Pre-IPO Profits

The Truth About Investment Sizes

The Truth About Investment Sizes
By Adam Sharp
Date December 1, 2020

I’ve made well over 100 startup investments since 2014. Looking back, there are some mistakes I made early on that I wish I had avoided. One big one is I would get way too excited about some of the startups. I invested too much in my first 10 deals because I was so excited. But I had a limited pool of capital that I was investing from. Those large early investments meant that my next 40 investments were much smaller — which limited the returns that I might see.

I invest smarter now and try to make all of my investments a standard size. The primary reason is simple: It’s very difficult to predict which investments will be successful early on. 

Some of the deals I’ve been most excited about have turned out to be losers — and vice versa. By sticking to a standard investment size, I can limit my own biases as I invest. And spreading my investments out evenly gives me the opportunity to invest in more companies than I would if I sunk large amounts into the startups I’m most excited about. 

So my advice to new startup investors is to try to invest a (relatively) standard amount in each deal — no matter how exciting it seems at the time. Of course, it can be tricky when different syndicate deals have different minimum investments. But in general, try to make similar-sized investments in each startup.

There’s nothing more frustrating than seeing a deal go up in value 80x — and you only invested $1,000.

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