April 2026
“According to the Global Entrepreneurship Monitor friends and family investing annually accounts for $50 to $75 billion in early stage capital in the United States. This is two to three times the amount of money invested annually by either angel investors or venture capitalists. A first-rate team with a second-rate idea will always outperform a second-rate team with a first-rate idea.”
– Brian Cohen, What Every Angel Investor Wants You to Know
“I see now that the circumstances of one’s birth are irrelevant. It is what you do with the gift of life that determines who you are.”
– MewTwo
I get asked the same questions and give similar advice over and over again with different founders so I’ve decided to make a sort of FAQ.
How many investments do you make and why?
The ranges can vary pretty wildly but I aim to make 25 to 50 direct startup investments, 1 or 2 venture fund limited partner commitments and 2 to 5 secondary purchases per year. The direct startup and secondary investments are $10k cheques each and the venture fund investments are $100k each or whatever the minimum fund cheque size is invested into Australian startups annually.
I maintain discipline when it comes to cheque sizes which I don’t waiver from and have a spray and pray approach which I enjoy. It lets me meet the most number of interesting people which is fun and has the highest qualitative upside in friendship building and network creation. So I get to see a whole bunch of what feels like pretty advanced frontier stuff.
I also as a result get to think about strategy, product and business through the lens of a large number of startups. This feels like it keeps my brain sharp by honing other types of brain tools than the brain hammers I use in my businesses. When you go wide you develop a wider array of brain tools because you have to think so differently each time. You just can’t think about diverse fields through the same models.
It also allows the individual quantums to be low enough that I can often invest without even meeting the founders and it doesn’t occupy significant mental space or bandwidth so I get to be a low stress investor and help where I can. Because I’m investing from the balance sheet of my own companies, I don’t answer to anyone but myself and have no interest in raising a fund or having limited partners. Institutionalising the angel investing doesn’t sound fun to me.
I may not meet this many companies and so sometimes the amount invested is less than this but that’s my aim. In my head angel investing occupies the same space as charity does and it’s a way of giving back to the Australian startup ecosystem. Ideally every 100 investments, I get a 100X return which enables me to go infinite and continue this rate of investing forever.
I’m not trying to maximize upside by putting more dollars to work per investment but maximize longevity so I can ideally do this forever. At some point I’d love to have invested in thousands of startups. I find deals by 1/3rd from this blog and outbound, 1/3rd from meeting people at events and 1/3rd from warm introductions.
Most of being a good angel frankly is just being a good person, having some business success so you’re knowledgeable and then getting lucky. I also think there’s an element of being a helpful person to talk to and solve problems with. I’m the first person to admit it’s mostly some combination of confluence and luck which deep down I have no idea why it’s working so well exactly but I’m very happy it is.
Being a small cheque writer who doesn’t have reserves or do follow ons also allows me to be a confidant to the founders about all their problems which I especially enjoy without it creating downstream problems for them because I can’t effect future financings. These private strategy / problem solving / therapy sessions are the most fulfilling for me as an angel and where I believe I help the most and create lasting friendships.
To date I have 3 such 100X+ paper investments and only just recently crossed 100 total investments which means every additional investment is a theoretically risk free upside return and on a portfolio basis I stop keeping track beyond 10X. Having said this, the average investment is a total loss write off or a small returner. The power law is real and if I was a fund, I’d say half the returns are in the top 5 companies and the other half is in the remaining 95 companies.
What do you look for in an angel investment?
I don’t really have anything particularly I’m looking for, I’m more looking for a feeling I get when I see a company and meet a founding team that sparks joy. If I had to break it down into a framework, I ask myself these questions and I generally have to be yes to all 6 questions before making the investment. I decide within about a week and often as quickly as an hour. If I pass on an investment it’s because I answered no to one of the questions.
1. Do the founders seem talented, smart and honest?
2. Is the product directionally correct and where the world is going?
3 Is the product magical or do people want or need this?
4. Is the market really big or can you see a path to getting really big?
5. Will I feel like an idiot for missing or passing if it works?
6. If everything that could go right goes right can this get really big?
What are the most common founder mistakes?
1. Not launching. It might be surprising to hear that even with all the rapid software development and AI tools around 90% of startups will never launch. I generally don’t even look at unlaunched startups because 90% of the time they never will. This is the easiest way of filtering out failure, you can remove that entire 90% failure basket by only looking at launched products. It is the very rare exception I’ll do an unlaunched founder investment and I have to believe the founder is really good but always launch first and launch quickly.
2. Trying to raise money without growing. This is like trying to sail a ship through a storm without a tailwind. It’s definitely possible but makes things way harder than it needs to be. You need to be growing, ideally very quickly, to have an easier time raising money. Growth is that tailwind for your startup ship sailing into a storm. Focus first on growth then focus on raising money. A good growth hurdle target I like is 10% growth per month. Over long periods of time that is doubling in size every year and becomes exponential very quickly.
3. Not using your startups product. This is like a Michelin star chef who doesn’t taste their own food before sending it out to customers. You can’t be sure if you’re not using your product everyday that what you are shipping is Michelin star cooking or local diner cooking and if the quality is high or not. The reason is if you use your product everyday you’ll know where all the issues are and be proactively fixing them which improves the utility and quality of it. Which happens to also be what your customers want because you are in the mind of one of your customers if you use your product everyday.
4. Not focusing on revenue growth. Somewhere in startups people forget that a startup is also a business and a fundamental tenant of business is commerce which is charging money. What often happens is founders are playing a game of pretend where they are trying to raise money for products that have no growth or no revenue at all. But if you focus on growing revenue, the company will get big by itself without needing any money and if it’s sustainable from its own revenue then the startup is default alive and will eventually become successful. The best place to be is to not need anyone except your customers and certainly not investors. Unintuitively those are the startups most likely to get funded.
5. Not being an extreme athlete. Startups are a form of extreme sport where if you succeed and make it you become extremely wealthy. That means you have to be willing to endure pain and suffering like you can’t imagine and have to be resilient to the forces of the universe and markets. When these bad things happen to founders, the ones who aren’t going to make it buckle under the pressure and stress. If you’re going to make millions of dollars in the end then you are going to experience millions of dollars worth of pain. You’re going to compress an entire lifetime of work into the life of this startup and it still is likely not to be successful. I find it helpful instead to go into it expecting it to be the most difficult and painful thing you do in your entire life. It is literally attempting to run a decade long marathon with no breaks and no off switch.
When should we sell the company?
When you’re out of ideas or out of passion then it’s time to sell. You need passion to execute ideas and you need good ideas to execute when you have passion. If you’re missing one of them, it’s time to sell the business and move on to the next thing. That usually means selling to the most interested party but I’ve been pleasantly surprised by the ability of external investment banks or consultants to put acquisitions together. Alternatively it’s time to step back and hire an executive team to replace the founders if there’s no exit in sight.
An acquisition takes close to a year so if you think you’re burning out or running out of money and want to sell, start the process early so there’s a long runway to land the plane with. Often I think founders should develop relationships and friendships with acquirers many years before they’re even looking to get acquired just to keep a finger on the pulse. If you’re so burnt out that the thought of running the company for another year is giving you panic attacks then it’s probably time to just shut the company down altogether and walk away.
Startups are a multi turn game over a lifetime, failure doesn’t mean you’ll never succeed. In fact it likely gets you closer to success because you’re now more experienced. Turn the page and take the next turn. If you tried your best and were honest, don’t feel bad about losing the investors money, we know what we’re doing. And if the investors throw a hissy fit about losing their money, if the founder gave it an honest shot, then they shouldn’t be startup investing at all. Our job is to absorb all the risk through portfolios and startups are high risk frontier technology creation, the riskiest it gets.
How should we plan a funding strategy?
I’ve now seen a sufficiently large number of early stage companies raise seed rounds from brand name firms only to get orphaned down the line when they don’t hit their growth targets. Orphaning means that the brand name venture firm stops funding the company which sends a signal to the market and the company becomes unfundable by anyone. It signals that if a venture firm with very smart people and billions under management isn’t providing follow on funding, then the company isn’t good.
For example, the implicit assumption is that the brand name venture fund is full of very smart people and has lots of capital. They’re on the inside and know something that we the market do not. So if the smart people are not investing money, the threshold for conviction has to be above the brand names to continue funding the company. Which is too high a hurdle to meet and results in startups being stranded from any follow on funding at all.
So I now think a startup should raise their seed rounds from dedicated sub $100m under management seed funds and angel investors. Then only bring on brand name venture firms who are managing over $1b once they’re growing fast, scaling and need to raise their series A financing and beyond. The brand name VCs are not going away, you can just include them further down the line.
So I generally caution around raising early rounds from brand name investors unless you absolutely know that they’ll support you at every stage even if the business stumbles. Or treat each round as the last capital you’ll ever get so conserve it and budget accordingly. It’s especially heartbreaking to see a high growth business that just doesn’t have super crazy growth get orphaned.
Avoid this if you can. Often the early cheque from a brand name firm isn’t the symbol of support it seems like but is actually an option against your upside that only they can exercise. Controlling your runway is controlling your future. If you’re going to inject the rocket fuel that venture capital represents, then you have to be a rocket ship and grow like a rocket ship. If you’re not growing like a rocket ship, taking on rocket fuel means you’re probably going to implode.
You can alternatively not raise any money from investors and bootstrap the company. Reinvesting the profits generated and grow that way. By doing this you maintain ownership and control at the cost of speed and risk. You take on more personal risk since you’re not spreading it onto investors. Usually founders are able to pay themselves a small salary from the investors money the whole time, effectively derisking the whole enterprise. You can’t do that if there’s no investors.
You will also grow slower since you’re bottlenecked by your own profits. Raising money costs you control and ownership but you can spend the money to grow faster. Boostrapped might take you 10 years to become successful but raising money might get you there in 3 years. But if you’re going to be successful anyway, you probably don’t want to raise money since your magnitude of outcome is greater if you own more of the company.
How do I raise money from investors?
I’m not really sure exactly because I’ve never raised money from investors before. In my businesses, we raised capital from banks via debt as a byproduct of being a real estate technology company. I think the uncomfortable but correct answer to this question is that it’s actually really difficult and distracting to raise money for a startup. Majority of the time investors refuse to fund the company and the answer is a default no.
I’ll go beyond this and say that the easiest way to raise money is for the business to be of such high quality and be growing so fast that it doesn’t need any money. Then that’s the company that is most likely to get funded and everyone wants to invest in. So unintuitively the startups that most need capital won’t get it and the startups that don’t need it at all are the most likely to get funded.
If I have to take it a step further, the problem with power law industries is that it becomes a non consensus thing. Which means the ideas that seem immediately like great ideas aren’t likely to be the big winners because if they were obviously great ideas, someone would already be doing them and capturing the value. So the obviously great ideas that seem like the best investments don’t usually make the best investments.
So ideas that seem like bad ideas are the ones where usually the big outcomes lie. But by definition they seem like bad ideas which means they’re unlikely to get funded or they’ll have trouble raising money. Because seemingly bad ideas seem like bad investments. This is how you end up with this strange thing where the big wins of each generation actually struggle to raise money at the early stages at all. So the founders behind the biggest companies actually experience the most rejection.
This is the paradox of venture but it’s an axiom that holds true. So what do you do about this? I think the best way for a founder to respond to this phenomenon is not to optimise for raising money but to optimise for building the best company possible without funding and treat funding as a nice bonus that speeds up this process if you’re fortunate enough to have the networks and pedigree to be able to get it.
Now what do you do as an investor? How do you know at the early stage what are the great companies from the bad ones? Truthfully you can’t and because the basket that has all the bad companies usually also has the best ones. You can either go hunting for needles in a haystack or you can back pedigree and track record and join the queue for the ideas that seem like good ideas and are easily funded.
So what you employ is a sort of optimised pattern matching system where you make lots of educated guesses that are wrong most of the time. This is why having a portfolio is so important for the investor.
And why staying the course and in the industry is important for the founder. The founder only has their one company at a given time but can build multiple companies over a career and take multiple shots at goal. Because of the multi turn game aspect of the venture industry. Venture is really hard. It usually doesn’t work for both the founders and the investors.
What should I build and when do I have product market fit?
When you physically can’t keep up with the growth of the business that is when you have product market fit. That means when you wake up each day you have so many emails and receive so many calls from people trying to buy your product that it physically hurts you trying to meet that demand. It’s when the market is literally pulling the product out of you and you can’t help but grow and all your systems are breaking trying to support that growth and successfully deliver the product to those customers.
Supporting that growth over the long run is sometimes just as hard as getting the startup from no growth to start growing to begin with. I think it’s harder to achieve this if you are trying to build something difficult. I generally think difficult businesses are harder to run and get product market fit with so I recommend starting easy businesses first. Start an easy company, sell it. Then when you are rich, start a hard business.
I think that easy businesses are better businesses because they naturally are better at extracting margin from the market. But easy businesses spring up competitors quickly so it’s harder to stay successful once you’re winning. Difficult businesses on the other hand are harder to get going but have better moats and hurdles to overcome so once you’re winning it’s easier to keep winning because it’s harder for competitors to start and catch up.
An easy business to run doesn’t necessarily mean it isn’t technically challenging, I define easiness to run as how easy it is to sell the product ie how badly customers want it. If a product isn’t easy to sell then I don’t think people want it enough and it’s the wrong product. If a product is easy to sell that makes it easier to achieve product market fit which makes it easier to succeed. Whereas hard businesses are trying to shift consumer preferences entirely which can be an uphill battle but if you pull it off can create entirely new markets which you dominate.
I think that the way to discover good startup ideas from the building perspective is just to be regularly building ideas for products. Eventually you stumble upon a product space where it’s clear you’re creating something new that people want to buy from you. The product does a thing that people couldn’t do before it showed up.
Or if you are exploring markets first, you stumble upon some untapped demand where it is clear a lot of people want something that doesn’t currently exist and all you have to do is create that thing and release it. That the market is sitting ready to buy something if only it would show up into the word and be iteratively better than the current way that thing is currently done.
I sometimes think really great startups are like doing a magic trick or pulling a heist on the universe. It’s finding millions of people who are underserved and want something that only you can provide to the quality that they want. By the time you make it and succeed everyone wonders how insane it was that nobody had made this before. This is so obviously a better way of doing things in the world that you created.
How hard is building a successful startup?
There’s a funny thing about venture and startups where in many cases success is worse than failure because of how hard it is. The obvious consolation for all the pain is vast quantities of money. I can explain it with an idea. If you’re going to make $10m dollars from a successful startup in 10 years. What that means is you’re signing up for $1m of pain per year.
A normal job where you make $100k per year is a relatively stress free existence. So to make $1m per year is signing up for 10X more pain and stress per year than a normal job. The benefit though is you can concentrate that pain in shorter periods of time. You can for example compress a lifetime of working into only a few years of all out full tilt sprinting then never work again.
That’s also only if you succeed, you may not succeed. It’s not so linearly correlated but I think it’s a good mental model. People who have made millions of dollars have also experienced millions of dollars of stress and agony to make that money. This pain takes many shapes. Relationship collapse in both your friendships and marriage and children. Employee firings and periods of business failure. Negative customer experiences, sometimes people use a product and die from it. Lawsuits and litigation and fights.
Revenue declines and conflict and herculean fights. Health issues from overworking while doing perpetual 100 hour weeks. It’s pretty common for very successful people to feel like they have no friends because they spent all their time on the business. In extreme cases periods of time where large quantities of people in the world hate your guts and send you vitriol on a daily basis. This is the kind of weight and responsibility the founder has to wear on a daily basis.
This is why I equivocate startup founders in my head to being extreme athletes. The founding of a successful startup takes the same amount of dedication, resilience, fortitude, ingenuity and effort. Startups are an extreme sport and being successful at it is being a type of extreme athlete. And the same way most athletes never make it to the professional leagues, most startup founders never make it to the promised land of fame and fortune.
Every successful founder privately has horror stories of awful things that have happened to them and are covered in psychic scars that you can’t see. I generally wish more successful people described it like this so people trying to found companies knew beforehand the kind of life they were signing up for. Enter at your own peril.