Angel Investing

 ANGEL INVESTING

THE GUST GUIDE TO MAKING MONEY AND

HAVING FUN INVESTING IN STARTUPS

DAVID S. ROSE

A little more than a decade ago, in the Fall of 2002, the company I worked for,

PayPal, had just been acquired by eBay. In the wake of this deal, I was

considering a long vacation. PayPal had been successful, but countless dot-coms

had recently failed; many people felt that the consumer Internet boom was over.

But I began sensing opportunity. The entire online ecosystem was evolving. The

Internet was becoming ubiquitous, increasingly integrated into everyday life.

And real identity was beginning to play a more prominent role in the online

world.

As real identity became a more important aspect of the Internet, so too did the

connections between people. In the early days of the web, content was primary.

But as we started shifting from the Information Age into a new era—the

Network Age—relationships were taking precedence. Information was still

critical, but people were starting to rely more and more on other people to make

sense of the vast amounts of content available to them. Networks were starting to

frame everything.

Once I began to fully see the import of this shift, I decided to lean all the way

into Web 2.0 and the beginnings of the Network Age. To capitalize on how the

Network Age would transform the world of work, I founded LinkedIn. But I

didn't focus my attentions on only the professional side. I also became an angel

investor to invest in the social aspects of the Network Age, backing such

companies as Digg, Facebook, Flickr, Last.fm, Ning, Six Apart, and Zynga.

Over the course of a decade, I made angel investments in more than 100

companies.

Several of these companies generated significant returns. But I hadn't invested in

Flickr or Facebook hoping to make a quick score. As David S. Rose will tell you

in the book you are about to read, successful angel investors are usually the ones

who take a long-term view of things. I felt as strongly as I did about the

companies I invested in because I sensed that we were in the midst of a

technological and cultural shift that was going to play out not just over months,

or even years, but rather over decades. And these companies were creating

platforms, products, and services that promised to be increasingly relevant as

hundreds of millions of people started integrating the Internet more fully into

their lives.

Picking winners on the stock market, where companies have established track

records and there is a large body of information about them at hand, is hard.

Picking winners when a company is little more than a few hundred lines of code

is orders of magnitude more difficult. If you want to be a successful angel, you

have to have an appetite for risk and the ability to accept failure. More

importantly, though, you have to be curious. And studious. You have to want to

know everything you can possibly know about an emerging technology and the

entrepreneur who wants to bring that technology to market. If you're a new

angel, identify mentors, develop allies, and start building the networks of trust

that will ultimately inform your deal-making.

Picking up this book is a good start. David is an experienced angel himself, with

investments in more than 90 companies. He's lectured at top schools, taught TED

attendees how to pitch a VC, and created Gust.com, a platform for connecting

angel investors with entrepreneurs. Let your education begin!

—Reid Hoffman