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Finding “Unicorns:” Questions to Ask Before You Invest in a Startup

Many people ask me about startup investing and how to get started.   This post — while for informational purposes only and not investment advice — is intended to show you how one successful investor approached the early-stage game. Jason Calacanis (@jason) has made 125 early-stage startup investments and picked 6 “unicorns” (startups to exceed $1B in valuation) — one out of every 21. Based on his AngelList profile, Calacanis’ investments includes: Tumblr, Cozy, Thumbtack, Rapportive, Uber, Chartbeat, Groundcrew, Evernote,, Nimble, Crossfader, Signpost, Calm, many many more. He’s accelerating his deployment of capital and plans to invest in an additional 150 startups over the next 30 months. The following guest post is an exclusive excerpt from his new book, Angel: How to Invest in Technology Startups—Timeless Advice from an Angel Investor Who Turned $100,000 into $100,000,000. Using stories from his own angel investing career, Jason wrote this book as a playbook for aspiring angel investors. In particular, this post focuses on questions to ask founders before you invest, but it also serves as a tutorial on how to ask better questions in life and in business. Enter Jason A THOUSAND FIRST DATES The life of an angel is all about managing a deal funnel, which includes three distinct steps: sourcing deals, evaluating deals, and, finally, picking which founders you’re going to fund. Meeting with founders for an hour is the most frequent technique for angels to decide who to invest in, but certainly not the only one. There are some angels whose primary technique for selecting investments is to follow other smart investors, drafting off of their meetings and deal flow. Another technique is simply to review the core metrics and decide based on those. This can be done by reviewing a deck or by checking public information sources, like the App Store rankings, and traffic monitoring services, like Alexa and Quantcast. Some investors have a huge Rolodex and simply invest in the founders they already know, a technique that worked extremely well for investors who knew Elon Musk (Zip2 and PayPal before Tesla and SpaceX), Evan Williams (Blogger…

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