Though I have made a few angel investments here and there over the years, it has never been my primary approach to investing in startups. I joined a venture capital firm when I was 25 years old and have been working at a venture capital firm ever since. I grew up in the business of investing other people's money and that is how I have gone about investing in startups ever since.
Over the past five years, I have watched The Gotham Gal build a portfolio of angel investments. She has invested in almost fifty companies in the past five years and if you include things like restaurants and retail establishments, that number grows to closer to sixty five. She is investing our capital but these are her investments.
As I watch her select her investments and then work with them, I am impressed with the purity of intent that comes with being an angel investor. She invests in people she has confidence in and she invests in businesses that make sense to her. When she engages with her investments, she is giving her advice.
Compare and contrast that with a venture capital firm. A venture capital firm is in business to make money for its investors. They must invest in things that they believe will make money and they must be able to rationalize and explain their investments and their investment strategy. A venture capital firm has multiple partners and its investment decisions are based on the consensus of those partners. The advice an entrepreneur gets post investment reflects the inputs of all of the partners of the firm, not just the partner managing the investment.
There are some great strengths that come from the venture capital firm approach. At USV we have benefited greatly from our work to develop an investment thesis and then evolve it over time and be rigorous in our application of it. We also benefit from the collective insights and intelligence of our partnership and broader investment team.
But the more people you put around a table, the harder it is to make really gutsy investments. And the more you stick to your disciplined investment strategy, the more you say no to people and projects you like personally.
When people ask me about the startup investments I am most impressed with, the Mike Markkula investment in Apple and the Andy Bechtolsheim investment in Google are the ones I always talk about. These were people who took out their own checkbook and backed some people with an idea they thought had merit. And they were rewarded handsomely for these investments. They took 100% of the risk and got 100% of the rewards.
Yesterday at lunch my daughter Emily asked what I plan to do when I retire in the next ten or fifteen years. I replied that "I plan to do what Mom does". It looks like a lot of fun and I think I might be pretty good at it.
