When you invest early in startups, figuring out which ones will succeed can be tricky. Even professional venture capitalists (VCs) often miss amazing deals and invest in unsuccessful ventures.
For example, VC Jeremy Levine famously passed on investing in Facebook in 2004, telling co-founder Eduardo Saverin, “Kid, haven’t you heard of Friendster? Move on. It’s over!”
Ouch, that one had to hurt... But venture capitalists have to be very selective in the deals they invest in, that’s their job. In fact, the average partner at a VC firm only invests in 1-2 deals per year, so great opportunities will inevitably slip through the cracks.
However, as individual startup investors, we don’t have the same limitations most VCs do. We can invest small amounts of money in a very large number of deals, which may increase our chances of hitting a big winner.
Recent research by AngelList supports the idea of investing in a large number of deals. Here’s an excerpt from their research, which examined the results of thousands of startup deals.
“Conventional investing wisdom tells us that VCs should pass on most deals they see. But our research indicates otherwise: At the seed stage, investors would increase their expected return by broadly indexing into every credible deal.
That’s one of the results we found when we analyzed the thousands of deals syndicated by AngelList over the past seven years to test assumptions about the nature of venture capital returns. We’re presenting these findings in a first-of-its-kind report out today, Startup Growth and Venture Returns.”
Easy diversification with Republic’s Autopilot
Republic makes building a large startup portfolio simple with Autopilot. Autopilot lets you automatically invest as little as $20 in every deal that meets the following objective criteria. Only startups that have:
- Raised at least $150K
- From over 100 investors
- And reached at least 2x their minimum fundraising goal
Autopilot is free, customizable, and you can opt out of any deals you don’t like. If you invest $20 per deal, a year from now you could have a portfolio of 100 startups!
Think of Autopilot as similar to investing in a broad index of stocks, like the S&P 500, instead of trying to pick individual winners. Autopilot gives investors broad exposure to companies that raise money on Republic, and while it won’t eliminate the high risk nature of startup investing, diversification is a great mitigant.