My Angel Investments & What To Expect

Direct Investments


I love early-stage (seed) investing (it’s how I first cut my teeth). This is where companies are often generating little revenue (even pre-revenue in some cases), as this stage is more about sticking to a thesis, delivering a minimal viable product (MVP), learning from the needs of the market, and pivoting the business with the ultimate hopes of landing on some type of product-market fit (PMF).

At this stage, you’re more investing in the founding team, their ideas (how they envision the space they are building within), and their ability to know when to double-down and when to pivot. Rapid product evolution and customer feedback is the primary focus at this stage. For a product person like me, this ideation and building phase is a lot of fun.

But with fun comes risk—it’s like the wild west (ideating and pivoting is expensive)—you’re always a few missteps away from running out of money. Speaking of runway, most would think that if a startup runs out of money, your investment goes to $0, right? Wrong.

Believe it or not, there are actually ways to protect your investment from it being this black-and-white at these early stages. How might you ask? Well… startups at this stage usually have more time than they do money. So what if you invested in a small team that had 2–3 co-founders (now it’s important that at-least one of these people are a technical engineer—the dream team (in my opinion) is a product/marketing person (that is good at both), and a talented engineer (or even better, 2 engineers).

Why is this important? Well the beautiful thing is that driven co-founders will usually work even without money (so long as they still believe in what they are building at the time of running out of money), but employees won’t. That’s why they often say “you’re investing more in the team than the product at this stage”. The difference between a startup finding PMF and not could be as simple as a few extra months of runway.

It’s actually baffling to hear how many of the most successful startups managed to stumble on PMF but mere weeks before running out of money. So a great founding team could buy you up to an extra 12 months of free runway, greatly increasing the odds of finding PMF (depending on their life circumstances of course).

With risk comes reward—this is also where you can get those sweet 40–100x returns to pull up your overall portfolio. Say for example you invest in a company at a $10m post-money valuation, and they grow to become a unicorn ($1bn), that right there is 100x return (not accounting for the dilution). This means if you put in $20k, that would now be worth $2m (again, not accounting for dilution). At those returns, every other investment you made could go to $0, and you’d still be wildly up on your portfolio (say you put $20k into 40 startups, that’s $800k deployed, one of them hitting big and you’re up big). This is exactly why a company hitting unicorn status is usually seen as a big deal, it means that many millionaires were made (early investors and employees).

All of that said, all of this is just on paper. This means that there needs to be a liquidity event for all of this to actually be worthwhile (I’ll speak later about that in the Secondaries section).

Series A:

Making it to your Series A in the startup world is actually a pretty big deal (for the startups and investors). It’s a priced round, so all of you that signed those brittle SAFE agreements, whelp, we’re growing up—the lawyers are finally getting involved—and your investment gets to finally turn into actual ownership (company shares). Companies that make it to their Series A are usually doing over $1m/ARR, have found some type of successful way to acquire customers (with a reasonable CAC/LTV—Customer Acquisition Cost/Lifetime Value), but haven’t necessarily hit PMF (Product-Market-Fit) yet.

The goal here is a 10–20x return because it’s still quite early on in a company’s journey, so there is still a lot of upside, there’s just a lot of risk here still, since the company probably hasn’t nailed down customer acquisition quite yet. They are likely raising money to pull on some of the acquisition channels that have shown early signs of success. There’s still a high chance of failure here at-scale. Marketing and PMF is the most difficult thing to force—The best product without PMF is still a failure.

So using the same example as before: investing $20k at this stage, the hope is for it to turn into $200–400k (not accounting for dilution). You start seeing here how you really need to invest more money for later stage investments to give the type of return that you can hope to get out of a seed stage investment. So if you’re used to investing $20k checks into seed stage companies, you might want to double/triple that to $40–60k when investing at this stage if you have any hope for a 7-figure return.

Series B:

Made it to your Series B? Congrats! You likely have some level of PMF. What this means is, if you’re their target customer, you’ve likely heard of them. Take for example the investments above:

  1. Mercury is a business bank—targeting businesses (primarily startup founders). Are you a startup founder? If the answer is “yes” and you haven’t heard of them, I’d be shocked 🤯 (as would they).

  2. AngelList is a platform for syndicate, fund, and SPV management—targeting startup investors and fund managers. If you’re starting a syndicate or fund and didn’t at-least consider them as a solution, you’re probably not very good at your job (I’m only half-joking).

This my friends, is true Product-Market Fit.

Series B startups are a “safer” investment than the prior stages (each following stage comes with a bit less risk, but usually less of an upside due to higher valuation—which usually equates to more “certainty” of success), say goodbye to the potential of a 50x return as it’s just not going to happen here (unless they become the next Google/Amazon/Apple). That said, a 4x-10x is still possible! (Oh, and don’t forget, they are still a quick growing startup that very well could still go out of business).

As before, take a $20k investment, the hope is for it to turn into $80–200k. But good luck if the valuation is already at many billions of dollars (unless you’re a company like SpaceX 👀).

You’ll see here why you need to put way more into a Series B startup in order for the ROI to substantially pull up your portfolio. This is why you’ll rarely see angel investors going in on Series B and later rounds unless they are throwing in checks for $100–200k.


Would be shocked if you haven’t heard of the companies listed here. Typically when investing in a startup, you need to wait for them to be raising a round (Seed/Series A/B/C/D/E/F/etc.)—startup investing is a long game of patience, and those getting in early enough (Seed/Series A/B) may have been waiting 7+ years to liquidate their investment. On paper they may be multi-millionaires and doing well, but that doesn’t really mean anything if you can’t convert your shares into actual cash.

Now surely there’s a way to solve the liquidity problem without the company going public, no? Yep! That is what we call Secondaries. Once a startup gets to their later rounds (e.g. Series D/E/F), it’s quite common that early investors are looking to liquidate some of their investment (for a whole myriad of reasons). And that’s where the secondary market comes in. It’s where (usually a middle-man) connects the early investors looking to sell, with buyers (like me!). It’s essentially like any stock market app, just way more convoluted (requiring legal paperwork, and often board approval for the transaction to be completed).

You’re also likely buying in at a pretty high valuation (even a substantial premium over their last public raise), and depending on the hype around the startup, you might also get hit with a high carry/management fee to the platform or firm that is managing the transaction.

You likely hold onto these shares until the company goes public, and at that point, your shares will get converted into stock and be held on your favorite investing platform, with all the liquidity that comes with that. Companies usually go public when their valuation is closer to $5-10bn, there’s a whole different article that can go into why a company might not want to go public (cough-cough-Stripe).

The goal here is to 2-5x your money over a 3-5 year time horizon. (e.g. Take SpaceX, valued at over $100bn, could they hit a $500bn valuation over the next 5 years? Possibly, what about $2tn? Wait, as big as Google + Amazon combined? Yeah, not likely… You’re not likely going to 20x your secondaries investment.

Interested in getting access to secondaries? Stonks actually just launched Stonks Private, which is what we actually used to invest in OpenAI + SpaceX + Stripe in 2023. For a small annual fee, they charge 0% management fees and 0% carry.

(Requirement: you must still be an accredited investor)


Okay, okay, this is technically my first direct investment, but it was in the form of something called an “Internet Public Offering” which was essentially equity crowdfunding before that was even a thing (before the crowdfunded equity investing regulations were passed for non-accredited investors). This is similar to a late-stage investment, and there’s countless platforms now that allow for equity crowdfunding (WeFunder/Republic/etc.)


I much prefer direct investments, although angel investing is a numbers game, so I’ve invested in a handful of funds for diversification-sake.

Funds usually have some type of thesis (e.g. The Orange Dao is crypto startup-focused, Stonks YC S22 Cohort Fund is only investing in startups that make it into Y Combinators Summer 22 Cohort, etc.)

A fund might raise $20m, and then put $250k checks into 80 startups. You essentially get the average return across all of those startups. Many are likely to go out of business, but others might get a 30x multiple (that means the $250k turned into $6m, allowing the fund to write off (tax loss harvesting) many of the failures—this is exactly how startup investing works—if you don’t have an investment ever go to $0, you’re probably not taking enough risks to be successful in the space).

A great fund will return 3–5x (over a 7–10 year time horizon), which might seem “lame” after talking about all of the numbers above, especially with the earlier stage investments, but that’s not an apples to apples comparison. Even if you did get that 100x return from your seed stage investment, to figure out your actual return on invested capital (ROIC), you’d have to average in your wins with your losses. The same way that a fund comes up with that number.

Another way to view the fund return is in comparing it with the S&P500. When doing that, things become clear: getting anywhere near a 3–5x absolutely blows the 2x return of the S&P500 that you could expect over the same time horizon.

All of that said, there’s one interesting counter-point here, and it’s when you pull in a tech-focused ETF (like $QQQ) instead of the standard S&P500. One might argue that investing in a fund that only returned 4x the past decade, is actually a failure… Why? Well, you’d have gotten the exact same returns had you simply put the same money into $QQQ. In adding insult to injury, your investment in $QQQ would also be fully liquid (unlike a fund).

It’s a great point. If someone gave you 2 options with identical outcomes, but one is fully liquid, while the other one is totally illiquid, which would you take?

Against popular belief, I’d argue that, most would actually be better off actually choosing the illiquid option, because it has been proven time and time again that time in the market beats timing the market. So simply putting money into the market and not touching it for a decade is actually the best thing you can do. Oh wait, is that actually a feature of a fund? I’ll leave that for you to determine. 😬

In all of this post, I’ve been calculating the expected return for each stage based on a startup hitting unicorn status (most would say that’s a fair metric), but with that, I should probably let you know how many unicorns actually exist and are created per year.

Would you believe that there are only approximately 1,150 unicorns in the world as of January 2023? The world, slim that down to the US only (who leads the numbers) and you’re looking at only 612 (source). That’s not per year, that’s total. Take a look at per year and that number is closer to ~150 (with exception to the past 2 years due to the near 0% interest rate environment we were in):

So while all of these multiples sound exciting throughout the various stages, it’s important to note the probability of actually hitting these returns in and of itself are incredibly low.

That said, I have a couple more large investments already planned this year that I’m super excited about, and will be updating this post when they land, so be sure to check back in a few months if you’re curious as to what those might be!

Until then,
Alex Bass

Want to be alerted when I post more angel investing content?

Stay up to date

Get notified when we post (~3x Per Year)

Stay up to date

Get notified when we post (~3x Per Year)

Stay up to date

Get notified when we post (~3x Per Year)