Building wealth is a game of luck.
Last year I started evaluating startups to invest however I didn’t end up making any investments. I wanted to spend some time explaining the rationale behind the alternate investments.
Some might say that I already have some alternate investments in crypto currencies. And I agree. In fact, having two types of alternate investments which hold significant value is quite irresponsible. I’m writing this journal for my own benefit. CoastFi
Safety of CoastFi
The freedom that achieving coastFI brings is unimaginable. The fact that I don’t have to save anything further and yet I can retire at a normal retirement age has brought phenomenal peace of mind for me. This is absolutely incomparable. As I’ve discussed before instead of penny pinching I’d like to do things outside of my comfort zone for this entire year.
I’m also of the opinion that our generation might not ever retire. I’ve reasoned about this earlier. Our jobs, as a knowledge worker, isn’t dependent on our physical health. We could work from anywhere while on a laptop. I believe our cognitive abilities might decrease as we age but we could still be functional. Specially talking about my generation, we’ve tied up our identities with our job or what we do. FIRE is all about breaking away from it, it’s still going to be difficult for a lot of us. In fact I’ve noticed from some of the FIRE bloggers and reddit commenters that people continue to earn after achieving FIRE. Not many are completely retiring at a relatively young age.
I started this journal by saying building wealth is a game of luck. And this is going to be true for Angel Investing. No one can predict which startup does well. This mean the best strategy would be to spray and pray. If 99% of startups fail, the 1% that succeeds not only recovers your invested amount in aggregate but also gets you more. I’ll be investing in pre-seed or seed round which means I can expect an exit series A or Series B round as most founders don’t keep angel investors on their cap table on those rounds. One can expect liquidity in 5-7 years for startups who are doing well.
For the startups who succeed I’m expecting 10x returns on lower end and 100x returns on higher end. This is less than some alt coin returns. It’s good enough for me. Just one good company in the portfolio will enable me to reach my FIRE target. Of course there’s high risk and high reward.
Time to take advantage of network
I’ve always been part of the startup world here. Which meant I’ve struggled through the initial days of my career. My early 20s were where I didn’t save any penny because I didn’t earn a penny. And I’m not even kidding. The startup I worked for three years back in 2015 didn’t take off. There were delays in salaries. We couldn’t raise funds. Not even accounting the mental distress, it was a mess.
I’m in the startup world for so long that I’ve made friends. Some of them are starting up now. And that means I do get an introduced for making an investment every other week. In fact I ended up evaluating startups in 2021 but didn’t end up investing. Most likely I was fearful as I hadn’t achieved CoastFi yet.
I’ve seen wealth creation closely. People who joined early stage startups are now at a stage where they don’t have to work. I know someone who made money and ended up retiring. He only does some intraday trading now just for fun.
Now the point is, one can’t join multiple startups and wait for 4 years for your esops to vest. However one can invest in multiple early stage startups. You’re trading time with money.
Another point to remember is there’s way too much liquidity in the market which means it’s easy to raise funding in the current climate. Hence access to the network is important. And I feel that I’m rightly placed to take advantage of the network now.
In all, it’s all about whether you are ready to risk.
And with that I’d like to announce that I’ve made my first angel investments of the year 🙂 Ticking off one thing from your new year OKRs feels great.
Please don’t consider this as investing advise. Angel Investing is the riskiest of all instruments with 99% chances of failure.