Discover more from Flow State by Chris Schultz
How to be great at investing
Today, I’ll share what made me a successful investor & why I’m not anymore.
Investing is easy. You just have to be willing to place bets.
Investing successfully is hard. You have to place bets that pay off.
There is a lot of content out there about angel investing. This is not a how-to. Today, I’ll share what made me a successful investor and why I’m not anymore.
That’s right, I’m retired. I might unretire one day. But right now, I don’t believe in myself as an angel investor.
Because my instincts have dulled? No. Because my risk tolerance has waned? No. Because there aren’t startups out there worth investing in? No.
It’s because I’m not close to the game anymore.
I’ve been investing for nearly 15 years and have made 14 or so investments, so I now have enough time to take stock. My track record is pretty solid so far, with 6 exits. Most of the moolah in the coolah came from 2 of them. 1 unicorn 🦄 exit, 1 still in the stable.
So why not push some chips back in? Simple. Dealflow.
My success has always come from being close to founders. Going to where the deals are, not letting the deals come to me. When I started Launch Pad, the thing I loved most was working with entrepreneurs in a hands-on way. Putting in the hours at Capdeville meeting with hundreds of founders is what it meant to be in the game. As we scaled Launch Pad, my job became more operational and I grew further removed from the people who were the reason I started the business.
About 10 years ago, I became interested in the Nigerian tech scene and made several investments there, including helping to found a VC fund. I was successful because I went there. I had boots on the ground. I met the founders. I had a deep conviction about the growth of the market.
Since COVID, I’ve been out of the game. Sure, I have Zoom calls and emails with folks, but I spend more time at soccer practice with my daughter than I do with founders. And for now, I like it that way.
So, I’m hanging 'em up for now. Success boils down to curiosity. My focus is on other things at the moment. If I can’t be all in, it's better to be out.
To make this newsletter valuable and more than just a retirement announcement, I’ll try to share some lessons learned over my career as an investor. Remember, these are lessons for angel investing at an early stage, so they don’t necessarily apply to VC or later-stage investing.
Good investment practices:
If it's not a hell yes, it's a no
Companies that can get big big ($1bn) are good for investors at exit, and companies that can get pretty big ($10-100M) are good for founders at exit
Be super curious, get close to founders, be helpful so you have the inside track
Put your money where your mouth is when you deeply believe in something
Invest when success feels inevitable
Be ready to write a check quickly; the best deals don’t wait or suffer extensive due diligence
Follow on to your winners
Be a first believer. Invest as early as possible in a company
Invest in founders who have deep experience in an industry, know what is messed up, and are building a company to fix it
Bad investments happen when you:
Invest by committee which defaults to the least worst option
Try to control downside risk through board seats, traunching, and otherwise trying to exercise control over the founders. If you don’t believe they will succeed, don't invest
Wait for inbound deal flow
Mitigate risk by being the last money into a deal
Force deals into your “process.” This will negatively bias your deal flow and eliminate the best deals because they have other options
Invest only in founders you like
Pick companies that are features, incremental improvements, or regional me-too’s
Base decisions on social proof. Invest because somebody else is in
✌️❤️ & 🦄’s