Diversifying Your Portfolio & Learning to Speak Startup

Timecoded Guide:

[00:00] Podcast begins - Diversifying Your Portfolio & Learning to Speak Startup

[03:20] Starting your angel investment journey with the right philosophy

[09:06] Approaching an angel investor as a startup founder

[12:37] Setting up a startup studio & learning lessons from an ecosystem

[22:15] Teaching startup dos and don'ts at Softeq Venture Studio

[25:11] Writing & releasing The Ultimate Startup Dictionary

Is it important to invest in a lot of companies and diversify when angel investing?

Although other investors argue about the necessity of diverse investment portfolios, Muema believes that it is part of a successful investment strategy to have a diversified portfolio. Additionally, investors have to understand their risk appetite, and be aware of how much of their net worth they’re investing to avoid losing all their money. Finally, one of the most important parts of investing is understanding that it can take a very long time (often years) to see that meaningful exit you may be hoping for.

“It's best to have a diversified portfolio, number one. Number two, invest a small percentage of your net worth so that if you lose the money, you're not out of luck. And then, also recognize that it's a long-time horizon. I think a lot of investors don't realize it's a long-time horizon.”

What things should a startup founder think about when approaching an angel investor?

It isn’t just about angel investors being aware of their own strategies and appetites, but it’s up to startups to be aware of those things, too. Muema explains that a large majority of founders fail to understand the importance of specificity when going after potential investors. Not everyone is interested in what you’re offering, and many investors aim to invest in very specific areas. Knowing the type of investor you’re targeting and why greatly increases your investment odds.

“I would say, as a founder looking for money, the 2 critical things are you have to be a domain expert in your space, but then, you also have to be a domain expert in people who will fund your space as well.”

How are you involved in the Softeq Venture Studio?

For each cohort in the Softeq Venture Studio, Muema does two very important things: office hours and a talk about fundraising mistakes. During office hours, startups within each cohort are able to ask Muema anything about fundraising, from insights to mistakes to niche concepts. For his talk, Muema takes a deep dive into the common fundraising mistakes he’s seen startup founders make and how to avoid them.

“Another mistake is not building a relationship with an investor before you ask him for money. So, do you follow them on Twitter? Do you follow them on LinkedIn? Do you know who they are? Have you engaged with them in some other capacity?”

Tell me about your upcoming book. Why should I read it?

As an experienced angel investor in a mentorship role at Softeq, Muema quickly realized there was a disconnect between the vocabulary investors used and the terminology early-stage startups were familiar with. The Ultimate Startup Dictionary was born from a desire to bridge this gap. Muema explains that this book aims to make this language more accessible and understandable to everyone, preparing more founders for the startup road ahead of them.

“The problem that I've seen in talking to early stage startups and founders is that they don't speak tech and they're not well versed in Silicon Valley speak. What is a cap table? What is a form 83B? What's an angel investor versus an angel group versus a super angel?”