I wish Sam provided a little more insight into upside risk, such as maybe how an angel investor could best structure his investments to ensure he gets that one 'outstanding investment'. He basically just stated what upside risk was, which has been discussed multiple times over in this forum.
I think Sam knows the Y Combinator investment strategy is best designed to take advantage of power law distributions and getting the very best investments. With crowdfunding and the JOBS act, being able to spread $10k across 50 different companies seems to open the door for everyone to participate in this type of investment strategy. Thoughts?
The way to do it is to have a good reputation among founders, and the way to do that is to a) work hard to help the founders you invest in and b) don't screw them. This becomes very important when the founder you really want to invest in is choosing among lots of offers.
Of course, you also have be able to identify the good companies, which I will write about later.
You won't get in on the good deals with that strategy. You should focus on getting in on the best deals to mitigate upside risk. That, plus getting good basic economics of the round, is what Sam is advising investors do.
I think Sam knows the Y Combinator investment strategy is best designed to take advantage of power law distributions and getting the very best investments. With crowdfunding and the JOBS act, being able to spread $10k across 50 different companies seems to open the door for everyone to participate in this type of investment strategy. Thoughts?