How to Be an Angel Investor

Paul Graham’s essay How to Be an Angel Investor demystifies angel investing for those considering this path.

Mechanics Are Simple

Deal structures matter far less than founders think. “When you hear people talking about a successful angel investor, they’re not saying ‘He got a 4x liquidation preference.’ They’re saying ‘He invested in Google.’”

Picking Winners is Paramount

The critical skill is identifying strong startups before they’re obviously successful. This requires judging founder quality before validation exists.

People Over Markets

Bet on “relentlessly resourceful” founders who can adapt. Good founders discover good markets; the correlation is strong.

Deal Flow Through Relationships

Startups are found through personal referrals. Becoming a known, reliable investor creates an expanding pipeline.

Practical Advice

• Start with small investments ($10k-$50k)
• Use standard legal templates
• Commit or decline decisively—avoid stringing founders along
• Help broadly and trust reciprocal goodwill

My Takeaway

Success comes from company selection, not negotiation tactics. “It’s too much overhead” to track favors.

Have you considered angel investing? I’d love to hear at persdre@gmail.com.