Minimal Due Diligence Wins

Dharmesh Shah shares his perspective on angel investing, emphasizing that extensive due diligence can actually harm returns by consuming valuable time that could be better spent elsewhere. He approaches angel investing with a quick decision-making process and minimal involvement.

Key Points:

• Investment Decision Process:

  • Makes decisions within 24 hours for 80-90% of deals
  • Has made over 100 investments
  • Rarely meets or talks to founders before investing

• Philosophy on Due Diligence:

  • Extensive research isn't worth the time investment
  • Time spent on due diligence effectively doubles the investment cost
  • Example: A $100,000 investment with 5 hours of due diligence equals $50,000-$100,000 in time value

• Primary Motivations for Angel Investing:

  • Not focused on financial returns
  • Lives vicariously through other entrepreneurs
  • Seeks bragging rights for being an early investor in successful companies
    • "No one cares how much you invested"
    • Values being able to say "I was in Okta back in the day" or "Stack Overflow back in the day"

• Investment Style:

  • Maintains minimal involvement with portfolio companies
  • Doesn't try to provide hands-on guidance
  • Focuses on making quick decisions rather than deep analysis

• Decision Framework:

  • Either likes the idea or doesn't
  • Either likes the founders or doesn't
  • Moves forward quickly once these basic criteria are met

This approach reflects a broader philosophy that sometimes less involvement and quicker decision-making can lead to better outcomes in early-stage investing.