Scott Adams is wrong. There are angel investors who invest in unproven companies, even at the concept stage. I'm one of them, and I prefer to invest in people. There are people who I'd invest in before even knowing what their companies plan to do.
No, investing in people is extremely common in the business world. Some would argue in fact that it is the exception to invest in anything other than the people first (and the business / idea / product after that).
A lot of what gets done in business, including investing, is who you know, reputation etc.
That's how many great investment networks function in fact. That's a premise of investing into people first. If you want to get close to Ron Conway, you can't get near him without having a connection that basically vouches for you. That's all about investing into people and reputation extension.
Is this post about angle investing, or about misperceptions of sexism?
There are probably as many definitions of angel investor as there are angel investment deals. I think he was trying to make a point about modern gender relations.
I have never invested in a friend, and I doubt I will. I have invested in capable people of whom I'd known for a while but were barely acquaintances. Friendship is separate.
So just like any other post on hacker news by someone with a product?
The "my experiences with product X as diving board for tangential point" is probably one of the less annoying positions on a scale that runs all the way from "pitching hard" to "cleverly designed to disguise relationship to the product."
Don't get me wrong, a lot of them are incredibly gross to witness, but to me this one barely registers.
You are, obviously. But isn't that the way tons of founders market their start-ups? That is, write blog posts, loosely (or slyly) related to the whatever product or company they are running?
I'm still not sure Scott Adams knows what an angel investor is. That, or I don't!
As I understand it, the real difference between angels and VCs is that angels invest without locking down a valuation, and angels invest without demanding control. A VC round comes with a firm valuation and with a board seat.
Angels sometimes invest in priced rounds. Convertible notes are a newer thing, and not yet 100% universal.
The biggest difference, traditionally, is that angels invest their own money or that of buddies, and that VCs invest the money of LPs. This is a little weirder these days, as there are super-angels/micro-VCs/whatever-their-business-card-says where that starts to become a distinction without a difference.
That's the difference that I think about re angel vs. VC.
I think that outside of SV, this distinction is more valid, as the hybrid "we're a VC that wants to look/act like an angel" isn't as prevalent. Probably because the trend towards angels isn't as pervasive outside of SV. But I'm not really up-to-date on the inner workings of raising capital, so I could be wrong.
The best way I've found to separate out Angels from VCs, given the extreme variety of definitions, is: an Angel is an individual doing the investing, in broad terms they're acting as their own vehicle even if they're incorporated; VCs operate as a firm, a company or unit of multiple venture capitalists that represent a brand and many of those individuals may come and go while the brand continues on without them. The Angel represents their own specific interests. The VC represents the interests of their firm.
There's a few points which sound right in this essay, but I'm surprised he didn't discuss the more technical definition and its impact on the ecosystem:
1) an angel investor is someone who invests their own money
2) a venture capitalist invests out of a fund, which is mostly other peoples' money (OPM!) while taking a fee + economics from the fund (the famous "2 and 20" model)
But that's not too useful, because what's important are the behaviors that come out of the situation.
Because most angels are investing their own money, they usually don't have crazy amounts of capital to work with. Thus, they usually invest early so they can get a better percentage at a lower valuation.
Many VCs also invest early, sometimes exclusively so with smaller funds, but they are often called "seed funds" to make that distinction. A fund which invests OPM is never called an "angel" regardless of what stage they invest at.
And finally, big funds (managing 100s of millions of dollars) are what we think of usually as venture capital.
(Funds that invest even larger amounts at higher valuations are often referred to as "late stage venture capital" or "growth capital." And there's more specialized terminology later stage since more specialized financial instruments can be brought into play - SPVs/debt/mezzanine/etc)
Where Scott's essay rings true is that idea that investors of all classes are more risk averse these days- they prefer to see traction since the cost of building an app/website is rapidly decreasing. Thus, they are all behaviorally acting like "traction investors" rather than "idea investors" whereas in the past, traction investors purely consisted of the growth capital guys.
This might be worse for the ecosystem since people want you to have everything built before taking in our first dollar of investment, but you could argue it means the ecosystem's $s are being allocated more efficiently also.
"I have a degree in economics, an MBA from Berkeley, and over 30 years of business experience. Do you know what question I hear in Silicon Valley nearly every time I meet with potential investors for CalendarTree?"
I would have supposed that Scott Adams has become quite wealthy from the Dilbert strip, his many books and all the spin-off merchandise (calendars, toys, etc.). Why would he need to look for outside investors to fund his app rather than just investing his own money? And if he's not willing to risk his own money to start his new business, what message does that send to potential investors?
Investors understand risk management. It is possible he knows he needs 15MM to go for the home run, but doesn't want put in the 15MM himself and go bankrupt in the process. Investors allow him to shoot for the moon.
Also, investors help with accountability, pushing through tough spots, connections, advice, etc. Investors also add credibility that 'rich white guy throws money at project' doesn't give.
Seems like you could write a shared calendar app for way less than $15M. And it's already in beta, so a lot of the development has been done already.
I also wonder how much success he's going to get selling to enterprise customers. Any company with over 200 employees already has a calendar system (Outlook or some cloud equivalent).
Pretty sure the $15 million referred to a long-term bet, that takes years to get through the burning cash phase and into profitability.
If you hire 20 people for the first year, that's going to cost three million dollars (if you're lucky) for everything all-in, without calculating potentially high customer acquisition costs early on.
Writing the calendar app is the least expensive, least difficult and least time consuming part of building a large scale business around it.
If you wanted to go big, and had three years to do it, you could easily burn through $10 or $15 million trying to get there before generating your first quarterly profit.
Heh. That's putting it mildly. Yes, he's hedging his bets. He has some Dilbert money he doesn't want to lose in case CalendarTree tanks. This is antithetical to a typical image of an entrepreneur who goes all in, and is a fanatical believer in the success of his or her product. A cynical angel may look at his start-up from that perspective.
"If I had to guess, I'd say Silicon Valley would be among the easiest for women to penetrate"
This is not an opinion grounded in any sort of reality. Attrition for women in technical roles is nearly double that of other industries. In finance, women make up around 20% of corporate boards. Not so in tech. Not by a long shot.
This is Scott Adams saying "hey guys, here's some stuff I think but haven't really tested even a little bit."
> This is Scott Adams saying "hey guys, here's some stuff I think but haven't really tested even a little bit."
For non-regular readers: that's exactly what Scott Adams' blog is about - throwing ideas into the wild and discussing them in the comments. It's a feature, not a bug.
The problems come when people read it without knowing that, and assuming he's advocating for <issue>, while he's more of a "what do you think about this crazy thought?" kind of writer. Check this post[1] (specially the disclaimer) for an example.
That may be so, but I think it's not a little pernicious for someone with standing and reach to say "Hayyyyy, so, I'm sure everything's FINE" when everything is not at all fine. Sloppy and counterproductive.
I assume that he can't get interest in his idea because folks are dubious about the idea, but are willing to be disproven ("come back when you have some traction")
If I had to guess, I'd say Silicon Valley would be among the easiest for women to penetrate
In the average relationship, the male is 4 years older than the female. That means that women (as a group, even if their individual dating patterns differ) have a "look-ahead" insight into which careers turn out well (medicine, law) and which promise the moon but fall flat (startups, academia).
Among a group of 21-22 year-old college-senior women, at least a few have dated 24-27 year-old guys, so they know a lot more about the career landscape than the 21-year-old men, who've been dating 18- to 20-year-old women.
That's why there are no women (except for hand-picked pretty tokens) playing the VC-funded game. They have the look-ahead information, and they're smart enough to see the VC-funded "tech world" as a fraud and not get involved. It's clueless men who get in, wreck their careers, and find themselves with no other options.
Law is a terrible career these days. Talk to folks just getting out of law school about what their career prospects are like, don't talk to folks who are lawyers. The latter have already cleared numerous weed-out processes (getting into law school, getting through law school, getting a job after law school) that chew people up and spit them out. About 20-25% of T14 law students (and virtually none from lower-tier law schools) make it to BigLaw positions paying $160K/year. The rest become small-town attorneys, public defenders, assistants in the DA's office, or go to work for boutique law firms. These positions pay about $40-75K/year, barely more than a public schoolteacher, and yet they have law school loans to pay off. Even if you do get a BigLaw position, it involves being some partner's bitch for 7-10 years until (if) you make partner yourself.
Medicine is a decent career if you get through it and can deal with the hours, but it also has a massive weed-out funnel. At my (top liberal-arts college) alma mater, the admissions department had a joke: "95% of you are pre-med. By graduation, about 2% of you will be pre-med."
This is also why your main thesis, about women having an information advantage about the career world because of their relationship partners being older, doesn't hold. There is a strong selection bias in relationship partners. Lawyers find it much easier to find girlfriends than unemployed law-school graduates who went back to live with their parents. Anyone who uses their personal relationship choices as data on how the employed population as a whole functions is getting seriously biased data.
I can't really disagree that law is an unappealing career choice these days. However, I'd say getting getting through law or med school at the elite is pretty well assured once you get in. Here are the numbers for boalt
Yeah, I should probably de-emphasize "getting through" law school in favor of getting into law school and getting a job after. Last I heard getting into a T14 law school was still quite challenging, and even then getting a well-paying job was far from assured.
Interestingly, they don't give admissions rates, but we can see that only 6% even get an interview. The numbers themselves are high, too. Looks like about 95%ile MCAT scores, and a high (nearly 3.8) GPA overall and in the sciences.
Law has similar numbers, though LSAT scores tend to be a bit higher - above 98%ile. My guess is that this is because law doesn't have the "weeder" courses in pre-med, so you do have a lot of high GPAs in history or other relatively easy majors.
Engineering is a very, very difficult comparison to make, because it truly is not the same thing. Licensure is unusual, largely limited to a couple of specialties, and happens (with exceptions) at the undergrad level anyway. Legally speaking, you don't need an MS or PhD for anything, and you rarely need a BS either. This of course is a big factor when thinking about admissions and attrition rates.
Still, there is a large PR effort in the US to convince the public and young people that there is a shortage of US Citizens going into "STEM" graduate programs. I've posted a link to a RAND study that concludes that this aversion is rational and market driven when you consider the pay and career prospects relative to the "professions" (medicine and law, as well as dentistry, MBA programs, even nursing and pharmacy... in SF, dental hygienists earn, on average, about 98% of a software developer's median salary).
It's very difficult to compare with graduate engineering programs, since they tend to be specialized at the degree level (rather than through residency in medicine or career choices later with law). But looking at entering class profiles, top engineering programs appear to be very selective. Not as selective in terms of admissions rates as medicine or law, but I think this is more a function of very heavy course requirements for admission (you can major in anything for law, and you can do pre-med in 2 years, whereas to apply to an MS or PhD program in engineering, you tend to need essentially 4 years of exceptionally difficult specialized coursework).
So admissions aren't really notably easier for graduate work in engineering, undergrad prep is very hard... and yet, attrition rates are brutal. Overall, engineering is the best of the bunch where PhD attrition rates are concerned, at about 35%. In hard sciences, these typically go up to about 50%. This is for a cohort that has gotten top grades in majors like physics and scored at least above the 90%ile on standardized tests, usually quite a bit higher.
In short - I'm willing to agree that getting into law school is tough, but not any tougher than getting in to a top grad school in engineering (probably much easier, when you consider the coursework you need to take for engineering), and getting through law school, based on attrition rates, appears to be far, far easier. Even med school appears far easier from an attrition rate point of view. They're hard working, sure, but so are grad students in STEM. I just don't think hard work can explain a difference in attrition rates between 50-100 times higher.
Of course, like I said, you don't need a PhD or an MS to do anything in engineering, so maybe they're not really useful as a point of analysis here. The reason I bring it up is that there is still a strong PR push to get more young US citizens (or these days, women) into STEM graduate programs, and yet the numbers are horrendous for that path. Difficult coursework, sky high attrition, and - at the elite level, since we're talking about "best and brightest" - mediocre outcomes compared to medicine and, at the elite level, perhaps law as well (and many other fields).
Nothing's really "good" for our generation. We got fucked over by the Boomers and have to live with it.
About 20-25% of T14 law students (and virtually none from lower-tier law schools) make it to BigLaw positions paying $160K/year. The rest become small-town attorneys, public defenders, assistants in the DA's office, or go to work for boutique law firms. These positions pay about $40-75K/year, barely more than a public schoolteacher, and yet they have law school loans to pay off.
It's much more than 20-25%. More like 75%. You have to get shit grades not to have BigLaw as an option. You're right that from a non-T14, the job market is pretty appalling these days.
Even if you do get a BigLaw position, it involves being some partner's bitch for 7-10 years until (if) you make partner yourself.
As opposed to being a boss's or investor's bitch? Your odds are way better at becoming a partner than getting an equivalent payout from an exit in the Valley.
This is the goofiest theory. By and large women are bad at career planning. Hordes of 23 year old women march off every year to get graduate degrees with zero payoff potential.
