In 2024, I received my first cash return from an angel investment.

Like 95% of startups, it wasn’t a success. 

But the founders were able to secure a sale and return some of the money investors had put in.

The thing is—I had a feeling it might not work from the start. I learned a similar lesson in my own journey.

I share this because in life, it's often not about learning new things. It's about reminding ourselves of what we already know.

I’m no expert in the game, but I have picked up some lessons from the investments I’ve made.

Here are six of them.

1. Product is Science, Distribution is Art

I've seen many companies build great products that solve big problems. But they don't reach the success or scale they needed to survive.

It doesn’t matter how good the product is if no one knows about it. 

You may think it's an easy fix - just start marketing the product or service.

But in a world with consumers and businesses are hearing 50+ sales pitches a day, it can be hard to get people to engage. No one cares as much as you do.

As Ogilvy says, “You’re not marketing a standing army, but a raving crowd.”

What I’ve learned is that building a product is generally easy and a matter of process. 

But building repeatable, scalable distribution and a message that resonates? That’s art.

The question for you is: Will this startup be able to break out from the noise?

2. Investor Updates = The Journey

One of the many joys of angel investing is being part of the journey.

People love being able to help and create something new.

But as Naval says, “A monthly salary is as addictive as heroin.”

Angel investing is often a way of getting the thrill and upside while keeping a 9-to-5 job.

The thing is that investor updates are often the only ‘experience’ investors get.

They are not part of product or marketing decisions but do want to help in any way they can. If you can't stay updated, you can't help.

Like most things - the journey is almost as important as the destination.

Those 300 words that founders send out each month are that journey.

A friend's startup took years to find product-market fit. They kept investors engaged with regular updates and it was a great ride.

Nothing went to plan. But that's normally the reality. And while it wasn’t a great outcome, it was a tonne of fun to feel involved.

If you’re angel investing, the best way I’ve found to stay informed is to uncover what the company has done historically. 

Ask and check out their past investor updates, they will give you the best sense of the ride you’re signing up for.

Question: Are you going to experience the joy of the journey, or are you just money?

3. Pivots Take Time

Startups succeed because they can move faster than incumbents.

The key reason is that they have fewer dependencies.

It's hard for Salesforce to get 70,000 people to change direction when the market moves. But it’s much easier for that scrappy 7-person startup to do that.

And when founders pivot, it can still take (painfully) longer than you think to make meaningful progress in the new direction. It can be a little disorientating.

Things are not working. Then there is a new, stronger signal and a change in direction. It’s exciting again.

But as the startup gets going in the new direction, they run into a new set of tough challenges. From there, they need time to overcome those too.

This is the Dunning-Kruger effect.

We overestimate its confidence in the new thing. They realize how hard it is.

I invested in a college-focused startup. It has since pivoted and is now gaining traction, but it is not a massive success yet.

3-to-6 months is the turnaround time to reorient the ship and get back up to speed. 

When testing this in the context of the runway, sometimes the shoe won’t fit.

This period is tough.

Lots of soul-searching as I ask who I am, like Zoolander, but the founders have the drive to make it work, anything is possible.

But as Winston said "Success is not final, failure is not fatal: It is the courage to continue that counts."

Question for you: Does the startup have enough resilience to pivot and get back to 4th gear?

4. Simpler the Better

Trying to rip and replace existing technology is a very difficult challenge for a startup.

This is because not only do you need to change people’s behavior, but the team needs to build enough surface area of the new product to even compete in the established market.

That takes time. So startups are better off finding a wedge with something more simple.

I wrote about this in “How to Get Your First 10 Customers for Your Software Product.”

Most startups need ‘Low Complexity, High Value’ solutions to get momentum. 

Simplicity is the ultimate sophistication, and a hot, simple product that is easy to adopt can spread like wildfire if there are no existing solutions in place (see Lesson #1 above).

Question for you: Is the product simple enough to scale?

5. Market Wins

There are three ingredients for a successful startup: market, team, and product.

Many smarter investors than me have repeated the most important information in many different ways.

If you're going to be in business selling hotdogs - do you want the best tasting ones, fastest service or most condiments?

That stuff might help, but the best thing is going to be a starving crowd.

It's 100x easier to grow when selling to a starving crowd. 

Question for you: Is the startup entering a great market?

6. Hard Work Required, Not Sufficient 

This one is my biggest and most important lesson.

Growth isn’t linear and most startups go through two years of eating dirt as they lay their foundations. 

I wrote another piece that you can check out here.