Angel Investing

English: Diagram of the typical financing cycl...
English: Diagram of the typical financing cycle for a startup company. (Photo credit: Wikipedia)
Angel investing is a beautiful thing. The person who put the first 100K into Google saw it become a billion and a half in eight years. You couldn’t win a lottery and see that kind of money. Peter Thiel put 500K into Facebook for 5% in its first Silicon Valley round and I believe second round overall and saw it become almost two billion dollars in six years, I think. Granted companies like Google and Facebook are rare.

Predictably there are fewer multi billion dollar companies than there are hundred million dollar companies. And there are far more companies that get bought in the tens of millions. A client of mine turned around and sold his app for a cool million. He had total ownership and so got all the money. That transaction was not covered by any of the tech blogs. There are far too many of those to hit the headlines.

A million might be small compared to a billion, but it is no small sum, objectively speaking. Considering a million could give 100K in annual return without getting used up, you could retire if you had a million dollars. I think it is very possible to live off of 100K a year.

Say you invested 50K in a company valued at a million for a five per cent stake, and the company had a 50 million dollar exit four years later, your 50K will have become 2500K, or two and a half million dollars. That would not be a bad return.

Post-IPO it is hard for a company to show wild growth like from inception to the IPO. Most VCs will cash out soon after an IPO for that reason. They know the wild growth is in the early stages.

Let me ask you a trick question. If you had 50K to invest, and you had the option to get 5% or 50% of a tech startup, which would you rather go for? Most people make the wrong choice and say they would like 50% of the company. Getting 5% is better. At 50% you will likely kill the hen that lays the golden egg. You will scare away round two investors. You will not leave much room for the company to be able to attract top talent. Chances are you will also have squeezed the founders of the company. Not being able to raise round two money, the company likely will die. And you will have lost your 50K. Because 50% of zero is? Zero.

A healthy tech startup is one that has plenty of equity for the founders of the company, for various rounds of investors, and for the entire team as it might build up over years.

IPOs are rare, but then it is a good thing that many other forms of exits are possible. Getting bought is a decent enough exit. Most tech startup founders dream about getting bought, and many do get bought.

It would be hard, probably impossible, to raise two million dollars for a tech startup in the New York City Nepali community. But a startup could possibly raise 100K or 200K. If the idea is great, and if the work with that initial seed fund is great, that startup could then go out into the larger market of professional investors and hope to raise two million dollars. A New York Nepali community that can not produce millionaire entrepreneur after millionaire entrepreneur is in no position to lecture the homeland Nepal on economic development issues. Practice before you preach.

Patel Brothers is likely the largest business in Jackson Heights. On an express train Jackson Heights is but 20 minutes from Times Square. As in, you are very much in the city when you are in Jackson Heights. And the place has a great selection of bars and restaurants. Jackson Heights is the only place in the city with garden apartment complexes. I think it would be possible for tech startups based out of Jackson Heights to surpass Patel Brothers - which is an old economy company - in a few swift years. Silicon Valley used to be apple orchards.

Angel investing is when you have the money - maybe 10K, maybe 20K, maybe 50K - but not the ideas, or the time, or the expertise to work on a tech startup. A lot of old economy professionals in the local Nepali community could afford to angel invest. Actually, I don’t think they can afford to not invest. You should harbor the fear of missing out.

The democracy movement is over. The Madhesi movement is over. Now for the next 20 years Nepal has no other business than rapid economic development. The local Nepali community will have to prove itself locally before it can hope for a significant involvement back home. Entrepreneurship is it, and tech entrepreneurship is the crown jewel.


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