Jason Calacanis has made a career — and a fortune — out of investing in startups as an “angel investor,” with six “unicorn,” or billion-dollar startups, to his credit.
He’s now looking to share his insight from the last 15 years on the “very opaque process” of Silicon Valley fundraising in his new book, “Angel: How to Invest in Technology Startups — Timeless Advice from an Angel Investor Who Turned $100,000 into $100,000,000.”
In an interview with TheWrap, Calacanis said he wants to shine a light on “how angel investors make their decision of who to bet on.” He also didn’t sugarcoat the high-risk, high-reward nature of investing in startups.
“You have to be willing to take a certain amount of risk, and deal with a large amount of bad news,” said Calacanis. “The majority of investments go to zero, these are highly speculative companies. They’re essentially experiments. Two, three, four people try to do something, [and the] majority chance is failure.”
In that sense, Calacanis compared being a “serial entrepreneur” to being a poker player: luck, coupled with sound strategy, can help an investor end up in the black. And with “Angel,” he’s confident his strategy can foster a new generation of investors.
“This is a formula I deployed, [and] I had outsized returns,” Calacanis said. “If you deploy my formula, you have a much better chance than if you try to figure out your own.”
The Fordham graduate acknowledges he “really got lucky” when he first jumped into the startup world. Ride-hailing juggernaut Uber and Thumbtack — a service connecting users to handymen or personal trainers — were two of his first five investments. Thumbtack is now valued north of $1 billion, and Uber is worth a whopping $70 billion.
In the past few years, Calacanis has become something of a patron saint of nascent investors. His active Twitter account and “This Week in Startups” podcast have put a face to the obscure world of Silicon Valley investors.
Calacanis doesn’t expect his readers to strike it rich immediately, or have a “nest egg” like he did, after he sold Weblogs, Inc. to AOL in 2005 for $20-35 million. But with some startups accepting infusions as low as $1,000, he thinks you’re better off betting a small percentage of your net worth on budding companies, rather than plopping money into major tech stocks.
“Everybody wants to own Facebook, Google, and Netflix,” said Calacanis. “I want to own the next Facebook, Google and Netflix.”
But can millennials — earning 20 percent less a year than they did a generation ago — afford to take the risks outlined in Calacanis’ book? When pressed if his “Angel” blueprint applied to cash-strapped young adults (like yours truly) Calacanis was adamant it’s a worthwhile bet.
“I do think if you take [angel investing] seriously, do it half-time or full-time, you’ll have the time of your life doing it,” he said. “You’ll either lose your money, but it’ll be either five-10 percent of your net worth, or there’s an outside chance you could return five, 10 or 100 (times) your return. That seems to me like a risk worth taking.”
And compared with more traditional investments, like a Master of Business Administration degree, Calacanis didn’t mince words.
“There’s a bunch of dips—s who spend a quarter million dollars on an MBA, they get out of school, they get a $100,000 a year job and then they’re paying $1,000 a month to try to pay off this MBA for the rest of their life,” said Calacanis. “It makes no sense.”
So if his daughter ends up saying she wants to attend business school, Calacanis will tell her the same thing he tells his readers: try angel investing instead.
“If my daughter said ‘I want to go get my MBA,’ I’d say ‘OK, here’s $200,000 for your MBA, or, you can take the $200,000 and we’ll angel invest it together,'” Calacanis said. “I’m going to pretty much going to guarantee you that angel investing, you’ll learn the most because you’ll work with 10, 20 different companies.”