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)
So, how can you join us?
Before I tell you, remember:
- Startups are speculative, and this is gambling. You shouldn’t invest anything you’re not comfortable kissing goodbye. Treat it as casino money.
- 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.
The Tim Ferriss Show is one of the most popular podcasts in the world with more than 900 million downloads. It has been selected for "Best of Apple Podcasts" three times, it is often the #1 interview podcast across all of Apple Podcasts, and it's been ranked #1 out of 400,000+ podcasts on many occasions. To listen to any of the past episodes for free, check out this page.
Comment Rules: Remember what Fonzie was like? Cool. That’s how we’re gonna be — cool. Critical is fine, but if you’re rude, we’ll delete your stuff. Please do not put your URL in the comment text and please use your PERSONAL name or initials and not your business name, as the latter comes off like spam. Have fun and thanks for adding to the conversation! (Thanks to Brian Oberkirch for the inspiration.)
152 Replies to “You'd Like to Be an Angel Investor? Here's How You Can Invest In My Deals…”
Not what I was eagerly dreaming of while refreshing the page … but still cool.
Best of luck! Would this service be open to serving commercial needs? How would I go about comparing pricing?
Cool way to join your insights! Definitely interested in investing. Cheers
Wow this reminds me much of what Alexis spoke about in his previous posts… find something w/ a poor user experience and fix it!
Thanks Tim for sharing this, it is almost like i have a my very own investor consultant 🙂
I am going to share this like crazy
Very cool. Wish I had the money to be accredited + invest.
This has been a personal pain point for me, and I hardly ever ship anything. Handling ANY shipment usually takes at least 30 minutes of my time, and it is NOT rewarding.
Since I value my time, this is a no brainer. I also often an shipping on behalf of someone, and could expense the fees to them. Great, great idea. If they can solve the two-sided market problem, they will be huge. We ship more and more things every day.
“Accredited Investor” = income of $200,000/year.
Basically, for every $1 that Tim spends he is entitled to $2 that we do. Quite Ingenious 🙂
I’m unsubscribing from your blog, sorry Tim.
Thanks for the update Eddie.
May you find what you’re seeking elsewhere, Eddie. I’m a big fan of James Altucher’s blog.
I plan to do the opposite and visit your site more frequently (a little disappointing I missed out on this opportunity).
I’m really glad I read this comment though, I just spent the last hour reading through James Altucher’s blog. It made me realize that it would be great if at some point you gave us your top 5 blogs that you follow. Thanks,
is this a sarcastic comment or you really like Altucher’s blog?
Thank you for this opportunity, I was just looking into Angel investing but found out that I lack the capital required for most investments.
Does your offer apply to international backers? I’m based in Europe.
Do I also have to be an accredited investor if I live in Europe and want to be a backer or invest in some of the companys on AngelList?
I couldn’t find any information on that.
Great concise post. I was aware of the changing legislation essentially allowing startups to advertise their fundraising rounds, but I think what Angellist is doing with this newfound flexibility is great!
But I’ve always believed (and am working on a detailed blog post about this as we speak) that the “accredited investor” rule (along with various legislation that incentivize private companies in their growth phases to remain private for longer, etc) is a MAJOR reason why upward mobility in America is increasingly more difficult, and the wealth gap is growing .
Now that — thanks for Angellist and the new legislation — it’s much easier for accredited investors to allocate and invest their capital as they see fit, do you think it’s time to lift the accredited investor rule all-together? Obviously this would significantly increase the potential fundraising rounds for startups, but also make a significant (and positive) improvement in upward mobility and the overall economy.
There is a great debate about this. I think the SEC’s concern is having people invest too high a % of their total nest egg in speculative investments likely to fail (like start-ups).
Curious to see how things shake out.
** Celebrity shock from your response!! **
…ok, I’m good.
Do you know of any big players in this debate? Would love to follow them on twitter to keep my finger on the pulse of the debate, and even maybe reach out to them to discuss details and/or interview them.
And I too am curious on how this will play out, but would much rather be involved in the dialog of crafting the solution than sitting on the sidelines **hoping** that Washington will get it right– I honestly think this is too important of an issue to sit idle on.
Is it possible to invest if you’re based internationally, i.e UK?
Tim – great idea, as usual.
By the way, I re-read “My Story and Why You Need This Book” for the “nth” time last night (4HWW) and I still can’t keep from laughing out loud at your hilarious escapades. It is truly remarkable how far you’ve come, and how generous you have remained with your readers.
Shyp is a great idea but i don’t think I’ll be viable until a large entity embrace it in a city. Ex: the municipal govermnent only do business with Shyp, a major enterprise, say Bombardier decides to use it and tell all employee to use it. Then it would spread. But otherwise, i ship packages 2x per year so it will never come to my mind to call shyp for something i rarely do. But it would be good for small businesses… and it still come down to how do you make them call you all the time?
question – if I sign up for automated backing, is that what it says it is, ie I am committing $2500 every time you make an investment? or – is it guarantee that I *can* back but get approval before I have made the commitment?
Future commitments are firm but not legally binding, see here for more: https://angel.co/help/syndicates#exceptional
Excellent concept, solves a real problem- extension of intelligent logistics to the only part of the shipping process that still sucks. Could be great for returns. I’m in!
Tim, I’d like to know how often you anticipate syndicating before I commit to backing your syndicates. Are you going to do a deal a week, one a month, or one everyone few months? Thanks for any info you can provide.
Every few months, I expect, but it’s dependent on when I have good opportunities so hard to predict.
Works for me… I’m definitely in and grateful for the opportunity. Thanks! I look forward to the next pick.
I like the idea, but I am late to the game. Is the ability to invest in Shyp now past?
I am new at this.
Thank you for your time.
Does the money in a 401k count when calculating the net worth for an accredited investor?
Gak, I don’t fulfill the needs to be accredited, so close though. I’d love to invest with you 🙁
I even dropped my lunch and ran home from campus to jump on my computer. I guess I will have to wait.
Terrific, I’m in! Tim, I’m the guy who bought your manuscript of 4 Hour Work Week for charity back in the day — it would be an honor and a delight to invest alongside you now.
In order to invest as a syndicate it states; “You must be accredited to invest.” How does an individual invest if they are not accredited???
Thrilled to see Shyp get the recognition it deserves! Have been following them for awhile. I also think it’s awesome of you to open up on your Angel investing Tim. Looking forward to more great stuff!
Tim, thanks for sharing and being so open. What cities is shyp available in now?
It is a great name and domain ..shyp. Great work.
We’re starting in San Francisco, but hope to expand soon. ~Jack (Shyp co-founder)
Would your also work if someone was moving and wanted to ship a bunch of stuff to their new location or is it only for smaller things?
love the concept and wonder how it could be incorporated in peoples ebay or etsy businesses that do lots of shipping.
Hi Jeremy. It’s just for small items at the moment (whatever you can ship via USPS, so say under about 70lbs).
Definitely agree about the potential for eBay and Etsy sellers!
moving would definitely be a sub-niche. International moves. College students. Long distance movers have 1000 and 2100 lb minimums. Shipping boxes via small package carrier is sometimes the most cost effective option. Having someone pack for you is a stress reliever during a stressful time.
Jack, I like what you guys are doing, it looks great! We would like to talk about offering the Shyp service to specific industries. We were in the early stages of creating a similar service for a unique community our company represents. Who would we talk to about this?
sure, email me at jack at shyp
Love it, Tim. Lifting of the ban on general solicitation + equity crowdfunding are game changers. Kudos on leading this new opportunity by example and with clarity.
Betaworks is doing something cool with Openbeta, too. http://betaworks.com/openbeta.php
Hope you’re well.
The true game-changer will be when the “accredited investor” rule is lifted.
not intended as advice but as far as I know there is nothing stopping an investor from ignoring the accredited conditions. There is basic due diligence on behalf of the investee (i.e. asking if you are accredited is about as far as it goes). If you want to invest despite not being wealthy enough to meet the requirement, well it is a free market in a free country (lol). Caveat emptor and good luck.
My own observation, having been involved in high net worth investments for my entire career, I never have seen a client refused for falsely reporting their income/net worth. One firm I was familiar with would simply send back the application with deficiencies highlighted, the clients would resubmit higher numbers and then their funds would be accepted. It protects the firms from someone losing money and suing saying they shouldn’t have been allowed to invest. I believe this is the purpose of qualified money more than consumer protection. At least the schleps scratching lottery tickets at the gas station have never had to submit a net worth statement, nor ever won a lawsuit saying they were swindled by the powerball. But that is far more commonplace than bad startup investments for sure.
Tim, are you open to investors outside of the US (I’m in UK)?
David, you would need a Tax ID number (TIN). This can take 6 weeks or longer.
I’m curious if they cover the cost of boxes and packaging material?
Hey David – Yes, we do. and we’ll do the packaging for you as well! ~Jack (Shyp co-founder)
I don’t get your motivation, Tim. Why don’t you invest all by yourself? You’re not confident and want to share risks?What is your actual role in startup? Why I can’t invest 1000 dollars for example?
Are these numbers roughly correct?
In order to get a 10x return on this investment, and assuming a 7.5M post-money valuation, and a 20% carry, Shyp would need an exit of around 93M.
If that’s correct, do you know of any comparable acquisitions in this industry?
How about the JOBS act – One of the key empowerments of the JOBS Act is that investors earning less than $100,000 a year can invest a maximum of $2,000 or 5% of their income, whichever is greater. If you make more than $100,000 you can invest up to 10% of your income.
Does this apply here?
Don’t think that’s in place as law yet…http://onforb.es/1aZAZK3
But, I think once it is in place there would be no reason to not just invest on your own and avoid Tim’s 20% of profits fee.
The Jobs act will flood the market with new money which means the only winners will be sites like Angelist that get a cut and the actual businesses raising the capital. Investors will invest in companies with sky high valuations because there will just be too much money in this market. Good time to be a business that needs funding though I guess, higher valuations.
Thanks for posting Tim! Are there any investing options for those of us who do not qualify for accreditation as an investor?
This is just a stupid trick to fool people that dont know anything about stocks. Here is how he does it:
* He invests money in a company before telling anyone, so lets say he buys ten shares at 100 dollar each.
* Then he tells every one to invest in that company, which unfortunatly some people will do. Lets say you follow his advice an buy also ten shares at 130 (because in the meantime the value of the shares has already started to climb).
* As more people invest, the more the price of the shares rises, to reach lets say 200 dollar few days later.
* Then finally he sells his shares for lets say 200 dollar each. So he has doubled his investment in no time.
* But then people start to think and inform themself about the company an notice that it is not worth the value its stock has reached, this is the time where the share price starts to quickly fall, because every body wants to sell its shares to reduce the losses to a minimum. Articles starts appearing saying that the stock is totally overbought and that the stock value is not proportional to the value of the company.
* When you notice that the price is falling, it is already too late and one share is only worth 70 dollar. So you sell your shares to avoid urther loses and in the end you have lost half of your investment.
So guys please think twice before giving your money to somebody that promises you that you will get rich in no time. If you really have to give him money because you dont believe me, then please only invest money that you wont need in the short time.
Steve, that is now how angel investing works. we are all investing at the same price here – Tim too. there is no market in early stage companies so the price won’t change until they get their first round of VC funding. at that point the valuation of the company goes up but it wouldn’t be uncommon for OUR shares to go down in value (at a price per share level) since we would get diluted.
so no, this isn’t a scam. Tim is very clear that this is risk capital. what’s great is that we get to invest $2500 in a startup – that was never possible before. you don’t like it? don’t invest. But I don’t think your statement is either correct nor helpful.
You are also missing the point that this is not strictly a financial investment, but a means to gain access to a Silicon Valley circle that you probably otherwise would not have the means or the proximity to reach. As Tim mentions, these deals are closing before you or I even knew they existed.
You could easily lose the $2,500 investment, yet gain an immeasurable ROI in terms of relationships, education and future-potential. Isn’t this the essence of 80/20 living?
I don’t know many start-ups that are publicly listed. You aren’t buying shares, you’re buying a percentage (which may or may not be diluted as further investment is sought). It is generally when the company goes public that you might consider winding up your investment.
So no, this is nothing like the ‘pump & dump’ you described.
Steve, your analogy seems to be referring to public company stocks. This is an angel investment. Tim and all of the other investors (including people that found it via this blog) are investing at the same valuation.
“So guys please think twice before giving your money to somebody that promises you that you will get rich in no time. ”
wow can you please point out anything REMOTELY resembling that claim in any of this post or related content?
Sheesh. How about learn to read or something and then work towards investment guru from there.
Unfortunately a very small percentage of Americans fit the “accredited investor” label. Hopefully the SEC lifts the income requirements, or at least lowers them to open access to a larger pool of potential investors.
Actually (unfortunately) the SEC is considering raising the income and net worth requirements to be accredited.
The SEC effectively raised the net worth requirements in 2011 by requiring investors to exclude the value of their primary residence.
However, the SEC will also finalize non-accredited crowdfunding rules in mid-to-late 2014. But that will be a new offering exemption with a new set of rules, including severe limits of how much risk (amount) an investor may take.
I do fear, the increased regulations will cause a cascading negative selection bias:
* Great startups will only take smart money (value-add VC/Angel money). * Good startups will take 506(b) accredited money (private).
* Mediocre startups will take 506(c) accredited money (public).
* Poor startups will take non-accredited money (yet to be finalized rules).
That said, Angel List syndicates and backers are awesome new features that will revolutionize the Angel/VC funding ecosystem.
This would be good if I wasn’t starting out (barely) myself. But the presence of possibility keeps me keen and pushing forwards.
I’d love to dip my toes into Tesla Motors.
I would be curious to know what percentage of Tim’s readers would qualify for Accredited Investor.
bummed I dont qualify as an accredited investor
If I had $2500 or more to play with, I certainly would in this case – I hope to be in that kind of position in the future. That said, I am glad I read this post since I’m currently in the process of raising money from friends and family to cover the costs of developing apps (also something I’ve only gotten into by being a long-term reader of your blog), and I’ve decided to use your post as a guideline for the e-mail I’ll be sending out (the disclaimers and “Before I tell you…” sections were an eye opener – investing should be looked at as gambling, no matter how cautious you are)
On a totally different note, I just wanted to say thanks for the free 4HC audiobook, which was convenient to listen to in the car / on my iPod. As a result, I’ve been going back to the hardcopy and actually implementing things (I own 2 hardcopies, signed by the Master himself). For example, my girlfriend and I were so impressed by the taste of the “Sexy Ribeye” that this will be part of our weekly dinner repertoire.
I totally support the elimination of the ban on general solicitation. Presumably you filed your form D 15 days ago regarding this post. Beware of the pitfalls in the new regulations here.
Advanced Form D is still in the proposed rules that are not yet in effect (comment period ended today); along with the solicitation material filing requirements and the Form D penalties and statutory disclaimers/legends. Hopefully these rules will be amended before coming into effect.
Presently the only added requirement of 506(c) versus 506(b) are the higher verification requirements of investor accreditation status (which Angel List will handle).
Verify my comments with your securities attorney of course.
Interesting offer, but I guess it’s only for limited number of people, who satisfy the income / available capital requirement. Investing in start-ups at such early stage is extremely risky… so think twice. But this may work for some…
In my view taking $2500 to test a small lifestyle business idea you have would be a much better investment, if not financially it would at least provide experience of creating something and would be a good learning.
Dang, the “accredited investor” guidelines are a bit of a bummer. I’m close, maybe next year. But if someone wants to throw $2500 at a project, why not let them? (I suppose that’s why they say the rich get richer, eh?)
Shyp guys, if you’re listening, would love to work with you on some level … we could do some fun marketing things. 🙂
We’re listening 🙂
feel free to ping us. founders at shyp dot ocm
Any chances for non-US based interested parties?
Chile or Netherlands ?
Hit me up please.
Non-US investors can participate in accredited investments, and can join Angel List, but they still must meet the U.S. SEC Accredited Investor standard (Rule 502).
A startup would have to use a different exemption (Regulation S) to offer securities to *only* non-US investors without the Rule 502 requirement; which generally they will not do.
I love the photo captioned “I’m inviting you to join me”, showing you holding a huge knife. Nice branding choice there.
So Tim, is this kind of like picking you to manage my stocks only all of the stocks you pick would actually be investments in startups? So what is your historical rate of return on all the startups you have invested in?
Seems like it would be relevant to mention that you’re also an investor in AngelList as that definitely has some bearing.
Gee, too bad this is only open for accredited investors. Can’t they change the law on that point as well? I mean if you trust Tim Ferriss and want to invest with him, why run into a hurdle?
there are proposals to change this law, but it is still in discussion
I am actually more curious about how they will handle bulky items that tend to be so darn expensive to deliver. If they can negotiate rates to a point where you can compete with Amazon and big box on shipping, this could blow up as a company and be a great boon to small business selling online. Can you add your own branding to the box? What type of discounts can we expect from either heavy or oversized items? Do you have significant dim waivers for example?
Hi Chris. Whilst we are starting with consumers first, we are actively considering the shipping needs of small businesses. You raise some interesting points (such as businesses wanting branding on boxes) and we will definitely consider these as we expand. – Jack (cofounder at Shyp)
Thanks Jack. Again, the bulk/heavy item shipping is where there really is a huge need right now as it is under-utilized. Let me know if you want to talk about a lot of the things me and customers deal with shipping wise…
appreciate your input Chris. Where about’s are you based? It’d be great if you could ping me at jack at shyp dot com would be cool to chat.
I will ping you! I am based in Honolulu (It’s own issues shipping wise… thank you Jones Act) but have customers all over the US and in British Columbia as well.
Tim. I am overjoyed.
Have applied to be part of your ongoing syndicates.
Have wanted this opportunity for a long long time.
In my view, this is the biggest positive legal development that has happened in my lifetime.
I’m super excited to see you promoting the opening up (legalizing) of fundraising. I just joined AngelList—Thanks Tim!
This is exceedingly generous and sportsmanlike of you, Tim! Shyp is also addressing an interesting problem in the marketplace.
As an entrepreneur looking to break even, I am unable to invest such a large amount in Shyp. But I wish you and the Shyp Team the very best! Keep us posted on the Shyp story.
Remember what Tim’s blog was like? Cool. What is this posting like now?
A pitch to get in on Amway products.
Hoping for the return of diet, exercise, languages, and cooking.
Missed getting in on the first round, but I’ve always wanted to help get some innovative startups rolling.
Thanks for not only posting the news about the change in regulations, but taking the step to make something happen. I’ll be looking for my opportunity to jump in and play angel. In the meantime, retweeted.
Also, wish someone had told me about my promotion to president of Paypal.
Nice idea. It will take a small miracle to succeed in this space, but I am sure somebody will do it.
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.
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.
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?
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.
Really unfair there is an income requirement to invest.
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
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
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
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.
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.
Team Producer is the minority – as are we the rich.
Team Consumer is the majority – as are the poor.
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.
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.
Ah, I was so excited to give this a go but then I read the “Accredited Investors” definition. Such a pity.
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.
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;”
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.
You hit the nail on the head. An Angel Investing Co-op.
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.
$1000 makes investing much more realistic for those stuck in the middle class.
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?
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.
It seems a company like Shyp would be easily poised for acquisition from an Amazon.com if that’s the direction they would like to go.
Assuming they are successful.
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?!
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.
This is great! Just some more work before I can get accredited!
Tim, can you please confirm that you’ve finished raising the $225k already? The site says “they’re no longer accepting online investments”… Thx!
correct. It got taken within 53 minutes of the blog post going up.
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 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 ?
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.
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.
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!
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?
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.”
It’s amazing how far you have come.
Did you start off your entrepreneurial journey with direct sales?
Best wishes for you but angels ain’t real you know. Watch you back with the capitalist.
This is the start of a new world for startup funding…
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!!!
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?
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!
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.
oh man – I hope it comes to Australia – I hate leaving the house to go to the post office #introvertproblems
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.
What quarterly package are you referring to?
Thanks for giving us the heads up about Shyp, we could do with a service like this here in the UK.
Angel List seems to give greater opportunities to investor looking to secure on recommendations startups. Came to know about angel list from your post.
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.
Great opportunity for investing for those that qualify……thanks.
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.
Good luck, Tim!
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.
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.
Sent from my iPhone
how i would be lucky if i get the chance to talk to you!
How do I invest in your selected start ups
This post definitely needs a little updating, Tim. Wouldn’t you say??
Things haven’t gone as expected for Shyp. Being forced to suspend operations in Chicago, Los Angeles, and New York, and reduce headcount at headquarters.
I’m sure you’re glad with the CEO’s decision but what else can you say about the performance of this start-up and what you’ve invested in it?