Investing in Startups: Lessons from Michael Seibel | Day 2 of Startup Investor School

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This article is a summary of a YouTube video "Michael Seibel - Startup Investor School Day 2" by Y Combinator
TLDR Angel investing should be approached as a form of charity rather than a way to make money, and investors should consider the potential return and value of smaller investments, invest quickly, stay in touch with YC founders, and invest in people even if their idea seems stupid.

Key insights

  • 🚽
    "Someone described it to me as taking money, flushing it down the toilet, and then very rarely walking up on the street to a million dollars just laying there."
  • 📈
    Despite not considering himself a great angel investor, Michael Seibel has invested in several companies with over a $50 million valuation, showcasing the potential for success in early-stage investments.
  • 💰
    "If one of your friends is starting a company and you would have FOMO if it would become a billion dollar company just shut up and write him a check."
  • 💰
    Not enough investors think about what happens after demo day, but there are often opportunities to invest in good companies six to twelve months later at higher valuations and with more information.
  • 🤔
    Investing in startups requires the ability to see potential in founders, even if their ideas may initially seem stupid or unconventional.
  • 💡
    An impactful investor can have a rare but significant influence on the direction of a company, as seen in the examples of the Socialcam acquisition and the advice that led to the creation of video systems for justin.tv and Twitch.
  • 🌱
    The impact of YC goes beyond billion-dollar companies, as they aim to provide opportunities for founders to take a shot at their ideas and continue the cycle of support in the startup ecosystem.
  • 💡
    YC's high bar for talent has created a trend where people understand that being part of YC means being surrounded by extremely talented individuals, perpetuating success.

Q&A

  • How does the speaker view angel investing?

    — The speaker sees angel investing as a form of charity rather than a way to make money.

  • How many angel investments has the speaker made?

    — The speaker has made 50 angel investments, with 46 being early stage.

  • What should investors consider when writing angel investment checks?

    — Investors should consider the realistic chances of getting a return and how much profit they would make at a billion dollar exit.

  • How can investors invest quickly?

    — Investors can invest quickly by creating a system to hear pitches, sign paperwork, and wire money.

  • Should investors invest in people even if their idea seems stupid?

    — Yes, investors should invest in people even if their idea seems stupid, if they have conviction.

Timestamped Summary

  • 💰
    00:00
    Angel investing is like charity for Michael Seibel, not a way to make money.
  • 💸
    03:14
    Consider the chances of return and potential profit when writing angel investment checks, based on speaker's 50 investments with 1 billion dollar exit and 6 over 50 million dollar valuation.
  • 💰
    05:33
    Invest quickly by creating a system to hear pitches, sign paperwork, and wire money, and invest in your friend's startup if you fear missing out on a billion dollar company.
  • 💰
    07:55
    Investors should stay in touch with YC founders after demo day as the most hyped investments may not be the best ones and good companies often raise money before Series A.
  • 💰
    10:15
    Invest wisely by scaling check size based on potential return and considering the value of smaller investments for critical thinking.
  • 💰
    12:26
    Invest in people even if their idea seems stupid, as a truly impactful investor can change the direction of a company, but YC startups should go after many investors as the majority of YC companies will fail and missing out on big companies can be due to being on the fence or being too busy helping other companies.
  • 💰
    16:44
    Invest smartly by doing your homework, having strong conviction, and choosing good investors who sign paperwork quickly.
  • 🚀
    18:54
    YC's secret to success is their open application process and focus on selecting top talent, while constantly reflecting and improving their program.
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This article is a summary of a YouTube video "Michael Seibel - Startup Investor School Day 2" by Y Combinator
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