YC
Michael Seibel - Startup Investor School Day 2
@ Y Combinator
03/07/18
Takeaways
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Michael Seibel
03/07/18
@ Y Combinator
The rest of the course will primarily feature perspectives on investing from outside of Y Combinator, so don't worry, we're not solely focused on our own experiences.
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Michael Seibel
03/07/18
@ Y Combinator
The lessons you've heard from Y Combinator partners are quite general and relevant to investing in startups, whether inside or outside of Y Combinator.
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Michael Seibel
03/07/18
@ Y Combinator
I view angel investing as a way to give back, similar to how people on the East Coast donate to charity, rather than just a means to make money.
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Michael Seibel
03/07/18
@ Y Combinator
I've been angel investing for 4.5 years, making 50 total investments, with 46 of them being early-stage Y Combinator companies.
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Michael Seibel
03/07/18
@ Y Combinator
You need to write a big enough check when angel investing; otherwise, the potential returns may not significantly impact your financial situation.
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Michael Seibel
03/07/18
@ Y Combinator
Create a system to invest quickly, as you often have limited time to make decisions when opportunities arise.
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Michael Seibel
03/07/18
@ Y Combinator
An A+ investor is someone who provides money quickly, signs paperwork promptly, and doesn't delay the process unnecessarily.
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Michael Seibel
03/07/18
@ Y Combinator
If you have FOMO about a friend's startup potentially becoming a billion-dollar company, just write them a check instead of hesitating.
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Michael Seibel
03/07/18
@ Y Combinator
If you're attending demo day without prior research, be prepared to act quickly, as other investors may have already done their homework.
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Michael Seibel
03/07/18
@ Y Combinator
You can do your homework on YC companies before demo day by reading about them on blogs and product launch sites.
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Michael Seibel
03/07/18
@ Y Combinator
Investors often overlook what happens after demo day; many good companies will raise additional funds six to twelve months later. Maintain a relationship with the founder to be helpful, as this can lead to future investment opportunities.
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Michael Seibel
03/07/18
@ Y Combinator
Investing six to twelve months after initial contact can lead to better valuations and more information about the startup.
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Michael Seibel
03/07/18
@ Y Combinator
The most hyped investments on demo day are often not the best; the crowd's perception can be misleading.
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Michael Seibel
03/07/18
@ Y Combinator
When considering how much to invest, smaller checks can have a significant impact if the company becomes a billion-dollar success.
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Michael Seibel
03/07/18
@ Y Combinator
To achieve big returns, you need to write larger checks, but only after you have conviction in the investment.
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Michael Seibel
03/07/18
@ Y Combinator
Being a great investor requires hard work and dedication; many people dabble without putting in the necessary effort.
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Michael Seibel
03/07/18
@ Y Combinator
Cap tables with unequal equity splits, where founders have sold large portions of their company early, are concerning.
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Michael Seibel
03/07/18
@ Y Combinator
Party rounds are not scary as long as you have good investors who can sign paperwork quickly.
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Michael Seibel
03/07/18
@ Y Combinator
Model out a Series A with expected dilution between twenty and thirty-five percent for founders. I prefer a dilution of twenty to thirty-five percent for founders after two funding rounds, as anything less than fifteen to twenty percent equity may not motivate them enough to work towards a successful exit.
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Michael Seibel
03/07/18
@ Y Combinator
At Y Combinator, we often help startups clean up their cap tables and convince previous investors that their current setup is detrimental to the company.
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Michael Seibel
03/07/18
@ Y Combinator
Startup founders are often unemployable, which can be a sign of their potential, especially the best ones.
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Michael Seibel
03/07/18
@ Y Combinator
It's easier for Y Combinator to say yes to funding a company than it is for individual investors, as we have a more streamlined process.
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Michael Seibel
03/07/18
@ Y Combinator
Investing in startups is like baseball; most of the time, you're going to strike out, so it's important to remain calm and not over-intellectualize decisions.
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Michael Seibel
03/07/18
@ Y Combinator
There's diminishing returns with excessive analysis in investment decisions; confidence in your process is key to writing checks.
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Michael Seibel
03/07/18
@ Y Combinator
Even if a startup doesn't become a billion-dollar company, I find comfort in knowing I'm helping founders take a shot at their dreams.
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Michael Seibel
03/07/18
@ Y Combinator
Y Combinator's sourcing power comes from an open application process, which allows us to find talented founders who may not excel in networking.
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Michael Seibel
03/07/18
@ Y Combinator
The quality of students at Y Combinator is a significant factor in its success; having talented individuals creates a self-perpetuating cycle of excellence.
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Michael Seibel
03/07/18
@ Y Combinator
We assess our performance at Y Combinator by reflecting on our feelings about past batches and implementing programs to help companies raise Series A funding more effectively.
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Michael Seibel
03/07/18
@ Y Combinator
A-plus investors are often easy to identify; if they claim to be one, they might not be. Luck plays a significant role in investment success, and a good track record doesn't guarantee being an A-plus investor.