Startup Investor School Preview with Geoff Ralston | Summary and Q&A

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February 7, 2018
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Y Combinator Podcast
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Startup Investor School Preview with Geoff Ralston

TL;DR

Investor School is a four-day class that aims to teach the fundamentals of startup investing, helping individuals become effective angel investors.

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Questions & Answers

Q: Why did Y Combinator decide to create Investor School?

Y Combinator created Investor School in response to the demand for knowledge on effective startup investing. They have observed ineffective behavior and approaches to angel investing and aim to educate people on avoiding pitfalls and becoming better investors.

Q: What type of person is eligible to participate in Investor School?

Any accredited investor can participate in Investor School. Accreditation is determined by the SEC based on income and wealth qualifications. Y Combinator also hopes to increase diversity among investors through this program.

Q: Is there a recommended investment amount for angel investing in the valley?

While the recommended investment amount varies, Y Combinator suggests that people should have some spare cash they can afford to lose. Angel investing is a high-risk investment paradigm, and individuals should be prepared for potential downsides.

Q: What topics will be covered in the Investor School curriculum?

The curriculum will cover the basics of startup investing, the mechanics of startup investing (including convertible notes and cap tables), and how to be a good investor. It will also touch upon evaluating companies, deal flow, and the changing landscape of investing in the 21st century.

Summary

In this video, Jeff Ralston discusses Investor School, a four-day class taught by Y Combinator that aims to teach the basics of startup investing. The class is open to accredited investors and covers topics such as the history of angel investing, mechanics of startup investing, and evaluating startup companies. Ralston also talks about the importance of being a good investor, deal flow, and the changing landscape of investing in the 21st century.

Questions & Answers

Q: What is Investor School and who is it for?

Investor School is a four-day class taught by Y Combinator that aims to teach the basics of startup investing. It is open to accredited investors who have an interest in investing in startup companies.

Q: Why did Y Combinator decide to start Investor School?

Y Combinator decided to start Investor School because they have seen many ineffective approaches to angel investing. The team at YC has made their fair share of mistakes in angel investing and wants to help others avoid the same pitfalls.

Q: What are the qualifications for participating in Investor School?

The main qualification is that participants need to be accredited investors, as defined by the SEC. This means they need to meet certain criteria in terms of income and wealth. The course is open to anyone who meets this requirement.

Q: How much money should someone be ready to invest if they want to get started in angel investing?

The amount of money to invest is a personal decision. While there are flexible guidelines, the exact amount depends on how much one is willing to lose and how much potential upside they are seeking. Most angel investors invest tens of thousands of dollars, but there is variability, with some investing a minimum of $5,000 and others investing hundreds of thousands of dollars.

Q: What topics are covered in the Investor School curriculum?

The curriculum covers the basics of angel investing, including the history of investing and angel investing, mechanics of startup investing, evaluating startup companies, and how to be a good investor. The course also addresses the changing landscape of investing in the 21st century.

Q: How should investors evaluate startup companies?

Investors should evaluate startup companies by meeting with the founders and talking to them. The course will provide guidance on how to conduct these meetings and make informed judgments about whether to invest in a particular company.

Q: What are some red flags to watch out for when meeting with founders?

One red flag to watch out for is a lack of passion and belief in what the founders are doing. If the founders don't display a strong passion and belief in their venture, it may be a sign that they aren't fully committed and dedicated to overcoming the challenges of a startup. Investors should also look for founders who can articulate their vision and respond well to tough questions and challenges.

Q: How can someone mentally prepare to become an angel investor?

One way to mentally prepare is to learn from experienced investors and hear their stories. Understanding the challenges and successes of other investors can help shape one's mindset and approach to investing. Developing mental models and being aware of the risks involved in angel investing is also important.

Q: What does it mean to be a good angel investor?

Being a good angel investor means following one's passion for investing, while also being rational and not overly emotional. It involves saying no explicitly, but kindly, and being honest with oneself and the founders. Good angel investors have deal flow and understand that angel investing is a game of big wins, not small returns. They also focus on being good to their companies, offering support and guidance when needed.

Q: Have you made any successful investments where you were unsure in the beginning?

Yes, one of the best examples is an early angel investment where the founder was an old friend. Despite initial uncertainty about the space and other factors, the investment turned out to be successful. This case highlights the importance of knowing and trusting the founder, as well as having a belief in their capabilities.

Q: What are some common mistakes you've made as an angel investor?

There have been many mistakes made as an angel investor, such as investing in family members, investing in spaces without sufficient knowledge or understanding, and being fooled by founders who didn't have the necessary skills or expertise. These experiences have provided valuable lessons on what not to do as an angel investor.

Q: Do you often invest in international companies?

No, Jeff Ralston doesn't often invest in international companies. However, he has invested in international Y Combinator companies. Investment in international companies requires a deep understanding of the local ecosystem and can be more complex. It's recommended to invest in spaces that are familiar to the investor.

Takeaways

Investor School is a four-day class taught by Y Combinator that aims to teach the basics of startup investing to accredited investors. The curriculum covers various topics including the history of angel investing, mechanics of startup investing, evaluating startup companies, and being a good investor. The course emphasizes the importance of following one's passion, being rational, saying no kindly, and having deal flow. It also highlights the changing landscape of investing in the 21st century, including the rise of online platforms and crowdfunding. By attending this course, investors can gain valuable knowledge and skills to become more effective and successful angel investors.

Summary & Key Takeaways

  • Investor School is a four-day class that teaches the basics of startup investing, helping individuals become effective angel investors.

  • The course covers topics such as the history of angel investing, the mechanics of startup investing, and how to be a good investor.

  • It also addresses the changing landscape of investing in the 21st century, including the rise of platforms like AngelList and initial coin offerings (ICOs).

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