How To Turn $10,000 Into $150,000 With Angel Investing

So I started angel investing almost 1 year ago. Well, I did it 5 or 8 companies personally in the last— before that, I forget. And a couple of them have turned out to be like meaningful, like turning $20 grand into like $300,000, $400,000, $500,000. And I'm like, holy shit, this is how it works. And like, but like, it sucks for a while, right? Because you just invest it and you're like, well, that money's gone and you don't ever hear about them. And then you're like, oh, nice, it works. And so I'm like, And so some of those cases, those are huge markups. In other cases, I'm just now experiencing like 2x and 3x and 4x markups. And I'm like, that's awesome. What would happen if that was— had I invested in this company at a $10 million valuation instead of a $50 million valuation? That would have been wild. I've noticed that your angel investing is on a tear. Our friend Suli just said, whatever Sean— what did he, what did he say? Whatever Sean—

he was like, oh, I got this new brilliant investment strategy. Sean invests in something and then he tells me about it 2 weeks to 2 months later, and then I pay 10x price for the same item, for the same company.

It was great.

Which is like anecdote, like the— he was joking, obviously. Obviously that's not great. He's like making fun of himself because that's literally what's happened in like, I think, 6 or 8 deals now where I'll even tell him about it, but he just delays responding for a couple weeks, or I forget to tell him and I tell him, or he tells me about the company a few months later. I'm like, oh yeah, I invested in that. He's like, awesome, can you make an intro? And I make the intro, and but the price has gone up like dramatically because the company has more traction or more whatever. So that's what he was joking about.

But how are you getting such good shit?

Um, I don't know, like dude, it's amazing. So I feel like there's, I think the easy answer is, oh cool, I do this podcast and because of this podcast, people come inbound, right? The bigger this podcast gets, the more people, uh, want you to invest. And there's this great, um, thing my buddy Vishal taught me, which he goes, startups are the only asset class. Like real estate doesn't work this way. Stock market, like in real estate, if you wanna buy it, you go buy it. If you want stock, if you wanna buy it, you go buy it. Startups are the only thing where even if you want in, you, you don't just get in. The security selects you. The asset selects you just as much as you're selecting the asset. And that one insight is pretty important. It basically means you need to build your brand and your reputation so that people want you in deals because the best deals are all super competitive to get into. And you want people to, when they're first thinking of an idea, to reach out to you because they know, oh, you know, like for example, I did a great deal recently and it's so funny, you're going to hate this. It's going to piss you off so much. You've been talking about short-term rentals. Somebody came to me with a short-term rental startup idea because they thought I was you or something, or somebody was like, hey, bro, why did you say that to me? Well, by the way, the subject line that she reached out with was, last one in. It was like, hey, I have the smallest bit of allocation left in this.

Motherfucker.

God, this company called Hostfully, you'll love it because it's, it's literally exactly what you're doing. You should get it. I'll enter you. You will get in. But, but basically what they're doing is you, if you own a bunch of Airbnbs, which is kind of like a new market, uh, it's basically like you're a property manager. So you're more than just renting out your home or one home. So you have multiple properties, but you're not a traditional property manager who owns a multifamily, you know, like a building of like 32 units. And so this is for people who run multiple Airbnbs and it's just like, it makes your life way easier as the, as the owner of that. And they have like a few million dollars in recurring revenue. The valuation was great, founder was really impressive. So I was like, oh yeah, great, SaaS software for people who manage multiple vacation rentals. And then you're over here building short— Sam's Short-Term Rental Club, building this community, doing this thing. And I got the benefit because people thought I was you. That's, that's one answer. The piss you off answer.

That's ridiculous. That is the piss me off answer. Whatever. It is what it is. Send me that.

I'll send you that.

What's the company called? Can we talk about it?

Yeah. Hostfully.

Hostfully. Well, then I can just email her. It's, uh, is it, uh, do they have a bunch of, uh, uh, VCs behind it or all angels?

Um, I think this round's a lot of individuals. I'm not sure. It was like, I was kind of late to the party, so I was just pretty quick to just be like, okay, this makes a lot of sense. Uh, you know, the right, once, once you have revenue in a few million dollars, uh, that's recurring and they really haven't even like figured out what their marketing strategy is going to be yet. It's like, okay, that's a pretty good signal. That this is going to work and it's a pretty indispensable tool for a property owner. So I like that one. But I would say, okay, here's, here's some of the things that have happened. One is when I share deals with you, you share deals with me. My buddy Julian Shapiro shares like some of the best deals. He's just very— he's very like consistent with it, meaning like every week he's sending me some good shit. That's, I would say, 40 to 50% of the portfolio is relationships with friends who themselves are experts and specifically people who are experts in one niche. So it's like we've been doing a bunch of like salesperson software and it's because we like have a relationship with Kraft Ventures who is started by David Sacks. He's kind of like the enterprise SaaS guy. He built Yammer, sold it for $1 billion. His fund specifically just focuses on SaaS companies. And what you're—

you talk to— so David sends you stuff?

David? Not me particularly. So my partner Ramin, who runs my fund, he basically has a good relationship with somebody at Kraft. So for example, when they're seeing something good, they're just trading notes all the time. And so we're getting to get in on a lot of their deals. So if even— if are they giving you the deal as being—

but do they, are they giving you the deal because they like Sean or they like Romain?

In this case is Romain because, uh, he has that relationship. He's catching up with that guy every 2 weeks, goes get coffee or whatever it is. And, but then I do the same with my guys, right? So I do the same with the people in India or the people in Southeast Asia, cuz I'm like, I think that's where a lot of opportunity is and that's where I have the right relationships. So we're sharing stuff just amongst that. So, and then the other thing is like themes. So for example, once I decide that a theme is correct, like worth betting on, what I learned from Suli actually is the level of aggression you need to have once you decide X is a good idea, you need to go invest in that company and then like the 5 other companies that are like adjacent to it. So for example, there's this trend of banking, of like neobanks, right? So this started several years ago. Where people basically were like, look, banks are something everybody uses but has super low customer satisfaction scores. Like their apps sucked, their marketing sucked. So basically people are like, look, we can create like a digital-first bank. And this started like Nubank is probably the best example of this. It's in Brazil. They're like, oh, look. Yeah.

And they're about to go public.

People are underbanked there. So they start a new bank. A friend of mine was like, led their investment. And now it's a $10 billion company and it has like millions of customers in Brazil. And then the same thing happened in the UK with Revolut and Monzo, whatever. So this idea of neobanking basically of can you make super slick, like slick app for customers, digitally market to go get customers. And basically you're building, um, you're actually not building the banking part. You usually go partner with like some bank like BBVA or something like that. Under the hood it's BBVA, But the customer relationship is with a company that's really good at taking care of customers and building good user experiences. Anyway, so that's the short answer is like, okay, decide that that's a good idea. And that takes many forms. So like we talked about this before, like Ramp or Brex. These are like, Brex I think was the fastest growing YC company in the last few years. And you look at it, you say, is this a good idea? You say, well, what are they actually doing? They're basically giving credit cards to some group of people that were dissatisfied with current credit card providers. Brex did it for startups, and they get a portion of every time that card swipes. Oh, interesting. So if a million people are spending $1,000 a year on it and they're keeping 1.3% of the interchange fee of the debit card or whatever, you can come up with some number. You say, wow, this company's gonna get big pretty fast. So we did that math of neobanks. How much is a neobank customer worth and how much is a credit card customer worth? And then we went and did it in every niche we could think of. So we, we invested in Keep, which is doing this for Canada, and then we invested in Pluto, which is doing this in the Middle East.

But, but did you holler at them?

Yeah. Then we go search and destroy. Basically, it's like, how do you go hunt for the best companies that are doing this in, in either this geography or with this customer base?

So for example, you just DM them on Twitter, probably.

Yeah, exactly. We just reach out, cold DM and say, hey, I'm a believer in this for this, this and this reason. What you're doing looks super interesting. Would love to invest. And sometimes it comes inbound, sometimes it's, oh, you get 100 things inbound, but you know what you're looking for. So you quickly pounce on the 4 that fit your, your thing.

Aren't you out of money at this point from the fund though?

I raised more money because I was like, I was like before I thought, dude, you know, will I get $1 million worth of deals every quarter that are good deals? I'm not just trying to invest in crap, so I need to invest in good deals. So I was like, I don't know how many high-quality deals I'll have. And now I realize that like whatever I, whatever I had before was too low. So now we're doing almost $2 million a quarter. We raised more money because we just had better deals, man.

I, because I'm starting, so I started angel investing almost one year ago. Well, I did it 5 or 8 companies personally in the last, before that, I forget. And a couple of them have turned out to be like meaningful, like turning $20 grand into like $300, $400,000, $500,000. And I'm like, holy shit, this is awesome. That's awesome.

Yeah.

And like, but like it sucks for a while, right? Because you just invest it and you're like, well, that money's gone and you don't ever hear about 'em. And then you're like, oh nice, it works. And so I'm like, in some of those cases, those are huge markups. In other cases, I'm just now experiencing like 2 and 3 and 4X markups. And I'm like, that's awesome. What would happen if that was, had I invested in this company at a $10 million valuation instead of a $50 million valuation? That would've been wild. And like, how do I do that?

Well, one of the reasons, so I hated startup investing for a while because I was like, you know, is this the best use of time and money?

Dude, it feels like an expensive hobby. I'm just spending money and not getting anything in return.

Yeah. And then I realized two things, which is Bezos has this quote, which I believe he goes, one of the biggest competitive advantages you can have is being long-term oriented. Basically, if you prioritize like if you have a 10-year view where you're like, okay, I'm going to maximize what I can do in 10 years, and the other guy is trying to make the most they can make, you know, for their quarterly earnings call, right? This is what— this is how Amazon worked, right? Amazon was basically like, we're willing to lose money to invest so that we provide 2-day shipping instead of 7-day shipping, or free 2-day shipping, or a larger selection, but it's going to cost us more because we're going to have more inventory or whatever. So we're going to go into all these other verticals— books, CDs, whatever. They basically said, like, his strategy was long term, this is going to be the most valuable strategy. Short term, we're going to get punished by the market because our quarterly earnings are not going to look great. But that turned out to be the, like, magic, you know, the sort of like the biggest competitive advantage Amazon had was their ability to be long-term oriented. I think this is true just in general, which is if you're competing against somebody who they need a result in one year and you're willing to be patient and get the result in 5 years, 7 years, or 10 years, You can make bets that they can't make. So that means you get to have lower price bets, um, that will pay off bigger just over a longer time horizon. So I think if you have the luxury of a long-term time horizon, that's a competitive advantage. That's how startup investing works is if you need money or you need to see positive growth in one year, startup investing sucks. If you're willing to play a 10-year game, this can be an awesome game to play.

And so do you think that— well, but do you think you told me you're like, man, I think I could 3.5x my fund because that's average. Now it seems like it's going to be significantly more.

Yeah. Like, you know, you think about kind of like what's the floor? You know, I think a 3.5x would be, you know, a solid outcome, but, you know, nothing to write home about. But like with a small fund like ours, you know, you could see things where you can get a 15x, you can get a 20x. There are literally crypto small funds like ours that have had 100x. They 100x the fund in the period of time. Right. So, so, you know, you shouldn't really The ceiling is high, but the floor is pretty reasonable. So the first thing was, okay, long-term oriented is a competitive advantage. I like sharp investing for that reason. The second one is you want to do things that compound. So for example, if I wanted to beat the market in the stock market, right? I want to beat the S&P 500. I need to have proprietary, like, intelligence. I need to be smarter than anybody else about something. And I think just being smarter at a game where money's on the line is just really hard to do. Whereas if you do, if you basically say, hey, my advantage comes from my reputation or my network of people that I know, that's just gonna compound every year. The more deals I share with you, the more deals you're gonna share with me. The more companies I have that are winners, that's gonna make it easier for me to get into the next winner or for founders to come reach out to me 'cause they'll say, oh, I saw you did these 5 Indian unicorns. I'm an indie, I want to be the next one of them. So you should invest. Can you invest in me? So compounding also comes into play here in a way that doesn't happen in the stock market and doesn't even really happen in real estate. Real estate has it to an extent, but, but not in the same way as how fast your reputation can compound in startup investing. So anyways, those are my two reasons why I now actually view startup, startup investing as a, as a game worth playing, because it uses two of the superpowers that, that I believe in that I think most people undervalue.

Is it gonna— what do you think will earn more, the e-com thing or this angel investing thing?

Uh, probably the— for me personally, the e-com thing, because I just own the majority of that company. So, you know, if it sells for $50 million or $100 million, you know, I'll own the majority of it. But, uh, whereas with startup investing, you know, it's like my fund invests $100,000, we own 0.8% of this startup. I personally have 20% of the carry, but then I share with Ramin and Ben and Zach. And so I personally own 14-point-something percent of the carry or whatever.

Sure, sure, sure.

You know, so it's not like, you know, you're owning a slice of a slice of something big versus just owning the— you know how it is, owning the majority of something that sells for a decent chunk is, is just better financially.

It's so much better. And yeah, I, I think that whenever people raise money, I'm like, are you sure, man? You might be able to sell this for $50 million and you'll make more money than if you raise money and sell it for $500.

Yeah, exactly. Now, you know, but I have to operate that other business, whereas startup investing is like, you know, a joy, right? You just read about cool ideas, you meet awesome founders and you say yes, you write the check and then they go do the hard work. So it's, you know, just a different thing.