How To Invest In Startups


This post is by Sam Altman from Sam Altman


There is a lot of advice about how to be a good startup founder.  But there isn’t very much about how to be a good startup investor.

Before going any further, I should point out that this is a particularly hard time to invest in startups—it’s easier right now to be a capital-taker than a capital-giver.  It seems that more people want to be investors than founders, and that there’s an apparent never-ending flow of capital looking for access to startups.

The law of supply and demand has done its thing.   Valuations have risen, and the best investment opportunities are flooded with interest.  As a friend of mine recently observed, “it’s much easier to get LPs to give you money for your seed fund than it is to get a meaningful allocation in a ‘hot deal’”.

That said, to do well as an investor, you need to do three things: get access to good investment opportunities, make good decisions about what to invest in, and get the companies you want to invest in to choose you as an investor.  That’s it! You can often help the companies you invest in become bigger than they otherwise would have been, but the sad reality is that your best investments will do quite well without you.

Access

Getting access to investment opportunities is the easiest of the three categories: you can just work hard.  It’s surprising that most investors don’t work hard, but it’s true, and a bug that you can exploit.

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