I’ve made well over 100 startup investments since 2014. Looking back, there are some mistakes I made early on that I wish I had avoided. One big one is I would get way too excited about some of the startups. I invested too much in my first 10 deals because I was so excited. But I had a limited pool of capital that I was investing from. Those large early investments meant that my next 40 investments were much smaller — which limited the returns that I might see.
I invest smarter now and try to make all of my investments a standard size. The primary reason is simple — it’s very difficult to predict which investments will be successful early on.
Some of the deals I’ve been most excited about have turned out to be losers — and vice versa. By sticking to a standard investment size, I can limit my own biases as I invest. And spreading my investments out evenly gives me the opportunity to invest in more companies than I would if I sunk large amounts into the startups I’m most excited about.
So my advice to new startup investors is to try to invest a (relatively) standard amount in each deal — no matter how exciting it seems at the time. Of course, it can be tricky when different syndicate deals have different minimum investments. But in general, try to make similar-sized investments in each startup.
There’s nothing more frustrating than seeing a deal go up in value 80x — and you only invested $1,000.
Source: Early Investing