Aug 2025
“Nothing wilts as fast as laurels that have been rested on. Nobody is an authority on your potential but you. You have to put yourself in a position to be lucky.”
– Roelof Botha, Sequoia Capital
“The number one reason a startup shuts down is not actually running out of money, which is what most people believe. The number one reason a startup fails is that the founder gives up. When someone tells me they have a founder they want to introduce me to but they’re worried because the person is a wild card, I set that meeting up for the next day. Angel investors are looking for wild cards, because the best founders are typically inflexible and unmanageable, pursuing their visions at the expense of other people’s feelings.”
– Jason Calacanis
Over a decade ago I made a declaration that I’d start angel investing. Mostly as a statement about how little capital there was being invested by rich people in Australia, that if I, a broke 19 year old would start writing angel investments, then they should also. That even incremental amounts of additional capital flowing to Australian startups would widen the funnel and produce dramatically larger outcomes.
I had a little bit of success in that time but not enough to absorb sustained losses that angel investing requires of you to find the winners. Fast forward to 3 years ago, I outlined how much someone would need to have to scale up an angel investing operation. After writing that essay, it started to dawn on me that maybe I was closer to that mark than I thought and you could actually scale up angel investing incrementally instead of all at once. So that’s what we did.
My wife and I started putting aside an amount that we felt like we could afford to lose then started making small angel investments in promising startups. Within that idea, a strategy started to emerge and that’s what this essay is. It’s the long winded answer to what is the strategy and what do we actually do after we’ve invested in a startup.
Axioms and Ideas
Here’s 2 sobering facts about the venture business from Roelof Botha at Sequoia Capital, the best venture firm that has ever lived. 98% of the returns of the greatest companies occur after they go public at valuations above a billion dollars. PayPal, eBay, Google, MongoDB, NVIDIA, Facebook, Microsoft, Amazon, all of these legendary companies follow this power law distribution. That means if you bought the stock when they went public and held onto it, you likely outperformed all the seed investors who sold at IPO. Because most of the upside was still ahead of the company.
The second sobering fact is that 50% of companies that go public trade at a lower price than their last private fundraising valuation. Even within outliers there’s a normal distribution. So the best outliers do better than you could ever imagine. The average outlier does worse than you hoped. There are outliers within a field of outliers, no wonder it’s so hard. What that also says is that the entry price isn’t material but the exit price is very. So in technology, the companies can grow so fast and become so big that it is genuinely beyond imagining but can also lose momentum and get disrupted before you realise.
Sequoia is right and it’s something I believe and have lived in the outliers exceptionalism model of startups and that’s what I’m hoping to try and participate in. So from the beginning that’s the orientation of the compass, we’re going to be taking moonshots and home run swings, not aiming for base hits. We’re not playing Moneyball we’re playing Squid Game. Someone is going to win big and there’s going to be lots of losses as we support people trying new things.
So that’s what I’m looking for, people who want to build big companies and startups that could become big, meaning they’re doing something fundamentally new and the founders have big ambitions and seem talented and resilient. Subtly, what that also tells you is that price doesn’t matter at all. The valuation at which you invest in a startup is entirely uncorrelated to how well it does and so is meaningfully irrelevant to your returns. You just have to be in it, how much you own and when you bought isn’t what we’re optimising for.
The price of entry is only relevant if you don’t have one of these great enduring companies in your portfolio and your returns are influenced by smaller outcomes such as an acquisition. Then if the company gets acquired for $50m or $100m and whether you invested at a $10m or a $20m valuation is very meaningful to your returns. But I would argue that those small outcomes are not what the game is about for your returns. They’re great for the ecosystem and the founders of those businesses, but venture is a power law business and it exists to create outlier outcomes.
So the first big idea is we decided early on that we wouldn’t care about the valuation or price of entry at all. This has helped us get into a lot of deals that we would never normally have access to. Hot startups with high valuations, overlooked startups with low valuations, all were fundamentally the same to us. Our money would go in at whatever the valuation and terms the founder wanted. And we would trust that they were operating on good faith to produce a good outcome.
If you don’t care about valuation and you’re trying to get outliers, then a second thing happens also, you don’t care about the terms either. This saves a whole bunch of time. There is basically zero negotiating and we can make decisions on the spot quickly. Often we can decide over a coffee or don’t even need to meet the founders, we can do a phone call and decide to join a funding round as is at whatever the terms are. We can get an introduction and then decide within an hour of getting that email. That speed I think is a competitive advantage.
Doing this I discovered there’s a term for this type of investing, it’s called Most Favoured Nation. Where you put in money at whatever the best terms already are. But also there’s a secret weapon hidden in it. Because you don’t care about entry price, can move quickly, do basically no diligence, and invest at whatever the current terms are, you can invest along the full growth continuum. You can join a growth round at a $500m valuation as easily as you can join a seed round at a $5m valuation.
This makes you a low stress investor because your investment doesn’t take up any time which allows you to enter companies that you’d never have a chance at most of the time. The founder isn’t thinking about the money, they’re thinking about the value of having you as a shareholder in the business and how you can help them. By virtue of essentially your personal brand and reputation.
So within that is the ideals by which we would operate. Move quickly, pay whatever entry price and terms we have to and be such high quality operators and create such a good personal brand that the founders want us invested in them. Which means being transparent, honest, blunt and operating on good faith in every interaction.
What happens when you invest in a company at a $500m valuation as opposed to a $5m valuation? The larger company is already working and growing. Your overall multiple on the investment goes down but your internal rate of return goes way up because that company will IPO or get acquired sooner. Companies also compound faster at later stages by overall larger quantums.
What that looks like is it’s usually faster to go from a $1b market cap to a $10b market cap than a $10m market cap to a $100m market cap. Even though those multiples are the same, a 10X, the speed at which fast growing companies hit them is different and is why the later internal rate of return can be greater even if the multiple is lower, because it happens faster.
It also shapes the way you think, you’re not optimising for exit when you meet a company, you’re thinking how big could this get? Could Canva get as big as Adobe? Can Airwallex get as big as Mastercard? Can Xero get as big as Intuit? Because then you want to hold your ownership forever. I love asking myself this question when meeting brand new startups, how big could this get?
The second big idea, in this essay I worked out that you’d need to have a portfolio of 76 companies to get a large enough portfolio to be able to get a unicorn in your portfolio. I’d like to do over my career many times that number. So to go wide at scale our angel cheque size has to be commensurately low at about $10k – $20k per investment with no follow ons. That is small enough to participate in just about anything and also no signalling issues because we don’t follow on, so we could help with problems the business was facing.
So going wide with small cheques investing at whatever the prices and terms already are, that’s pretty much the whole strategy. But that unlocked a second order problem, how are we going to meet 76 companies? Do we even know that many people or have enough time? That led us to the second answer, we should invest in other funds directly that have different networks and strategies to us and are also actively investing.
This is where something special happened. Venture is a field of exceptionalism and outliers. By definition that means that you have to be doing something different and be slightly insane, otherwise people would already be doing it. So we decided to support new ideas and people taking big risks starting new funds and splitting the money allocated for investing – half into emerging funds, half investing directly ourselves. Suddenly a repeatable strategy was born, there naturally forms a sort of barbell.
I don’t know many founders in Sydney. So let’s go back a fund manager in Sydney. We generally invest early, so let’s back a fund manager who buys secondaries later. I don’t know anything about AI or Crypto, so let’s back a fund manager who does. And so on. That would allow us to effectively index Australian startups and venture. Getting exposure to all different types of people and strategies. As I meet more and more of these people, we’ll do more and more of them.
The third axiom is that we’d be forward and blunt. A lot of investors I see essentially wait for the best startups to somehow come to them to ask them to invest and the investor won’t speak plainly or explain themselves, then wonder why their returns are average and they miss the big wins. It becomes a form of adverse selection. We aren’t going to do that, we’re going to be forward and direct and actively reach out to meet people and offer to invest in them to cut through the noise.
In the words of Mike Maples from Floodgate, we’re going to play offence with our money and only need to get a 100X return approximately 5% of the time to be a successful startup investor. You score more goals if you take a lot of shots on goal, even if you also miss more. As part of playing offence, we ask ourselves in the background, “how do we make sure we’re invested in every would be Unicorn in Australia? How do we know if we’re looking at one?”
I truly don’t know, one of the benefits of exceptions to rules being where the value is created is that you have no idea what you’re looking at a lot of the time. And by definition you can’t create any heuristics or rules because the next win might be an exception to that rule. So pattern recognition actually just doesn’t work. As the pattern trains, the new thing comes along that smashes that pattern to bits.
I think first we have to find them then we have to make sure we’re in them, regardless of how. Whether you invest at the start or the middle or the end, you just have to be there because of how big the big winners can get. So that’s how we invest. Next is what do we do after we’ve invested? I think everyone that invests in startups has something they do after they’ve invested. But this is what I do.
Money and Network
After I’ve written a cheque to a company, I’m available to that founder as much or as little as they want me to be and I stay reactive and let them decide how much or how little they would like to use me as a resource for their company and how they would like to. I try to leave the company alone, I don’t tell them what to do, I don’t try to advise, I don’t demand coffees or updates or anything. In fact I openly say to spend more time building and growing than investor schmoozing.
I’m essentially a walking pool of experience and a resource that they can tap into in whatever way they’d like and almost everything I know is on my blog in essay format so you can verify. In addition to that, everyone I know is fair game for me to do an introduction to. But I caveat that I may not know anyone who can be helpful or not know the answers, sometimes I think founders think we know more people than we actually do, but I will try my best.
What I do find is most of the time the founders reach out to me a couple times a year, if that. And usually need help with some facet of problem X that is pretty specific. Usually I’ve seen some variation of that before or know someone who has and can tell stories about how it was solved or what measures were put in place to fix it which seems to be helpful. Similarly I’ll often meet people I think could be helpful for them and they’ll get random introductions.
I’m a believer in the stoic thoughtful story teller version of advice giving. Where I like to tell stories and parables that have lessons in them but without directly telling founders what to do. Unless they’re about to drive over a cliff or get themselves sued, in which case I will say don’t do X or do Y. But most of the time it’s just stories and trying to understand deeply the problems they’re facing and how I can be helpful to fix it. Sometimes the fix is an introduction to someone else and I’ll often do half a dozen or so introductions to put them in touch directly with someone who faced and solved that problem before. Or someone who has lived that experience.
Founders are welcome to take the money and also never reach out to me at all which is also totally fine. There is no right or wrong way to do this. Businesses and founders come in all different shapes and flavours and operational cadences. People can do whatever they feel is best for them and I’m happy to work with whatever they want to. The important aspect here is to keep interactions with minimal stress and maximum fun.
Sometimes I think investors are too hard on founders and my approach is to be upside oriented and inject optimism. That the founder leaves feeling like they can take over the world while also telling them how it is straight up. That what I am fundamentally are safety rails on a tenpin bowling lane. I improve the odds of a founder hitting a strike or a spare by trying to be the barriers to prevent the ball from falling off the edge too many times. I think investors also overpromise and underdeliver majority of the time and I try to do the opposite of that.
The other reason I like the reactive mode of angel investing is because I have a finite amount of bandwidth and time. If you have a large portfolio of let’s say 100+ companies. Ideally I’d like to invest in many times that over my career but let’s start with a nice big round number of 100. Then if each of the 100 sends you an update every month and they want a detailed reply or wants to do a coffee each month, that’s over 1,000 emails a year and 1,000 coffees a year you have to do. Which you just don’t have enough time for. Nobody has that kind of time. So you’re present for the important parts when the startup needs help. But trust that for the most part, they can figure the rest out themselves.
Product and Feedback
After investing in a startup or fund, what I find is that company is now occupying a small space in my brain and I’m thinking about them passively all the time. That means randomly I’ll have ideas about them and founders will often get random emails from me with crazy ideas about their business I’ve just had. I recommend taking everything with a grain of salt, they are the experts in their startup after all not me, and either ignoring it or taking on board as commensurately to how helpful they feel it is.
The other thing I do after a startup is in my portfolio is I’ll add that product into my suite of products that I use in day to day life. What that means is I become a customer of the product and can see first hand all the product problems they’re facing. Areas of high churn, missed opportunities, growth hacks, polishes to features, ways to improve etc etc.
I believe fundamentally great products are the backbone of great businesses. That great products sell themselves and polishing and improving a great product is the easiest method of growing a great business. Product also happens to be a high order bit of low hanging fruit so investing here pays out with disproportionately high upside.
I’m a product person who has scaled small apps to the most popular in the country so a lot of the product feedback is a skill. I think product is kind of like comedy, everyone thinks they can be funny but few people are really good at it and can go up on stage and be funny on demand. What that looks like in practice is I’m a sort of mystery shopper for the company, I’m in the head of their customers and are thinking about and trying to improve the product from the view of a user. Because that’s what I am, I am now a user of their service. Sometimes I use the products every day.
That’s actually been a source of immense satisfaction in angel investing. When I invest in a startup that then becomes a core part of my life and improves it measurably in completely unpredictable ways. I really love it when that happens. I have truly lost count of the number of times a startup I’ve invested in has improved my life. Some in massive and profound ways. You genuinely want the business to win not just for the returns but because it is improving your life.
I find when you’re both a customer and investor, the recommendation to use it and improve it holds a lot more weight because you genuinely want the product to improve and for the bugs to get solved. You’re acutely aware of where the bugs and bottlenecks are and how best to solve it. Blindspots the founders themselves have when they’re not on the frontlines using their own product day to day.
Herein lies a proof for something I think a lot of people wonder when they question startup business models or when they’re on the fence about starting a startup, they think why can’t insert X big company just come and do this. But I have been waiting years for insert X big company to launch a product or do something that some startup comes and launches out of nowhere. So what I want out of the world more often than not is launched by a startup not by a big company.
What that does for me is it allows me to live in the future. Because these are the products I use everyday, I feel very much at the cutting edge of almost every industry which improves my life by that much. Once you live this at scale you realise that big companies have huge blindspots all around them that can get picked off one by one by promising startups. So I don’t think a big company being able to do something should ever be a reason not to do something. Even if they do, markets are so big they can have multiple products at the same time.
Psychology and Problems
There is a peculiar problem in startups where internally the company might be on fire and everything is breaking and everyone is fighting with each other. But to the outside world they all have to put on a brave face and say how well everything is going and how promising it all is. Living that cognitive dissonance is difficult and tough for a persons mental health.
They can’t really confide in or trust their venture capital investors with their problems because they want those people to invest in their future rounds of capital raising. If they told them all the problems, it would likely blow up future fundraisings so the founders have nowhere to turn to for help with the serious problems they’re facing.
They usually also don’t want to turn to their family and friends because it’s not socially acceptable. Friends working difficult 9 to 5s don’t want to hear about the stresses of running software companies who’ve raised millions of dollars of funding seemingly out of thin air. But actually building a company is very hard and life wrecking. So there’s very few places to turn to talk about it and find help.
Often the problems are parasocial such as family death, divorce, friendships that fall apart and so on. These are stressful at the best of times but can be depression spiral inducing at the worst of times when compounded with the stress of trying to build a company. Because so much of a startup at the early stages is just an extension of the founders themselves. Founders usually turn to other founders for pseudo therapy sessions but those people are usually in the same stage of a journey as them. They haven’t come out the other side yet.
This is a unique space that I think angels are well equipped to operate in. The hybrid coach, therapist, management consultant role. To be able to help with the often interpersonal psychology problems of trying to start a startup while also helping diagnose and solve the business problems. Because the angels don’t invest in future rounds, there is no signalling problems. I’ve found it’s often really helpful for founders just to be able have someone to talk to who understand the unique world they’re in and know that person is in their corner and has experienced similar.
I’m in the unique space of having had almost every single bad thing imaginable happen to me as a founder but we still have made it to the other side. Lots of my friends and family dying right as I had a baby, check. Being sued by lots of billion dollar companies and governments, check. Our scaling company got crushed by a pandemic and we lost 99% of our revenue and had to let go of 99% of our staff, check. Cofounder lawsuits and not being able to raise any investor capital whatsoever despite doing dozens of meetings, check. And so on and so on.
That scar tissue comes with experience. Sometimes the founder sessions are just psychology or therapy sessions where you remind people that things might crash and burn, but it’ll be ok and you will come out the other side in the end, possibly with lots of money. I have a belief that if you’re there for a person when they’re going through one of the hardest periods of their life. That when that person starts to succeed, they’ll bring you along for the ride. So if you’re going to be in an industry for a long time, you can develop relationships deeply and use time as a competitive advantage.
The kind of thing that would make you a good friend to someone is the best way to do this. I also find it deeply satisfying when I’ve known someone for a long period of time, which great startups can run for decades, and you develop a deep friendship with that person. Some people separate business and friendship but I’m a believer in comingling it all together. That when you’re all friends and all helping each other make lots of money, it unlocks even greater upside than if you’re just colleagues.
That business may fail. But that doesn’t mean the next business that founder starts isn’t going to be successful. Or maybe it can turn around and become successful from a near death. Or maybe it just dies and then you do something else. Most successful founders I’d argue have had a lot of failure in their past. Being available in these dark moments when it looks like you as the investor is going to lose all your money, I think is a special place angels can exist in. If a founder or business is struggling, being someone they can talk to can mean the world to them. So I make sure I show up in these moments, in fact I would even go so far as to say I’m especially good in these moments.