Why Angel Investors Don't Make Money ? And Advice For People ...

Editor?s note:?Andy Rachleff is President and CEO of Wealthfront, an SEC-registered online financial advisor. He serves as a member of the board of trustees and vice chairman of the endowment investment committee for University of Pennsylvania and as a member of the faculty at Stanford Graduate School of Business, where he teaches courses on technology entrepreneurship.?Prior to Wealthfront, Andy co-founded and was general partner of Benchmark Capital.

Everywhere I go in Silicon Valley I hear people discussing their angel investments. The conversations remind me of fish stories. People love recounting the one time they caught a big fish, not the many futile hours they spent waiting for a bite.

My skeptical perspective on angel investing is colored by my 25 years in the venture capital business and the data I use to teach my students at the Stanford Graduate School of Business.

I know that many of our clients at?Wealthfront?are tempted to become angel investors after they sell their company stock post-IPO. It?s not that I think becoming an angel is a bad idea; it?s just that most people who expect to make money as angel investors are fooling themselves.

To understand why I think this way, bear with me for a few paragraphs about what makes venture capital firms successful. There aren?t many successful firms, as this Kauffman Foundation?research?makes clear. Cambridge Associates, an advisor to institutions that invest in venture capital, says that only about 20 firms ? or about 3 percent of the universe of venture capital firms ??generate 95 percent of the industry?s returns, and the composition of the top 3 percent doesn?t change very much over time.

Those premier venture firms succeed because they have proprietary knowledge of the characteristics of winning companies. Over the years, the knowledge of what it takes to succeed is passed down from partner to partner and becomes part of the firms? institutional memory. (In a professional setting, it?s not the failures that teach people the most, but the successes. Failures teach us a lot personally, but that?s a different story.)

The premier venture capital firms know the best investments have high technical risk and low market risk. Market risk causes companies to fail. In other words, you want companies that are highly likely to succeed if they can really deliver what they say they will. Unfortunately, consumer Internet companies don?t follow that pattern. They usually have low technical risk and high market risk. There is very little chance they can?t deliver their product. The big issue is whether the startup?s product is of value to a large enough audience.

Most people see angels as taking market share from venture capitalists. I think that is the wrong perspective: The premier venture capital firms have consciously outsourced consumer Internet companies? bad market risk onto the angels, maintaining their returns as a result.

How low are returns for angels? I don?t know of good statistics on returns for angels who invest in tech companies, but I can deduce returns from what I know about the venture capital business. As explained in the Kauffman Foundation?research, the?overall?return for the venture capital industry has been quite poor (the average VC fund barely returned investor capital after fees). According to an annual seed financing survey by Fenwick & West, only 45 percent of companies that received seed financing in 2010 went on to raise venture financing in the next 18 months. Twelve percent were acquired, but likely in talent acquisitions that lost money for the angels.

If the average VC fund barely makes money, and seed investments represent even less compelling opportunities than the ones pursued by venture capital firms, then the typical return for angels must be atrocious. Even Ron Conway?s second angel fund, which had the good fortune to invest in Google (a 400x cost winner), only broke even (that means close to a 0 percent IRR)!

I know some of you are thinking you?ll be the exception to the rule. Maybe, but if so, it won?t be because you?ve been a great executive at a startup. My teaching partner at Stanford, Mark Leslie, the founding CEO of Veritas Software and a successful angel investor, tells me I would have been a better venture capitalist if I had been CEO of Wealthfront first, and a venture capitalist second, instead of the other way around. I tell him absolutely not. Running a company has not improved my investing skills, which are completely unrelated to being a good leader and strategist. Unfortunately, many entrepreneurs do not understand that being a good executive has nothing to do with being able to pick companies likely to succeed on the large scale needed to generate a good investment return.

My conclusion is that unless you are Andy Bechtolsheim, legendary founder of Sun Microsystems, Granite Systems and Arista Networks, and can have the pick of the best technical founders in the Valley, or you are a member of the Paypal Mafia, you should not be an angel investor. A few elites have a chance of making money. The rest of you are in for pretty dismal results.

I know that most of you are going to ignore my advice. If you do, and decide to make angel investments, here are a few tips:

1. Assume you are going to lose all your money. Treat success as a complete surprise. Successful venture capital firms generate approximately 80 percent of their returns from less than 20 percent of their investments. The chances are high your angel investments will be losing bets.
2. Don?t do it unless you are worth at least $1 million or earn at least $200,000 per year. The SEC requires these minimums for angel investors because it is the minimum regulators believe is necessary for an individual to withstand the loss of the investment.
3. Take a portfolio approach. Whenever you invest in a risky asset class like startups, movies or new artists, you need to have a portfolio, because the law of small numbers will likely lead to a complete loss on your investments.? Remember talent acquisitions, which represent the vast majority of successful angel investments, usually result in a loss for the investors. Try to build a portfolio of at least 15 companies.
4. Limit the size of your angel portfolio to 10 percent of your investible assets. Even sophisticated institutions that have the financial wherewithal to take significant risk and have access to the premier venture funds tend to allocate no more than 5 percent to 10 percent of their portfolios to venture capital. You don?t have the staying power or the financial expertise of these endowments, so try to limit the size of your overall bet.

Perhaps the best angel investment you could make is choosing the right company to work for. The value of the options associated with a successful company will swamp the return on any angel investment you?re likely to make, even if you do happen to have a success.

In case you?re interested, I make one or two angel investments each year, but I don?t do it to make money. If I wanted to make money on those investments then I would want the benefit of the counsel of my former partners at Benchmark Capital, because I know it is too hard to make such high-risk investments on my own.

I make those few angel investments because I want to help my best students achieve their goals, and because I like being involved in startups. That?s the ultimate lesson from the fish stories in Silicon Valley. True fishermen cast their lines not because they want the fish, but because they like fishing. It?s fine to be an angel investor ? just don?t do it for the money.

Wealthfront is an online financial advisor that manages your investments for you so you can live your life. An SEC registered investment adviser, Wealthfront provides sophisticated investment advice at 75% lower fees than typical financial advisors. The company?s investors include Marc Andreessen, Jeff Jordan, DAG Ventures, and retired partners from Benchmark Capital and Kleiner, Perkins, Caufield & Byers. We?re located on Forest Avenue in Palo Alto, halfway between San Francisco and San Jose, minutes away from Caltrain.

? Learn more

Source: http://techcrunch.com/2012/09/30/why-angel-investors-dont-make-money-and-advice-for-people-who-are-going-to-become-angels-anyway/

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Iranian news agency picks up Onion article as fact

CHICAGO (AP) ? A joke by the satirical newspaper The Onion appears to have gotten lost in translation.

An Iranian news agency picked up ? as fact ? a story from the paper about a supposed survey showing an overwhelming majority of rural white Americans would rather vote for Iranian President Mahmoud Ahmadinejad than President Barack Obama. But it was made up, like everything in the just-for-laughs newspaper, which is headquartered in Chicago.

The English-language service of Iran's semiofficial Fars news agency republished the story Friday, several days after it appeared in The Onion.

The Iranian version copied the original word-for-word, even including a made-up quote from a fictional West Virginia resident who says he'd rather go to a baseball game with Ahmadinejad because "he takes national defense seriously, and he'd never let some gay protesters tell him how to run his country like Obama does."

Homosexual acts are punishable by death in Iran, and Ahmadinejad famously said during a 2007 appearance at Columbia University that "in Iran we don't have homosexuals like in your country."

The Iranian version of the article leaves out only The Onion's description of Ahmadinejad as "a man who has repeatedly denied the Holocaust and has had numerous political prisoners executed."

The article was featured prominently on the Fars website alongside its usual fare of stories about advances in Iranian military technology, condemnation of Israel and Iran's nuclear program. The story appeared to have been taken down by about mid-day, Chicago time.

Calls to Fars representatives were not answered Friday.

The Onion reveled in the fact that it had been taken seriously.

Onion editor Will Tracy put out a tongue-in-cheek statement that referred to Fars as "a subsidiary of The Onion" that has acted as the paper's Middle Eastern bureau since it was founded in the mid-1980s by Onion publisher T. Herman Zweibel.

"The Onion freely shares content with Fars and commends the journalists at Iran's Finest News Source on their superb reportage," Tracy said in jest.

It's not the first time a foreign news outlet has been duped by The Onion. In 2002, the Beijing Evening News, one of the Chinese capital's biggest newspapers, picked up a story from The Onion that claimed members of Congress were threatening to leave Washington unless the building underwent a makeover that included more bathrooms and a retractable dome.

Source: http://news.yahoo.com/iranian-news-agency-picks-onion-article-fact-170925534.html

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RPOF's former director: 'Presumed' prostitutes attended GOP fundraiser

Delmar Johnson, the state's star witness in the fraud and theft trial of former Florida Republican Chairman Jim Greer, told attorneys in a sworn statement that he saw a golf cart full of women ? he presumed they were prostitutes ? at a party fund-raiser in the Bahamas in 2008.

Johnson, 33, of Winter Garden, gave a video-recorded deposition June 15 in the criminal case against Greer, the ousted party chairman now awaiting trial on theft and fraud charges. The Orlando Sentinel obtained a copy Friday.

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http://www.sun-sentinel.com/sports/highschool/football/broward/fl-brow-top-ten-0929-20120929,0,848148.story

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Johnson described Greer as "dictatorial" and said Greer blind-sided him in early 2009 when he proposed creating Victory Strategies LLC, the company that prosecutors say Greer and Johnson used to steal money from the state party.

Greer says he did nothing illegal and that the company earned legitimate fund-raising commissions. Prosecutors say he set it up in secret and used it to funnel $125,000 of party money into his personal bank accounts.

In his deposition, Johnson said Greer insisted that there be no paper records tying him to the company. They were largely successful, Johnson said, except that the party's chief financial officer, Richard Swarttz, came to suspect Greer was behind Victory.

Still, Johnson said, Swarttz paid Victory's invoices without question. "Nobody questioned the chairman," Johnson said.

Johnson's most dramatic revelation was about a party fund-raiser in the Bahamas in 2008. In attendance were major party donors and prominent Florida Republicans, he said.

"I specifically saw a golf cart with young ladies drive by, the extent of why they were there I did not specifically know," Johnson said. "But I could presume they were prostitutes."

In his deposition, Johnson identified a handful of prominent Republicans whom he said were at the fund-raiser, including Greer and Tallahassee lobbyist Brian Ballard.

Ballard said Friday night that he was there, along with about 100 other people, and said he knew nothing about any guests spending time with prostitutes.

He called it "ridiculous and disgusting" that the people who attended had been "thrown into a scandalous lie."

Although Johnson owned a 40 percent share of Victory Strategies, he was not charged because he struck a deal with prosecutors, agreeing to testify against Greer and repay the $65,000 that he earned through Victory Strategies.

Defense attorney Damon Chase pointed out during the deposition that Johnson was the one who opened Victory Strategy's bank account, was the only one who ever submitted invoices to the party for payment, the only one who deposited the party's checks to Victory and the only one who had a key to its post office box.

Johnson said he did those things at Greer's direction.

Greer, 50, of Oviedo, is charged with four counts of theft plus fraud and money laundering.

rstutzman@tribune.com or 407-650-6394.

Source: http://feedproxy.google.com/~r/orlandosentinel/news/~3/BZZ2dDZ-vjE/os-jim-greer-delmar-depo-20120928,0,6340766.story

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Daytrading, Stock Trading, Investing and Forex Trading ...

There are numerous opportunities to be had with stock option daytrading it can be a good way to earn some additional money if you're following the right methods and trading pointers. You've probably heard varied opinions about stock option daytrading that leave you pondering if it is a great idea or not, and a few of the people will even tell you it's a bad form to get yourself concerned in. While others will make it obvious that securities dealing is the ideal way to make a return on your investments. The most important factor to figure out your success is whether you've got the right coaching and systems to help your stock trades be profit-making. To find success with your career in daytrading remember that you're also going to want to contemplate how much you can invest. The more constantly and consistently you can work, even if you're only able to give a few hours each week, the more sorted you will be. One of the most vital rules about daytrading is that you will need to understand how much you stand to benefit and how much you stand to lose at the close of the day. Too many folks know how much they stand to benefit, but then they don't weigh that against what they stand to lose.

But because a day trader recognizes that wildly oscillating industrial info and also fooling information which will ultimately become public data will create the V word ( which is generally Adored by day traders ) VOLATILITY Volatility, to the average, each day financier is an exceedingly bad thing, and creates big risk, and most likely leads to great losses. There are that many reasons that you must pause and consider what type of losses and wins that you may take, but the most vital thing to recollect is you will need a clear view of what your options will be. Standard , buy-and-hold speculators like nice smooth, slow, steady ( upward ) movement. Volatility to a normal financier can be particularly straining psychologically, and regularly leads to the sickening phenomenon among long term speculators of ?buy high, sell low? ( which is, naturally, extraordinarily opposite of what the goal is ). ) You like the concept of trading a fashion that has the highest possible cost ( commissions, spread paid, needed set-up and technology, investment in ?learning how? ) and lowest possible margins ( money ? costs ). Fluctuating ) markets represent?IF they know what they are doing.

Please consider : You don't earn money in this game by emulating what everybody else thinks, by jumping onto the next hot indicator that other traders are talking about, or by attempting to prove how smart you are to the market by being a ?high frequency? retail trader. ( Do all of your trading mates gloat about ?scalping? the market? Hard luck for them, don't make the very same gaffe. ) At one time traders HAD to pay tons to trade because all commissions were high. Today, many traders Opt to pay through the nose in commissions by selecting to be, ?highly active day traders?.

This made short-term trading not too much better than a bet at a casino. Hyperactive daytrading is a concept promoted by brokers as it pulls the most possible cash out of your account and places it in their income stream.

Source: http://traders101.com/2012/09/28/daytrading-daytrading-2/

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Google's Field Trip app pops up location-relevant info

Google's Niantic Labs have pushed out a new app called Field Trip, which simply pops up location-specific information cards as you wander or drive around town. It's vaguely Google Nowish in its predictions, and provides several channels of content, such as historic places and events, lifestyle, food and drink, cool and unique places, and plenty more. There's plenty of control over how many and what kind of notifications you get for this app through its various settings, so no worries about getting too annoyed with the app or having your battery drained into nothingness. Information can also be relayed over audio if you have a Bluetooth or wired headset plugged in. Content partners include big names like the Food Network, Zagat, Cool Hunting, and plenty of others. 

Unfortunately, Field Trip is currently only available in the U.S., but it still looks pretty awesome. I'd love to see something similar that uses voice instead, so you could leave your phone on the table during a conversation and have relevent Wikipedia articles pop up automatically as you talk. It's always weird spending the minute or two looking stuff up only to find the conversation has drifted somewhere else entirely. 

Anyway, it looks pretty sweet, and it's free to boot. iOS users will be able to get in on the fun shortly too. I hear they're having trouble getting around these days. 

Source: http://feedproxy.google.com/~r/androidcentral/~3/XlzYyj6c2U4/story01.htm

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What's Facebook's New Real Estate Investment Deal? ? CT Homes ...

Facebook recently announced a sizable new investment in California real estate. What is it, is it a good move and what other opportunities are evolving for real estate investors?

Facebook?s New Real Estate Bet

Zuckerberg recently proclaimed he was ready to make some ?big bets?. One of them appears to be a major expansion of the social networks offices in Menlo Park, CA. The massive complex is being designed by the legendary Frank Gehry and boasts an expansive hanger like 10 acre open working area heralded as the ?largest open floor plan in the world?.

So beyond the cool design, is this really a smart move given the current stock situation and will the show end up killing productivity at the tech giant causing it to lose even more of its edge?

It is certainly a fantastic time to buy California real estate, especially with interest rates so low however many question whether this is the only smart thing about the plans. You?d think Facebook was still the last brand who needed to stoop to Hollywood antics in order to stay in the news. Building the tallest condo or office building or even selling the most expensive one is one thing but there are real business operations to be kept in mind here.

Many are concerned that the vastnesses of the open space could easily kill productivity and creativity and ultimately the stock, especially after plowing so much money into the new building and taking on more overhead. Yes, having mini kitchens throughout, treadmill desks, a roof top walking trail and encouraging more interaction between staff sounds good but it is going to take some amazing design skill to be able to keep real working going on. Before you think about opening a real estate office like this think about the noise, lack of focus, germs, privacy and stress. Tech firms like Facebook can?t afford high turnover or to slip for even a month.

Facebook?s Opportunities for Real Estate Professionals

Mobile aside and not mentioning the fact that Apple left out further integration on the new iPhone 5, Facebook also seems like it may be losing serious ground to Google as Google+ racks up 400 million plus serious business users and Facebook slashes user numbers due to fake accounts.

Zuckerberg did allude to the social network pursuing search marketing as a channel which could be interesting but will face serious competition. However, many will be surprised if the Zuck is still at the head of the table next year. Right now he?s a sitting duck, a scapegoat whose firing can save Facebook from bankruptcy when current plans don?t go right, but if there is one thing the he is slick about it is control.

Real Estate Education from Facebook

While this is a great time for buying California real estate you have to imagine flipping real estate like this has to be a little more challenging given the numbers and niche.

Maybe the original house is a hotter flipping item? What other soon to be billionaire entrepreneurs? inspiring first digs are up for grabs and can be flipped for great profit with a good story?

This entry was posted on Friday, September 28th, 2012 at 2:00 pm and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

Source: http://www.cthomesllc.com/2012/09/whats-facebooks-new-real-estate-investment-deal/

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Jay-Z: Bringing Nets to Brooklyn an American dream

NEW YORK (AP) ? Jay-Z has accomplished a lot in his career, but his latest feat has him feeling that like he's living the American dream.

The 42-year-old music mogul and entrepreneur says when he was a poor kid in the New York City borough of Brooklyn, he never imagined that he'd someday own a basketball team. Now Jay is part owner of the Brooklyn Nets and instrumental in moving the franchise from New Jersey.

He feels his rags-to-riches story embodies all that is possible in America.

"Yeah I think I'm the American dream," Jay-Z said. "That whole thing that you could come here and pull yourself up by the bootstraps, like that whole thing what America has always put up to the world that we represent. I feel that. Yes, I've lived that."

Jay-Z made the comments at the launch party for the upcoming NBA 2K13 video game, where he acted as the game's executive producer.

As a child, he says, he dreamed of glory on the basketball court.

"You know the three-two-one, oh, he hits the winning shot," Jay-Z said. "But no one was ever on the court saying I was gonna own the Knicks. Yes, it's way beyond any of my wildest dreams."

Now as part owner of the Nets, he's even designed the team's black and white logo. Brooklyn has not had a professional sports team since the Brooklyn Dodgers left for Los Angeles after the 1957 baseball season.

Rapper Bow Wow, who appears in the video game, says he's always looked up to Jay-Z, but the move to bring the Nets to Brooklyn immortalizes him.

"I think that's the biggest inspirational thing for any kid growing up in any ghetto and any suburb, and you can do whatever you want to do as long as you put your mind to it. That's a great man to follow, right there," Bow Wow said.

As for his success with music, fashion with his brand Rocawear and now a video game, Jay says his creativity is all over the place.

"When you're an artist, you can see greatness in all things, and you say, man, I wonder if I can try and tinker with that and maybe if we put the music into (NBA)2K and bring those two cultures" together, Jay Z-said. They "were cousins already, so why not bring the family together and let them sit at the same table?"

The Brooklyn Nets will play in the newly built Barclays Center. But before his new team takes the court for the first time, the rapper will christen the new arena with an eight-show run beginning Friday.

___

John Carucci covers entertainment for The Associated Press. Follow him at http://www.twitter.com/jcarucci_ap

Source: http://news.yahoo.com/jay-z-bringing-nets-brooklyn-american-dream-054712915.html

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