How these top Silicon Valley entrepreneurs choose their angel investments

ivelina

Published

October 10, 2024

Many of the top entrepreneurs in the world also happen to be some of the most successful angel investors. But, every angel has their own investment thesis and beliefs about what to look out for when picking founders and startups.

Below we take a look at the investment strategies from some of the most iconic investors in Silicon Valley.

1. Tim Ferriss - due diligence

Famous as: Bestselling author and podcast host.

Notable startup investments: Uber, Facebook, TaskRabbit, Twitter, Shopify, Duolingo

His angel investing advice: The most important thing angel investors can do is thoroughly research potential investments before committing any money, in other words - due diligence. This means not only looking at the company's financials and market opportunity, but also talking to customers, competitors, and other stakeholders to gain a better understanding of the business. Get to know the founder's vision and plan for executing that vision, as well as assess the competitive landscape and potential risks.

2. Sam Altman - the power law

Famous as: The CEO of OpenAI.

Notable startup investments: Airbnb, Stripe, Reddit

His angel investing advice: The power law: The power law states that the single best investment you make will be worth more in return than all the other investments combined. Your second-best investment will be better than the third and subsequent investments put together. This is a truth that most investors find deeply counterintuitive. As a result, almost everyone invests the wrong way. Instead of focusing on the failure rate, you should concentrate on the magnitude of your biggest success. You could have a 95% failure rate, but if one investment returns a billion dollars, you would still be happy.

3. Jessica Livingston - qualities of the founders

Famous as: The co-founder of Y Combinator.

Angel investing advice: Look at qualities of the applicants. Do they seem earnest? Do they seem determined? Are they flexible-minded? And most importantly, what is the relationship between the co-founders like? Being a successful investor requires having a team with you that can help you judge the technical aspects and potential of an idea, and then someone to understand the founders' characters and the relationships between them.

Notable startup investments: Reddit, Clever, Triplebyte, Eva

4. Marc Andreessen - focus on the market size

Famous as: The co-founder of Andreessen Horowitz.

Notable startup investments: Facebook, Twitter, Lyft, Uber, Airbnb, Slack

His angel investing advice: The two most important factors in angel investing are the people behind the idea and market size. Investors need to look for founders who are passionate, driven, and have a clear vision for their company. It's also important to invest in companies that have a large addressable market since a company's potential for growth is directly tied to the size of the market it serves.

5. Fabrice Grinda - find your niche

Famous as: A serial entrepreneur and angel investor who has made over 1,000 investments in startups across the world.

Notable startup investments: Moova, Fresha, Scalefast, Candidate Labs, GuruCall

His angel investing advice: It is important to specialize and find your niche, but your niche can be broader than commonly assumed.

Although Fabrice specializes in companies with a marketplace business model, there are many types of marketplace companies (horizontal, verticals, “pick”, B2B) and there are many industries (musical instruments, staples, logistics, food delivery, chemicals, steel, crypto, beauty, etc…) and there are also many different countries

6. Naval Ravikant - luck is important

Famous as: The founder of AngelList and a prominent angel investor.

Notable startup investments: Uber, Twitter, Yammer, Gumroad, Varda, Alchemy

His angel investing advice: Angel investing is one of the few professions where you can objectively improve every day until the day you die. And success isn’t only because of a lot of diligence, but also a lot of luck, especially when it comes to tech startups. It’s all about the right place, right time, market forces, timing, and regulatory action against or pro.

7. Joanne Wilson - a long-term game

Famous as: American businesswoman and angel investor.

‍Joanne Wilson is an angel investor who focuses on investing in female-led startups. Her first investment was in 2007 in a friend’s company called Curbed Media. At the time, she didn’t have an investment thesis per se and wasn’t planning to become an active angel investor.

Notable startup investments: Vengo, Curbed Media, Bazaar, VinePair

Her angel investing advice: Be prepared to wait at least 7 years to assess your portfolio and which companies are winners or losers. And always support the founders you invest in and help them out wholeheartedly.

8. Ron Conway - add value to the founder

Famous as: The "Godfather of Silicon Valley," has made strategic investments in companies like Google, Facebook, and Twitter.

Notable startup investments: Google, Facebook, Twitter, Ambient AI, Asana, Flipboard

His angel investing advice: As angel your role is to add value to the founder. There are no quick hits - an investor with integrity and don't go in looking for a quick hit.

9. Cyan Banister - believe in the founder

Famous as: Angel investor and entrepreneur in Silicon Valley.

Notable startup investments: Uber, Upstart, Seed, SpaceX

Her angel investing advice: Dive deep into people. Products and strategies are likely to change, so angels shouldn't don’t focus too much on that. What matters most is the long-term relationship with the founders and whether or not you believe in them. Ask yourself if that is the right person to tackle the problem they are trying to solve, and would you drop everything to work for them?