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Summary:

The only thing keeping pace with the proliferation of angel investors is the size of their funding rounds. Keith Rabois, an active investor in companies like YouTube and Yelp, shared his thoughts with us on the growing number of angels.

Keith Rabois will tell you that he’s not a passive angel investor — quite the opposite. Along with a check, Rabois wants to bring to his investments the wisdom he’s gleaned from his time as an executive at companies including PayPal, LinkedIn and Slide (where he is currently VP of business development and strategy), as well as his experience investing in companies such as YouTube and Yelp. These days he’s high on companies like Palantir and AirBnB.

Last week, he stopped by our office to share some of his insights into startups, Silicon Valley, investment trends and the rise of the super angels. Given his genuine desire to not only fund but help young companies, it was only natural that during our video interview he was a font of useful information for investors and entrepreneurs alike. In particular, he shared his insights on:

  • The proliferation and growth of angel rounds
  • The dearth of exits for angels
  • The importance of figuring out what you want from your VC
  • Questions to ask a potential angel (among them: What have they done in their own career?)

During the conversation, he pointed out that three years ago it was rare to see $500,000 angel rounds of investments in startups. Today, that’s the minimum starting point; it’s more common to see $750,000 angel rounds.

Is that because there are too many angels? “There is a halo around being an angel investor or a seed investor,” Rabois told me. “I was joking with someone recently that when you went to a party, it’s cooler to be a seed investor raising a round than an entrepreneur, and that’s a sign of major bubble in investing. “

Sit back and watch this 20-minute interview. And if you are a startup/entrepreneur, pay close attention:

By Om Malik
  1. Am I the only one who hears the bad-acid-trip-audio around minute 11?

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  2. Like the “not to follow ‘herd’ mentality part quite a lot”.

    Desirable situations for investment from an entrepreneur perspective might be as follows (in order of desirablity):
    1. money + connection or experience in the target market.
    2. money + investment in a project which has direct relationship with the enterpreneur’s product/serivce
    3. money + genuine interest in working with the entrepreneur
    (best not having invested in too many projects or you won’t have time…)

    Additionally, link to VC would help with the future… but the focus is NOW…

    If none of the above, money would be no different than a loan from bank.

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  3. [...] full post on Investing – Google Blog Search Posted in News | Tags: &amp, Angel, From, Investing, Learn, Startups, State, [...]

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  4. Great video Om.. please bring us more like it!

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  5. Thanks Keith, loved the insights! I like your undergirding theme that at the end of the day, it always comes down to relationshipins between people: some examples you mention are: 1) the matchmaking between the entrepreneur and the VC; 2) the entrepreneur who doesn’t go with the crowd; 3) understanding the motivations of the mass market. I loved every minute of the video!

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  6. [...] From GigaOm’s Om Malik. See the entire article from Om: The State of Angel Investing & What Startups Can Learn From It, According to Keith Rabois. [...]

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  7. Phenomenal interview. Great insights, very engaging. Does anyone know of the writing that Keith referenced by Reid?

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  8. I am going to try and do more of these. any requests on who you would like to hear from. I am drawing up a line up of interviews.

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  9. Peter Verkooijen Sunday, June 20, 2010

    Very interesting, but none if this really matters anymore. In the coming years increasingly the government will run everything, directly or through “public-private partnerships”. The way to succeed as an “entrepreneur” will be to toe the right political line and have the right political connections.

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  10. As a private investor in Slide, I wish Keith would pay more attention to the growth and future of Slide. To say that this investment has gone south is an understatement. Slide has been struggling for 3 years now since it first grew as the first large Facebook app developer. SInce then it has tried and failed on various business models (direct sales, brands, virtual goods, social games, etc.). At this point in time, my guess is that Slide is heading fast towards deadpool status. What exactly is Keith doing as EVP (btw: if you’re a start-up and there is an EVP title you are already doomed!) to salvage this investment? It seems to me he’s spending most of his time focusing on other investments and sparring with Chris Dixon on Twitter.

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  11. [...] des Tages: GigaOM über Angel Investments (mit 20 Minuten [...]

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  12. My freaking God this guy is an Assclown! First of all he’s failed to realize that the Valley Girl has been dead for over a decade. For crying out loud, learn how to speak. Every phrase should not end with a question mark? Next, up, entrepreneurs are at their prime in their twenties? Ha! History and data suggest they are at their prime in their forties. Lastly, if your “not qualified” to understand a “technology” company (what the hell is the difference between a technology company and an Internet company? Does he mean B2B vs B2C?) then how can you be investing in one and not the other? Good luck with Slide, I hope the company survives you’re idiotic advice…

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  13. Om, it’s great that you’re bringing video onto the site. But this video needs a lot of editing and shortening – it should have been a 3-minute clip.

    To be honest, after watching half of it, I wanted to strangle the interviewee. Did he have too much coffee, or was it something stronger? Gawd:)

    Sorry, i was trying so hard to be positive :-)

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  14. [...] Video: The State of Angel Investing & What Startups Can Learn From It, According to Keith … [...]

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  15. A “heard mentaility” in investing creates a glut that drags everyone down.

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  16. Reminds me of TED talks, very convenient to listen to. I like Keith’s summary and insight. In my business, it is hard to be too entrepreneurial or innovative in terms of the actual products, since those are delivered by third parties, but we can try to enhance our services in an innovative way, ultimately helping our customers by adding actual value.
    I’m looking forward to the day I’ll feel comfortable devoting some time to try another business endeavour and possibly invest into some young talent. Thank you for the inspiration, Om!

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  17. [...] Keith Rabois, the new general manager of Square after his company Slide was sold to Google, is actually the fastest on the draw, with five investments in summer 2010 Y Combinator startups. Five out of 36 companies is a stunning correlation between his and YC’s choices. Rabois’ picks include private and ad hoc social networking site The Fridge. (See our recent video interview with Rabois embedded below.) [...]

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  18. [...] as they do entrepreneurs.  Keith Rabois (mentioned in my previous posts on angel investors) is on record on GigaOm as saying how important VC backed deals are to him.  Why?  Because he doesn’t look to invest in quick flips.  He believes that returns are [...]

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  19. [...] Silicon Valley and not part of the new valley, represented by angel investors such as Dave McClure, Keith Rabois and Chris [...]

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