Indie Hackers Investors December 15, 2020

Early Signs Of A Billion Dollar Company - Elad Gil (Key Points)

Richard Awoyemi @RichAwo

Originally posted at: thestartup.substack.com
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What got me thinking:
🎙 | Early Signs Of A Billion Dollar Company - Elad Gil

Recently, I’ve written my first angel investments into early-stage companies (with a few more in the process). But, I also have to say “no” regularly, even though most ideas are great. With such a risky industry, the question is, what makes a good investor?

Elad Gil is one of the most renown angel investors around. His portfolio includes Airbnb, Airtable, Anduril, Brex, Checkr, Coinbase, Flexport, Gitlab, Gusto, Instacart, Opendoor, PagerDuty, Pinterest, Samsara, Square, Stripe, and Wish. He recently sat down on NFX and discussed how he spots companies before they’re worth billions. Here are four key points.

1. Colossal markets are more important than you think. Teams do matter a lot, but that’s probably the wrong emphasis. If the demands too small, even the best founder will fail to meet their aspirations. If the market is large enough, then even a mediocre founder can succeed.

Small piece of big pie > Big piece of a little pie

2. Companies that innovate early and get to a second product line tend to innovate frequently. Like most things, innovation takes practice. It’s a muscle that needs working out. If you do it early, when operations are small, you’ll likely do it again. If you leave it late, you’ll struggle to do repeatedly as operations scale.

3. Every startup needs a single miracle. Any less would make for an overcrowded market - because it would be too easy to enter. Any more would require “cascading miracles” (ref. John Malone) to succeed. The compounded the difficulty, reduces the slim chance of success from low to virtually zero.

4. Balance a fair valuation and expert board members. Early board seats within the company matter. Board members can even vote to remove the founders. So make sure you bring people on board who you can work with for at least ten years. They’re as significant as early employees. You also want to make sure one or two of them has growth stage expertise. The skills needed initially differ to those required when scaling, acquiring companies and expanding geographically.


Final Thoughts

Investing is an area full of tried and tested principles. I’ve spoken to veterans who’ve wasted money trying to rewrite these principles only to lose money. This list is not exhaustive, and there’s some room for different bespoke thesis. However, study these principles and others, that will allow you to spot outliers.


Yes - I’m The Plug 🔌

Last week, I built this No Code Resource. It’s continued to grow, so check it out.

This week, I’ve found the Side Hustle Stack. If you’re looking for some extra income in 2021, here’s a great place to start.

Merry Christmas 🎅


Do you see what I see? 🗞👀

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Morning Brew is one of the most successful newsletters to hit the scene. They did so well that Insider Inc. purchased a majority stake at a $75 million valuation (someone should tell them to buy mine 😅). However, their initial growth was through 5-minute university lectures - and manually adding emails. Paul Graham’s startup advice is still relevant, “Do things that don’t scale”.

📈 From Rugs To Riches | Doordash Investor Turned $1.9mil into $440mil

The recent IPOs are providing jaw-dropping returns to many early investors. In this case, Mar Hershenson and Pejman Nozad (former rug dealer turned investor) made a killing. Their initial Doordash investment is up circa 1000x. However, their blended position through follow-ups has them up 233x overall.

🐦 Twitter Purchases Squad | From Tweets To Virtual Hangouts

Squad is an app that lets you hang out with your friends via video chat and screen-sharing. We’ve already seen Twitter mention their shift towards fleets and spaces, so this acquisition is less alarming. But will this be enough for them to compete with Clubhouse?


Thanks for reading!

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