I LOVE Seeing $5k Investments on a Cap Table

We are invested in a company that just raised a small round from friends and family. The founder got really scrappy, pinged every person he knew in the startup ecosystem and finally managed to get enough money in the door where he could close his note and get back to work.

He pitched a lot of angel investors and VC’s and got a ton of “this is too early for us.” We think all those people are all crazy. The company is awesome.

We unfortunately don’t invest enough money to fill up a whole round so rely on the founder being able to get other money in the door alongside ours.

This founder managed to get a bunch of his friends invested. Many of whom were not traditional angel investors and could only afford to write $5,000 checks. But while not angel investors, a lot of these people run BD at startups, have founded their own startups or are somehow related to the ecosystem.

While not hugely wealthy, they are mostly quite “sophisticated” investors, whatever the hell that means.

We LOVE seeing $5,000 investments like this. Some might argue that having too many investors leads to “noise.” But I think seeing $5k checks from friends speaks very highly of the entrepreneur. It’s not like seeing a bunch of $5k checks from Angel List where the investor/investee relationship is sorta transactional. It’s a much more intimate $5k investment.

We love the situation because:

  • This founder is all in. He’s pitched everyone he knows. His whole social network knows he’s launching a startup. Failure wouldn’t be a quiet one and he was shameless about asking people for an investment. He didn’t wait for a traditional VC firm to give him permission to start his company. He decided to start it and did everything and anything he could to get it off the ground. He also didn’t view raising money from friends as “asking for a favor.” He was and is convinced he’s giving friends an opportunity to make money. That’s absolutely the right way to think about it. If you think it’s a favor to ask for an investment, don’t ask at all.
  • We love seeing friends invest in a founder. We’ve known the founder for a couple of months now. We know people in common, he’s been impressive, his updates rock; but I’ve never worked with him. I didn’t go to school with him, see how he treated his friends, see how he treated the people he doesn’t like, see how well he does under pressure or if he was the friend others relied on. When I give talks to college students I tell them to be the one in their friend group others would invest in one day. This guy is clearly that person!
  • Raising $5k at a time from investors is not an easy task. the founder has already self-selected himself into a group of founders either hard working, talented or desperate enough to get through hard shit. Nothing scares me more than when a founder has too easy a time raising his/her seed round. Is screws up the expectations of what raising future rounds will be like. This founder already knows how to get through the hard stuff and has a healthy respect for the struggle of raising capital.

We’re so excited for the company to launch — we think it’s gonna be rad.

[5'9", ~170 lbs, male, New York, NY]. I blog about investing. And usually about things I’ve learned the hard way. Opinions are my own, not CoVenture’s

[5'9", ~170 lbs, male, New York, NY]. I blog about investing. And usually about things I’ve learned the hard way. Opinions are my own, not CoVenture’s