Everyone tells angels not to invest more than they can afford to lose. I obey. Here’s why…
“You no need-uh money? You no like-uh eat?” – Junior Soprano.
What a Startup Is Worth
Most startups aren’t worth a nickel.
Sound harsh? Sure.
But it’s true.
The terminal value for most of these companies is 0. They will not make it. They will be failed experiments.
And that’s okay! That’s what we do.
But that’s why you can’t invest money you can’t afford to lose. Because no matter how good you are, lose you will.
So why do it? Well, financially speaking, it’s because you might hit an Uber.
One of those makes up for an awful lot of mistakes.
In fact, it should make up for all of them. And a whole lot more besides.
“Who’s Roelof?”
“But I won’t lose money, I’m really smart!” you might say.
I’m sure you are. But what about Roelof Botha?
Don’t know who he is? He works at Sequoia, the best venture capital firm in the history of the friggin’ planet.
And not only does he work there. He runs the whole darn place!
You think you’re better than him?
I certainly don’t. And if you do, then I don’t think you’re as smart as you think you are.
Roelof has lost money. In fact, he’s lost the whole investment, every cent.
What Happens If You Invest Money You Can’t Afford to Lose
If you can invest in startups, you’re rich.
I know, you’re not Bill Gates. Neither am I.
But you’re well ahead of most humans. You’re not scratching to survive.
Do you like this comfortable life?
Do you like not having to work for anyone else? Or at least being able to withstand some time unemployed?
Do you like not having to worry about money, or whether you’ll eat?
I’d wager you do. So do I.
So don’t risk it. Not for anything.
Warren Buffett said it better than I can:
“It’s insane to risk what you have and need for what you don’t have and don’t need.”
Wrap-Up
Why do people invest in startups?
I’ll tell you why I do it.
It’s interesting. Simple as that.
And no, I’m not insensitive to money. If I make a bunch, I might buy something. Why not?
But I didn’t need money when I started this. If I did, how could I even do this full time?
So I have my fun. But I’m not going to imperil this free and secure existence.
That would be silly.
And I suggest you don’t either.
Note: I am not an investment advisor and this is not investment advice. It is merely my opinion derived from research and experience. Take it with a grain of salt.
More on tech:
Are Hackers After Your Brain? — The Rise of CogSec
How to Get Started Angel Investing
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