You'd Like to Be an Angel Investor? Here's How You Can Invest In My Deals…

150 Comments

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Most deals get done in informal settings. Now, I’m inviting you to join me. (Photo: Russell Yip)

 

Please note that my syndicate investing in Shyp has now closed. You can still back me on AngelList to gain priority access to future deals. More updates will be posted here later in the round.

 

On September 23, 2013 (that’s today), the world of startup financing changes forever. It’s a truly historic moment.

Previously, I couldn’t publicly share deals with you. Now, thanks to an unprecedented legal change, I can offer a portion of my start-up investments to any of you who qualify as “accredited investors.”

  • Previously, you had to be part of a small club to see such deals. Not any more.
  • Previously, you might even need to be in Silicon Valley, drinking wine and having coffees around the clock, to see good deals before they filled up. No longer.

Starting today, I’ll share some of my favorite deals with you, beginning with a start-up called Shyp.

Notable companies I’ve advised include Uber (pre-Series-A), Evernote, Automattic (WordPress.com), Shopify, and TaskRabbit, among others. Early investments include Twitter, Facebook, Reputation.com, etc.

In this case, I used a “Spearhead Capital” blog post to my ~1.4M monthly blog readers to find promising startups. Nearly 400 companies applied, many of which are producing millions in revenue. Out of all of them, and with the help of Naval Ravikant (CEO/co-founder of AngelList) to interview finalists, I chose Shyp.

Shyp is the fastest and easiest way to ship packages. More on that shortly.

Investing alongside me–and potentially you–in this round are:

  • David Marcus (President of PayPal)
  • Brian McClendon (Founder of Google Earth)
  • Daymond John (Founder of FUBU, Shark on ABC’s “Shark Tank”)
  • Joshua Schachter (Founder of Delicious, Tasty Labs)
  • Aaron Batalion (Co-founder of LivingSocial)
  • Homebrew (Hunter Walk and Satya Patel)
  • Naval Ravikant (CEO/co-founder of AngelList)
  • Scott Belsky (Founder and CEO of Behance)
  • Sherpa Ventures (Scott Stanford & Shervin Pishevar)
  • Antonio J. Gracias (Board Member at Tesla and SolarCity)
  • XG Ventures (Andrea Zurek and Pietro Dova)
  • Osama Bedier (Former head of Google Wallet)

…and more

So, how can you join us?

Before I tell you, remember:

  1.  Startups are speculative, and this is gambling. You shouldn’t invest anything you’re not comfortable kissing goodbye. Treat it as casino money.
  2.  If you are going to invest in startups despite this high risk, plan on building a portfolio of dozens, very slowly and carefully. This should be just one of many. Read more on approach here.

The Short Version

If you’d like to invest in Shyp, simply click here.  A description of the company is in “The Longer Version” below.

You’ll need to set up an AngelList profile (free), and the minimum investment is $2,500. We’re only able to accept $250,000 from everyone.

For more on the team and concept of Shyp, click here.

If you miss this one, not to worry–you can automatically join my deals in the future, which puts you first in line next time.

Can’t invest right now? No worries. If relevant, I’d love for your to consider any of the below actions. Shyp and I would really appreciate it!

- Apply to be a Shyp Hero (Heroes are Shyp’s drivers). Click here.

- Apply for a job on Shyp’s core team. Click here.

- Interview the co-founders of Shyp: Kevin, Josh, and Jack. They’re clever gents. Just email: founders at shyp dot com.

- Tell Shyp which city you live in so they can launch there before others!

The Longer Version

I’m putting my name and network behind Shyp and personally investing $25,000. I’ll also be providing oversight and advising the company on product/conversion optimization, national launch strategy, etc.

I’m using a new AngelList feature called “Syndicates” to share my $250,000 allocation of Shyp.

Unlike venture capitalists (VCs), I am charging zero management fees. If you don’t win, I don’t make a dime. If you invest alongside me, the only expense is a 20% “carry” (roughly 20% of the profits) if there’s a good outcome.

DESCRIPTION OF SHYP

Shyp is the fastest and easiest way to ship packages.

Through the Shyp iPhone app, you take a photo of what you want to send, specifying destination and pick-up time. You’re done.

A “Shyp Hero” (driver) arrives at your home or office at the specified time, takes your unpackaged item away to be packaged, then sends it on its way via the optimal carrier (i.e., Fedex, UPS, etc.). Shyp automatically optimizes for speed and cost, and Shyp charges no more than Post Office prices, plus a $5 pickup fee for sending solo items. If you send more than one item, the company waives the $5 pickup fee.

More on how this works below the video.

I have confidence in the team, and here’s why I love the model:

- Recurring revenue. It has a frequent use case, just like Uber and Evernote (again, both of which I’ve advised). Millions of people can use Shyp on a weekly or daily basis.

- It’s simple and solves a real problem. Do you enjoy going to the post office or UPS store? Scheduling pickups that require you to be available for 3-6 hours? Of course not. Shyp makes fixing all that as easy as snapping a picture. And they package everything for you. No more wasted afternoons.

- It has unusually high margins. Shyp matches USPS retail prices, but by taking a volume discount from carriers and utilizing regional couriers (that end-users cannot), Shyp can maintain high profit margins. Using OnTrac, as one example, is 75% cheaper than USPS.

- It’s tackling the “first mile” problem, not the “last mile” problem. Lots of companies are focused on same-day delivery from retailers to consumers: the last mile. It’s a crowded battlefield of a market. But what about the burden of packaging up shipments from homes and offices? This “first mile” problem is enormous, and the market is neglected. Shyp aims to own it.

How to Get In First

Would you like first access to my future deals, right alongside my close friends?

To see things before I post them on the blog, you can automatically back me on AngelList, as Naval (CEO of AngelList) and others are doing. Click here for more details. This will ensure you don’t miss anything.

###

DISCLAIMERS — DON’T SKIP:
Startups make big plans a lot, and most don’t follow them. Shyp might run out of money; customers might not like using a third party to ship things; UPS, Fedex, or some upstart could start competing; or the team could simply fall apart tomorrow. Any statements about their future plans, margins, etc., are pure speculation on my part. That’s why startup investing is very risky, so again: don’t invest anything you aren’t prepared to write off 100%. Last but not least, I’m not necessarily planning on sending frequent updates or notices of Shyp’s change in plans (if any), as startups change on a weekly or daily basis.

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150 comments on “You'd Like to Be an Angel Investor? Here's How You Can Invest In My Deals…

  1. Tim, you’re a brilliant marketer and now it seems you’re turning your Valley access and your blog following into a direct profit centre for you.

    From how I understand “carry”, you’re going to risk $25,000 out of a $250,000 syndicate investment, but earn 20% of the profits of any sale of the syndicate’s share. So for a 10% investment, you get 30% of the syndicate’s profits.

    I’m making up numbers, so please correct me if I’m off. If the investment delivers a 4X return, that would be $1MM (750K total profit), Tim would receive $75K from his original share, + 20% of the $675K for the balance of the Syndicate, or an additional $135K. So the syndicate’s profit would be $540K from $225K invested (2.4X), and Tim’s would be $210K off $25K invested (8.4X).

    Again I may be wrong so please explain this to me.

    Obviously my doubts explain why I wouldn’t invest but I’m not sure a single sentence about Tim charging a 20% carry is much of a disclaimer either.

  2. Pretending that your readers can qualify to be part of this elite is a bit…funny? If we were so wealthy we wouldn’t be looking for your advice to become wealthier (in money or spirit)… So, here is the question: any 4HWW to bypass the income thing? Something like start a “business development company” or “small business investment company”? That would be appreciated!

    Anyways, it was an interesting read

    • The 4HWW way to do this is to become part of the 1%. Start a company, sell it, and then you will be in a position to do angel investing. Sorry, but this is a 1%er game.

  3. Tim,
    I am considering becoming a backer but considering I need to back every deal you do how many deals do you typically invest in per year?

  4. Tim, I’m a big fan, and I’ve gone through all of the comments on this post. I’m really struggling to accept your proposal of a 20% carry. Countering it with the zero charge, it at first seems balanced, but really is not. It almost suggests irresponsibility the way you have so simply cautioned readers. The accredited investor rule does function to protect people – but I truly wonder if the majority of readers who would like to be angel investors truly comprehend the roulette-like nature of the start-up world. As you said,

    “If you are going to invest in startups despite this high risk, plan on building a portfolio of dozens, very slowly and carefully.”

    ..and that’s the reality of it, Dozens. So one is looking at maybe seeing some return on perhaps 50k. Roulette, and the fueling pipe dreams. Ultimately, this comes across as a way for you to make money. From my eyes, it’s not positive.

    I will continue to be a fan – although I tend to think that a 5% carry would be far better for all parties involved. Obviously I’m not drawing numbers as others have. Yet nonetheless – 20% is huge.

    • Of course it’s a way for him to make money. He’s not doing it out of the goodness of his heart. I agree that the 20% is steep. I would have accepted a 10% carry, especially for an “in” into the world of angel investing. Anyway, very few people would qualify as an accredited investor, and one would hope that those who do have the ability to decide for themselves whether or not it’s a good deal.

    • So just running the numbers – if a $250,000 company explodes into a “10 bagger” and is ultimately worth $2.5 mil this means Tim gets 27 times his initial investment when those “investing alongside of him” get 7 times

      Initial Valuation $250,000
      Value after exit “10 bagger” 10 $2,500,000
      Profit $2,250,000
      Tims “20% Carry” 20% $450,000
      Tims share of investment 10% $225,000
      Total Returns to Tim $675,000
      Tims return Multiple on initial investment $25,000 = 27
      Profit for left for other investors $1,575,000
      Other investors return multiple $225,000 = 7

      NICE ;)~

  5. Interesting P2P delivery concept. Seems well thought out. Will be interested to hear how it goes once launched (process, customer feedback, markets, growth, drivers, glitches, etc.). Maybe once you guys figure it all out and educate the market, I’ll raise a round for a differentiated competitor called on http://www.P2PDelivery.com. Until then, all the best! Cheers, Chris

  6. Tim
    By soliciting potential public investors over the internet, there is a possibility you may be in violation of securities regulations. You should check with a local attorney experienced in these matters–I am only aware of the possible problem, I don’t practice in this particular area of law. You might be innocently jamming yourself up. Just a suggestion.

  7. How many of Tim’s fans earn more than 250K a year?

    Tim is a millionaire. He’s part of the 1% or 2% of American society. The vast majority of you, including myself, make up the 98 or 99% of the rest of American society. Occupy Wall Street brought this country’s attention to the horrific economic inequality in this country.

    If more proof positive has ever been provided that American society is living through a new Gilded Age it is now. The top 10 percent of earners in the United States took home more than 50 percent of all income in 2012, the highest amount ever recorded since data was first collected in 1917.

    And yet, Tim’s fans lionize him and bow down to him as if he’s their would be savior. At least that’s how it comes across in the vast majority of comments Tim receives on his blog. Tim has done a terrific job of creating himself and living life on his own terms.

    Most of you probably live life on your own terms. But why do you worship Tim so much?

    • If I’m not mistaken. Millionaires actually make up less than 1% of the American economy. The ones who earn six figures make up the 1-2%. The average income per individual as of 2012 I believe was $38,000.

      Might need someone to verify this though.

    • Gordon,

      Making money is the ultimate IQ game. It’s for winners (not for whiners). I don’t make any money (on paper), yet I live a great life. The biggest secret is leveraging off the information you get from others – Like Tim.
      I don’t need to worship someone to respect them. Great information for those who know what to do with it is priceless.

  8. The people who need access to alternative investments the most are excluded from participating in most of them because of the “Accredited Investor” requirement. I understand the reasoning but don’t like it.

  9. Tim – Thanks for posting this. So this must be one of the ideas you referenced at the Samovar Q&A! Great concept that has potential to disrupt and change how startups are funded. Why should VCs have all the fun, anyway?

    I unfortunately missed out on the opportunity to help fund Shyp – it sounds like a very interesting concept that (to quote Tim O’Reilly) helps “close the loop” in package shipping, potentially disrupting a very established industry. Should be interesting to watch, and to use as a service. I applied as a small-time investor for future deals.

    Thanks,
    David

  10. Could we start an Angel Investing Co-op? I’m sure there are different restrictions for groups to gain accreditation though but that would actually open doors to us 4-hour peasants.

    • Your co-op would need assets exceeding $5 million (while itself not violating SEC rules in raising that $5 million).

      “3. a charitable organization, corporation, or partnership with assets exceeding $5 million;”

      Otherwise all individual members must be accredited:

      “5. a business in which all the equity owners are accredited investors;”

      http://www.sec.gov/answers/accred.htm

      • Adam, can you help with understanding what constitutes a Business Development Company or Small Business Investment Company as in provision 1? It doesn’t seem like there are asset requirements here, but I’m assuming there are other declarations one must make. Thank you in advance for any help.

      • Thank you both for the replies Adam ad Gordon, very helpful. I don’t have the time or resources to manage such financials for a co-op but I was thinking, this would be a perfect campaign for a Kickstarter. But there may be some obstacles:
        1) not sure a successful campaign ($5mill) would qualify for accreditation as a group.
        2) if it did, would there be a spot in Tim’s investor portfolio still open for us
        3) sure there is a legal jungle once profits would be distributed.

        But man, no risk until the funding goal was met. 5000 people investing $1000. Would open up Kickstarter to a whole new form of venture capital strategies.

  11. Will your future syndicate investments always be $2500 or will they vary with each startup?
    I understand that there are specific circumstances where a member of the syndicate can skip a particular startup but what is the process for permanently exiting the syndicate?

  12. this is awesome. regarding Shyp, why do you think “last mile” players would not easily extend into the “upstream” – they already have people on the ground and would make their business model even more efficient.

  13. This is very cool guys. Congratulations. Question? How is AngelList independently verifying the potential investor’s accredited investor qualifications? I know with the new JOBS regulation there is a higher threshold incumbent on the managers taking in new money, but I have yet to understand how this is going to get done absent collecting investor tax returns?!

  14. Hey Tim,

    So you’ve done it again…

    I am guessing the next book will be “The Four Hour Investor”…

    I really like the movement you are now a driver for. I believe it’s going to fundamentally disrupt the way companies raise money and will ultimately democratize the market.

    As to some of the critical notes: in the way Tim is structuring his fees, he is actually undercutting the market because he does not take a management fee. The 20% on realized gains is normal. Other firms will often compensate themselves by taking a higher performance fee, frequently exceeding 25%.

    You have to weigh that when you make a decision in whether you join a syndicate like this. What he has proven is that he has a nose for pretty cool investments and has access to a deal flow that you would never hit if this opportunity wasn’t there.

    Having said that, angel investing in particular and venture capital as an asset class in general is not for the fainthearted. You stand the risk of loosing all or more than the capital you put up.

    Good luck with this.

    Best,

    Martijn

  15. Tim, can you please confirm that you’ve finished raising the $225k already? The site says “they’re no longer accepting online investments”… Thx!

  16. Hello Tim,

    Interesting concept and it will be tough to compete with the big boys. If you are looking for savings on corrugated boxes, let me know. My friend just bought a box company in emeryville in January. Its called Brookfield box co. and can price very competitively and has saved my company 10%. He also can do emergency runs and smaller runs so you dont need a large warehouse to stock all the boxes. Let me know if this company is in need of this service.

    Thanks,
    Hugh Ly

  17. Tim,

    Thanks for the great post. A bit disappointed though that fundraising for SHYP is closed.
    Maybe you or someone else has already answered this question, but why was the investment cap for Shyp set at 250K ?

    Thanks

    • That’s the amount that we agreed with Tim to allocate. We also had traditional angel investors investing, so needed to allocate amounts to them.

  18. Keep in mind, it is no longer acceptable under the new SEC rules to simply say that you’re accredited, or to fill out a questionnaire. Under the rules for this exemption, your accredited status needs to be certified by a lawyer, CPA, financial advisor or a third party certification company. Companies that try to use the exemption without confirming the buyer’s accredited status (and likely, people who syndicate on AngelList) will lose the ability to use the exemption and subject themselves to personal liability to the investors.

  19. One more question: how do you evaluate how reasonable the valuation is? I see no way to get information to do this before committing the money, so in backing your deals we’d have to rely entirely on your due diligence… It’d be good to know more about what your key criteria and evaluation process to get comfortable with making what are essentially blind investments. Thanks!

  20. Hi Tim,

    I don’t make the $200,000 per year, but I bank over 100K (because I have no expenses). Is there any way I can invest, as I have about 50K just sitting around and feel like the odd-ball that isn’t allowed to play?

    • There’s no way you can get involved if you don’t meet the accredited requirements. Maybe in the future they will ease up on the requirements, and then you will be able to get in on the action. Currently angel investing is a rich man game.

      • Is there any platform out there to connect entrepreneurs and investors who have just below $1million net worth and 300K combined income?

  21. I think people are misunderstanding what the 20% carry means…its not an expense. If your investment earns a profit, 20% of that number goes to the general partner in the fund. And I don’t believe that Tim is the only general partner, so you are not “paying 20% to Tim.”

  22. Terrific Idea. E-commerce will continue to grow, and the demand for shipping will only increase. Here in Los Angeles, myself and my neighbors are ordering tons of items on-line… it allows you to avoid traffic, and the hassle of finding parking in a crowded city.

    I wish you all the best on this venture!!!

  23. Not sending frequent updates? Maybe you should be using Visible.vc. Tracking updates and metrics is just smart, purposely going blind and shoving your head in the sand is… well, do I really need to explain? What if a change is something someone in the syndicate can help with?

  24. Tim,

    this is off-topic but I wanted to get your attention! After being physically bullied most of my life I decided to face my fear of bullying/violence by getting in the ring at age 25. There’s a local MMA fight in 4 months that I’ve signed up for to check the ‘Stakes’ box in ‘DiSSS’.

    I’ve got 4 hours a day to practise. What should I start with, BJJ then muay thai then boxing?

    I know Dave Camarillo is at the top of your bjj instructor list, so I’ve grabbed his book from amazon. If there’s anything else you could point me to it would be awesome, if not, no worries — your creative live show with Dave inspired me to face my demons and get in the ring. Thank you!

  25. Regardless of all the speculative opinions and advice from the numerous people who are clearly regurgitating the poorly researched blogs, often disguising unrelated cause and effect relationships with abstract analogies so entertainment distracts the search for facts. Every tweet from a VC is scripture without analyzing the content analytically and questioning the motives because we look at them as if they made $250m. Most angels are using money they made and some VCs have but they’ve simply using others. Syndicates are the new early stage VC compition, but hopefully that will hrlp shift those VC to the much needed series A arena or seeds may continue to see the silly over valuation. So, to correct or clarify, if u are a foreign resident, u must attain a TIN. If u are not a us citizen and a foreign resident yoh must attain a ITIN. You are not prohibited from investing (some restrictions apply to rare situations), however, each company has an obligation to perform due diligence on their investors and may (many cases should) elect to decline foreign investment from individuals who fail to meet US accredited investor guidelines. This will change drastically sometime within the next 20 months as the SEC issues a new class of stock to support Title III. The real question is wil the extremely active VCs continue to play the philanthropic mentor to entrepreneurs as general solicitation open easier ways for them to raise funds? Because you have to know that their are only 3 reasons that they are active bloggers and tweeters. 1, to help ease the preexisting relationship and network restrictions of the former GS rules. 2 deal flow. Ok, have u ever met a vc that usues his speaking engagements and twitter to hear new pitches? 100% always mention at every speaking opportunity that they look at deals through intros and referrals from their network. If u don’t know the 3rd by now… look no further than Tesla, Salesforce, Shyp, airbnb, snapchat, vine, sqwiggle, etc.

  26. The Ferriss brand has really been an amazing phenomenon. However, I DO feel that you need to pay attention at each step. Recently received your Quarterly package. While disappointed in the previous one, this one SUCKED big time – total rip off. And then watched the semi drunken rambling conversation with KR and it just look like a “Beiber” move – don’t give a shit anymore and — whatever.
    Listen – its been ore than 15 minutes of fame BUT it can easily turn into Tim WHO…
    Just my thought for the morning overlooking the ocean here in Vancouver.

    M

  27. Angel List seems to give greater opportunities to investor looking to secure on recommendations startups. Came to know about angel list from your post.

    Thanks

  28. Are there any similar investing options available for folks that don’t meet the accredited investor profile? Would love to participate in something like this (even on a much smaller scale) but I’m not even close to the accredited level yet.

  29. That’s interesting Tim. Thank you for sharing your deals. I think you would not have shared this if you did not believe in it in the first place. The fact that there are big names investing with you encourages me to invest in it too.

  30. Shyp sounds okay. On iSeed though, we prefer a startup that can improve at least a small part of it. And yes, I have to agree with you Tim, when we started this venture, we were quite excited to get a pitch from random companies. After hundreds of pitches, we were forced to admit, it rarely works.

  31. Tim, you’re a god to me. I’ve read every word of all of your books, and in doing so I feel compelled to reach out to you in every medium I am capable of. I myself have been subconsciously subscribed to your ideologies regarding efficiency and the power of the human spirit since I was a young boy, and after reading my own similar thoughts put into your words in text I feel more inspired and confident to expand my own horizons. This message is not only meant to serve as a heartfelt thank you, but as a call to action as well. I feel like I’ve met one of the only people in the world who thinks like I do after reading your stories, but I believe there’s so much more than what’s in your books I could learn from you. I’m not you’re average 22 year old college senior bump on a log, I believe deep down that outliers find each other in this world. So here I am, reaching out. After reading your blog post regarding consulting costs I would also like to reassure you there is a 7 figure budget.
    Sincerely,
    Michael Thomas

    Sent from my iPhone