Interesting new post from Sam Altman with advice on how to be a good startup investor.

A quick summary of the advice, which in summary form comes across as a very linear process (makes perfect sense since investing is a pipeline driven business).

  1. Getting access to investment opportunities - through sheer hard work and/or building a unique brand.
  2. Improving your decision-making on what to invest in. Sam asks himself whether he’d work for that person as a first step. For founders he looks at scrappiness, speed, and a core belief in themselvs. For markets, he looks at size but importantly growth rates, and whether companies are ahead of the market or riding a strong technology adoption curve.
  3. Close Rate is an important metric when capital is easier to come by. It’s a relationship game - you have to be helpful and decisive, and treat founders as peers.
  4. Stay helpful - Be specific and tactical, make intros, help them hire, find investors, etc. Help them solve real problems. Warn them of big mistakes they’re about to make (and you’re sure of it), and stay out of the idea factory. Not your job.

Some key paragraphs:

The spectral signatures of the best companies I’ve invested in are remarkably similar. They usually have most of the following characteristics: compelling founders, a mission that attracts talented people into the startup’s orbit, a product so good that people spontaneously tell their friends about it, a rapidly growing market, a network effect and low marginal costs, the ability to grow fast, and a product that is either fundamentally new or 10x better than existing options.

The most important way to help founders is to get them to be more ambitious—to think bigger and to have more self-belief. Help them set ambitious but achievable goals. Momentum is important and self-reinforcing—most people set goals that they expect to be just out of reach, which is usually demotivating. It’s better to continuously set goals that you can just barely hit.

The central learning of my career so far has been that you can and should scale up things that are working. The power of scale, and the emergent behavior that sometimes comes from it, is tremendous. I think about the potential energy of future scale for every investment I make. Most people seem terrible at this, so it’s another bug you can exploit.