🤝 This edition is sponsored by SimpleClosure

Not every startup makes it… and SimpleClosure makes that okay

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📰 Today's topic: Do you need to understand what a company does before you invest?

Here's a confession that might make you feel a lot better about your next investment.

A GP recently fought his way into a hot round. A famous fund had co-led the seed, the company was clearly pulling real revenue, and he was practically begging for an allocation. But in a candid moment, talking it through, he basically admitted: "I don't really know what they do. All I know is they're making a lot of money."

You read that right. An experienced investor. Begging to get into a round. For a company whose product he couldn't fully explain.

So to the newer angel writing $5k checks: how much do you need to understand before you invest?

Less than you think. And also, be careful.

Both are true, so let me untangle them.

At the earliest stages, you're not really betting on the product. You're betting on the founder and the trajectory. What the GP did know was huge: the founder was a phenomenal seller, a top fund had put real money in, and the company was clearly pulling revenue. You don't need an engineering degree to recognize a rocket taking off.

(This is freeing if you've ever passed on something just because the tech went over your head. Plenty of great investors back companies in fields they couldn't get hired at.)

So no, you don't need to understand every technical detail. The team and the signs of traction tell you most of what matters at pre-seed.

Now here's the trap.

There's a difference between "I don't understand the deep tech" and "I'm investing purely because a famous fund did."

Chasing a logo is how FOMO dresses itself up as conviction. A big-name firm on a cap table is a data point. But they're wrong plenty - and they're optimizing for their portfolio’s returns, not your $5k.

The fix is dead simple, and it costs you ten minutes: write a short deal memo before you wire money. A few honest paragraphs answering plain questions. Why this founder specifically? What's the actual signal here, beyond who else is on the cap table? Is there real revenue, real pull, real customers? And what would have to be true for this to go to zero?

The act of writing forces clarity. It separates "this founder is special and something real is happening" from "everyone else is doing it and I'm scared to miss out." One of those is a reason to invest. The other is just FOMO with a nicer outfit.

So back founders you believe in, even if the tech is fuzzy. Just make sure you can say why in your own words first.

– Brian from Angel Squad

📕 Startup term you should know

Ever heard of Venture Scout?

Someone who hunts down promising startups for VC funds to invest in. In exchange, scouts get a slice of the carry - meaning if the deal does well, they get paid.

My insider scoop: Sequoia's scout program alone has surfaced deals like WhatsApp and Instagram. The real perk is you can invest your own money in a startup and get paid to bring it to a bigger fund - that's the "double dip." It's also just a great way to level up: you're seeing tons of deals, learning how top VCs think, and building relationships that'll pay off in your own investing career. Most scouts take home 5–10% of the fund's carry on any deal they source.

Overheard in SF…probably

“Our product has achieved product-market fit with ourselves. We use it every day, so that counts as user validation.”