🤝 This week’s edition is sponsored by Mappa

Thirty seconds of your voice contains more information about how you think and operate than you could ever imagine. Decision-making patterns, empathy, strengths, blind spots. Things you can't rehearse in the mirror. Most hiring processes don’t come close. They measure how well someone interviews, which isn’t very useful anyway. At Mappa, we built AI to read all of it from audio. And turn it into the thing hiring has never had: a measurable, reliable signal for fit. Get your behavioral read free today.

📰 Today's topic: Who makes money when you make money?

Every time you invest through someone else, you're trusting them with two things: your money and your interests. The first is obvious but the second is where angels might get tripped up.

So before you commit a dollar, ask yourself: does this person make money only when I make money?

There are basically two ways a manager gets paid.

The first is carry, short for carried interest. It's the slice of the upside a manager earns after you get your money back. Say you put in $5k, the investment does well, and you get your money plus a profit. The manager takes a cut of that profit. The key word is after. Carry means they don't eat until you do.

Why it’s good:

• Ties their payday to your return, so they're motivated to pick winners

• A manager willing to bet on outcomes is signaling real confidence

Watch for:

• Can nudge toward swinging for the fences, since carry only pays on big wins

• Takes years to materialize, so most managers need some base fee to survive

The second is a fee on AUM, which stands for assets under management. That's just the total pile of money a manager is overseeing. An AUM-based fee is a percentage of that pile, charged every year, no matter what the investments do. Pile soars, they get paid. Pile sinks, they still get paid.

Why it’s good:

• Keeps the lights on. Pays for staff, diligence, and the admin that makes a fund work

• Predictable income means the manager isn't desperate or cutting corners

Watch for:

• They get paid whether you win or lose

• When fees dominate and carry is tiny, the incentive shifts from picking well to just gathering more money

The difference is massive. Carry pays a manager to pick winners while AUM pays them to gather dollars.

Most funds run on a healthy mix, and a reasonable management fee just keeps the lights on. The thing to watch is the balance. What you want to see is a manager with meaningful carry, because that's the part that ties their payday to yours. The more of their upside that depends on your return, the more aligned you are.

So next time something exciting shows up, don't ask "what can I get into?" Ask "who's getting paid, and for what?"

– Brian from Angel Squad

📕 Startup term you should know

Ever heard of Customer Concentration Risk?

This is just a fancy way of asking: how much of your revenue is riding on a handful of customers? Usually we're looking at your top 5 or 10. If a big chunk of your money comes from just a few accounts, you've got concentration risk because if one of those customers walks, your numbers take a nosedive.

My insider scoop: Here's our rule of thumb: if any single customer makes up more than 20% of revenue, that's a yellow flag. We're not saying it's a dealbreaker, but we want to see that the company is hustling to spread things out and not putting all its eggs in one (very large) basket. This matters even more for B2B companies, where losing one whale of a client can wreck your growth overnight.

Overheard in SF…probably

“We're not just building a company, we're building a movement. A movement that happens to require $50M in Series B funding.”