endorsing Fascism.
Hot take: Another woman talks about her emotional journey as an angel investor. I am tired of these articles. A huge number of them: You can beat them by investing in the S&P 500 via a low cost ETF. What (economic) value these angel investors providing? I will tell you: Little, to zero, to negative.
[dead]
>> I told him I wanted investment from Kevin Durant. It was fall 2018, KD was playing for the Warriors, and he had won Finals MVP earlier that year. I was a KD fan and had heard he did tech investing.
So you skipped a friend or family member because KD is good at basketball and has lots of money? Super "field guide" /s
A friend or family member can’t get you box seats in an NBA game. You would be surprised how far that gets you in sales. I was a client of a recruiting company - hiring people through them - and they had season tickets to basketball games and baseball games they would give away.