As a VC or angel investor, how has your approach to investing changed over time?
The biggest change is the one that ALL serious angel investors eventually arrive at: no matter how smart or experienced you are, there are simply too many exogenous factors affecting outcomes for you to be able to pick only winners.
Having now invested in over 85 startups, and finding that my personal metrics are very similar to aggregated industry ones, it is clear that (a) there is little to no correlation between my home runs and my personal favorites, and (b) angel investing done correctly really *can* produce a consistent IRR in the 25%-30% range.
As a result, my investing has changed from limited investing (1-3 deals a year with intense due diligence) to broad-based investing (5-10 deals a year, with more moderate work). I now look for opportunities that fit my general thesis, take a very hard look at the entrepreneur (“betting the jockey, not the horse”), make sure the deal terms are standard and the valuation realistic, and then invest quickly and firmly.
With the number of investments in my portfolio and the size of my network, I am increasingly attempting to streamline, expand and scale my assistance to my companies, taking as a role model the kind of amazing support that great seed funds like First Round Capital provide to their CEOs.
*original post can be found on Quora @ http://www.quora.com/David-S-Rose/answers *
Written by David S. Rose
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