Outperform The World’s Best Startup Investors

As you may know, every year, Forbes Magazine publishes the “Midas List” – a list of the top U.S. venture capital firms.

The folks on this list are professional investors with a track record of success – so if you’re interested in early-stage investing and want to emulate the best of the best, you should pay attention to their names, right?

Uh, wrong.

Today, not only will we show you who should really be on the early-stage Midas List – we’ll also show you how to “follow” them so you can invest alongside them.

And since our topic today is about how to leverage the best startup investors (and, yes, since it’s holiday time), we’re also going to share with you a special report from Crowdability that was just published. In this report, four professional early-stage investors reveal how they’d approach equity crowdfunding if they were in your shoes.

Venture capitalist Fred Wilson (Managing Partner in Union Square Ventures and early investor in such companies as Tumblr and Twitter), believes the Midas list is mistakenly capturing all kinds of investors – whether they’re “Seed” and “Series A” investors who write checks when a company is little more than an idea on the back of a napkin, or “Later Stage” investors who invest when a company is more mature.

It pays to be a follower when it comes to equity crowdfunding. You just need to be sure you’re following the right people!

As Fred wrote, “For me, the firms who invested in the Seed and Series A rounds of $1 billion+ exits is the only list I care about.”

You see, most of the firms on the Forbes List are “later stage” investors. Instead of investing small amounts of capital into unproven startups, they put a ton of capital into later-stage companies.

By the time a later-stage venture capital firm like Kleiner Perkins invests, a “startup” might already have hundreds of employees, and millions in revenue. They might even be on their way to going public.

What Fred is saying is that by the time the “Midas” investors put money into a company, it’s no longer a question of if the businesses will succeed, but rather a question of when the success will happen, and how big it’ll be. And if that’s the case, what could early-stage investors like us – investors focused on opportunities in the equity crowdfunding market – possibly learn from the folks on the Midas list?

The answer is this: Not much.

But what if we could put together our own Midas List? A list of investors who actually have the “golden touch” like old King Midas?

Let’s give it a shot…

Based on Fred’s criteria, let’s look for professional investors who have invested in multiple startups at their earliest stages – startups that have eventually been acquired or gone public (often called an “exit”) for over $1 billion.

According to a recent article on TechCrunch, since 2003, 39 venture-backed startups have been valued at over $1 billion. Some of the companies have yet to “exit,” so we’ll focus only on the ones that have already been acquired or gone public.

Using CrunchBase (an amazing tool for any early-stage investor), we can look for investors who were involved in these companies’ Seed or Series A rounds of financing.

Below is our “Midas List” – I’ve included the name of the firm or individual, and the number of “billion-dollar exits” they’ve been involved in. (Finding the names of individuals can be challenging; finding the name of firms is a piece of cake.)

1. Sequoia Capital – 5
2. Greylock Partners – 4
3. New Enterprise Associates – 4
4. Peter Thiel (including Founders Fund investments) – 4
5. First Round – 2
6. Charles River – 2
7. Union Square Ventures – 2
8. SV Angel – 2
9. Austin Ventures – 2

Now, you may be thinking, “Thanks for the great list, Wayne – but how does this help me make money?”

Well, if you read my recent article about one of my favorite crowdfunding investments going on right now, you know you can invest alongside top angel investors by “following” their activity on AngelList, a high-quality crowdfunding platform.

Now you can do the same with our “Midas List” above.

You see, even though many of the names are firms as opposed to individual investors, we can still find and follow people that work at those firms. For example, if you look up Greylock partners on AngelList, you’ll see that, 2 months ago, one of the partners, Josh Elman, started to follow a company on AngelList called memoir.

At the time, memoir was raising a seed round. In addition to Josh, there were a number of other successful angel investors following and investing in the company.

It pays to be a follower when it comes to equity crowdfunding. You just need to be sure you’re following the right people!


Best Regards,

Wayne Mulligan
for The Daily Reckoning

P.S. Speaking of following the right people, in today’s issue of Tomorrow in Review, we gave readers a free gift that introduced them to some of the “rightest” people in the early-stage universe… My business partner and I have been talking to everyone we can about this new market – not just about ways we can help you navigate this new world, but ideally, how we can help them make money. And some of our venture capitalist friends offered to help us out. To ensure you never miss another great opportunity like this one, you can sign up for the FREE Tomorrow in Review email edition, right here.

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