Advice On Angel Investing … and Other Advice, Too

Everywhere I go in Silicon Valley I hear people discussing their angel investments. The conversations remind me of fish stories. People love recounting the one time they caught a big fish, not the many futile hours they spent waiting for a bite.

Andy Rachleff, President & CEO, Wealthfront

Andy Rachleff, president & CEO, Wealthfront

That’s how Andy Rachleff, Wealthfront’s president & CEO, began a recent post on TechCrunch about whether or not becoming an angel investor is a good idea. Andy, a co-founder of Benchmark Capital and a faculty member at Stanford University Graduate School of Business, used his knowledge of the venture capital business and seed investing to make the case that it’s terrifically difficult for an angel investor to make money because seed investments are so risky. His advice:

My conclusion is that unless you are Andy Bechtolsheim, legendary founder of Sun Microsystems, Granite Systems and Arista Networks, and can have the pick of the best technical founders in the Valley, or you are a member of the Paypal Mafia, you should not be an angel investor. A few elites have a chance of making money. The rest of you are in for pretty dismal results. …

That’s the ultimate lesson from the fish stories in Silicon Valley. True fishermen cast their lines not because they want the fish, but because they like fishing. It’s fine to be an angel investor – just don’t do it for the money.

Andy’s piece, which has been widely shared across Twitter, Facebook and other social media, grew out of the recognition by Wealthfront’s team that people who make money in an IPO or an acquisition seek advice about becoming an angel. Investing is part of the culture of Silicon Valley; some of us have been angels ourselves, or have friends who are. We recognized the need for a good, research-based approach to the question of what to expect as an angel investor and what the odds are of seeing good returns.

Over the past few months, you’ve seen us broaden the information available here, so that we’re no longer discussing just investment management; now we’re looking at Silicon Valley’s entire financial lifecycle. We’ve answered questions including How Do I Choose Where To Work? and How Much Should I Be Paid? the latter with a Startup Compensation Tool. We’ve also looked at What To Do After A Lockup Expires, and When To Sell Your Employee Stock.

The broader range of topics reflects our evolution from a software-based investment service into a full-service software-based financial advisor for Silicon Valley.

We’re delighted for people to reach out to us – tweet us @wealthfront with questions you’d like us to answer.

Andy’s post on TechCrunch and the other pieces we’ve written are examples of the way Wealthfront’s research and our team’s knowledge about financial life in Silicon Valley can benefit the tech community. Now, we want to know more about what’s on your mind, and how we can help you. Please be in touch – and if you’ve found our information valuable, please share it with your friends and co-workers.

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