To Angel or LP: Investing Guide for New Tech Millionaires

Facebook's S-1 caps an amazing last few quarters of tech wealth creation with LinkedIn, Zynga, Groupon and Pandora going public and small/medium acquisitions continuing to occur at a healthy pace. Many of these new millionaire employees will likely become angel investor hobbyists, using their wealth to kickstart the next generation of startups.

It's a reasonable hypothesis - I certainly saw this happen at Google and personally have made small investments in a handful of ventures, mostly ones founded by friends. But my advice to the fortunate would be to consider becoming LPs in the top early stage venture funds, which can often outperform from both a financial and market intelligence standpoint. [I'm a very small LP in two early stage funds which allowed me to invest below their usual minimums since I'm not quite a Zuck :) ]

While angel investing is currently glam with a low bar to entry, you need to be prepared for the following realities:

• Large portfolio is required to spread out risk (mitigated only by your own investment picking skill and access to dealflow)
• You'll get heavily diluted if the company isn't only up and to the right. As a small early investor you will be most impacted by flat rounds or other steps a company takes as it grows.
• You likely won't follow on in future rounds meaning that you can't double down on winners

Investing as an LP in early stage funds give you more protection and allow you to treat this as an asset class instead of "fun money."

Being in the right funds also gives you incredible market intelligence via your investor reports. I'm able to see the real numbers behind acquisitions, writedowns, valuations on new rounds (as multiple previous rounds, not necessarily total company valuation). It's really a birds-eye view of the sector and valuable in its own right. Plus you get access to the portfolio for purposes of your own relationships and conversations - whether you want to offer help or any other business need. 

So all you new millionaires, start cozying up to not just founders but the investors you respect the most. See if they'll take your checks too. It's not quite as easy as angellist but it's a great opportunity to invest back into the community.

One untold story behind YouTube's success

Five years after Google's acquisition of YouTube there's no doubt it was a great move. At 4+ billion views a day, YouTube is the first global living room. And if you're looking for businesses with headroom, it doesn't hurt to be playing in the $500 billion tv ads+VOD+subscription market. But when YouTube was first brought on board, questions didn't just come from journalists, some Googlers were raising eyebrows as well. "Eh, they just got lucky," was heard more than once, and certainly the price paid was the product of several factors, but that can always be said of an acquisition. Upon joining in January 2007 I personally discovered a reality that still hasn't really been reported: early YouTubers were amazing operators and don't get enough credit for building an incredibly capable team very quickly.

As a product YouTube was a runaway success -- growing to 100 million daily views during its first 18 months - and of course uploading & streaming video is much more intensive than just serving a webpage. Hypergrowth sites have one job to do: stay running under incredible load. Steve Chen still shivers a bit when you ask him about the rate at which new servers were being racked those days. YouTube managed not just to stay operational but continued to release new features at an amazing pace.

The quality and rapid growth of the team was the most significant factor in why YouTube succeeded. Almost all of the early technical/product/UX hires were previous colleagues or referrals. What a competitive advantage! Imagine being able to basically skip sourcing, interviewing, training, team building and fast forward to just working at a productive clip. As YouTube expanded they were able to bring on new talent very quickly. Attribute this not just to the fact it was a 'hot startup' but to the close relationships everyone had with one another. They just enjoyed working together at a personal level. And anyone that has spent time with Chad & Steve know there's a warmth, charm and charisma present.

The YouTube story is not just about luck or timing but execution, and that's part of the tale often ignored in their success. When we talk about founders we often like to hone in on their raw intellect but the ability to pull a team together is equally valuable and in the end, probably has more to do with success than any of their other talents. That's why it doesn't surprise me to see YouTubers sticking together at new startups such as Endorse and TheIceBreak. One gutcheck for entrepreneurs and leaders: would your former teams/colleagues work with you again? If the answer is "no," then you are going to have a very hard time succeeding.

The Growing Knowing<>Doing Gap

Knowledge has never been easier to obtain, and that's a wonderful reality. Facts and other people's expertise are available 24/7 through web services, social graphs, mobile apps. With just a few tweets, queries or posts, you can know anything.

But that doesn't mean you can do anything. That's the difference between knowledge and applied knowledge. And this gap is as wide as ever. Applied knowledge can come from experience - having done it before - or from an ability to quickly move from theory to practice. An adaptability that 20 years ago wasn't as important in business because folks tended to specialize, the pace was slower and information was less readily available. We've moved from a place where you could impress people with your smarts to where all that really matters is executing.

Over time I've seen hiring change to meet this new reality. Moving away from mere "interviews" to asking candidates to give a presentation on something they've studied or achieved. Structuring "try before you buy" periods as a contractor. A greater emphasis on references. Pushing beyond the bullet point resume. It's not just a focus on results, it's how did you get there.

Don't try to be the smartest person in the room anymore. The smart person isn't sitting in any room - she's out there getting shit done.

5 Essential Product Design Books That Aren't About Product Design wp.me/p25u9C-mM via @hunterwalk
— PandoDaily (@PandoDaily) January 25, 2012

My New App: Drive n' Text

So now there's a phone attachment which allows you to block certain phone functions while driving such as texting. Sure that's one approach but here's the way I look at it. Let's say you've got a fat guy and he just loves his In n' Out burgers. I mean just loves them. You want him to lose some weight - what do you do? Stop him from eating the burgers, right? NO! You make the burgers healthier - remove the sauce and cheese. Make them slightly smaller. Don't change behavior so much as reduce the risk profile of said behavior.

It's with this philosophy in mind that I introduce my new mobile app: Drive n' Text!!!!

What's Drive n' Text? It's an app that assumes you're driving a car while texting and thus takes steps to make sure you do so safely. Like enlarging the virtual keyboard by decreasing the text window display size. And knowing that you need to stop typing every once in a while to look up at the road, so we'll prevent the iPhone screen from going dark because who wants to fumble for the home or power button. Or giving you a default set of emoji characters atop the qwerty line.

Not safe? Big liability risk? I'll just note this is FOR PASSENGERS, definitely not advised for drivers. No, I would never imagine drivers using this, just passengers.

Opportunity knocks!

#BlackoutSOPA recap: how i learned to love Ashton Kutcher

On TechCrunch today I posted a #BlackoutSOPA wrap-up. Shares learnings about building a web service that scaled to 85k+ users in <10 days.

Don't Wait. Donate.

I applaud those who are well off financially and also state they're willing to pay higher taxes if only the government would raise their rates. But why wait? It's called charity. Don't wait, donate.