📕 Startup term you should know

Ever heard of Liquidation preference?

Decides who gets paid, and how much, when the company sells.

My insider scoop: Many angel deals have a 1x non-participating preference. Plain English: you get your money back first, then split what's left with everyone else. Just one bite. Fred Wilson's take is that preferences protect investors when things go badly but quietly eat founder returns when the exit is just okay. On a small acquisition, they can swallow most of the money before common shareholders (founders and employees) see anything.

📰 Today's topic: Getting in is the whole game

When you start angel investing, the hard part isn't finding the great company. It's getting in.

Ask around and everyone wants a piece of the same handful of names. The buzzy AI lab. The pre-IPO fintech everyone's sure will pop.

Demand is infinite. Allocation is not.

The scarce thing is a seat, not an opinion

We recently watched the scramble for a hot late-stage AI deal play out in real time. Founder-famous, marquee fund leading the round, the kind of logo that sells itself.

The interesting part is every conversation was about access. Who has allocation, how much, and what you had to prove to get it.

In one case an investor literally had to hop on a screen-share with the bank and show a nine-figure balance just to qualify for a seat. That's the game at the top - proof of funds, not proof of insight.

For a new angel, that flips the usual advice on its head. You spend all this energy learning to evaluate companies, and then the deals you'd most want are the ones you can't touch.

How deals reach you

Great allocation almost never shows up in your inbox from a stranger. It travels through relationships.

The people who reliably get access tend to be:

• For early-stage: Operators the company actually wants on the cap table - future customers, supply-chain partners, credible names

• For late-stage: Connectors who can bring real check-writers (family offices, strategics) into a round

So if you're starting out, the move isn't to chase the hottest logo. It's to become useful to the people routing deals - show up, be easy to work with, and be clear about what you can bring.

The fees will try to eat you

Say you do get access. Read the structure before you fall in love.

A great company can still be a bad investment if three layers of fees each skim on the way in.

Two structures worth an automatic "no" for most new angels:

• Double-layer SPVs: a fund into a fund into the deal, fees compounding at every step

• Forward purchase agreements: you pay now for shares you may or may not get later, on terms you don't control

None of this means walk away from good deals. It means do the arithmetic on what actually reaches the company versus what gets skimmed, and negotiate carve-outs when you can.

The takeaway

Picking is table stakes but access is the edge.

Spend less time perfecting your thesis on companies you'll never get into, and more time becoming the kind of investor that deal-makers want in the room. Then, when the seat opens, read the fine print before you take it.

– Brian from Angel Squad

Overheard in SF…probably

“Our go-to-market strategy is simple: once we get Elon to tweet about us, we'll have achieved product-market fit across all demographics.”