Angel Investing 101:
Lessons from a Self-TaughtAngel with 2x Unicorns
Getting started? Venture Fundamentals Program
angelschool.vc/venture-fundamentals
● Time: Essential venture skills (10 hrs) + Investment Committee membership
● Covering:
○ Venture Benchmarks
○ InvestmentThesis
○ Cap tables & Dilution ○ Convertible Financings ○ Decision frameworks ○ Case Studies
○ …and More!
● Program
Quick Intro
About Jed Ng
● Operator: Built world’s largestAPI Marketplace w/ a16z-backed startup.
● Venture Investor: Self-taughtAngel. 2x Seed → Unicorn.
● Syndicate Lead: Backed by 1300+ LPs.
● Founder @AngelSchool.vc:AngelAcceleratorfrom 1st check to leading Syndicates
How syndicates work
Investors Startups Syndicate Lead
Curated Dealflow
● Deal sourcing at scale
● Due diligence
● Building datarooms
● Access to deals by aggregating capital
CapitalAccess
● Access to 100s of investors
● Single $100k+ cheque
● Pre-built trust & relationships
● Cleaner cap table
● Expert network
What is Broken in Venture
1. Capital Supply is Neglected: Capital is treated as an afterthought. We see a ‘fixed quantity’+ ‘Zero Sum’ mindset when accelerators tell startups to go look forAngels or VC.
…Regulatory policy (and enforcement) is either outright flawed and/or contradictory.
2. High ‘Barrier to Entry’:Angel investing is MUCH more accessible now.Affordability is not the issue.
→ Despite the nomenclature,Angels DO NOTfall from the sky with bags of money.
→ Core problems are (i) knowledge, (ii) ‘pay to play’skills acquisition, (iii) support and safety, (iv) feedback/learning cycles.
3. The Syndicate ‘Chasm’: Syndicates fit the capital spectrum -Angels ($3k - $25k) → Syndicates ($100k+) → VCs ($1 MN+).
There is no playbook for building syndicates…
…Yes, syndicates deploy ~$10 BN / yr today.
This is a MARKET WORTH BUILDING FOR!
Investment Thesis
Investment Thesis: Focus to build skill
Geography
(Where does an investor deploy capital?)
Sector/
Domain
(Which industries or verticals do they invest in?)
Stage
(Which stage of companies do they invest in?)
Your Options
Returns Profile:Angel Investing
Here is what your returns profile looks like as an angel investor investing directly in N Startups
PortCo Return
Portfolio Return
• Each PortCo has uncapped theoretical upside Portfolio return is the sum of ind. PortCo profit / loss
• Loss is limited to 1x
Portfolio (1x Return)
Portco (1x Return)
Portfolio Profit (>1x Return)
Returns Profile: Syndicate LP
Here is what your returns profile looks like as an investor in deals B, D, E
Deal by Deal Syndicate
• ~5% admin costs per deal (SPV + mgmt. fee)
• LPs decide which deals to invest in LPinvests in deal B, D, E
Deal Level Returns
Returns Profile: Fund LP
Here is what your returns profile looks like as a Fund LP
LPInvestment
Returns
Getting into Venture: Your options as anAngel
Decision Making
Decision Framework: Here is what we look for…
Product / Service
Market
Product / service differentiated by 10x not 10%
Big and HUGE markets differ by 1000x
Defensibility
Traction
Team Economics
Valuation
High revenue quality and unit profits fuel growth (and lowers dilution)
What assets makes it hard for others to replicate your business?
Traction de-risks the business and validates if the strategy is working
Serious entrepreneurs with skin in the game and skills to execute
Fair valuation today and long term view of exit value?
Portfolio Construction
Managing risk
Life changing outcomes
Portfolio construction: Maximizing your odds of success 1
1. Acceptance of Risk:Assume that whatever you invest in venture will go to 0. Be prepared to walk away.
Do not expect liquidity until an exit event. Even if your shares are valued, there might not be a buyer.
2. Take your time: Dealfow is limitless. Capital is finite.
Get plenty of exposure (see a lot of pitch decks), BUT…be stingy with writing checks. Keep your early euphoria in check.
3. Diversification Matters: You might have 1 winner out of 10 or 20 startups you back. Be committed to building a portfolio.
4. Outcome levers:You have multiple ways to improve your odds of venture success.Think of them as weapons in your arsenal: more deals, bigger checks, better diligence.
5. Tradeoffs: Realistically there are tradeoffs among the different levers. Be aware of them and make the right tradeoffs for your philosophy.
For example, writing a bigger check allows you to do deeper diligence.That improves your odds of success at the expense of capital.
Portfolio construction: Maximizing your odds of success
Reality check: Generally speaking, here is what holds true when you’re starting out:
○ Low on skill and experience.
○ Finite pool of capital for venture (and won’t increase significantly in the near term).
○ Access to dealflow is constrained (largely a capital constraint)
7. Small bets early:The psychology of investing changes once you stake capital. It’s important you experience this.
However, your decision making is poorest when starting out.As such, make undersized bets early (Syndicates help you improve deal access, learn from their diligence, and diversify)
Diversify over time: Capital is finite. Don’t be in a rush to write checks. You’re in it for the long game.You can diversify by building a portfolio over a period of years.
9. Life changing Outcomes: The whole point of venture is to get outsized returns (10x, 20x, 50x, 100x?)
Say you backed a startup that returns 100x.
If you invested $1000 → $100k…so what? On the other hand, $10k → $1 MN (much better!)
Portfolio construction: Maximizing your odds of success
10. Invest in your skill: Diligence skill is another success lever. It takes many reps and time to develop. Start working on this early. Great decision making pays off in the long term.
11. Join Syndicates: Let someone else do the heavy lift of sourcing deals and doing diligence on your behalf.You have 100% decision control over your portfolio. (Be aware: not all syndicates have high standards so vet carefully).
12. Scale UP(when you’re ready): Build your own syndicate or start a fund.You access more capital and write bigger checks.You’re removing personal capital as a constraint.
○ That gives you more deal access and allows you to do deeper diligence.
○ You charge carry so you improve your upside.
○ Scaling up moves multiple levers!
Strategy (AngelSchool.vc’s cheat code to Scale VC)
The venture bottleneck
Investor Community
● 1300+ LPs
● $0 marketing
● 100% inbound growth
How do we scale:
● Networks and relationships?
● Access to capital?
● Diligence bandwidth?
● Deal specific expertise?
● Investment skill?
● Curated dealflow & deep diligence
● 100% LPdecision control
● Incentives aligned with LPs
Dealflow
AngelSchool.vc Scaling model
Investor Community Programs
● 1300+ LPs
● $0 marketing
● 100% inbound growth
Learning Philosophy
Investment Committee
Our ‘North Star’: we help Angels from 1st check to leading syndicates
The Lab’: get deal experience, safety net, build community
● Curated dealflow & deep diligence
● 100% LPdecision control
● Incentives aligned with LPs
Dealflow
The ‘Super Network’: 3 Investment Hubs, 1300+ LPs
Our Scale (and Efficiency)
AcceleratingAngel Investors: From 1st check.….to Super Angel
Venture Fundamentals
Syndicate Blueprint
● Essential venture skills forAngels
● Real deal experience
● Global Investor network
Learn More
● Build your ownAngel network
● Invest at $100k+ scale
● Earn carried interest
Learn More
Disclaimers
This material has been prepared byAngel School Pte Ltd (the “Company”) and is general background information about the Company’s activities at the date of this presentation.The information in this material is provided in summary form only and does not purport to be complete.This material is for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation for any security, nor does it constitute an offer to provide investment advisory or other services.This material does not contain all the information that is or may be material to investors or potential investors and should not be considered as advice or a recommendation to investors or potential investors in respect of the holding, purchasing, or selling of securities or other financial instruments and does not take into account any investor’s particular objectives, financial situation or needs.This document may contain forward-looking statements.Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Reliance on this information is at the sole risk of the reader.This document and its contents are confidential and proprietary to the Company. No part of it or its subject matter may be reproduced, redistributed, passed on, or the contents otherwise divulged, directly or indirectly, to any other person (excluding the relevant person’s professional advisers) or published in whole or in part for any purpose without the prior written consent of the Company. If you have received this document in error, you must return it to the Company immediately.The information contained herein has not been independently verified. No representation or warranty, express or implied, is made regarding the material's fairness, accuracy, or completeness and the information contained herein. No reliance should be placed on it.All projections, valuations, and statistical analyses are provided for information purposes only.They may be based on subjective assessments and assumptions and may use one among alternative methodologies that produce different results, and to the extent they are based on historical information, they should not be relied upon as an accurate prediction of future performance.
AboutAngel School
AngelSchool.vc is the ultimate Accelerator for Angel Investors - from 1st check to leading syndicates as Super Angels. We give emerging venture investors world-class training, build their track record as a member of our Investment Committee (IC) and access to our global alumni network.
The AngelSchool.vc Syndicate is backed by 1300+ LPs and deploys $MNs annually. Subscribe here for exclusive dealflow.