The Secret to Refining Your Personal Investing Thesis
He’s also an angel investor, startup advisor, and full-time parent. We sat down with Srivats to learn how up-and-coming angels can find their unique investment thesis. We cover topics like:
- Working with zero data as an early-stage investor
- Why Twitter is an overlooked educational tool
- How the Babe Ruth effect manifests in VC
“As an investor, I’ve never run a startup. So, the question for me is — how do I diversify the info I consume to empathize with the entrepreneur’s experience?”
To invest in early-stage founders, prepare for uncertainty
As an angel investor who leans toward young companies, Srivats often enters the picture while the team is still finding their footing and working through (very early) growing pains.
That means he usually has little-to-no hard data to work off of. This was especially tricky for him to internalize as an engineer by trade who’s always fallen back on analyses.
Since then, he’s grown accustomed to pitches with founders who have nothing more to show for their idea than a clunky website — or maybe an MVP and some users, if you’re lucky.
In those cases, he’s learned to assess ideas for feasibility (without relying on numbers), but also to remain open-minded as founders paint a picture of the future.
The payoff is immeasurable if you can get in on the ground floor with a stellar startup, but you’ll need to be prepared to weather the unpredictability of early-stage ventures.
“Sometimes, you’ll just have to make investment decisions with zero data. Then, you’re along for the ride with them to support them through the ups and downs.”
When you’re just getting started, meet everyone you can
When starting out as an angel, it's crucial to broaden how you operate (especially if you've never invested before) by speaking to as many founders and VCs as possible.
In Srivats’ case, he’d never been a founder himself, having always taken more of an operator’s seat. So, he would have to diversify his info streams to understand the entrepreneurial process.
He began chatting to almost every founder he could find: people who cold pitched him through LinkedIn, Twitter, or email; founders he admired with mutual connections; and more.
This didn’t just reinforce how he empathizes with founders.
It also sharpened his broader capabilities to understand any person — industry members and everyday consumers alike — in the context of their background.
To hear from the pros, just log onto social media
Even before joining Angel Squad, Srivats would turn to Elizabeth, one of Hustle Fund’s GPs and co-founders, for investment insights that would shake up his initial approach.
The kicker? He did this entirely via Twitter at the time.
The two would eventually meet, and Elizabeth would introduce Srivats to Angel Squad. But he started out following her account and internalizing her observations to apply to his own deals.
He recommends that other young investors looking for guidance do the same. Even if you can't access your VC idols directly, they'll often share tons of wisdom through their public platforms.
For instance, Gokul Rajaram is a “dream mentor” for Srivats — and being able to just passively consume his knowledge over time (and over the Internet) has made an impact on his investing.
“If you look for it, you’ll find a lot of great content from investors that’ll sharpen your thinking. I mean, it’s unbelievable — they put so much out there for free.”
The secret to honing your own investment thesis
As Srivats puts it, most of your early investing approach will comprise pattern matching.
You’ll note best practices by more experienced investors, apply them with actual investments, and slowly learn to predict success based on KPIs, founder traits, market viability, and so on.
In his words: “That was a major input for my first decision-making models. I’d just talk to a lot of entrepreneurs and investors who have been there, done that.”
It comes down to condensing these countless streams of info, trying them out for yourself, and, in time, adding your own spin to these ideas to formulate your unique investment thesis.
After all, you can only figure out what works for you as an investor by actually investing.
With enough experience under your belt, you’ll likely start gravitating toward certain variables you want to optimize for, because you’ll better understand your ideal investor-company fit.
Ultimately, cultivating your investment thesis comes down to honoring your authentic passions and allowing your work to reflect your personality.
Valuable questions to consider include (but aren’t limited to): What industries get you truly excited? Would you love to help a founder build from zero, or would you thrive at the seed stage?
“It’s all about leveraging the high-quality information out there and condensing it in your own ways. Just start applying it in meetings, investment diligence, etc.”
Using the Babe Ruth effect to manage angel expectations
When it comes to getting into the swing of angel investing, Srivats reminds us that our work is grounded in numbers and endless research — but it's ultimately a lottery.
Looking back, he summarizes his earliest deals with Angel Squad as: “Here are a ton of shots at investing in some companies. Maybe you’ll strike it big with one of them.”
While most of the checks you write will result in a dud, the hope is that the one check that becomes a home run drives an outcome of 10X or 100X.
The size of the success matters more than the frequency of the failures.