Two and a half years into my angel investing experiment, some of my Companies are doing great, and others are struggling. But I have a trick that gooses my returns, big time.

Big Bucks, No Whammies!

I’m a true believer in every company I invest in. At the moment I back a founder, I think she’s going to take over the world.

So I make the same first Investment in every company. At that early stage, I don’t yet know who the winners will be.

But a year or two later, winners begin to emerge.

By that time, many companies try to raise follow-on funding. Some are crushing it, while others are floundering.

When that next fundraise comes, I have a big decision to make.

What It Takes to Get Another Check

I always want to concentrate capital in my best companies. And after two years of reading monthly updates and working with the founder, I have a pretty good idea which companies are out front.

When I see a startup tripling revenue year over year with reasonable burn, I want to re-invest. That’s typically 20-30% of my portfolio.

Not many startups can triple revenue in a year. Those that do represent an elite — companies with a huge market who know how to conquer it.

The Surprising Effects of Doubling Down

I re-invest up to about 5x my first check. I usually put this into the Seed Extension or Series A. Those are the next rounds of funding after my investment, which usually comes at Seed.

Going “super pro rata” has an amazing effect on your portfolio.

My first investments were all about the same size. But soon, just a few companies represent a huge slice of the total.

My most successful startup is a great SaaS company I backed in 2021. Between my re-investment and some modest markups, that company is now 17% of my portfolio.

Compare that to a struggling company I also invested in during 2021. Today, that company represents just 1.5% of my portfolio.

My position in the winning company is more than 11 times larger, even though they started out the same size!

Hard Conversations

Behind all this math are some really hard conversations.

Great founders who are working super hard come to me regularly, asking for more money. I have to tell them no.

Some are about to lose their companies. They face slim chances pitching new investors.

And nonetheless, I have to turn them away.

The hard truth is that this is a business. There is no substitute for performance.

However, founders turn around struggling companies every day! And if that happens, I’d be delighted to re-invest.

Wrap-Up

In venture capital, a tiny share of startups produce almost all the returns. Our only job is to own as much as we can of those companies.

That’s why I double down on my winners. Those are the companies that can put the money to its best use — and it’s my job to get it to them.

Do you re-invest in your winners? Why or why not?

Leave a comment and let us know!

If you enjoyed this post, subscribe for more like this!

More on tech:

How Product Velocity Can Make You a Unicorn

For Venture Funds, Small Is Beautiful

New York Just Behind SF for Venture Deals

Save Money on Stuff I Use:

Fundrise

This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 with great returns.

More on Fundrise in this post.

If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

Misfits Market

I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

I wrote a detailed review of Misfits here.

Use this link to sign up and you’ll save $15 on your first order.