What I learned from passing on investing in Twitter & Zynga — & saying yes to Uber & Thumbtack

QLpky

This week I was asked to speak to a dozen billionaires at a secret meeting about putting $100b to work. They wanted me to talk about what I’ve learned over the past five years as an angel investor.

Well, here it is.

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It took me five years, but I’ve learned what the two most important factors are in the success of an angel investor. It’s not being smart, it’s not being diligent, and it’s certainly not being a visionary.

After passing on Twitter and Zynga, I invested in Thumbtack and Uber. Looking back, I knew Ev and Mark were winners, but I didn’t think their ideas — for “updates” and “social poker” — were winners.

I was wrong about their ideas, but I was right about them.  

When Travis and Marco came along with their ideas, I didn’t even try to judge if “on-demand drivers” and “a better craigslist” were winners, because I knew the individuals were winners.

That’s enough information to make a bet.

Which leads me to “Jason’s Law of Angel Investing,” which states:

“You don’t need to know if the idea will succeed — just the person.”

After five years of this, I’m always looking for signals that the person is a winner — even in failure. Two of my favorite founders have had their asses handed to them, and I’m chomping at the bit to see what they will do next, because I know Matt and Josh are winners who do great work, so eventually they will hit it.

Just like Elon hit SpaceX on his third swing at bat and Tesla on his fourth, and Travis hit Uber after Scour and Red Swoosh.

Great founders grind it out and figure it out, so as angels you really don’t need to overthink if electric cars will work, whether on-demand transportation will scale, or if Medium.com is a platform or a publication (hotly debated) — you just need to know if someone is a winner.

Raise.com and Wealthfront.com are slick products, but their founders George and Adam are the real reasons I’m a shareholder. Those two are under the radar, but well above the crowd. Then I have super early stage founders like Jill, Mei and Julie who I just know will win — on this company or the next (or the next, or the next).

How do you tell if someone is a winner? That leads to me “Jason’s Second Law of Angel Investing,” which states:

“Your success is correlated to the amount of time you give to founders.”

Any excuse for me to spend time with founders, I come up with it. From my podcast to my events, from my offices hours to my incubator, from social media to Bastille Day, everything I do is a giant funnel to spend time with founders.

The more time you spend with folks, the better you’ll know if they’re winners or not.

Most folks are not winners, but everyone has the ability to become a winner if they apply themselves and stop being victims.

Here are the things I look for that tell me the person is a winner:

  1. Resiliency: the #1 trait in winners.
  2. Relentlessness: the #2 trait in winners.
  3. Debatable: people with big vision love to debate their ideas and every aspect of their product. If you’re not willing to engage in vibrant, challenging, and sometimes uncomfortable debate you will not be a winner.
  4. Intractable: my signaling tells me that the willful, recalcitrant founders are the ones who make it through the fire — not the subservient, obedient, and easy-to-deal-with founders. If you’ve been called “difficult” your whole life that could be sign that you’re a great entrepreneur (“could” is a key word in that sentence).    
  5. Curiosity: can this person suck up all the information on the planet, process it, and incorporate it into their strategy — even if that means recognizing and then ignoring what they’ve learned.
  6. Networkability: can you get to anyone or do you need me to walk you into the room?
  7. Product vision: do you know what you’re building, why you’re building it, and how to make it exceptional? Do you even know what makes products exceptional?
  8. Fearlessness: can you take on any project in any vertical without any prior knowledge?
  9. Resourcefulness: Do you find ways to turn nickels into dimes and dimes into dollars? Can you find the best way to solve for X with the least amount of effort?  
  10. Charisma: There is no substitute for a founder’s ability to get people to embrace their vision. Folks can call it leadership or sales or charm. It’s all the same thing at the end of the day, your ability to get people to embrace how you want the world to be.

One thing to keep in mind is that not everyone has all of these qualities, and people frequently succeed without many of them. These are just the signals that one sees most often — but not exclusively — in a successful founder.

all best, @jason

Some things going on in my world:

  1. If you want to learn how to angel invest, I suggest joining my AngelList Syndicate.
  1. I launched AdReplacer as an Inside.com experiment yesterday. Was #1 on Product Hunt, but the founder of Outbrain flamed me — and I responded here: “Fight! Fight! My Response to the CEO of Outbrain.” This is the second experiment, with the TLDR extension being the first we did. I’m going to write a story on “How we got the #1 slot on ProductHunt two times in a row.”
  1. We are giving the first 10,000 tickets to LAUNCH Festival to founders for free this year. 1,000 folks signed up in the first couple of days … so I’m guessing these will all fill up quickly. Don’t wait, grab a founders ticket.
  1. We’re hosting an Angel Summit at LAUNCH Festival this year. If you’re an angel — or aspiring angel — you can apply to attend the Angel summit.
  1. We are hosting four dinners at the Launch Festival. If you want to hang with the speakers, startups, angel investors, and press, you want to get the Super VIP Pass — which at $3,000 is half the price of the CODE conference, 1/3rd the price of TED, and 1/10th the price of Davos (and if you’re into startups, a much better experience!).
  1. LAUNCH Hackathon will feature 1,000 developers over two days creating companies. The top seven make it to the main stage and the top four from that group will come to the LAUNCH Incubator and receive a $250,000 investment (pending due diligence, graduating, not committing any fraud, yada yada). If you want to be an API Partner we could use some help feeding 1,000 developers.