Angel Investing Covid Update

During late January, February and March we saw an influx of deals, and some changes in deal terms, with increasing uses of SAFEs, higher valuations, and terms that are betting on a rebound of the economy and, to our view, are unreasonably optimist. There is a bit of a childish behavior.

Although we know Angel Investing is risky, we see no reason why we need to be sloppy. We look for market-product-team fit, as well as inconsistencies as base our estimates for valuations on future growth, and value creation. Yes, we are ready for good news. And there are MANY.

Five factors impact the quantity and quality of deals and deal terms.

1. Vaccinations are ramping up, and with that, an expectation that we are getting over the pandemic. We are all ready to get back to "normal". We just don't know what "normal" will be like.

2. Markets are unreasonably high, creating a FOMO (fear or missing out), and a false sense of economic growth. Some analysts expect the market to crash because on the basis that economic exponential growth is unlikely in the next two years. Others expect the economy to thrive on the basis or readjustment of costs, aligned focus and innovation. Truth is that we don't know for sure.

3. Small and unsophisticated investors feel they can reap the rewards of the stock market. GameStop shorts, through Robinhood, created a frenzy of speculative investments with NO foundation. On the positive side, it showed that the majority lagging behind is stepping up to understand futures and stock market and that lean platforms are allowing individuals to learn how to invest. Whether this widens or shortens the wealth gap remains to be seen, yet I hope it is on the positive trend. We all benefit by sharing the pie of wealth. 

4. New, emerging talent is diverse. Backstage capital, founded by Arlan Hamilton, a black gay woman who used to be homeless few years ago, raised millions of dollars TWICE on Republic.co  breaking records for investors that can put as little as $100 on any deal. I think it is fantastic, more backers, more founders, more diversity. I trust that also more talented supporters will raise to the occasion because money is only one type of capital: experience and contacts are also very relevant. Check out Hamilton's book: It's about damm time. https://amzn.to/39GIxHy.

5. Cryptocurrencies have surged again, entering main stream financial sector, with companies like Tesla playing with the market (Tesla earned more money in few weeks with Bitcoin than in a year selling cars), JP Morgan, Chase, Cashapp, etc. The interest in Cryptocurrencies has raised the value of many. The possibility to invest as little as a dollar in crypto is now feasible. The rate of growth is incredible despite the ups and downs. 

5. NFT or Non-fungible tokens, are a new type of asset based on - blockchain-. As with any early stage type of asset, there is a lot of hype and speculation in the market. https://kelo.com/2021/03/18/nft-related-stocks-draw-attention-as-digital-asset-buzz-grows/  One of the funniest NFT I saw was Charmin, the toilet paper brand. https://www.theverge.com/tldr/2021/3/17/22336115/charmin-nft-toilet-paper-cryptoart-marketing.

I hope you enjoy this note with all of the ups and downs of the unusual financial markets. I shared this note earlier to the member of my investment club and I still think this is a great time to be an angel investor.

Professional angel investing provides amazing rewards financially, intellectually, emotionally, and even spiritually.

None of the comments above can be assumed to be an endorsement of any investment.